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Air Emissions Cap&Trade Programs: Revolution and Evolution in the U.S.

Air Emissions Cap&Trade Programs: Revolution and Evolution in the U.S.

19 April 2005

napolitanoEuropean Emission trading of CO2 certificates started at the beginning of 2005. A totally new environmental policy instrument for the European market economy was introduced which has to be proven in the first allocation period from 2005-2007. The U.S. is considered to be the leader concerning Cap&Trade. First steps with the concept of marketable emission permits were taken in the mid-1970s. In a discussion with Sam Napolitano, Director of the Clean Air Markets Division of the EPA’s Air Office, experiences were exchanged – the U.S. long term expert knowledge with quite recent European experiences. The Transatlantic Dinner Dialogue took place in Berlin, on 19 April 2005.

Sam Napolitano started by giving a brief overview of the of the history of cap& trade in the U.S. which has been successfully implemented especially with the reduction of SO2 and NOx. The Acid Rain Program, which has been implemented during the last 10 years, succeeded in reducing SO2 emissions from power plants by 8.5 tons per year since 1990 and acid rain by 25-40% since then.

Benefits are estimated at almost $ 80 billion per year. On the federal level, cap & trade programs for annual SO2 and NOx emissions are conducted to reach the National Ambient Air Quality Standards and to reduce ozone. In the following discussion specific features within the European Cap& Trade approach, especially concerning the German implementation of CO2 Emission trading, were pointed out and characteristics of the American and European Model were compared. Advantages and drawbacks of a voluntary or mandatory participation of companies of a certain sector in the system were debated. Corresponding to this the alternatives of auctioning and allocating the certificates especially in terms of economic acceptance were debated.

In this context the issue of ways to optimize allocation rules were discussed and the implication of diverging national, economic and technique factors were considered. The question of the U.S. participation in the world wide Kyoto Regime was only shortly touched upon but it was estimated as an essential pre-condition for the joining of China and India within the regime. To conclude, Sam Napolitano outlined the U.S. strategy for reducing greenhouse gases and stressed the importance of enhancing clean technologies and fuel switch.

This Transatlantic Climate Dinner Dialogue is part of the series of events „Transatlantic Climate Dinners - Wine & Ideas from the New World“, that Ecologic organizes with the support of the German Marshall Fund of the United States (GMF).


Sam Napolitano
19 April 2005
Berlin, Germany