68 CHAPTER 3 Environmental History, Politics, and Economicsless expensive options for reducing sulfur emissions but had no
incentive to adopt them.
Consequently, the Clean Air Act Amendments of 1990 allowed
the EPA to limit the amount of sulfur that could be emitted, with
a smaller amount allowed each year, and then sell the rights to
these emissions. Each year, the EPA allows the Chicago Board
of Trade to auction permits to emit sulfur; companies may then
buy and sell these permits as needed during the year. Industries
quickly adopted a variety of technologies, such as removing sulfur
before burning coal, and met the EPA’s sulfur reduction goals
ahead of schedule and at a lower-than-expected cost.
Tradable permits have not worked as well in all cases.
Attempts to reduce water pollution have had mixed results,
especially when more than one pollutant is involved.
Grandfathering, or exempting older facilities, has undermined
other efforts. And in the sulfur case, the EPA was able to
establish clear goals and accurately measure emissions, both of
which may prove a challenge for a greenhouse gas cap and trade
system. Nonetheless, the success of tradable sulfur emissions
suggests that incentive-based regulation has a promising future.Tradable Permits and
Acid Rain
Many international policy experts believe that a cap and trade
system is the most promising approach to managing the problem
of climate change. They argue that setting a global (or nation-
by-nation) cap on greenhouse gases would encourage people
to find innovative and inexpensive ways to reduce emissions.
However, incentive-based environmental regulations remain less
familiar than command and control regulations. The example of
tradable sulfur emissions permits to reduce the effects of acid
rain demonstrates how effective the approach can be.
When coal containing sulfur is burned, sulfur dioxide is
created and released, causing acid rain (see Chapter 8). Through
the 1970s and 1980s, Environmental Protection Agency (EPA)
regulations reduced sulfur emissions primarily by mandating
command and control solutions. This meant that many large
coal-burning power plants had to install specific, and often very
expensive, equipment. By the late 1980s, these facilities knew of
CASE STUDY ✓✓THE PLANNER
Skip Brown/NG Image Collection Ted Spiegel/NG Image Collection
These buildings in Ottawa, Ontario, Canada,
have been damaged by acid rain. This is an
example of an externality caused in part by
sulfur emissions from coal-burning power plants
in the United States.Coal-burning power plants in the United States, such as this one in West Virginia,
emit sulfur that causes acid rain. Until the 1990s, the EPA mandated emission
control technology. Since the 1990s, companies have had more flexibility in how to
reduce their emissions.