The Environmental Protection Agency recently released an assessment of its current acid rain regulatory program indicating that corporations have been meeting sulfur dioxide (SO2) reduction standards through the tradable permits system that is in place for this purpose.
But according to many Tufts experts, the tradable permits system - which sets a mandatory 8.5 million ton cap on SO2 emissions from coal-fired power plants and allows a limited and periodically decreasing number of pollution credits to be bought and sold in a free market - has limitations as well as benefits.
"While the acid rain program has been successful, it may not be as wildly successful as its most ardent supporters suggest," said Robert Russell, an Urban and Environmental Center for Policy and Planning lecturer. "There have been other measures independent of acid rain regulations that contributed to a decrease in SO2 emissions."
The permit system was introduced in an amendment - Title IV - to the 1990 Clean Air Act.
The Reagan administration's deregulation of the railroad industry allowed for the transport of coal that was naturally low in sulfur. (Deregulation made it economical to sell coal from the west to power plants in the east, and coal from western regions is naturally much lower in sulfur than coal from the east.)
According to Russell, part of the tradable permit system's effectiveness is due to the nature of SO2, which disperses when released.
"Without precise local effects, it doesn't matter so much where permits are bought and sold," Russell said. "If the effects of SO2 were more localized, we would have to worry about pollution hot spots."
Because of SO2's non-localized effects, the overall reduction of emissions matters more than the reduction of emissions in a particular area - but the problem of localized pollution is not entirely avoided. The state of New York, for example, has sued corporations in an attempt to decrease upwind emissions.
Economics professor Jay Shimshack said people in his profession view the tradable permits program as a success.
"Substantial SO2 and NOx emissions reductions occurred, and these pollution reductions were achieved at considerably lower costs that command and control alternatives," Shimshack said. (According to the Environmental Protection Agency's [EPA] Web site, command and control programs "establish specific, inflexible emissions limitations with which all affected sources must comply.")
"Estimates suggest cost savings have exceeded $1 billion annually, and 'hotspots' concerns for this policy were largely unfounded," Shimshack added. "Further, best estimates suggest total benefits of the program have exceeded total costs by a considerable margin, although many of the economic benefits come from reduced adverse health outcomes - not from ecosystem benefits of reduced acid rain."
The success of Title IV was a victory for Environmental Defense, a leading environmental organization that was particularly supportive of economics-based solutions.
Others are more skeptical of these solutions being implemented on an international scale. "Tradable permits systems may be helpful in the reduction of CO2 emissions, in compliance with the Kyoto Protocol," said Professor William Moomaw of the Fletcher School and the Urban and Environmental Center for Policy and Planning. "But while trading credits in the EU will work, it's harder to see how these exchanges could be effective among other countries where emissions may not be monitored as strictly," Moomaw said.
Despite the limitations of permit trading between countries, Moomaw is confident that trading systems within companies and between companies can at least help reduce greenhouse gas emissions.
"Trading can happen within a single company, among several companies, or among nations," Moomaw said. "Trading is going on in the commercial sector, even though the U.S. is not part of an international trading program."
The acid rain program was not the first time that a tradable permits mechanism has been used to help regulate a pollutant: When lead was phased out of gasoline during the 1970s, lead refiners traded the right to continue manufacturing lead gasoline.
But this tradable permits system was on a smaller scale. The acid program is much larger - involving the entire electrical industry. Shimshack said the appropriateness of a tradable permits program depends largely on the particulars of the problem being addressed.
"Tradable permits programs aren't preferred to alternatives when the transaction costs of trading are high, political and administrative costs of program operation are high, or if the regulating agency is considerably uncertain about the distribution of costs and benefits of reducing pollution," Shimshack said.
The Bush administration is proposing a tradable permits system to regulate mercury emissions. "I don't think that this is a good idea," Moomaw said. "[Unlike SO2], mercury does not disperse, so certain areas would become very polluted."
"Command and control might be a better strategy for mercury regulation, since mercury is more localized and poses severe and direct threats to human health," said Associate Professor of Civil and Environmental Engineering John Durant.
