The Environmental Effects of SO₂ Trading and Banking

Dallas Burtraw and Erin T. Mansur

Environmental Science and Technology, Volume 33, Issue 20, October 15, 1999, pages 3489-3494.
Resources for the Future Discussion Paper 99-25
Reprinted in Tietenberg, Tom. ed. Emissions Trading Programs, Vol. 1: Implementation and Evolution (Aldershot, UK: Ashgate, 2001), pp. 253-258.

Abstract:

The widely acknowledged innovation of Title IV of the 1990 Clean Air Act Amendments is sulfur dioxide allowance trading, which is designed to encourage the electricity industry to minimize the cost of reducing emissions. Few studies have examined the environmental effects of trading, and none have explored the effects of banking. We used an integrated assessment computer model, the Tracking and Analysis Framework, to evaluate changes in emissions of SO₂, atmospheric concentrations of sulfates and deposition of sulfur, and public health benefits from reduced exposure to SO₂ and particulate matter. We assessed geographic and temporal changes at the state level that result from trading and banking and compared them with estimated cost savings. Our findings are not consistent with the fears of the program’s critics. In the East and Northeast including New York State, an area of particular concern, we found that health benefits increase and sulfur deposition decrease slightly as a result of trading. Nationally, trading results in health-related benefits in addition to significant cost savings. Banking changes the timing of emissions, but the geographic consequence of banking is varied.