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State-Level Air Emissions Trading: The Michigan and Illinois Models.

Barry D Solomon¹, Hugh S Gorman¹

¹a Graduate Program in Environmental Policy, Department of Social Sciences, , Michigan Technological University , Houghton , Michigan , USA.

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|January 7, 2017

Summary

Economic incentive programs like cap and trade are being explored for air pollution control, but face challenges. State-level experiments in Michigan and Illinois reveal both promise and significant hurdles for ozone compliance.

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Area of Science:

Environmental economics
Air pollution control policy
Atmospheric science

Background:

The 1990 Clean Air Act Amendments spurred interest in economic incentives for pollution control.
Programs like the federal Acid Rain Program and RECLAIM exemplify this trend.
Ozone standard attainment presents challenges related to geography, chemistry, and enforcement.

Purpose of the Study:

To evaluate the strengths and weaknesses of market-based incentive programs for ozone compliance.
To analyze the implementation of Emission Reduction Credit (ERC) trading and cap and trade systems.
To assess the early outcomes of Michigan's and Illinois's state-level ozone compliance programs.

Main Methods:

Analysis of Emission Reduction Credit (ERC) trading systems.
Evaluation of cap and trade program designs.
Review of state-specific ozone compliance initiatives in Michigan and Illinois.
Examination of monitoring and enforcement challenges.

Main Results:

Michigan's NOx and VOCs ERC model faces serious issues, including EPA disapproval due to concerns about backsliding and improper ERC generation.
Illinois's VOCs cap and trade program shows promise but suffers from limited source coverage.
Both programs highlight ongoing challenges in monitoring and enforcement.

Conclusions:

Market-based programs offer potential for ozone compliance but require careful design and implementation.
Experimentation with different market mechanisms is crucial for determining their ultimate utility.
Addressing issues like geographic scope, atmospheric chemistry, and source coverage is vital for program success.