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Economics of Pollution Trading for SO2 and NOx

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  • Burtraw, Dallas

    (Resources for the Future)

  • Palmer, Karen

    (Resources for the Future)

  • Krupnick, Alan

    (Resources for the Future)

  • Evans, David

    (Resources for the Future)

  • Toth, Russell

Abstract

For years economists have urged policymakers to use market-based approaches such as cap-and-trade programs or emission taxes to control pollution. The SO2 allowance market created by Title IV of the 1990 U.S. Clean Air Act Amendments represents the first real test of the wisdom of economists’ advice. Subsequent urban and regional applications of NOx emission allowance trading took shape in the 1990s in the United States, culminating in a second large experiment in emission trading in the eastern United States that began in 2003. This paper provides an overview of the economic rationale for emission trading and a description of the major U.S. programs for sulfur dioxide (SO2) and nitrogen oxides (NOx). We evaluate these programs along measures of performance including cost savings, environmental integrity, and incentives for technological innovation. We offer lessons for the design of future programs including, most importantly, those reducing carbon dioxide.

Suggested Citation

  • Burtraw, Dallas & Palmer, Karen & Krupnick, Alan & Evans, David & Toth, Russell, 2005. "Economics of Pollution Trading for SO2 and NOx," RFF Working Paper Series dp-05-05, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-05-05
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    sulfur dioxide; nitrogen oxides; emission trading; power plants; air pollution;
    All these keywords.

    JEL classification:

    • 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
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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