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Marketing Failure: The Experience With Air Pollution Trading in the United States

(1) 42 U.S.C. 7401-7671q, ELR Stat. 101-618.

(2) It is not clear that there are genuine cost savings resulting from trading. Lead was eventually eliminated so refinery upgrades were merely delayed, not avoided. Similarly, with the failure of RECLAIM to reduce pollution to the levels required, power plants in southern California were ordered to install emission reduction technology. They thus paid for technology, as well as pollution credits that ultimately were useless. In addition, multi-million dollar fines were levied on several polluters. Economists claim that the acid rain trading program is saving money, but it has yet to reach its end-date of 2010, so such claims may be premature. To the extent that there are cost reductions, they are attributable not to trading per se, but to the cap. Doing less, by definition, costs less than doing more.

(3) The statutory language of the acid rain law describes the allocations as "not a property right," leaving open the question of what kind of "right" it is. Notwithstanding this language, commentators regularly describe the allocations as rights. Consider the following commentary in the Aug. 5, 2001 Washington Post: "what Payne and Taylor trade is the right to pollute-specifically, the government-given right to emit sulfur dioxide (SO2) and nitrogen oxides, the two gases chiefly responsible for acid rain." Ricardo Bayon, "Trading Futures in Dirty Air-Here's a Market-Based Way to Fight Global Warming," Washington Post, at B02.



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