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Who Loses under Cap-and-Trade Programs? The Labor Market Effects of the NOx Budget Trading Program

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  • E. Mark Curtis

    (Wake Forest University)

Abstract

This paper tests how a major cap-and-trade program, known as the NOx budget trading program (NBP), affected labor markets in the manufacturing sector. The cap-and-trade program dramatically decreased levels of NOx emissions and added substantial costs to regulated firms. Using a triple-differences approach, I examine how labor markets adjusted in manufacturing industries that were exposed to the program. I find that overall employment in the manufacturing sector dropped by 1.3%, with energy-intensive industries losing up to 4.8%. Employment declines are shown to have occurred primarily through decreased hiring rates rather than increased separation rates, thus mitigating the impact on incumbent workers. Young workers experienced the largest employment declines, and earnings of newly hired workers fell after the regulation began.

Suggested Citation

  • E. Mark Curtis, 2018. "Who Loses under Cap-and-Trade Programs? The Labor Market Effects of the NOx Budget Trading Program," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 151-166, March.
  • Handle: RePEc:tpr:restat:v:100:y:2018:i:1:p:151-166
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    Cited by:

    1. Joseph E. Aldy & Maximilian Auffhammer & Maureen Cropper & Arthur Fraas & Richard Morgenstern, 2022. "Looking Back at 50 Years of the Clean Air Act," Journal of Economic Literature, American Economic Association, vol. 60(1), pages 179-232, March.
    2. Chen, Shiyi & Jiang, Lingduo & Liu, Wanlin & Song, Hong, 2022. "Fireworks regulation, air pollution, and public health: Evidence from China," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    3. E. Mark Curtis & Daniel G. Garrett & Eric C. Ohrn & Kevin A. Roberts & Juan Carlos Suárez Serrato, 2021. "Capital Investment and Labor Demand," NBER Working Papers 29485, National Bureau of Economic Research, Inc.
    4. Marin, Giovanni & Vona, Francesco, 2021. "The impact of energy prices on socioeconomic and environmental performance: Evidence from French manufacturing establishments, 1997–2015," European Economic Review, Elsevier, vol. 135(C).
    5. Hongyu Nian & Chunhua Wang & Haitao Yin, 2022. "Size control or intensity control: a comparative study of two Common Environmental Regulations," Journal of Regulatory Economics, Springer, vol. 61(3), pages 169-190, June.
    6. Marc A. C. Hafstead & Roberton C. Williams III, 2020. "Jobs and Environmental Regulation," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 1(1), pages 192-240.
    7. Haywood, Luke & Janser, Markus & Koch, Nicolas, 2021. "The Welfare Costs of Job Loss and Decarbonization– Evidence from Germany's Coal Phase Out," IZA Discussion Papers 14464, Institute of Labor Economics (IZA).
    8. Antosiewicz, Marek & Fuentes, J. Rodrigo & Lewandowski, Piotr & Witajewski-Baltvilks, Jan, 2022. "Distributional effects of emission pricing in a carbon-intensive economy: The case of Poland," Energy Policy, Elsevier, vol. 160(C).
    9. Hille, Erik & Möbius, Patrick, 2019. "Do energy prices affect employment? Decomposed international evidence," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 1-21.
    10. Garth Heutel & Xin Zhang, 2020. "Efficiency Wages, Unemployment, and Environmental Policy," NBER Working Papers 27960, National Bureau of Economic Research, Inc.
    11. Curtis, E. Mark, 2020. "Reevaluating the ozone nonattainment standards: Evidence from the 2004 expansion," Journal of Environmental Economics and Management, Elsevier, vol. 99(C).
    12. Clay, Karen & Jha, Akshaya & Lewis, Joshua & Severnini, Edson R., 2021. "Impacts of the Clean Air Act on the Power Sector from 1938-1994: Anticipation and Adaptation," IZA Discussion Papers 14494, Institute of Labor Economics (IZA).
    13. E. Mark Curtis & Ioana Marinescu, 2022. "Green Energy Jobs in the US: What Are They and Where Are They?," NBER Chapters, in: Environmental and Energy Policy and the Economy, volume 4, National Bureau of Economic Research, Inc.
    14. Curtis, E. Mark & Lee, Jonathan M., 2019. "When do environmental regulations backfire? Onsite industrial electricity generation, energy efficiency and policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 174-194.
    15. Heutel, Garth & Zhang, Xin, 2021. "Efficiency wages, unemployment, and environmental policy," Energy Economics, Elsevier, vol. 104(C).
    16. Mark Curtis, E. & Lee, Jonathan M., 2018. "The reallocative and heterogeneous effects of cap-and-trade," Economics Letters, Elsevier, vol. 172(C), pages 93-96.
    17. Moritz A. Drupp & Ulrike Kornek & Jasper N. Meya & Lutz Sager, 2021. "Inequality and the Environment: The Economics of a Two-Headed Hydra," CESifo Working Paper Series 9447, CESifo.
    18. Olivier Deschenes, 2018. "Environmental regulations and labor markets," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-22, November.
    19. Matthew Gibson, 2019. "Regulation-Induced Pollution Substitution," The Review of Economics and Statistics, MIT Press, vol. 101(5), pages 827-840, December.
    20. Wang, Yizhong & Hang, Ye & Wang, Qunwei, 2022. "Joint or separate? An economic-environmental comparison of energy-consuming and carbon emissions permits trading in China," Energy Economics, Elsevier, vol. 109(C).
    21. Ferris, Ann E. & Frank, Eyal G., 2021. "Labor market impacts of land protection: The Northern Spotted Owl," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    22. Dongil D. Keum, 2020. "Cog in the wheel: Resource release and the scope of interdependencies in corporate adjustment activities," Strategic Management Journal, Wiley Blackwell, vol. 41(2), pages 175-197, February.

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