Transactions Costs in Tradeable Emissions Markets: An Empirical Study of the Regional Clean Air Incentives Market in Los Angeles
Posted: 24 Oct 1999
Date Written: Undated
This paper examines the Regional Clean Air Incentives Market (RECLAIM) which was launched in Los Angeles in January 1994. RECLAIM is an emissions trading program which is expected to decrease hazardous pollutants from stationary sources in the South Coast Basin. I analyze the transactions data and conduct hedonic price regressions to find that the price of Reclaim Trading Credits is higher in the Nitrogen Oxide market as compared to the Sulfur Oxide market. Also prices in the coastal zone are higher than in the inland zone. The facility level data reveal that transactions costs can be very high for some facilities in RECLAIM. The transactions costs variables have been defined to include search costs and information costs. These costs are significant and are responsible for some facilities not entering the emissions market. The study also draws policy implications for the development of future emissions trading programs.
JEL Classification: Q25, Q28, Q38, C24, C25
Suggested Citation: Suggested Citation