Unintended Consequences of California’s Cap-and-Trade: An Examination of Industrial Electricity Productivity since California Enacted Assembly Bill 32, the California Global Warming Solutions Act


  •   James J. Tanoos


Greater American regulatory moving from federal to state governments has resulted in varying levels of environmental legislation and regulation. One example is the cap-and-trade system in California, which has been deemed a success in limiting greenhouse gas emissions as well as in earning revenue for the state. However, the coinciding production rates for polluting organizations has not been analyzed on a macro level. This study examined the air pollution and production rates of electricity organizations operating in California since cap-and-trade went into effect and found that since the legislation took effect, not only did production decreased slightly, but also, contrary to much analysis, the rates of air pollution from these organizations increased sharply. 

Keywords: Air Pollution, Sustainability, Regulatory Authority, Energy Sector


Altshuler, A., & Luberoff, D. (2003). Mega-Projects: The changing politics of urban public investment. Washington, DC: Brookings Press.

Donovan, T., Mooney, C., & Smith, D. (2009). State and Local Politics: Institutions and Reform. Florence, KY: Wadsworth Cengage Learning.

Gerber, B., & Teske, P. (2000). Regulatory policymaking in the American states: A review of theories and evidence. Political Research Quarterly, 53(4), 849-886.

Sapat, A. (2004, March-April). Devolution and Innovation: The adoption of state environmental policy innovations by administrative agencies. Public Administration Review, 64(2), 141-151.

Daley, D., Haider-Markel, D., & Whitford, A. (2007). Checks, Balances, and the Cost of Regulation: Evidence from the American States. Political Research Quarterly, 60(4), 696-706.

Potoski, M., & Woods, N. (2002). Dimensions of State Environmental Policies: Air pollution regulation in the United States. Policy Studies Journal, 30(2), 208-226.

Harris, P. (2002). The Environment, International Relations, and U.S. Foreign Policy. Washington, DC: Georgetown University Press.

Blonigen, B. (2005). A Review of Empirical Literature on FDI Determinants. Atlantic Economic Journal, 33, 383-403.

Copeland, B. & Taylor, S. (2000, April). Free Trade and Global Warming: A trade theory view of the Kyoto Protocol. National Bureau of Economic Research: Cambridge, MA.

Dasgupta, S., Hamilton, K., Pandey, K., & Wheeler, D. (2006, September). World Development. Environment During growth: Accounting for governance and vulnerability. 34(9).

Williams, M. (2016, April 14). What causes air pollution? Retrieved from. https://phys.org/news/2016-04-air-pollution.html

Burtraw, D., Linn, J., Palmer, K., & Paul, A. (2014). The Costs and Consequences of Clean Air Act Regulation of CO₂ from Power Plants. The American Economic Review, 104(5), 557-562.

Center for Sustainable Systems University of Michigan. (2017, August). Greenhouse Gases Factsheet. Retrieved from. http://css.umich.edu/factsheets/greenhouse-gases-factsheet

U.S. Energy Information Administration (EIA). (2017, May 10). Frequently Asked Questions? How much of U.S. carbon dioxide emissions are associated with electricity generation? Retrieved fromhttps://www.eia.gov/tools/faqs/faq.php?id=77&t=11%20EIA,%202017

Williams, J. (1997, June 1). Energy and the Making of Modern California (Series on Technology and the Environment) Reprint, 1998 Edition. Akron, OH: University of Akron Press.

Thompson, V. (2014, February 15). Sophisticated Interdependence in Climate Policy: Federalism in the United States, Brazil, and Germany (Anthem Environment and Sustainability). New York, NY: Anthem Press.

Schmalensee, R. & Stavins, R. (2015). Lessons Learned from Three Decades of Experience with Cap-and-Trade (Rep.). Fondazione Eni Enrico Mattei (FEEM).

Durning, A. & Bauman, Y. (2014, May 22). 17 Things to Know About California’s Carbon Cap. The Golden (State's) rules.

Ansolabehere, S. (2014, August 8). Cheap and Clean: How Americans Think about Energy in the Age of Global Warming. Cambridge, MA: The MIT Press.

Kasler, D. (2016, August 23). California’s cap-and-trade carbon program sputters again. Retrieved from. http://www.sacbee.com/news/politics-government/capitol-alert/article97380457.html

Center for Climate and Energy Solutions. (2017). California Cap and Trade. Retrieved from https://www.c2es.org/content/california-cap-and-trade/

Environmental Defense Fund (EDF). (2017). How cap and trade works. The system reduces emissions by setting a limit on pollution and creating a market.

Bushnell, J. (2008, January). The design of California's cap-and-trade and its impact on electricity markets. Journal of Climate Policy, 8(3), 277-292.

Murphy, K. (2017, September 12). Here’s how California plans to spend $1.5 billion in cap-and-trade money. The Mercury News.

Carmona, R., Fehr, M., Hinz, J., & Porchet, A. (2010). Market Design for Emission Trading Schemes. SIAM Review, 52(3), 403-452.

Kaswan, A. (2012, April 24). Applying the Clean Air Act to Greenhouse Gases: What Does It Mean for Traditional Pollutants?

