Five Years of Interstate SO2 Allowance Trading: Geographic Patterns and Potential Cost Savings

Interstate trading of SO2 emission allowances under the Clean Air Act, the largest-scale application of market principles to environmental protection, is projected to save over $2.3 billion out of a possible $3 billion in annual compliance costs in the next decade. This study shows that, with one exception, Midwest states have thus far not used trading to sustain high SO2 emission levels.