Do Pollution Markets Harm Low Income and Minority Communities?

On the Measurement of Environmental Inequality:

Ranking Emissions Distributions Generated by Different Policy Instruments

Erin T. Mansur and Glenn Sheriff

Journal of the Association of Environmental and Resource Economists, Volume 8, Issue 4, July 2021, Pages 721-758.
Working Paper, September 2019.
NBER Working Paper 25666, April 2019 (under previous title “Do Pollution Markets Harm Low Income and Minority Communities? Ranking Emissions Distributions Generated by California's RECLAIM Program”).

Abstract:

Adapting methods from the income distribution literature, we use a normatively significant metric to rank emissions distributions from alternative policies in a manner consistent with an explicit well-behaved preference structure. The approach allows one to determine which policy has the most desirable outcome for a given demographic group as well as which groups benefit most from a given policy. Applying these methods to Southern California’s NO_x pollution-trading program and a counterfactual command-and-control policy suggests that in this case trading benefited all demographic groups and generated a more equitable overall distribution of emissions, even after considering the lower aggregate emissions. We find that blacks experienced the largest gains from RECLAIM relative to the counterfactual, while Hispanics benefited least.