Equity Impacts of a Market for Clean Air

While a growing body of literature documents the disproportionate shares of pollution borne by under-represented and low-income communities, less is known about how environmental regulations and markets contribute to these shares. This talk presents the results from a recent working paper that studies the equity impacts of a market-based policy to regulate local air pollution, the NOx Budget Program, a seasonal cap-and-trade program for nitrogen oxide (NOx) emissions. This study uses a new empirical approach to causally estimate a key feature of market-based policy, heterogeneous treatment effects across regulated firms, and an air pollution transport model to connect changes in emissions to local air pollution. We find that the NOx Budget Program reduced environmental inequities and premature mortality from electricity sector pollution. A counterfactual policy that replaces the market with a uniform pollution reduction standard contributes less to narrowing environmental inequities and leads to fewer avoided mortalities overall. Our findings stem from the spatial distribution of power plants, individual’s residential locations, and the heterogeneous effects of the program on regulated power plants.

Speaker: Paige Webber, University of North Carolina, Chapel Hill