Spillover benefits of carbon dioxide cap and trade: Evidence from the Toxics Release Inventory

Abstract

AbstractReducing greenhouse gas emissions is necessary to meet climate goals, but these emissions are not the only harmful bi‐products of fossil‐fuel combustion. This paper shows how a regional cap‐and‐trade program designed to regulate CO2 emissions affects the release of federally‐regulated toxins in the Toxics Release Inventory. We find that the program reduces toxic releases from coal‐fired electric plants by 78%, and that harmful metal releases (e.g., lead, mercury) have fallen by 54%. There is no evidence of spillovers into non‐adopting areas. This unintended beneficial effect of the carbon dioxide cap‐and‐trade policy provides compelling evidence of the co‐abatement of harmful compounds alongside greenhouse gas emissions.