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All History of US Environmental Policy

Week 5: Acid rain

To tackle environmental problems, market-based solutions, such as emissions trading, have gained popularity in our decreasingly-conservation-focused political environment as an alternative to strict command and control regulation. Proponents of market-based solutions argue that such mechanisms provide economic incentives for companies to reduce their pollution levels, whereas command and control regulation imposes fixed standards and penalties.

By establishing a market for pollution credits, these policies can create jobs in providing permits, such as for restoring wetlands. Since federal rulemaking evaluates costs and benefits in considering policy, these market-based solutions create more benefits, often paired with lower costs, which look appealing as economic solutions that create capitalist value and grow the economy.

Historically, new environmental legislations have been met by resistance from companies/governments that need to comply with the argument that compliance will take time. Creating a market for solutions incentivizes those solutions to spring up immediately, allowing faster uptake by the harm-doers and resulting in net environmental improvement sooner.

One widespread cap and trade program now is in the corporate carbon accounting world, where the GHG Protocol has helped establish massive markets for carbon offsets and removal. While reductions of companies’ own emissions can take significant organizational work and movement, buying offsets or removal can be a purely financial decision that happens sooner and supports jobs in the offset/removal industries. Supporters of carbon offsets argue that they’ve led to more net carbon reductions than waiting for companies to figure out how to reduce their own emissions; skeptics would note that making emissions reductions purchase-able allows companies to continue their harmful emitting and write a check to paper them over using a small chunk of their profits.

In the case of acid rain, this approach has been successful in reducing sulfur dioxide emissions, the key contributor. EPA established the Acid Rain Program, starting in 1995, to establish a market-based emissions trading system for sulfur dioxide—the federal government’s first cap and trade program. The Acid Rain Program set a limit on total emissions, which was lowered to 50% of the starting emissions by 2010, and allowed affected power utility companies to trade emissions permits. EPA data indicates that sulfur dioxide emissions have decreased 95% from 1980 to 2021 (from 17.26 to 0.95 million tons), a remarkable result that has coincided with a reduction in acid rain.

If the government could will any environmental protection into existence without worrying about economic costs/benefits, strict command and control regulations set obvious, objective outcomes for the environment. In a capitalist system balancing the desires of industry/lobbying, voters, bipartisan political appeal, economic effects, and environmental wellbeing, market-based solutions are here to stay.