In this paper, I investigate the effects of the U.S. federally implemented Solar Investment Tax

Credit (ITC) on states’ solar energy installation and utilization. In particular, I compare relative

trends in solar installation and utilization between states with initially higher levels of solar and

states with initially lower levels of solar, before and after the implementation of the Solar ITC.

My findings demonstrate that states with initially higher levels of solar prior to 2006 — the year

the Solar ITC took effect — experienced rapid, significant growth in solar installation and

utilization relative to states with initially lower levels of solar, on average. These results suggest

that the Solar ITC had a larger effect on solar installation and utilization in states with initially

higher levels of solar compared to states with initially lower levels of solar, on average.

This dissertation consists of three essays that explore the distributional consequences of environmental policy and the impacts of environmental phenomena on vulnerable populations. These chapters use causal inference methods together with pollution transport models and remote sensing data to explain some of the causes of environmental inequities and analyze how environmental policy affects existing environmental disparities.

The first chapter studies the distributional consequences of incomplete regulation. Environmental policies that do not regulate all sources of pollution can be ineffective if firms are able to shift production processes from regulated to unregulated sources. Such incomplete regulation could affect the spatial distribution of pollution and who bears its burden. I study the consequences of incomplete regulation in the context of a policy intended to reduce pollution from mills that process sugarcane in Mexico. In response of the regulation, I show that mills shifted some processing to the fields where sugarcane is grown. I find that following the policy, sugarcane fields linked to regulated facilities increased fires by 14% which increased PM2.5 exposure by 6%. This pollution increase is associated with worse birth outcomes for nearby populations: I estimate decreases in birth weight associated to pollution from fires. Pollution increases were unevenly distributed across communities: agricultural fields tend to be located near poorer populations, and therefore the increase in fires increased their pollution burden. These results highlight that incomplete regulations can create environmental inequality when the unregulated sector is located near disadvantaged populations.

The second chapter, based on joint work with Kyle C. Meng, analyzes the environmental justice consequences of environmental markets. Environmental markets have been increasingly used to address environmental problems. By lowering the cost of regulation, markets are widely adopted for their allocative efficiency. However, there are growing concerns that these markets can reallocate pollution exposure, increasing pollution exposure in disadvantaged communities. We combine causal inference methods together with a pollution transport model to estimate whether California's carbon market increased the pollution concentration gap between disadvantaged and other communities (the environmental justice gap). We find that the environmental justice gap was increasing prior to the introduction of the cap and trade program but it has since decreased after the introduction of the program. This finding suggests that market-based climate policies can have environmental justice co-benefits for disadvantaged communities.

The third chapter, based on joint work with Eva O. Arceo-Gómez and Alejandro López-Feldman, explores the effects of extreme weather events on rural welfare in Mexico. We study the poverty and labor effects of one of the worst droughts in Mexico in the past 70 years. We find that droughts have negative effects on rural households' wellbeing: households that experienced a drougth had lower per capita earnings and were 5 percentage points more likely to experience poverty than households that did not experience a drought. We also find that droughts have negative impacts on employment and schooling and these effects vary by gender: droughts reduce female employment and male school attendance. In addition, households with more experience with water scarcity are less likely to be affected by droughts. Given that climate change will increase the frequency and duration of droughts, our paper suggests that these extreme weather events are likely to become an additional threat to rural households in low and middle income countries.

Unregulated global and local air pollutants impose high costs on society. For more than half a century, economists have argued that the introduction of market instruments such as pollution taxes or cap-and-trade markets can cut aggregate emissions at the lowest cost. Market instruments have been implemented by some countries to reduce local pollutants, such as nitrogen oxides, and global pollutants, such as greenhouse gas (GHG) emissions. One problem with this context is the lack of evidence on the cost savings of market-based policies relative to other policies. Particularly for global pollutants, a second problem with the patchwork of policies is carbon leakage, where emission reductions from regulated countries are offset by emission increases in unregulated countries. This dissertation seeks to explore these two problems. The first chapter, Do environmental markets improve allocative efficiency? Evidence from U.S. air pollution, develops a framework to test the allocative efficiency changes of introducing cap-and-trade markets. The framework is applied to landmark U.S. air pollution markets using manufacturing data. The chapter finds evidence of allocative efficiency gains for some markets. The second chapter, Carbon pricing and competitiveness pressures: The case of cement trade, provides empirical evidence of decreased net exports of a carbon-intensive product, cement, in British Columbia, Canada following the introduction of their carbon tax. The third chapter, Do carbon tariffs reduce carbon leakage? Evidence from trade tariffs, combines theory and data to study the effects of proposed carbon tariffs that price the carbon content of imports on foreign GHG emission changes. The chapter finds evidence of reduced GHG emissions from targeted industries and an unintended emission offset effect from downstream industries. Together, these chapters provide evidence on the efficiency and effectiveness of policies promoted to mitigate harmful air pollutants.