BLOOMINGTON, Ind. -- Programs that allow facilities to buy and sell emission allowances have been popular and effective since they were introduced in the U.S. two decades ago. But critics worry the approach can create heavily polluted "hot spots" in low-income and minority communities.
A new study by Evan Ringquist, professor in the Indiana University School of Public and Environmental Affairs, finds the problem hasn't materialized -- that the efficiency gains of allowance trading have not come at the expense of equitable treatment of minorities and the poor.
"There is very little evidence that allowance trading causes 'hot spots,'" Ringquist said. "This study finds there is no inherent trade-off between efficiency and equity when using market-based instruments for pollution control."
The study, "Trading Equity for Efficiency in Environmental Protection? Environmental Justice Effects from the SO2 Allowance Trading Program," is scheduled for publication this spring in the journal Social Science Quarterly.
It focuses on the sulfur dioxide allowance trading program (ATP) established by 1990 amendments to the Clean Air Act. The program created a market for trading pollution credits to reduce emissions of sulfur dioxide, which causes human health problems and acid rain that results in environmental damage.
While the sulfur dioxide program is the largest and most established U.S. market, there are regional markets for other regulated pollutants, including nitrogen oxides, volatile organic compounds and carbon dioxide. Domestic markets have been proposed to curb mercury pollution. And an international carbon market would be an element of a "cap and trade" initiative to slow climate change.
The idea behind emissions allowance trading is simple. Some firms and facilities can reduce their emissions by required amounts without facing excessive costs, but some can't. With a trading system, firms with low control co
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