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Robbing Peter to Pay Paul: The Impact of California’s Cap-and-Trade Program on Toxic Emissions

Author

Listed:
  • Narae Lee

    (Business and Technology Management, Korea Advanced Institute of Science and Technology, Daejeon 34141, Republic of Korea)

  • Aseem Kaul

    (Carlson School of Management, The University of Minnesota, Minneapolis, Minnesota 55455)

Abstract

We empirically examine the consequences of the introduction of a cap-and-trade program in California, showing that although the program helped reduce greenhouse gas (GHG) emissions, it had the unintended consequence of increasing toxic emissions from treated facilities, as facilities cut back on their waste-treatment efforts to reduce GHG emissions. We further show that this effect was weaker for more harmful toxins, for facilities that had invested in reducing toxic waste at source, and for those that were subject to close scrutiny from regulators, consistent with it being the result of strategic firm actions.

Suggested Citation

  • Narae Lee & Aseem Kaul, 2025. "Robbing Peter to Pay Paul: The Impact of California’s Cap-and-Trade Program on Toxic Emissions," Management Science, INFORMS, vol. 71(6), pages 5409-5418, June.
    • Handle: RePEc:inm:ormnsc:v:71:y:2025:i:6:p:5409-5418
    DOI: 10.1287/mnsc.2023.03560
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