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The so2 Allowance-Trading System and the Clean Air Act Amendments of 1990: Reflections on 20 Years of Policy Innovation

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  • Chan, Gabriel
  • Stavins, Robert
  • Stowe, Robert
  • Sweeney, Richard

Abstract

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.

Suggested Citation

  • Chan, Gabriel & Stavins, Robert & Stowe, Robert & Sweeney, Richard, 2012. "The so2 Allowance-Trading System and the Clean Air Act Amendments of 1990: Reflections on 20 Years of Policy Innovation," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(2), pages 419-452, June.
  • Handle: RePEc:ntj:journl:v:65:y:2012:i:2:p:419-52
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    Cited by:

    1. Lawrence H. Goulder, 2013. "Markets for Pollution Allowances: What Are the (New) Lessons?," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 87-102, Winter.
    2. Jaime de Melo, 2014. "Trade in a “Green Growth” Development Strategy. Issues and Challenges," Revue d’économie du développement, De Boeck Université, vol. 22(HS01), pages 157-184.
    3. Richard Schmalensee & Robert N. Stavins, 2013. "The SO 2 Allowance Trading System: The Ironic History of a Grand Policy Experiment," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 103-122, Winter.
    4. repec:eee:enepol:v:107:y:2017:i:c:p:210-224 is not listed on IDEAS

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