The Environmental and Distributional Consequences of Emissions Markets: Evidence from the Clean Air Interstate Rule

Posted: 26 Jun 2017

See all articles by Mehdi Benatiya Andaloussi

Mehdi Benatiya Andaloussi

Columbia University

Elisabeth Thuestad Isaksen

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment

Date Written: June 25, 2017

Abstract

Who benefits from market-based environmental policies? To shed light on this question, we investigate the environmental and distributional consequences of regional cap-and-trade programs to mitigate sulfur dioxide and nitrogen oxides from U.S. power plants. Using double and triple differences, we find that these programs substantially reduced emissions beyond our counterfactual development. Looking at the socio-economic characteristics of the areas surrounding each power plant, we find that policy-induced SO2 reductions were smaller in poor, low educated and minority neighborhoods. There is a similar but weaker pattern for NOX emissions. We further find evidence of sorting and capitalization of policy-induced emissions reductions into property values. Due to lower home-ownership rates, poor neighborhoods benefit less from the real estate appreciation. Overall, our findings suggest that the environmental and economic benefits from market-based environmental policies are unevenly distributed across socio-economic groups.

Keywords: air pollution, cap-and-trade, environmental policy, environmental injustice

JEL Classification: Q52, Q53, Q56, Q58, C33

Suggested Citation

Benatiya Andaloussi, Mehdi and Isaksen, Elisabeth Thuestad, The Environmental and Distributional Consequences of Emissions Markets: Evidence from the Clean Air Interstate Rule (June 25, 2017). Available at SSRN: https://ssrn.com/abstract=2992180 or http://dx.doi.org/10.2139/ssrn.2992180

Mehdi Benatiya Andaloussi

Columbia University ( email )

420 West 118th Street
New York, NY 10027
United States

Elisabeth Thuestad Isaksen (Contact Author)

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

HOME PAGE: http://https://sites.google.com/site/elisabethisaksen/

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