GLOBAL CO2 EMISSIONS TRADING - EARLY LESSONS FROM THE US ACID-RAIN PROGRAM

The U.S. Environmental Protection Agency is implementing a program of SO2 emission allowance trading as part of the Acid Rain Program authorized by the Clean Air Act Amendments of 1990. Electric utilities may use allowance trading as part of their compliance strategy to meet SO2 emission reduction requirements, which begin in 1995. In the interest of a free market in emission credits, some utilities began trading in 1992. A strict but essential requirement for continuous-emissions monitoring was developed to support the trading program. This program is being widely watched and will be evaluated as part of an effort to determine if market concepts can be successfully extended to other environmental issues. One such issue is greenhouse gas emissions and their link with global warming and climate change. This paper focuses on the early lessons learned, issues, and challenges involved in going from a domestic electric utility SO2 emissions trading program to inter-industry, inter-gas and international as well as national emissions trading and offsets programs. Prominent among these issues are CO2 allowance allocations, equity, emissions monitoring, enforcement, and cost-effectiveness.