Robbing Peter to Pay Paul: The Impact of California's Cap-and-Trade Program on Toxic Emissions.

This article empirically investigates the impact of California's cap-and-trade program, a regulatory regime aimed at reducing greenhouse gas (GHG) emissions, on toxic chemical emissions from large manufacturing facilities. Using a difference-in-difference design comparing treated California facilities to similar non-California facilities, the study finds that while the program effectively reduced GHG emissions, it unintentionally increased toxic emissions by 26%–42%, primarily due to firms cutting back on toxic waste treatment to lower GHG-related costs. This increase was more pronounced for less harmful toxins, facilities without source reduction technologies, and those under less regulatory scrutiny, indicating strategic firm behavior. The findings highlight important trade-offs between environmental objectives and suggest that policymakers should consider how climate policies might affect other voluntary environmental efforts by firms.