In a study entitled “Trading Equity for Efficiency in Environmental Protection? Environmental Justice Effects from the SO2 Allowance Trading Program”, Professor Evan Ringquist at the University of Indiana has found that efficiency gains from sulphur dioxide (S02) allowance trading have not come at the expense of the equitable treatment of minority and low-income groups.
The study considered the environmental justice impacts of the SO2 allowance trading program, which was established pursuant to amendments to the Clean Air Act in 1990. The program is aimed at reducing SO2 emissions, which cause acid rain and human health problems. In particular, Professor Ringquist considered the potential conflict between the efficiency of market-based tools for pollution control and social equity, and whether the SO2 program inadvertently transferred pollution into minority and poor communities. As part of his research, Professor Ringquist obtained trading records for all facilities participating in the SO2 allowance trading program between January 1995 and March 2009. He then used statistical models to determine whether allowance trading led to concentrated pollution in poor communities. Professor Ringquist concluded that it did not: “There is no inherent tradeoff between efficiency and equity when using market-based instruments for pollution control. Policy makers, however, might make an effort to design and implement future emissions trading programs in a manner that reduces the monitoring costs of tracking emissions trading. By reducing monitoring costs, policy makers may prevent the concentration of emissions in poorly educated communities while preserving the efficiency benefits of these instruments.”
This research could shed some light on the concerns expressed by the Association of Irritated Residents (AIR), which has brought a court challenge against the California Air Resources Board’s decision to use cap-and-trade as the mechanism to reduce California’s greenhouse gas emissions (Association of Irritated Residents, et al. v. California Air Resources Board). AIR believes that companies which buy the right to exceed emission limits will release greater amounts of pollutants in surrounding communities, mostly poor and non-white. As Professor Ringquist suggests, perhaps the most prudent approach would be to design an emissions trading program that makes it easier for the effects of the program to be monitored by local residents.
The study is available online at Link