Title IV of the 1990 Clean Air Act Amendments, which establishes a market for transferrable sulfur dioxide discharge permits (SO2 allowances), and been hailed by economists as a triumph of economic incentives over command and control regulation. The gains from using economic incentives are a reduction in the costs of pollution control: Firms operating at high marginal pollution abatement costs are supposed to purchase the right to emit SO2 from firms operating at how marginal abatement costs, with cost savings resulting as abatement shilfts from high-to-low marginal cost firms.
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