Comments on paper by Jonathon Remy Nash and Richard L. Revesz

Date15 August 2002
Publication Date15 August 2002
AuthorDaniel H. Cole
Daniel H. Cole
This paper tackles an issue that is becoming increasingly important as
tradeable quota instruments proliferate: the distribution of the costs and
benefits of environmental regulation. No one should be surprised that this issue
has arisen. Like most economists, the advocates of tradeable permits have had
little to say about distributional issues. But distributional issues have become
prominent, especially with the rise of the environmental justice movement.
The question is whether it is possible to maintain the enhanced efficiency
associated with tradeable quotas without sacrificing equity. Conversely, can we
better account for distribution concerns in designing emissions trading programs
without losing their efficiency advantages? More than anything else, the Nash
and Revesz paper illustrates the difficulties inherent in efforts to combine equity
and efficiency in a tradeable permit regime.
To cut to the chase, I think their idea of an web-based system for
pre-approving trades of emissions allowances is clever, but not without
problems. The first problem is that the cost of setting up the pre-approval system
may not be worth the benefits. I am thinking here primarily of the acid rain
emissions trading program under the CAA, which simply has not generated the
kind of hot spots with which Nash and Revesz are concerned. This is not to
say that the potential for hot spots does not exist, but to this point at least,
distributional problems have not materialized. Consequently, I think their
conclusion, that the national sulfur dioxide trading program is poorly designed,
is unwarranted. To argue that just because it doesn't deal with feasible but, as
An Introduction to the Law and Economics of Environmental Policy: Issues in Institutional
Design, Volume 20, pages 379-381.
© 2002 Published by Elsevier Science Ltd.
ISBN: 0-7623-0888.5

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