ABSTRACT
The spatial relationship of harmful environmental externalities to adjoining populations has received increased attention recently in the United States, with a focus on the location of incinerators, Toxic Release Inventory (TRI) emitters, landfills, and National Priority List Superfund areas (Haynes 2001: 17-31). This study addresses a new and quite different issue in the matter of spatial pollution impacts: Does market-based incentive regulation, although reducing market-wide pollution, lead to sub-area increases (hot spots) in pollution over baseline levels affecting nearby resident populations? Specifically, the authors compare the before-and-after spatial distribution of pollution that results from the application of a cap-and-trade market program to reduce stationary-source emissions of volatile organic compounds (VOC) in the Chicago severe ozone nonattainment region. This market incentive program was combined with traditional regulations, which had previously determined the before-trading, sub-area distribution of emissions.
