Warming to a market in carbon

DURHAM -- At a time when so much public policy seems not to be working, policy successes need publicity. One example is America's clean air policy that rapidly decreased acid rain, impressing nearly all parties involved, especially with its financial efficiency.

The story of how the country controlled acid rain needs telling if only because the public paid for this improvement in environmental quality. The acid-rain story also introduces us to a much more complicated story -- the story of how America is beginning to wrestle with carbon dioxide, the major environmental pollutant of our age.

Environmental headlines of the 1980s could pass for those in today's papers and magazines. Behind the headlines is a similarly strident tone of environmental disaster, public nervousness, industrial culpability and government inaction. In the 1980s, headlines warned of acidification; today, they warn of rising carbon dioxide and global warming.

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From the 1950s to the 1980s, scientists published thousands of papers as we learned about ecological effects of acid rain. Some scientists took their findings to the press and to Congress, warning that power-plants and automobiles were acidifying soils, lakes, and streams. A few warned that whole forests and fisheries were being wiped out, and that it was too late to save acidified ecosystems. Scientists debated among themselves about the details of acid rain, but nearly all were concerned about the gradually corrosive effects of acid rain on the environment.

To control acid rain, politicians and EPA regulators opted not for traditional "command-and-control" regulation, but chose a new approach to air pollution control, one advocated in the young field of environmental economics. Regulators "capped" acid-rain emissions for the nation, and the cap for allowable emissions was set to steadily decrease over the years.

The most dynamic part of the new policy was the market EPA created for acid rain pollutants, a market used by business itself to curb air pollutants. Companies that were able to quickly and easily reduce emissions sold their excess reductions to companies not able to achieve pollution reductions.

Although simple in concept, many details had to be worked through -- but the results have been spectacular. Decreases in acid-forming pollutants have been more rapid than projected, and at substantially lower cost.

"Cap-and-trade" is now applied internationally to many environmental problems, including pollutant discharges to rivers, particulates from heavy-duty engines, lead in gasoline, and CFCs (chlorofluorocarbons) that harm ozone in the upper atmosphere. Even Chinese economists are exploring cap-and-trade to control their burgeoning air-pollution.

In the 1980s, the record of cap-and-trade was mixed, but as experience accumulated, market-based environmental policies gained support, due to both effectiveness and efficiency. Cap-and-trade taps local expertise to reduce pollutants and provides incentives for new technology and improved environmental management.

The success of 1990 clean air policy can serve as a Chapter One introduction for curbing carbon dioxide emissions. The acid rain success can help guide us in designing emissions trading and markets for fossil-derived carbon dioxide.

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Even so, moving from sulfur dioxide to carbon dioxide is not a trivial jump. Sulfur is only a few percent of coal, while carbon is over half. Sulfur pollutants cycle through the Earth's ecosystems as one of many chemical elements, whereas rising carbon dioxide stimulates photosynthesis, alters growth of food crops, traps solar radiation and may already be affecting Earth's climate.

Cap-and-trade for sulfur will eventually seem straightforward compared to the complex approach we will need for carbon dioxide. Detailed analysis and planning will be required, all while engaging in decades more research aimed at understanding the global carbon cycle, the dynamics of climate and alternative energy systems.

The story of how America controlled acid rain is too little told, and ironically, the most important lesson of the acid-rain story has little to do with acid soil and acid lakes. That most important lesson is about how modern society chose to alter its substantial amounts of wastes and pollutants by subjecting the wastes to market forces. What better story is there as we begin to wrestle with the pollutant carbon dioxide?

(Daniel deB. Richter Jr. is a professor at Duke University and director of graduate studies for the University Program in Ecology in Duke's Nicholas School of the Environment and Earth Sciences.)