Very cool experiment from India on a cap and trade market in industrial air pollution. The treatment group (randomly assigned firms which used the market) saw drops in pollution and also a drop in the cost of lowering pollution. Why the latter? Because those who could lower their pollution levels more cheaply can sell the right to pollute to the firms who have higher costs for doing so.
https://bpb-us-w2.wpmucdn.com/campuspress.yale.edu/dist/7/2986/files/2024/07/ets_paper-25.pdf
MR has a good post about it, which is where I first saw this:
https://marginalrevolution.com/marg...ion-in-india-with-a-cap-and-trade-market.html
https://bpb-us-w2.wpmucdn.com/campuspress.yale.edu/dist/7/2986/files/2024/07/ets_paper-25.pdf
Market-based environmental regulations are seldom used in low-income countries, where pollution is highest but state capacity is often low. We experimentally evaluate the world’s first particulate matter emissions market, which covers industrial plants in a large Indian city. There are three main findings. First, the market functioned well: permit trade was active, and plants bought and sold permits to meet their compliance obligations almost perfectly. Second, treatment plants, randomly assigned to the emissions market, reduced pollution emissions relative to control plants by 20% to 30%. Third, the market reduces abatement costs by 11% at a constant level of emissions. We use rich data on plant bids for emissions permits to estimate heterogeneous marginal abatement costs and evaluate cost savings. These estimates show that plants can reduce emissions for small increases in abatement costs. The pollution market therefore has mortality benefits that exceed costs by at least twenty-five times.
MR has a good post about it, which is where I first saw this:
https://marginalrevolution.com/marg...ion-in-india-with-a-cap-and-trade-market.html