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Sulfur Dioxide Emission Trading Program

The most notable example of an emission trading program is the national sulfur dioxide (SO2) emission allowance market established under the 1990 Clean Air Act Amendments.  These amendments mainly affect fossil-fueled electricity generators.  Abt Associates played a key role in the design stages of this program, assisting the Environmental Protection Agency's (EPA's) Acid Rain Division in analyzing the proposed sulfur dioxide emissions permit market.  We examined several important market components, including:

  • Potential structures of the allowance market;
  • Potential market players, market makers, and market rules; and
  • Potential market management and monitoring practices.

As part of this effort, we examined both private and public trading markets (e.g., New York Stock Exchange, spot oil market) to identify elements and practices that are relevant to the sulfur dioxide emissions permit market.  Based on these findings, we recommended how to best design, manage, and monitor the sulfur dioxide emissions market.  We also developed a program evaluation process and discussed methods and data sources for establishing quantitative criteria to measure program success.