The SO2 Allowance-Trading System and the Clean Air Act Amendments of 1990: Reflections on 20 Years of Policy Innovation
Chan, Gabriel, Robert Stavins, Robert Stowe, and Richard Sweeney (2012). The SO2 Allowance-Trading System and the Clean Air Act Amendments of 1990: Reflections on 20 Years of Policy Innovation. National Tax Journal 65(2): 419-452. doi: 10.17310/ntj.2012.2.06.
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 regulation. The program was a great success by almost all measures. This paper, which draws upon a research workshop and a policy roundtable held at Harvard in May 2011, investigates critically the design, enactment, implementation, performance, and implications of this path-breaking application of economic thinking to environmental regulation. Ironically, cap-and-trade seems especially well suited to addressing the problem of climate change, in that emitted greenhouse gases are evenly distributed throughout the world’s atmosphere. Recent hostility toward cap-and-trade in debates about U.S. climate legislation may reflect the broader political environment of the climate debate more than the substantive merits of market-based regulation.
cap-and-trade, market-based environmental policy, acid rain, sulfur dioxide, Clean Air Act Amendments