Benefits and Costs From Sulfur Dioxide Trading: A Distributional Analysis

Abstract

Prior to the passage of Title IV of the 1990 Clean Air Act Amendments (CAAA), there had been a lively debate involving Congress, the U.S. Environmental Protection Agency (EPA), and academics, about the need for reducing sulfur dioxide (SO2) emissions due to the problem of acid rain. In addition to domestic pressure, Canada was putting political pressure on the United States to decrease acid rain. Just after the passage of the CAAA the United States and Canada signed the Canada-United States Air Quality Agreement, aimed at controlling transboundary acid rain. How damaging is acid rain? The National Acid Rain Precipitation Assessment Program found that acid rain causes minor damage to crops and modest damage to aquatic life in acidified lakes and streams. Burtraw et al. (1998) estimate the expected environmental damages from acid rain on recreational activities, residential visibility, and morbidity to be about $13 per capita in 1990.