In 1990, President George H.W. Bush signed into law an amendment to the Clean Air Act that mandated emissions reductions of the harmful pollutant sulfur dioxide, SO2, from coal fired power plants. The government did not instruct industry how
In 1990, President George H.W. Bush signed into law an amendment to the Clean Air Act that mandated emissions reductions of the harmful pollutant sulfur dioxide, SO2, from coal fired power plants. The government did not instruct industry how they were to achieve the reductions, but merely that they were required to. A novel system called ‘cap and trade’ was implemented for the first time that allowed polluters some flexibility in how they met the targets by trading credits.
Cap and trade was a market based policy innovation that broke with the typical ‘command and control’ methods for reducing pollution. The market-based approach led to a wave of innovation in exhaust scrubber technologies and created a profitable market for sulfur products that was not anticipated. There is now a large market for sulfur commodities derived from coal, particularly in agrochemicals, a market that reached 41.1 million metric tons in 2012. The cap and trade model was so successful that SO2 pollution was reduced by 50% far faster than predicted and at one-fourth of the expected costs according to EDF (Environmental Defense Fund), one of the original architects of the plan.
The current model generally 