IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/27205.html

Some searches may not work properly. We apologize for the inconvenience.

   My bibliography  Save this paper

Do Environmental Markets Cause Environmental Injustice? Evidence from California's Carbon Market

Author

Listed:
  • Danae Hernandez-Cortes
  • Kyle C. Meng

Abstract

Market-based environmental policies are widely adopted on the basis of allocative efficiency. However, there is growing concern that market-induced spatial reallocation of pollution could widen existing pollution concentration gaps between disadvantaged and other communities. We examine how this \environmental justice" (EJ) gap changed following the 2013 introduction of California's carbon market, the world's second largest and the most subjected to EJ critiques. We estimate that the program lowered GHG, PM2:5, PM10, and NOx emissions by 3-9% annually between 2012-2017 for sample industrial facilities regulated only by the carbon market. Using a pollution dispersal model to characterize resulting spatial changes in pollution concentrations, we find the program caused EJ gaps in PM2:5, PM10, and NOx from these facilities to narrow by 6-10% annually. We demonstrate that explicit modeling of pollution dispersal is critical for detecting these results.

Suggested Citation

  • Danae Hernandez-Cortes & Kyle C. Meng, 2020. "Do Environmental Markets Cause Environmental Injustice? Evidence from California's Carbon Market," NBER Working Papers 27205, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27205
    Note: EEE EH PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w27205.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. Evan J. Ringquist, 2005. "Assessing evidence of environmental inequities: A meta-analysis," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(2), pages 223-247.
    3. Michael Ash & T. Robert Fetter, 2004. "Who Lives on the Wrong Side of the Environmental Tracks? Evidence from the EPA's Risk‐Screening Environmental Indicators Model," Social Science Quarterly, Southwestern Social Science Association, vol. 85(2), pages 441-462, June.
    4. Burtraw, Dallas & Palmer, Karen & Krupnick, Alan & Evans, David & Toth, Russell, 2005. "Economics of Pollution Trading for SO2 and NOx," RFF Working Paper Series dp-05-05, Resources for the Future.
    5. Meredith Fowlie & Stephen P. Holland & Erin T. Mansur, 2012. "What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's NOx Trading Program," American Economic Review, American Economic Association, vol. 102(2), pages 965-993, April.
    6. Corbett Grainger & Thanicha Ruangmas, 2018. "Who Wins from Emissions Trading? Evidence from California," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(3), pages 703-727, November.
    7. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    8. Lara Cushing & Dan Blaustein-Rejto & Madeline Wander & Manuel Pastor & James Sadd & Allen Zhu & Rachel Morello-Frosch, 2018. "Carbon trading, co-pollutants, and environmental equity: Evidence from California’s cap-and-trade program (2011–2015)," PLOS Medicine, Public Library of Science, vol. 15(7), pages 1-20, July.
    9. Evan J. Ringquist, 2011. "Trading Equity for Efficiency in Environmental Protection? Environmental Justice Effects from the SO 2 Allowance Trading Program," Social Science Quarterly, Southwestern Social Science Association, vol. 92(2), pages 297-323, June.
    10. Spencer Banzhaf & Lala Ma & Christopher Timmins, 2019. "Environmental Justice: The Economics of Race, Place, and Pollution," Journal of Economic Perspectives, American Economic Association, vol. 33(1), pages 185-208, Winter.
    11. Greenstone, Michael & Gayer, Ted, 2009. "Quasi-experimental and experimental approaches to environmental economics," Journal of Environmental Economics and Management, Elsevier, vol. 57(1), pages 21-44, January.
    12. Erin T. Mansur & Glenn Sheriff, 2019. "Do Pollution Markets Harm Low Income and Minority Communities? Ranking Emissions Distributions Generated by California's RECLAIM Program," NBER Working Papers 25666, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mark Colas & John M. Morehouse, 2022. "The environmental cost of land‐use restrictions," Quantitative Economics, Econometric Society, vol. 13(1), pages 179-223, January.
    2. Faiella, Ivan & Lavecchia, Luciano & Michelangeli, Valentina & Mistretta, Alessandro, 2022. "A climate stress test on the financial vulnerability of Italian households and firms," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 396-417.
    3. Josh Blonz & Brigitte Roth Tran & Erin E. Troland, 2023. "The Canary in the Coal Decline: Appalachian Household Finance and the Transition from Fossil Fuels," NBER Working Papers 31072, National Bureau of Economic Research, Inc.
    4. Ivan Faiella & Luciano Lavecchia, 2021. "Households' energy demand and the effects of carbon pricing in Italy," Questioni di Economia e Finanza (Occasional Papers) 614, Bank of Italy, Economic Research and International Relations Area.
