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

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  • Robert N. Stavins

Abstract

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 established a sulfur dioxide allowance trading program. This essay identifies lessons that can be learned from this grand experiment in economically oriented environmental policy. The author examines positive political economy lessons, asking why this system was adopted from acid-rain control in 1990, and he considers normative lessons that can be learned from the program's structure and performance, focusing on lessons for the design and implementation of future systems.

Suggested Citation

  • 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.
  • Handle: RePEc:aea:jecper:v:12:y:1998:i:3:p:69-88
    Note: DOI: 10.1257/jep.12.3.69
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    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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