Sulfur allowance trading and the regional clean air incentives market: How similar are the programs really?

This paper investigates in detail the design parameters of the two most prominent U.S. tradeable emission permit program - the U.S. EPA Sulfur Allowance Trading Program and the South Californian Regional Clean Air Incentives Market (RECLAIM). In contrast to expectations and the existing literature the two programs turn out to be rather different in several important design parameter choices. Common elements emerge primarily in the existence of an ambitious, quantified environmental target, stringent emission monitoring methods and high penalties for non-compliance, the importance of a competitive permit market, and some compromises necessary in order to gain political acceptability for the instrument and program.