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

Author

Listed:
  • 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
    DOI: 10.17310/ntj.2012.2.06
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    Citations

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    Cited by:

    1. Kumar, Surender & Managi, Shunsuke & Jain, Rakesh Kumar, 2020. "CO2 mitigation policy for Indian thermal power sector: Potential gains from emission trading," Energy Economics, Elsevier, vol. 86(C).
    2. David Rapson & Erich Muehlegger, 2023. "Global Transportation Decarbonization," Journal of Economic Perspectives, American Economic Association, vol. 37(3), pages 163-188, Summer.
    3. 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.
    4. Kopits, Elizabeth & McGartland, Al & Morgan, Cynthia & Pasurka, Carl & Shadbegian, Ron & Simon, Nathalie B. & Simpson, David & Wolverton, Ann, 2014. "Retrospective cost analyses of EPA regulations: a case study approach," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 5(2), pages 173-193, June.
    5. Richard Schmalensee & Robert N. Stavins, 2019. "Policy Evolution under the Clean Air Act," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 27-50, Fall.
    6. Joseph G. Schiavo & Robert Mendelsohn, 2019. "The Effect Of Domestic Air Pollution Mitigation And Fracking On Retirements Of Coal Power Plants," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-21, May.
    7. Jaime de Melo, 2015. "Trade in a ‘Green Growth’ Development Strategy: Issues and Challenges," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 22, pages 553-580, World Scientific Publishing Co. Pte. Ltd..
    8. Wang, Ke & Wei, Yi-Ming & Huang, Zhimin, 2016. "Potential gains from carbon emissions trading in China: A DEA based estimation on abatement cost savings," Omega, Elsevier, vol. 63(C), pages 48-59.
    9. Ann Ferris & Ronald J. Shadbegian & Ann Wolverton, 2014. "The Effect of Environmental Regulation on Employment: An Examination of the 1990 Clean Air Act Amendments and its Impact on the Electric Power Sector," NCEE Working Paper Series 201403, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Feb 2014.
    10. Ann E. Ferris & Ronald J. Shadbegian & Ann Wolverton, 2014. "The Effect of Environmental Regulation on Power Sector Employment: Phase I of the Title IV SO2 Trading Program," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(4), pages 521-553.
    11. Janet Currie & Reed Walker, 2019. "What Do Economists Have to Say about the Clean Air Act 50 Years after the Establishment of the Environmental Protection Agency?," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 3-26, Fall.
    12. 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.
    13. MacGregor, James, 2017. "Determining an optimal strategy for energy investment in Kazakhstan," Energy Policy, Elsevier, vol. 107(C), pages 210-224.
    14. Nelson, Erik J. & Withey, John C. & Pennington, Derric & Lawler, Joshua J., 2017. "Identifying the impacts of critical habitat designation on land cover change," Resource and Energy Economics, Elsevier, vol. 47(C), pages 89-125.
    15. Michael Hübler & Frank Pothen, 2021. "Can smart policies solve the sand mining problem?," PLOS ONE, Public Library of Science, vol. 16(4), pages 1-15, April.
    16. Lawrence H. Goulder & Andrew R. Schein, 2013. "Carbon Taxes Versus Cap And Trade: A Critical Review," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-28.
    17. Daniel Leppert, 2023. "“No fences make bad neighbors” but markets make better ones: cap-and-trade reduces cross-border SO2 in a natural experiment," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(3), pages 407-433, July.
    18. Lawrence H. Goulder & Andrew Schein, 2013. "Carbon Taxes vs. Cap and Trade: A Critical Review," NBER Working Papers 19338, National Bureau of Economic Research, Inc.
    19. Tengda Lu & Xieer Dai & Jun Chen & Ming Dai, 2018. "Pricing Industrial Discharge Quota (IDQ): A Model Reflecting Opportunity Cost of Performing Ecological Responsibility," Sustainability, MDPI, vol. 10(6), pages 1-20, June.

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