Who Loses Under Power Plant Cap-and-Trade Programs?

NBER Working Paper No. 20808

Issued in December 2014

NBER Program(s):Environment and Energy Economics



This paper tests how a major cap-and-trade program, known as the NOx Budget Trading Program (NBP), impacted labor markets in the regions where it was implemented. The cap-and-trade program dramatically decreased levels of NOx emissions and added substantial costs to energy producers. Using a triple-differences approach that takes advantage of the geographic and time variation of the program as well as variation in industry energy-intensity levels, I examine how employment dynamics changed in manufacturing industries whose production process requires high levels of energy. After accounting for a variety of flexible state, county and industry trends, I find that employment in the manufacturing sector dropped by 1.3% as a result of the NBP. Young workers experienced the largest employment declines and earnings of newly hired workers fell after the regulation began. Employment declines are shown to have occurred primarily through decreased hiring rates rather than increased separation rates, thus mitigating the impact on incumbent workers.

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Document Object Identifier (DOI): 10.3386/w20808

Published: Who Loses under Cap-and-Trade Programs? The Labor Market Effects of the NOx Budget Trading Program E. Mark Curtis Posted Online March 02, 2018 https://doi.org/10.1162/REST_a_00680

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