CertificatedTrading - The Wall Street Journal Interactive...

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The Wall Street Journal Interactive Edition -- October 3, 1997 Certificate Trading Program Reduces Acid Rain Emissions By JOHN J. FIALKA Staff Reporter of THE WALL STREET JOURNAL WASHINGTON -- As part of a sixth-grade science project, Rod Johnson's students in Glens Falls, N.Y., removed 330 tons of sulphur dioxide from the air. Holding raffles, bake sales and auctions over a three-year period, they raised $25,000 to buy 330 certificates in the U.S. Environmental Protection Agency's acid-rain-emissions trading program -- one of the nation's hottest new commodity markets. Each certificate allows the owner to emit one ton of the noxious gas. Utilities trade the certificates -- some selling them for profit, others buying them to comply with air-quality standards. But the students at Glens Falls Middle School are going to sit on theirs. The way the EPA program works, that means the nation's air will be that much cleaner. Proposed by the Bush administration in 1990 as a novel, market-oriented solution to the problem of acid rain, the trading of what amounts to sulfur-dioxide-pollution permits has led to results that have exceeded expectations. Since its 1994 inception, the trading program, administered by the EPA, has contributed to a 30% drop in sulfur-dioxide emissions from major polluters, the agency says. Cheap Alternative President Clinton hopes to sell a version of the trading program to other nations meeting in Kyoto, Japan, in December to conclude a treaty that curbs global warming. Though some environmentalists don't like this approach, and government agencies are finding it hard to explain the complex system to local citizens, business-people are warming to it. And Mr. Johnson says his students like trading because, "We can identify a problem and then participate in a solution." Trading appears to be a cheap way to help curb pollution. Industry had complained that removing sulfur dioxide from the air would cost as much as $1,500 a ton. But the price of about 7.2 million certificates being traded this year reflects a cost
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of $90 a ton. After years of hand-wringing, acid rain is being reduced by a market that lets individual companies make their own antipollution strategies. "This program turns companies into pollution minders," says Daniel J. Dudek, a senior economist for the Environmental Defense Fund in New York, who sold the idea to the Bush administration and has become a kind of Johnny Appleseed, spawning other trading plans. "When they [polluters] think about it, they say, "Hey! That's money going up the stacks." " Trading allows a company to hunt for the most cost-efficient ways to reduce emissions. In some programs it doesn't necessarily have to be their emissions. The Los Angeles area's South Coast Air Quality Management District, for example, established a program in which it gave four oil refineries credit in the form of certificates for removing the equivalent 2,000 tons of smog after they bought and junked 17,502 pre-1982 cars, which,
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This note was uploaded on 10/12/2008 for the course ECON 1 taught by Professor Bergstrom during the Spring '07 term at UCSB.

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CertificatedTrading - The Wall Street Journal Interactive...

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