Collaborative Research: Market Based Emissions Policies


Douglas Almond
Professor of Economics and International and Public Affairs


This project funds research that will evaluate how firms and consumers respond to market-based policies that are supposed to improve air quality and address environmental issues. The focus here is on testing hypotheses drawn from economic theory about how new environmental policies affect business and public health in the rapidly growing Chinese economy. China is about to adopt a new national program of cap-and-trade emissions policies. The research team will collect innovative measures of pollution, firm outcomes, and individual health. They will analyze these data to test the team's hypotheses about whether or not these policies will achieve the stated goals. Predicting and understanding the effects of these policies is important for many scientific reasons. What is more, the policies could potentially result in Chinese manufacturers facing much higher costs of environmental compliance, which would have important implications for worldwide trade and the comparative advantage of manufacturers in countries such as the United States that already have strong environmental controls. This project therefore will provide valuable new evidence to researchers around the world and policymakers in the United States who are charged with promoting US economic competitiveness.