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The effect of cap-and-trade programs on firms' profits: Evidence from the Nitrogen Oxides Budget Trading Program

  • Linn, Joshua

Cap-and-trade programs have become an increasingly common means of regulating emissions from electric power plants, but there is little empirical evidence about the programs' effects on regulated firms' profits. This paper uses stock prices to estimate the change in expected profits under the Nitrogen Oxides Budget Trading Program (NBP). Using regional variation in compliance costs, I find that the NBP reduced expected profits by as much as $25 billion, primarily affecting the values of coal generators that operate in states with restructured electricity markets.

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File URL: http://www.sciencedirect.com/science/article/pii/S0095-0696(09)00062-X
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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 59 (2010)
Issue (Month): 1 (January)
Pages: 1-14

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Handle: RePEc:eee:jeeman:v:59:y:2010:i:1:p:1-14
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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