The So2 Allowance Trading System: the Ironic History of a Grand Policy Experiment

@article{Schmalensee2012TheSA,
  title={The So2 Allowance Trading System: the Ironic History of a Grand Policy Experiment},
  author={Richard. Schmalensee and Robert Stavins},
  journal={Political Economy: Taxation},
  year={2012}
}
Two decades have passed since the Clean Air Act Amendments of 1990 launched a grand experiment in market-based environmental policy: the SO2 cap-and-trade system. That system performed well but created four striking ironies. First, by creating this system to reduce SO2 emissions to curb acid rain, the government did the right thing for the wrong reason. Second, a substantial source of this system’s cost-effectiveness was an unanticipated consequence of earlier railroad deregulation. Third, it… 

THE SO₂ ALLOWANCE-TRADING SYSTEM AND THE CLEAN AIR ACT AMENDMENTS OF 1990: REFLECTIONS ON 20 YEARS OF POLICY INNOVATION

The introduction of the U.S. SO₂ allowance-trading program to address the threat of acid rain as part of the Clean Air Act Amendments of 1990 is a landmark event in the history of environmental

What Can We Learn from the End of the Grand Policy Experiment? The Collapse of the National SO 2 Trading Program and Implications for Tradable Permits as a Policy Instrument

The 1990 amendments to the Clean Air Act created a trading program in sulfur dioxide (SO2) emissions that has served as the seminal example of how an emissions trading program could be designed. Yet

Instrumentation Strategies and Instrument Mixes for Long Term Climate Policy

The good intentions of COP21 are to be reached by novel climate policy instrumentation, beyond what has been developed till now. For the long term two fundamentally different strategies emerge, each

European carbon market: lessons on the impact of a market stability reserve using the Zephyr model

In January 2014, the European Commission proposed the introduction of a Market Stability Reserve (MSR) to improve the functioning of the European carbon emission trading scheme. This article is an

The Impact of Tradable Permit Program Design on Emissions: Evidence from the United States Acid Rain Program

As reducing emissions of harmful pollutants remains a primary concern in environmental policy, it is beneficial to examine a successful policy initiative – the United States Acid Rain Program (ARP).

A new political economy of climate change

This article responds to Jean Tirole, winner of the Nobel prize for economics in 2014 and the signatories of the international appeal launched by Toulouse School of Economics and the Climate

Straighten Up and Price Right: The Political Life and Times of a Carbon Tax in the United States

This thesis in Government explores the coalitional and institutional politics of carbon pricing initiatives in the United States. It draws upon the political history of U.S. environmental policy,

Emissions Trading in the Climate Policy Mix — Understanding and Managing Interactions with other Policy Instruments

Emissions trading promises the achievement of a pre-defined environmental outcome at least cost. If the system works and key assumptions hold, it would seem to be an “optimal” climate policy

The design of environmental markets: What have we learned from experience with cap and trade?

This article reviews the design of environmental markets for pollution control over the past 30 years, and identifies key market-design lessons for future applications. The focus is on a subset of
...

References

SHOWING 1-10 OF 109 REFERENCES

THE SO₂ ALLOWANCE-TRADING SYSTEM AND THE CLEAN AIR ACT AMENDMENTS OF 1990: REFLECTIONS ON 20 YEARS OF POLICY INNOVATION

The introduction of the U.S. SO₂ allowance-trading program to address the threat of acid rain as part of the Clean Air Act Amendments of 1990 is a landmark event in the history of environmental

The Political Economy of Market‐Based Environmental Policy: the U.S. Acid Rain Program1

The U.S. acid rain program enacted in 1990 gave valuable tradable sulfur dioxide emissions permits—called “allowances”—to electric utilities. We examine the political economy of this allocation.

What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading

The most ambitious application ever attempted of a market-based approach to environmental protection has been for the control of acid rain under the Clean Air Act amendments of 1990, which

Benefits and Costs from Sulfur Dioxide Trading: A Distributional Analysis

Policy-makers and others interested in environmental justice (EJ) are concerned that poor and minority communities are disproportionately exposed to pollution. Title IV of the 1990 Clean Air Act

Experience with Market-Based Environmental Policy Instruments

Environmental policies typically combine the identification of a goal with some means to achieve that goal. This paper, prepared as a chapter draft for the forthcoming Handbook of Environmental

The Effect of Allowance Allocations on Cap-and-Trade System Performance

An implication of the Coase theorem is that under certain conditions, the market equilibrium in a cap-and-trade system will be cost-effective and independent of the initial allocation of tradable

Market Effects of Environmental Regulation: Coal, Railroads, and the 1990 Clean Air Act

Title IV of the 1990 Clean Air Act Amendments introduced a cap-and-trade system for sulfur dioxide emissions from electric power plants in the United States. This paper analyzes the effects of that

U.S. Emissions Trading Markets for SO2 and NOx

The U.S. Clean Air Act Amendments of 1990 initiated the first large experiment in the use of market-based regulation to control environmental problems with the introduction of an emissions trading

Sulfur Dioxide Control by Electric Utilities: What Are the Gains from Trade?

Title IV of the 1990 Clean Air Act Amendments (CAAA) established a market for transferable sulfur dioxide (SO2) emission allowances among electric utilities. This market offers firms facing high

What Did the Market Buy? Cost Savings Under the U.S. Tradeable Permits Program for Sulfur Dioxide

Title IV of the 1990 Clean Air Act instituted a nationwide system of tradeable pollution permits for sulfur dioxide emitted by electric power plants. This paper asks: What were the cost savings from
...