PRESENTATION OUTLINE
Pollution Permits involve giving firms a legal right to pollute a certain amount.
Ex. 100 units of Carbon Dioxide per year
If the firm produces less pollution it can sell its pollution permits to other firms.
However if it produces more pollution it has to buy permits off other firms.
There will be a market for pollution permits. If firms pollute a lot there will be low supply and high demand therefore the price will be high for permits.Therefore there is an incentive for firms to cut pollution
These pollution permits are used in the form of Carbon credits. Each country has been given a permit to produce Carbon dioxide pollution which causes Global warming. If it pollutes less than its quota then it can sell it to other countries. Therefore there is an incentive to pollute less.
It is difficult to know how many permits to give out. The government may be too generous or too tight.
Difficult to measure pollution levels. There is potential for hiding pollution levels.
Administration costs of implementing the scheme.
Countries who pollute more than their quotas can simply buy permits off other people. Therefore rich developed countries have been buying permits of less developed countries. This has not reduced pollution.
Since 1978 generating units are required to limit sulfur dioxide to a "lowest achievable emissions rate" of about 0.6 lbs/mmBtu.
Title IV of the 1990 Clean Air Act established the allowance market system known today as the Acid Rain Program. Initially targeting only sulfur dioxide, Title IV set a decreasing cap on total SO2 emissions for each of the following several years, aiming to reduce overall emissions to 50% of 1980 levels.
Its primary goal is the reduction of annual SO2 emissions by 10 million tons below 1980 levels of about 18.9 million tons.
Requiring electric power generating plants cut sulfur dioxide emission rates to 2.5 lbs/million British thermal units (mmBtu).
