TY  - JOUR
AU  - Schmalensee,Richard
AU  - Stavins,Robert
TI  - The SO2 Allowance Trading System:  The Ironic History of a Grand Policy Experiment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18306
PY  - 2012
Y2  - August 2012
UR  - http://www.nber.org/papers/w18306
L1  - http://www.nber.org/papers/w18306.pdf
N1  - Author contact info:
Richard Schmalensee
MIT Sloan School of Management
100 Main Street, E62-520
Cambridge, MA 02142
Tel: 617/253-2957
Fax: 617/258-6617
E-Mail: rschmal@mit.edu

Robert Stavins
JFK School of Government
Harvard University
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-1820
Fax: 617/496-3783
E-Mail: robert_stavins@harvard.edu
AB  - Two decades have passed since the Clean Air Act Amendments of 1990 launched a grand experiment in market-based environmental policy: the SO2 cap-and-trade system.  That system performed well but created four striking ironies.  First, this system was put in place to curb acid rain, but the main source of benefits from it was unexpected.  Second, a substantial source of this system’s cost-effectiveness was an unanticipated consequence of earlier railroad deregulation.  Third, it is ironic that cap-and-trade has come to be demonized by conservative politicians in recent years, since this market-based, cost-effective policy innovation was initially championed and implemented by Republican administrations.  Fourth, court decisions and subsequent regulatory responses have led to the collapse of the SO2 market, demonstrating that what the government gives, the government can take away.
ER  -