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Creating Markets for Air Pollution Control in Europe and the USA
Authors:Ger Klaassen  Andries Nentjes
Institution:(1) European Commission, B-1049 Brussels, Belgium;(2) Groningen University, 9700 AS Groningen, The Netherlands
Abstract:This paper surveys recent efforts to relax the rigid regulatory frameworks for air pollution control in Europe and the USA. European policies have mainly taken the form of bubbles and compensation or offset schemes. Emission trading has been limited to intra-firm solutions for various reasons: industry structure, absence of real scarcity, and too restrictive trading rules. Bubbles have been granted to homogenous sectors only and can be characterized as direct regulation for a group rather than tradable permit systems. By contrast, the sulphur allowance program in the USA has laid down the foundation for a pollution permit market with few formal restrictions. Problems that arise are mainly related to local environmental and public utility controls. Europe can learn from the USA that regular national permit markets could be installed, preferably for homogenous sectors. In designing the permit system, the differences between the USA and Europe in terms of ecosystem sensitivity, stringency of regulation and differentiation of regional environmental policy have to be taken into account.
Keywords:emission trading  bubbles  Europe  USA  air pollution
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