Short answers, pulled from the story.
Emissions trading is a market-based approach to controlling pollution that sets an overall cap on total emissions, then issues permits allowing the holder to release a specified quantity of a pollutant. Polluters that reduce their emissions below their permit level can sell the surplus; those that exceed their permits must buy more from others. The result is that reductions happen first where they are cheapest.
The efficiency of the cap-and-trade approach was first demonstrated through microeconomic computer simulations conducted between 1967 and 1970 by Ellison Burton and William Sanjour for the National Air Pollution Control Administration. The first full cap-and-trade system was launched under Title IV of the 1990 Clean Air Act, which targeted sulfur dioxide emissions linked to acid rain, with the cap taking effect in 1995.
Yes. SO2 emissions from Acid Rain Program sources fell from 17.3 million tons in 1980 to about 7.6 million tons in 2008, a decrease of 56 percent. A 2014 EPA analysis estimated the program avoided between 20,000 and 50,000 incidences of premature mortality annually due to reductions in fine-particle concentrations.
Grandfathering is the practice of allocating free permits to existing polluters based on their historical emissions. Economist Ross Garnaut argues these permits are not truly free because their scarcity gives them real value, which accrues entirely to the emitter while costs fall on consumers. Critics also note that grandfathering can slow the adoption of cleaner technologies by keeping polluting industries viable longer than they would otherwise be.
China established its national Emissions Trading System in 2017. A 2021 study published in PNAS found that the system reduced total firm emissions by 16.7 percent and emission intensity by 9.7 percent, despite low carbon prices and infrequent trading.
A 2024 systematic review and meta-analysis of 80 ex-post evaluations across 21 carbon-pricing systems found average emissions reductions of approximately 5-21 percent after implementation, narrowing to around 4-15 percent after correcting for publication bias. EU Emissions Trading System data specifically show regulated manufacturers reduced CO2 emissions by 14-16 percent with no detectable losses in output or employment.