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The U.S. allowance trading system for sulfur dioxide: An update on market experience

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  • Renee Rico
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    Abstract

    In 1990, the U.S. Congress passed legislation that amended the Clean Air Act to create a new program to mitigate the effects of acid deposition in the U.S. through emission reductions of sulfur dioxide (SO 2) and nitrogen oxides (NO x) at electric utility plants across the country. The SO 2 reductions, totalling a 40% reduction nationally from 1980 levels or a 10 million ton reduction annually, are achieved largely through an emission trading system, the largest program of its kind designed to date. This trading system has the potential to save up to half of the compliance costs associated with more traditional source-by-source emission limit programs. This paper briefly discusses background on the acid rain issue in the United States, and the principal features of the program, including: a permanent cap on utility emissions of SO 2 beginning in 2010, decision to grant up-front allocation of emission credits to reduce individual approvals of trades, the use of continuous emission monitors and automatic penalties to ensure compliance, and integration of the Acid Rain program requirements with other Clean Air Act programs. The paper also discusses the development of the allowance trading market to date, including the types of compliance options chosen and quantity and type of emissions trading being conducted. Copyright Kluwer Academic Publishers 1995

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    File URL: http://hdl.handle.net/10.1007/BF00693019
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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

    Volume (Year): 5 (1995)
    Issue (Month): 2 (March)
    Pages: 115-129

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    Handle: RePEc:kap:enreec:v:5:y:1995:i:2:p:115-129

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: Emission trading; United States; sulfur dioxide; air pollution; costs; cost-effectiveness;

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    Cited by:
    1. Olivier Godard & Christine Cros, 1998. "The economic design of a potential tradable permit system for SO2 emissions in the European Union," Post-Print hal-00622840, HAL.
    2. Stronzik, Marcus & Dette, Birgit & Herold, Anke, 2000. "Early crediting als klimapolitisches Instrument: Eine ökonomische und rechtliche Analyse," ZEW Dokumentationen 00-13, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Coria, Jessica & Sterner, Thomas, 2008. "Tradable Permits in Developing Countries: Evidence from Air Pollution in Santiago, Chile," Discussion Papers dp-08-34-efd, Resources For the Future.
    4. Reimund Schwarze & Peter Zapfel, 2000. "Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(3), pages 279-298, November.
    5. Brookshire, David S & Burness, H Stuart, 2001. "The Informational Role of the EPA SO2 Permit Auction," Journal of Regulatory Economics, Springer, vol. 20(1), pages 43-60, July.
    6. J. Diltz, 2002. "U.S. Equity Markets and Environmental Policy. The Case of Electric Utility Investor Behavior During the Passage of the Clean Air Act Amendments of 1990," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(4), pages 379-401, December.
    7. Stavins, Robert, 2001. "Experience with Market-Based Environmental Policy Instruments," Discussion Papers dp-01-58, Resources For the Future.
    8. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
    9. Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer.
    10. Labandeira-Villot, Xavier, 1996. "Market instruments and the control of acid rain damage : Effects of a sulphur tax on the Spanish electricity generating industry," Energy Policy, Elsevier, vol. 24(9), pages 841-854, September.
    11. Sandoff, Anders & Schaad, Gabriela, 2009. "Does EU ETS lead to emission reductions through trade? The case of the Swedish emissions trading sector participants," Energy Policy, Elsevier, vol. 37(10), pages 3967-3977, October.
    12. Burtraw, Dallas & Lile, Ron, 1998. "State-Level Policies and Regulatory Guidance for Compliance in the Early Years of the SO2 Emission Allowance Trading Program," Discussion Papers dp-98-35, Resources For the Future.

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