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January - March 1997


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Reducing Sulfur Dioxide Emissions
Through Market-Based Regulation

[Abstract] [References]

Predicting Global Climate Change: New Tools, New Insights
[Abstract] [References]

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Reducing Sulfur Dioxide Emissions
Through Market-Based Regulation


In 1995, the acid rain provisions of the 1990 Clean Air Act Amendments (CAAA) went into effect. By year's end, electric utilities had reduced emissions of sulfur dioxide (SO2) far more than required by the new law. According to an Energy Laboratory analysis, the reduction was largely the result of a novel regulatory scheme that turned the right to emit SO2 into a valuable commodity that could be bought and sold. Under the new law, utilities were issued a limited number of fully tradable permits to emit SO2. Some utilities faced high costs to reduce emissions, so they bought permits from utilities whose costs were lower. Other utilities reduced emissions below their allowable levels, thereby freeing up permits to sell or to save for meeting tighter emissions restrictions in the future. The result was an unprecedented emissions reduction at a lower-than-expected cost. Judging by the success of this first large-scale experiment, "market-based" environmental regulation could be an effective means of controlling other pollutants, among them worldwide emissions of CO2.


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Predicting Global Climate Change: New Tools, New Insights


A new climate-change model developed at MIT provides scientists and policymakers with an unprecedented ability to analyze potential impacts of human activities and proposed policies on the global climate system. The model simulates economic growth and associated emissions, flows of greenhouse gases into and out of land and oceans, chemical reactions in the atmosphere, climate dynamics, and changes in natural terrestrial ecosystems. It also includes previously ignored interactions among those processes--interactions that can have a substantial impact on predicted outcomes. For example, most models assume that emissions of methane and nitrous oxide from wetlands and soils are constant. But MIT simulations show that predicted rises in temperatures will cause natural emissions of those greenhouse gases to increase by 15%-60%. Other results suggest that when carbon dioxide levels become very high, the oceans may be a less effective "sink" for that gas than is often predicted. By simplifying certain components, the researchers made the model "computationally efficient" without compromising its ability to represent key climate phenomena. Performing long-term simulations and repeated runs with changed assumptions is therefore economically feasible. A series of runs using a range of plausible assumptions regarding human emissions, ocean circulation, and cloud cover suggests that predictions of temperature change are even more uncertain than generally believed. The researchers are now using the model to clarify key sources of uncertainty and to examine the effectiveness and costs of proposed policy options.


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