Tuesday, July 13, 2010

The Return of Command and Control

As I discuss in Chapter 10 of my favorite textbook, economists usually favor market-based solutions to control pollution over command-and-control regulations.  Sadly, it looks like policy is moving in the opposite direction.  The WSJ reports:
The original U.S. cap-and-trade market, which succeeded in slashing the power-plant emissions that cause acid rain, is in disarray following the issuance of new federal pollution rules.
The collapse in the pioneering market where power producers trade permits that allow them to emit sulfur dioxide and other pollutants that cause acid rain comes as policy makers seek to establish a similar market to curb the emissions of carbon, a cause of climate change.
The acid-rain market has struggled for the past two years as utilities, states and investors waited for the Environmental Protection Agency to issue new rules. The rules, released last week, put tougher limits on emissions by power plants but rely less on trading. As a result, the allowances that utilities now trade to allow them to emit sulfur dioxide are expected to become worthless.