How Would Facility-Specific Emissions Caps Affect the California Carbon Market?

Incentive-based approaches to addressing air pollution, such as cap-and-trade, enable flexible compliance that can reduce costs compared with prescriptive regulations. Flexibility implies that emissions reductions happen where abatement costs are lowest, but that may not be where emissions reductions are needed to mitigate preexisting inequities in pollution exposure. This paper examines the California carbon market and finds that emissions from stationary sources in disadvantaged communities have fallen overall as quickly and often more quickly than the state average, but with notable outliers often in densely populated areas. This paper considers additional requirements on individual facilities to ensure an equitable rate of progress and finds they would likely have little effect on the allowance market.