Title: Does emissions trading lead to air pollution hot spots? Evidence from an urban ozone control programme

Authors: Richard F. Kosobud, Houston H. Stokes, Carol D. Tallarico

Addresses: Department of Economics, University of Illinois at Chicago, Chicago, IL, USA. ' Department of Economics, University of Illinois at Chicago, Chicago, IL, USA. ' Department of Economics, University of Illinois at Chicago, Chicago, IL, USA

Abstract: This study is an empirical investigation into the contentious issue of possible sub-area hot spots caused by emissions trading in a pioneering application of a cap-and-trade market approach to reducing aggregate stationary-source volatile organic compound emissions in the Chicago severe ozone non-attainment region. When sub-areas are defined as populated zip codes, 89 out of 95 affected codes revealed a decrease and six an increase in emissions over pre-trading levels. If these six sub-areas are increased slightly in size by adding adjacent zip codes, emissions will be reduced in all sub-areas. Those sub-areas with the largest initial emissions revealed the most significant reductions after trading. The study also finds that trading has significantly reduced both aggregate market-wide levels and the variation in sub-area emissions from pre-trading patterns. Spatially constraining the present region-wide market to pre-empt possible future hot spots could reduce savings in pollution control costs by over 40%.

Keywords: cap-and-trade market; emissions trading; pollution control cost savings; spatial pollution hot spots.

DOI: 10.1504/IJETM.2004.004626

International Journal of Environmental Technology and Management, 2004 Vol.4 No.1/2, pp.137 - 156

Published online: 26 May 2004 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article