Pollution Rights Trading: A Solution to Pollution Problems?

Emissions trading may be one of the most important controversial issues in the Environmental Science field to date. With all of the hoopla on climate change and man being the main culprit of this climate change, it is not hard to see why emissions' trading is such a debatable issue. The question is: Is emissions trading the answer to controlling the many environmental problems in existence? Are programs based on emissions trading, also known as "cap-and-trade" programs, better than what has come to be known as "command-and-control" programs? Are emissions trading programs being abused by large companies, and if so, what can be done to stop this? Well, before we can answer any of these questions, one must know what emissions' trading is.

According to the text, emissions' trading is based on the belief that air pollutants, such as sulfur dioxide and carbon dioxide, are tradable commodities. The idea is that if corporations expel less pollution than the maximum they are allowed to expel, then they can put their left over allowances on the open market. The companies that pollute more than these "clean" companies can buy up these allowances. By doing so, they can continue to release the same amount of pollutant or they can invest in more advanced technology to clean up the pollutant, whichever is saves the company more money. Either way, neither company can release more pollution than is mandated by law. The whole idea is that the EPA sets a target and it is up to the industry to decide on how to comply (Easton, 2008, p. 95).

The whole concept of emissions trading is different from the command-and-control programs in which companies have to meet specific environmental standards and are told what technologies they should create in order to meet those standards. Proponents of emissions trading believe that command-and-control programs cause companies to just meet minimum standards and this, they say, stifles innovation. If a company is given more leeway and is given an incentive to clean up the environment, then it will strive to develop more advanced technology (Easton, 2008, p. 94-95).

A few decades ago, acid rain was a big problem in the eastern United States. Amendments to the Clean Air Act in 1990 led to the establishment of the Acid Rain Program. The Acid Rain Program is a cap-and-trade program which is credited with reducing sulfur dioxide emissions by about four million tons over the last decade or so. According to Charles Schmidt, a freelance science writer, this has reportedly reduced rainfall acidity in the Northeast U.S. by about twenty five percent. According to Dallas Burstaw, who works for the Resources for the Future in Washington D.C., the program works well because it's simple and affordable. The success of this program has brought a number of companies into the emissions trading scheme. Together, companies such as BP, Ford Motor Company, and DuPont plan to lower their greenhouse gas emissions by about five percent below 2005 levels (Easton, 2008, p. 96).

The emissions trading scheme is not problem free and it appears that proponents and not just opponents of cap-and-trade programs realize this. One of the biggest concerns is that the emissions trading on the open market can be easily abused. A number of environmentalists, whom according to Schmidt have a moderate feeling towards emissions trading, believe that any company that finds that its emission levels are below the maximum levels allowed are eligible for allowances that they can sell later. Many environmentalists believe that if industry is left to set the standards for emissions allowances and not the regulatory agency, then abuse will occur (Easton, 2008, p. 98). According to Brian Tokar, a college teacher and environmental activist, a number of companies have already done this. He points out that a number of companies are buying up credits like crazy. He cites that Duke Power, located in North Carolina, bought up a whopping thirty five percent of the short term allowances for sulfur dioxide emissions and upwards of sixty percent of long term allowances. A number of other companies bought upwards of over ninety percent of short and long term allowances. The fear is that the companies that buy the most allowances will be able to make the allowances market the way they want it. Tokar also points out that the value of credits has fallen and that is why these companies are buying so many of them (Easton, 2008, p. 102-103).

Another issue with the emissions trading scheme is that even if it does cause some decline in the amount of emissions of certain pollutants (such as sulfur dioxide and carbon dioxide), it wouldn't be as much as it would be under command-and-control standards. Even if a particular area has its average air pollution concentrations reduced, this doesn't mean a whole lot if the company is just buying up credits and not improving its technology (because the technology costs too much). According to an article written by environmental activist and journalist Gar Lipow (2007), countries such as Italy and Germany have reduced their SO2 emissions by 62% and 87% over an 11 year period (compared to the U.S. at 31%) and they have stuck to rule-based regulation (para. 2). Even with these figures, proponents of emissions trading insist that it's just in its infancy and that's why things are happening slowly.

So is emissions trading a good way to control environmental problems? Some believe so while others think it's a total waste. The fact is that emissions trading has had some success, albeit limited. Could this change? It does appear that support for cap-and-trade programs in Congress is rising as a number of senators are introducing bills. The problem is that there are disagreements on how to establish baselines for emissions. The thing that needs to be decided is "how the setup of a program would affect the distribution of the cost" ("Support Grows," 2007, para. 3). How would allowances be distributed, which companies would receive the permits, and how would baseline levels be calculated? When it comes down to it, it's all about money. Some people in Congress, as well as many presidential candidates, support the cap-and-trade system but want to combine it with a pollution tax (para. 10). This pollution tax, as Brian Tokar suggests, may actually help to reduce pollution faster because it would encourage companies to reduce their emissions as much as possible. This could, as Tokar says, "help reduce pollution beyond regulatory levels (Easton, 2008, p. 105). This tax would provide a large amount of revenue that would fund research and the production of green technology ("Support Grows," 2007, para. 10). However, it doesn't appear Congress will support any tax proposal (para. 8). Who's willing to pay the cost of expensive green technology? It seems logical to think that the flexibility that comes with emissions trading will encourage companies to find the cheapest means of innovation. Wouldn't it just be better to stick with the command-and-control system to clean the air and use emissions' trading as a backup?

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Dubuque: McGraw-Hill.

Lipow, G. (2007, February 19). Emissions trading: A mixed record, with plenty of
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