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The 1990 Clean Air Act significantly changed the government's approach to controlling air pollution,
embracing for the first time a market-based strategy designed to give utility companies incentives to comply. Under Title IV of the Clean Air Act, each of the 110 electric utilities with the
most sulfur dioxide emissions was granted a set number of pollution "allowances" based on its historical fuel use. An allowance is equivalent to one ton of sulfur dioxide emissions. Each
utility may emit sulfur dioxide up to the limit -- the "cap" -- imposed by its allowances. However, if a utility emits less than its allotted amount, by being more efficient, by using a
lower-sulfur fuel, or by using a renewable energy source like solar or hydroelectric power, it may sell its unused allowances to another utility as "pollution credits." Conversely, if a
utility cannot stay within the limits imposed by its allowances, it can buy pollution credits from a less-polluting utility. The system has two major advantages: it rewards companies that
pollute less and yet it is flexible enough to accommodate companies that cannot meet the standard of pollution control.
Title IV of the Clean Air Act has significantly decreased emissions from utilities according to a recent
summary report. Between 1990 and 2002, sources in the Acid Rain Program emitted 10.2 million tons of sulfur dioxide in 2002, down from 15.7 million tons in 1990. These emissions were slightly
more than the 2002 allowances granted under the program as utilities took advantage of unused allowances from previous years to go slightly above the cap for 2002. Similarly, with the drop in
emissions, the nation as a whole saw a similar dip in wet sulfate (acid rain) deposition and in ambient sulfate concentrations in the mid-Appalachian and northeastern U.S. where acid rain is
a significant problem *.
Recently, in 2003, the Bush Administration has proposed a Clear Skies Act which would utilize a
similar system for setting and reducing emissions from utilities and other industrial sources of sulfur dioxide, nitrogen oxides and mercury emissions. In fact, it would replace the Acid Rain
Program and extend it to 2018. Again, rather than setting emission limits for individual plants, the Act would allow plants to buy and trade emission credits toward meeting the cap.* The Act has faced strong opposition from
environmental groups and some states, who believe it would allow older, dirtier plants to increase pollution and emissions. In particular, the Act eliminates the New Source Review program,
which requires older plants expanding or modifying their production process and emissions to apply new pollution control equipment. Instead, they favor a more traditional approach of setting
stricter emission standards for both old and new plants.
There are potential flaws in this "free trade" system. For example, the allowance program assumes
that reductions in sulfur dioxide emissions will be of equal benefit to human health and the environment regardless of where they are made. This is not always true; some areas of the country
are more prone to acid rain than others. Emission reductions in an area where such emissions do not contribute to an acid rain problem will do little to help regions that are subject to such
problems. The Adirondack Council, the local governing structure of the famous state park in upstate New York, protested the fact that New England utilities would be allowed to sell pollution
credits to midwestern utilities, whose pollution is the source of acid rain already damaging northeastern forests, lakes, and rivers. Thus, even as utilities in the Northeast significantly
reduce emissions, the area environment will not improve if midwestern utilities do not also reduce emissions.* Because of these problems, the EPA recently adopted new, stricter regulations on major utilities in the Midwest and Northeast for nitrogen oxide emissions beginning in 2000 (nitrogen oxides, along with sulfur dioxide, contribute to acid rain formation).*
Despite these criticisms, Texas has embraced several of these new market-based approaches in its effort to reduce pollution.
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