    5. Kakuho Furukawa & Hibiki Ichiue & Noriyuki Shiraki, 2020. "How Does Climate Change Interact with the Financial System? A Survey," Bank of Japan Working Paper Series 20-E-8, Bank of Japan.
    6. Mariia Murasheva & Maria A. Cunha-e-Sa, 2022. "The impact of industrial pollution exposure on hospital admissions: Evidence from a cement plant in Russia," Nova SBE Working Paper Series wp652, Universidade Nova de Lisboa, Nova School of Business and Economics.
    7. 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.
    8. Bruno, Ellen & Hadachek, Jeffrey & Hagerty, Nick & Jessoe, Katrina K., 2022. "Unintended costs of climate change adaption: Agricultural wells and access to drinking water," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322241, Agricultural and Applied Economics Association.
    9. repec:ags:aaea22:335926 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hernandez-Cortes, Danae & Meng, Kyle C., 2023. "Do environmental markets cause environmental injustice? Evidence from California’s carbon market," Journal of Public Economics, Elsevier, vol. 217(C).
    2. Chakraborti, Lopamudra & Shimshack, Jay P., 2022. "Environmental disparities in urban Mexico: Evidence from toxic water pollution," Resource and Energy Economics, Elsevier, vol. 67(C).
    3. 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.
    4. Erin T. Mansur & Glenn Sheriff, 2019. "Do Pollution Markets Harm Low Income and Minority Communities? Ranking Emissions Distributions Generated by California's RECLAIM Program," NBER Working Papers 25666, National Bureau of Economic Research, Inc.
    5. Bouwe R. Dijkstra, 2022. "Payments from Households to Distant Polluting Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 681-715, July.
    6. Lucas Cain & Danae Hernandez-Cortes & Christopher Timmins & Paige Weber, 2023. "Recent Findings and Methodologies in Economics Research in Environmental Justice," CESifo Working Paper Series 10283, CESifo.
    7. David M. Konisky & Sanya Carley, 2021. "What We Can Learn From The Green New Deal About The Importance Of Equity In National Climate Policy," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(3), pages 996-1002, June.
    8. Hausman, Catherine & Stolper, Samuel, 2021. "Inequality, information failures, and air pollution," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    9. Jonathan Colmer & Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner, 2020. "Does pricing carbon mitigate climate change? Firm-level evidence from the European Union emissions trading scheme," CEP Discussion Papers dp1728, Centre for Economic Performance, LSE.
    10. Richard Schmalensee & Robert N. Stavins, 2019. "Policy Evolution under the Clean Air Act," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 27-50, Fall.
    11. Robert W. Hahn & Robert N. Stavins, 2011. "The Effect of Allowance Allocations on Cap-and-Trade System Performance," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 267-294.
    12. Richard Schmalensee & Robert N. Stavins, 2017. "Lessons Learned from Three Decades of Experience with Cap and Trade," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 59-79.
    13. Kakuho Furukawa & Hibiki Ichiue & Noriyuki Shiraki, 2020. "How Does Climate Change Interact with the Financial System? A Survey," Bank of Japan Working Paper Series 20-E-8, Bank of Japan.
    14. Remes, Piia, 2013. "Putting a Price on Carbon – Econometric Essays on the European Union Emissions Trading Scheme and its Impacts," Research Reports 62, VATT Institute for Economic Research.
    15. Banzhaf, H. Spencer, 2011. "The Political Economy of Environmental Justice," MPRA Paper 101191, University Library of Munich, Germany.
    16. Harstad, Bård & Eskeland, Gunnar S., 2010. "Trading for the future: Signaling in permit markets," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 749-760, October.
    17. Muller Nicholas & Tong Daniel & Mendelsohn Robert, 2009. "Regulating NOx and SO2 Emissions in Atlanta," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(2), pages 1-32, March.
    18. Cason, Timothy N. & Gangadharan, Lata & Duke, Charlotte, 2003. "Market power in tradable emission markets: a laboratory testbed for emission trading in Port Phillip Bay, Victoria," Ecological Economics, Elsevier, vol. 46(3), pages 469-491, October.
    19. Parry, Ian W.H. & Sigman, Hilary & Walls, Margaret & Williams, Roberton C., III, 2005. "The Incidence of Pollution Control Policies," Discussion Papers 10651, Resources for the Future.
    20. Marit Klemetsen & Knut Einar Rosendahl & Anja Lund Jakobsen, 2020. "The Impacts Of The Eu Ets On Norwegian Plants’ Environmental And Economic Performance," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-32, February.

    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:27205. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.