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A social welfare analysis of California's cap and trade
This paper evaluates California's (CA) cap & trade program (C&T) and its social welfare implications. I utilize a theoretical simultaneous move game to determine the optimal outcome for C&T. The outcome for such policy indicates that CA will implement C&T inducing firms to invest in abatement technology. To analyze if the theoretical results are occurring in practice, I collected data from the California Air Resources Board (CARB), Bureau of Economic Statistics (BEA), and the U.S. Energy Agency (USEIA), and used a standard OLS regression to measure social welfare. I found that there is a downward trend in the profits of the firms in the CA industry and emissions have increased under C&T