This study investigates the effects of environmental regulations on housing markets using a quasi-experiment setting – the Regional Greenhouse Gas Initiative (RGGI), a carbon emissions cap-and-trade program. Previous literature predicts a heterogeneous impact from cap-and-trade programs: House prices should rise as pollution levels decrease; however, in areas most heavily impacted by environmental regulations, damaged labor markets should lower housing prices. Employing a difference-in-differences approach, this study finds that house prices unexpectedly shifted down uniformly in regulated states. Specifically, the Regional Greenhouse Gas Initiative decreased house prices by 6% to 8% in participating states once the program’s 2014 cap revision is accounted for. Labor churn resulting from the implementation of the Regional Greenhouse Gas Initiative could explain these results.
