Pollution Credits By: Luke Jeseritz

What is a pollution credit? A pollution credit is a set amount of pollutants a privately owned corporation, utility, or government can release into the air in a year.

How do pollution credits work? Pollution is given a financial value (credit) and the amount of pollution a company can emit is capped. If a company does not use up all of their credits they can trade to other companies that need more. Known as cap-and-trade model

History 1977 Clean air act New way of trading developed by Dr. Richard Sandor Adopted by EPA in 1990 Trading began in 1990 after the creation of the clean air act. Originally intended to lower sulfur dioxide emissions.

What is a credit? One metric ton of stored carbon equals on carbon credit. Currently carbon credits in U.S are worth about $1.50 SO2 are worth about $500

Who trades credits? EPA acid rain program RECLAIM Worldwide trade European Emission Trading

Acid Rain Program Utility unit allowed to emit one ton of sulfur dioxide a year. Goal is to cut 1980 emission levels in half by Saves industry $2 billion dollars a year.

RECLAIM Southern California Began 1995 Credits equal one pound of pollution Put a cap on amount of pollutants in an area

Worldwide trade 1997 Kyoto Protocol Voluntary Modeled by the U.S.’s pollution credit trading

Problems with Kyoto Protocol United States withdrew in 2001 Emission requirements were impossible Russia and Ukraine only countries with large surpluses

European Emission Trading System (ETS) Set to begin in 2005 All major industrialized sources in Europe There will be pollution credits handed out that will be worth about $1 trillion in U.S. currency

ETS cont. Set up own systems for central banking, accounting and exchange. There is a trade barrier for credits with countries not in the European Union

Reasons for Trade barrier Not allow worthless Russian credits to flood market. This would cause extreme inflation to market.

Questions?