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

Reducing 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.