Subnational climate policies, such as the Regional Greenhouse Gas Initiative (RGGI) in the United States, can generate cross-border effects, including emissions leakage and positive spatial spillovers. We estimate a spatial difference-in-differences (DiD) model to evaluate these spillovers. Our spatial DiD framework separately estimates three effects: direct effects on participating states, spillover effects among RGGI states, and spillover effects to neighboring non-participating states. We find significant reductions in coal, natural gas, and petroleum consumption in RGGI states, along with notable spillover effects within the regulated group and into nearby unregulated states. Our analysis shows that subnational policies may lead to positive unintended consequences in addition to the well- known negative leakage effects.
