Title IV of the 1990 amendments to the Clean Air Act initiated a historic experiment in incentive-based environmental regulation through the use of tradable allowances for emission of sulfur dioxide by electric generating facilities. To date, relatively little allowance trading has taken place;...

Title IV of the 1990 Clean Air Act Amendments (CAAA) established a market for transferable sulfur dioxide (SO2) emission allowances among electric utilities. This market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit SO2 from firms with lower...