A team of researchers has looked at the sulfur dioxide trading program in the US and Canada, and finds two big results: first, the cost savings are not as large as was previously thought. Simple emissions standards can be met in a few different ways, so plant operators can actually make things cheaper without being able to trade emissions. When those extra cost savings are factored in, the program doesn't get as much credit for saving money.
Second, and more importantly: as we learned in class, costs include not only money paid by plant operators, but also damages to the environment and people in the area. Power plants that are trading emissions still don't take those extra costs into consideration. That's a problem, because some of the plants buying pollution permits turned out to be upwind of big population centers, so their pollution did more health damage than would pollution from the other plants.
Emissions trading schemes still have the chance to reduce the cost of meeting a pollution standard, but as always, we must consider ALL costs when trying to find the right amount of a good to be produced, and also when we think about where that right amount should be produced.
Complicated problems!
