Market-based environmental policies are widely adopted on the basis of allocative efficiency. However, there is growing concern that these market forces could widen existing disparities in pollution exposure between disadvantaged and other communities. Understanding whether such “environmental justice” (EJ) gaps widen or narrow requires estimating effects on pollution emissions and then tracking where that pollution goes. We develop an estimation framework that explicitly embeds a pollution dispersal model to examine how EJ gaps changed following the 2013 introduction of California's green- house gas (GHG) cap-and-trade program, the world's second largest carbon market and the one most subjected to EJ critiques. We find that the program reduced GHG and criteria air pollution emissions. Examining resulting spatial changes in pollution exposure, we find that the program reversed previously widening EJ gaps in PM2:5, PM10, NOx, and SOx, narrowing gaps to 2008 levels by 2017. We demonstrate that using a pollution dispersal model is crucial for the robustness of our results and note that our approach for mapping emissions to exposure is applicable to many environmental policy settings. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.