Abstract: More Clean Air for the Buck: Law, Economics, and Acid Rain
Cap and trade (what is more formally known as emissions trading) was first tried on a national basis with the acid rain plan, Title IV of the 1990 Clean Air Act Amendments. "Cap" refers to the process of reducing the total amount of a given pollutant that dischargers can emit and then capping the total emissions at some reduced level; "trade" refers to the ability of firms to buy and sell permits to pollute a fixed amount of a particular pollutant. This paper represents my preliminary review of the early years of emissions trading. I examine environmentalists' complaints about firms that "gamed" regulators as well as environmentalists' efforts to prevent gaming and in other respects create sound institutional supports for the acid rain plan.