It is accepted in current literature that market-based pollution reduction methods are more effective that conventional command and control policies. This paper examines the current trends in air quality levels in the US and the projected effects of the EPA‘s Clean Air Interstate Rule (CAIR) to develop a benefit-cost model to analyze the potential effectiveness of the cap and trade programs developed in this program. The model adopts a marginal benefit of pollution abatement from the literature and uses actual and projected market-based prices for annual SO2 and seasonal NOx allowances. The results show that the benefits of pollution reduction in both markets far exceed the costs.
Casey J. Wichman. "An Assessment of US Air Quality Policy: Past, Present and Future." Proceedings of the New York State Economics Association. vol. 1, October 2008, p. 124-133
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