Market Solutions to Environmental Problems

The cap-and-trade market that successfully reduced acid-rain emissions is threatened by new federal regulations, says The Wall Street Journal. Could cap-and-trade work as well for carbon? “The acid-rain market has been considered a success, helping to reduce sulfur-dioxide emissions by half. Permits to emit sulfur had once traded for $1,600 a ton. European carbon markets followed, and the Obama administration has said it supports the notion of caps on carbon emissions. The market’s collapse shows how vulnerable market-based approaches to reducing air pollution are to government actions. That could scare off investors, who won’t commit to a market where the rules can change at any minute.”