Goal:

Each system is designed to allow polluters flexibility in meeting emission limits. Goal is to achieve cleaner air at lower costs.

Assumption:

Polluters are I the best position to understand their own sources of pollution and how to make the most cost-effective reductions in pollution.

Establishes broad goals and regulation.

Who is responsible for Administering Trading Systems?

States and local agencies.

Plans:

Netting -- Began in 1974, sums the total output of pollution from a plant and allows increases in pollution some aspects of plant operations, as long as there are decreases in pollution in other aspects. The "net" amount of pollution should not change, (but ideally it should be a negative value if pollution levels are to decrease).

Bubbles -- Began in 1979, is similar to netting except that external trading is allowed between plants in an AQ Region.

Offsets (Began 1976) -- Applies in nonattainment areas. Allows a polluting plant to start operation in nonattainment areas if they are able to get existing facilities to reduce their levels of air pollution -- by e.g., paying for the installation of pollution control devices at the existing facilities. Offsets are only allowed when there will be a net decrease in pollution in the nonattainment area.

Banking (Began in1979) -- Polluters can buy emissions credits from polluters who pollute less than the allowed amount. In theory, the credit purchased allows the purchaser to pollute less than the original amount of the reduction.

The reduction in emisions as a result of the trade is determined by the "offset ratio". An offset ratio of 1:1 would result in no net reduction, while an ofset ratio of 2:1 would result in a 50% reduction in emissions.

 Results of Emission Trading:

Evidence suggest that emissions trading has lowered the cost of pollution control but has had a negligible effect on air quality.

Emissions trading schemes require careful monitoring of plant emissions; and

Because of high offset ratios.