CAPP Events: 2002

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Can Market Mechanisms Reduce Sulfur Dioxide Emissions in China?

China is seeking to reduce its emissions of sulfur dioxide, which is caused by pollution from coal-burning power plants, among other sources, and contributes to environmental problems like acid rain. Since 1999, RAND researchers Noreen Clancy, Paulette Middleton and RAND Graduate School student Hongjun Kan have conducted a study in collaboration with the U.S. Environmental Protection Agency (EPA) and the Chinese State Environmental Protection Agency (SEPA) to examine the feasibility of establishing a sulfur dioxide emissions trading program in China.

Middleton and Clancy were both heavily involved in the sulfur dioxide emissions trading program that began in the U.S. in the early 1990s. The U.S. program has proven to be a successful and cost-effective sulfur dioxide pollution reduction policy, and many of the lessons learned from that program are of value to the Chinese as they endeavor to establish a similar program.

The feasibility study involved an assessment of China's acid rain situation, including sources, transport, impacts, and control strategies. This information was used as the basis for evaluating a potential design of an emissions reduction program that utilizes market mechanisms to achieve the greatest environmental benefits at the least cost. The project resulted in two international workshops, one in Beijing and one in Washington, DC, attended by both U.S. and Chinese experts. In addition to working closely with these experts in developing the feasibility study, the RAND team wrote two expert papers that will be included as stand alone pieces in the final study. One paper focuses on modeling impacts of emission reductions in China; the other reviews available control technology options for emission reductions in China. U.S. and Chinese officials from EPA and SEPA are currently finalizing the feasibility study, which is expected to be completed by September 2002.