A few environmental economists, principally those located in or near Washington, D.C., have written a number of laudatory articles, arguing that not only does trading save money, but its saves even more than was projected before programs were adopted. Yet these articles rarely examine specific program details, such as a comparison of the experience of a trading regime in one jurisdiction to that of a command-and-control program in an adjacent area; or, the environmental benefits of a trading program in the United States with those of a regulatory approach in another nation, with analogous objectives. Despite the lack of such critical analysis, all manner of intrinsic advantages are attributed to trading. It is said to save money, encourage innovation, and stimulate rapid environmental improvements. Does it? The purpose of this paper is to answer that question, because no persuasive response can currently be found in the literature.
This examination started in the summer of 2002, aimed at examining in detail three such schemes in the United States:
- The leaded gasoline trading program, which began operation in the United States in 1974.
- The acid rain trading program, which was created by the 1990 Clean Air Act Amendments.
- The Regional Clean Air Incentives market, or RECLAIM, which started in southern California in 1993.