TY - JOUR

T1 - Pollution Added Credit Trading (PACT)

T2 - New Dimensions in Emissions Trading

AU - Schaltegger, Stefan

AU - Thomas, Tom

N1 - Funding Information: S.S. is exceedingly thankful for the generous support from the Swiss National Science Foundation. We are very grateful to Herman E. Daly, Ren~ L. Frey, Ana Roque de Oliveira, Rob Smith and Tom Tietenberg who helped us to improve the text with their excellent and helpful comments. The authors would also like to acknowledge the diligent research assistance of James Atkinson and Melissa Schilling. The usual disclaimer applies of course.

PY - 1996/10/1

Y1 - 1996/10/1

N2 - To date, sources of hazardous, toxic, or otherwise harmful emissions have been regulated on a pollutant by pollutant basis. Environmental policies, even the more advanced ‘incentive-based’ programs, have focused on individual substances rather than on the overall environmental problem to which the substances contribute. This has produced results that are less economically efficient and ecologically effective than is desirable. A more comprehensive approach combines the principles of emission reduction credit trading with advances made recently in the field of environmental impact assessment, to yield an advanced form of inter-pollutant trading, which we refer to as pollution added credit trading (PACT). PACT incorporates a method for estimating the total environmental harm generated (pollution added) by a facility emitting a variety of pollutants. Weightings that reflect relative harm are used to calculate total pollution added. Each facility covered by PACT would receive annual allowances for total pollution added that they could discharge to the environment. As with existing emissions trading programs, surplus allowances could be sold and shortfalls would be covered by purchasing other facilities' surplus allowances. PACT is more efficient than single-pollutant emissions trading in that it captures differences in marginal reduction costs that exist between pollutants as well as between facilities. It is more ecologically effective because it focuses on the overall environmental problem, rather than on the individual pollutants that contribute to the problem.

AB - To date, sources of hazardous, toxic, or otherwise harmful emissions have been regulated on a pollutant by pollutant basis. Environmental policies, even the more advanced ‘incentive-based’ programs, have focused on individual substances rather than on the overall environmental problem to which the substances contribute. This has produced results that are less economically efficient and ecologically effective than is desirable. A more comprehensive approach combines the principles of emission reduction credit trading with advances made recently in the field of environmental impact assessment, to yield an advanced form of inter-pollutant trading, which we refer to as pollution added credit trading (PACT). PACT incorporates a method for estimating the total environmental harm generated (pollution added) by a facility emitting a variety of pollutants. Weightings that reflect relative harm are used to calculate total pollution added. Each facility covered by PACT would receive annual allowances for total pollution added that they could discharge to the environment. As with existing emissions trading programs, surplus allowances could be sold and shortfalls would be covered by purchasing other facilities' surplus allowances. PACT is more efficient than single-pollutant emissions trading in that it captures differences in marginal reduction costs that exist between pollutants as well as between facilities. It is more ecologically effective because it focuses on the overall environmental problem, rather than on the individual pollutants that contribute to the problem.

KW - Sustainability sciences, Management & Economics

KW - Entrepreneurship

UR - http://www.scopus.com/inward/record.url?scp=0030251219&partnerID=8YFLogxK

U2 - 10.1016/0921-8009(96)00067-5

DO - 10.1016/0921-8009(96)00067-5

M3 - Journal articles

VL - 19

SP - 35

EP - 53

JO - Ecological Economics

JF - Ecological Economics

SN - 0921-8009

IS - 1

ER -