The Paparazzi Take a Look at a Living Legend: The SO2 Cap-and-Trade Program for Power Plants in the United States

Dallas Burtraw and Karen Palmer

RFF Working Paper Series from Resources for the Future

Abstract: For years economists have urged policymakers to use market-based approaches such as cap-and-trade programs or emission taxes to control pollution. The SO2 allowance market created by Title IV of the 1990 U.S. Clean Air Act Amendments (CAAA) presents the first real test of the wisdom of economists' advice. This paper provides an overview of the origins, design, and performance of the U.S. acid rain program, and an analysis of its specific features and its adaptability as a model for addressing other pollution problems, such as control of NOx or CO2 emissions. The program also has resulted in innovation through changes in organizational technology, in the organization of markets, and through experimentation at individual boilers, much of which arguably would not have occurred under a more prescriptive approach to regulation. There is ample evidence that allowance trading has achieved substantial cost savings, and there are lessons that can guide the design of future policies.

Keywords: emission trading; cap and trade; air pollution; cost-benefit analysis; electricity; particulates; sulfur dioxide; SO2; health benefits; acid rain (search for similar items in EconPapers)
JEL-codes: D62 Q25 Q28 Q4 (search for similar items in EconPapers)
Date: 2003-04-01
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: The Paparazzi Take a Look at a Living Legend: The SO2 Cap-and-Trade Program for Power Plants in the United States (2003)
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