Marland, E. & Domke, G. & Hoyle, J. & Marland, G. & Bates, L. & Helms, A. & Jones, B. & Kowalczyk ,T. & Tuseva, T. & Szymanski, C. (2017, March 30). Understanding and Analysis: The California Air Resources Board Forest Offset Protocol (SpringerBriefs in Environmental Science). New York, NY: Springer.

California Air Resources Board. “Quarterly auction information.” Washington GPO, 22 Feb. 2017. Web. 21 Feb. 2017.

Gallagher, D. (2012, September 19). Environmental Leadership: A Reference Handbook 1st Edition. Thousand Oaks, CA: SAGE Publications, Inc.

Cook, J. (2013, December). The Future of Electricity Prices in California: Understanding Market Drivers and Forecasting Prices to 2040.

Levin, A. & Pepper, R. (2017, July 28). California Extends Greenhouse Gas Cap-and-Trade Program Through 2030. Retrieved from. https://www.environmentallawandpolicy.com/2017/07/california-extends-greenhouse-gas-cap-trade-program-2030/

Purdon, M., Houle, D., & Lachapelle, E. (2014). The Political Economy of California and Québec’s Cap-and-Trade Systems. Sustainable Prosperity Research Report.

Reyes, O. (2016, August 26). State should look beyond cap and trade to develop more effective climate policies. Retrieved from http://www.sacbee.com/opinion/op-ed/soapbox/article97914327.html

Broekhoff, D. (2015, February 18). There Are Still Promising Alternatives to Carbon Taxes. Retrieved from https://www.brinknews.com/there-are-still-promising-alternatives-to-carbon-taxes/

Metcalf, G. (2009). Market-Based Policy Options to Control U.S. Greenhouse Gas Emissions. The Journal of Economic Perspectives, 23(2), 5-27.

Goulder, L. & Schein, A. (2013). CARBON TAXES VERSUS CAP AND TRADE: A CRITICAL REVIEW. Climate Change Economics, 4(3), 1-28.

World Bank Group. (2014, May). State and Trends of Carbon Pricing. California Trade and Cap Program. Washington, DC: Publishing and Knowledge Division.

Nivola, P. (1997, July 1). Comparative Disadvantages? Social regulations and the global economy. Brookings Washington, DC: Institution Press.

Managi, S. (2011, September 14). Technology, Natural Resources and Economic Growth: Improving the Environment for a Greener Future. Cheltenham, UK: Edward Elgar Pub.

Gollop, F., & Roberts, M. (1983). Environmental Regulations and Productivity Growth: The Case of Fossil-fueled Electric Power Generation. Journal of Political Economy, 91(4), 654-674.

Gray, W. (1987). The Cost of Regulation: OSHA, EPA and the Productivity Slowdown. The American Economic Review, 77(5), 998-1006.

Weber, W., & Domazlicky, B. (2001). Productivity Growth and Pollution in State Manufacturing. The Review of Economics and Statistics, 83(1), 195-199.

Farber, D. (2012). Pollution Markets and Social Equity: Analyzing the Fairness of Cap and Trade. Ecology Law Quarterly, 39(1), 1-56.

Clarke, J. (2015). California's New Majority Confronts Climate Crisis. Race, Poverty & the Environment, 20(1), 18-26.

Cox, J. (2017, July 16). Cap and Trade opponent: Climate change gives California Democrats an excuse to raise taxes. The Mercury News.

Lunsford, L. (2010, April 8). You're Fired! Why Liberals should never run the Government. (pp. 15). Bloomington, IN: Xlibris.

Kryzanek, M. (2010, August 9). Debates, Differences and Divisions: The 25 Issues That Shape American Politics. Abingdon, UK: Routledge.

Bakker, C. & Francioni, F. (2014, September 19). The EU, the US and Global Climate Governance. Abingdon, UK: Routledge.

Raymond, L. (2016, September 16). Reclaiming the Atmospheric Commons: The regional greenhouse gas initiative and a new model of emissions trading. Cambridge, MA: The MIT Press.

Brinkerhoff, N. Straehley, S. (2014, July 16). When Companies Break Environmental Laws, Why are Responsible Individuals Not Prosecuted?

Kaufman, N. (2016, March 1). Carbon Tax vs. Cap-and-Trade: What’s a Better Policy to Cut Emissions? Retrieved from. http://www.wri.org/blog/2016/03/carbon-tax-vs-cap-and-trade-what%E2%80%99s-better-policy-cut-emissions

Antisdel, T. (2017). Specialist/Database Administrator for the United States EPA; personal communication.

EPA. (2017, January 19). Greenhouse Gases Equivalencies Calculator: Calculations and references. Energy/Environment section. Retrieved from https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references.

Tanoos, J. (2012). Who’s Polluting the Hoosier Air? An Examination of International versus Domestic Industry Operating in Indiana. International Journal of Management Sciences, 1(9), 41-60.


Download data is not yet available.


How to Cite
Tanoos, J. 2018. Unintended Consequences of California’s Cap-and-Trade: An Examination of Industrial Electricity Productivity since California Enacted Assembly Bill 32, the California Global Warming Solutions Act. European Journal of Engineering Research and Science. 3, 8 (Aug. 2018), 30-34. DOI:https://doi.org/10.24018/ejers.2018.3.8.844.