Department of Commerce, respectively. E conomists have long advocated trade in organized markets for externalities like pollution. Both government and academic experts have investigated emission fees and marketable pollutant permits and have found that they enhance economic efficiency. More important, trade in pollutant permits would create incentives to shift away from heavily polluting fuels and to shut down old, dirty facilities. Since these older facilities and more noxious fuels are responsible for the bulk of emissions, the potential for ambient improvement is obvious.
Markets are simply better able than bureaucrats to meet specific environmental goals.
In recognition of these facts, the 1989 amendments to the Clean Air Act proposed by the Bush administration envision an expanded role for market-based environmental quality management. After describing the current regulatory structure, we shall examine political barriers to adopting a pollutant permit market that satisfies economic efficiency criteria. Where We Are Congress passed the Clean Air Act in 1970 and last amended it in 1977. Congress is now considering proposed amendments to the Clean Air Act that would achieve a 10 million ton reduction in sulfur dioxide from 1980 levels by the year 2000. This would be accomplished by establishing a system of marketable permits.