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Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?

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Abstract

This paper investigates in detail the design parameters of the two mostprominent US cap-and-trade permit program – the US EPA Sulfur AllowanceTrading Program and the South Californian Regional Clean Air IncentivesMarket (RECLAIM). In contrast to expectations the two programs turn out to be rather different in several important design parameter choices.Common elements emerge primarily in the existence of an ambitious, quantifiedenvironmental target, mandatory use of stringent emission monitoring methodsand stiff penalties for non-compliance, coexisting command-and-controlregulations, the creation of a competitive permit market structure, andsome distributional concessions in the initial permit allocation. Generalizing from these common features we find that provisions to assurepolitical acceptance, functional interdependencies and overlapping regulation are the most important influences on the design of applied cap-and-trade permit programs.

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Authors and Affiliations

  1. Institute for Environmental Study, Technical University of Berlin, Uhlandstr 4/5, 10623, Berlin, Germany

    Reimund Schwarze

  2. Vienna, Austria

    Peter Zapfel

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  1. Reimund Schwarze
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  2. Peter Zapfel
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Schwarze, R., Zapfel, P. Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?. Environmental and Resource Economics 17, 279–298 (2000). https://doi.org/10.1023/A:1026406931199

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