Spoiled Opportunity

September 21, 2012
By Alvin Powell, Harvard Gazette

In 1990, Northeastern lakes were becoming more acidic, threatening fish and other aquatic life and conjuring images of a future where lakes — even those in remote wilderness — were barren.
The culprit was acid rain, generated by fossil fuel burning in automobiles and power plants that spewed sulfur dioxide into the atmosphere, where it became sulfuric acid, falling in rain and as dry particles into lakes and forests.
Today, the acid rain problem is greatly reduced. Bipartisan legislation passed in 1990 cut sulfur dioxide emissions over the next 17 years to half the level of 1980, reaching the legislated target three years ahead of schedule and providing health and environmental benefits estimated to outstrip costs by tens of billions of dollars.
The sulfur dioxide regulatory system was adopted as part of the Clean Air Act of 1990. In it, total sulfur dioxide emissions were capped — enforced by a $2,000 per ton fine for excess emissions — and then permits were given to power plants across the country to emit a certain amount. Financial incentives for power plant cleanup came by making the emission permits tradable.

The program’s success made it a model of how a cap-and-trade regulatory scheme should work — everywhere but in the United States.

Robert Stavins, Albert Pratt Professor of Business and Government Environment and Natural Resources Program, said last week that national politics have “tainted” cap and trade, making it unlikely the country will adopt such a scheme to fight climate change anytime soon, even though similar plans are being adopted by other nations around the world.
Stavins, talked about lawmakers’ solution to acid rain Sept. 13 during a seminar held by the Kennedy School’s Regulatory Policy Program, led by Joseph Aldy, assistant professor of public policy.
“I think it is fair to say that it offered … a compelling demonstration of cap and trade and, more generally, of market-based interventions for environmental problems,” Stavins said.
Drawing on a working paper he authored with Massachusetts Institute of Technology Professor Richard Schmalensee, Stavins outlined the program’s success as well as four “ironies” — one of which is today’s conservative opposition to an idea that had wide support among Republicans.

“Conservatives have demonized their own policy innovation,” Stavins said.

Other ironies include that the government did the right thing — reduce sulfur dioxide emissions — for the wrong reason: to clean up the environment. Estimates of the program’s benefits put the price of health improvements from improved air quality far higher than benefits to lakes and forests. read more

 

Robert Stavins

Robert Stavins, Albert Pratt Professor of Business and Government Environment and Natural Resources Program, Belfer Center for Science and International Affairs

“I think it is fair to say that it offered … a compelling demonstration of cap and trade and, more generally, of market-based interventions for environmental problems,” Stavins said.


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