The Price of a Tonne · Episode 1 of 14 · 21 min
The Price of a Tonne
In 1968 Toronto economist John Dales proposed that governments decide how much pollution to allow, print exactly that many rights, and sell them. The episode lays out the competing answers of Pigou, Coase, Crocker, and Dales, and corrects the origin story: the first real trading program was the 1982-87 lead phasedown, not acid rain. Carbon is harder, since a market must count tonnes that are invisible, avoided, or stored in trees.
Who's who
- John DalesUniversity of Toronto economist who proposed selling pollution rights in 1968
- Arthur Cecil Pigou+3 more episodesCambridge economist who proposed taxing pollution in 1920
- Ronald Coase+3 more episodesEconomist who argued parties could bargain to efficient outcomes; Nobel 1991
- Thomas D. CrockerEconomist who proposed tradeable air-pollution permits in 1966
- W. David MontgomeryProved in 1972 that a permit market reaches least-cost allocation
- Martin Weitzman+1 more episodeAuthor of the 1974 rule for choosing a tax or a cap
- Raphael CalelHistorian of carbon markets at the London School of Economics
Where it happens
- University of Toronto, CanadaWhere Dales wrote his 1968 essay
- Guatemala+7 more episodesSite of 52 million trees planted in the first land-based offset
- Kyoto, Japan+2 more episodesProtocol adopted in December 1997 with three flexible mechanisms
Timeline
- 1920Pigou proposes a tax equal to the uncharged damage pollution inflicts.
- 1968Dales publishes Pollution, Property and Prices, proposing salable pollution rights.
- 1982EPA begins lead trading among refineries; more than 60 percent of lead moves through credits.
- 1988A Connecticut coal plant funds 52 million trees in Guatemala, the first land-based offset.
- November 15, 1990The Clean Air Act Amendments create the sulfur-dioxide Acid Rain Program.
- December 11, 1997Kyoto is adopted with three flexible mechanisms.
Still debated
Crocker and Dales are credited as independent originators of tradeable permits. The phrase "first trading program" is contested, since earlier EPA offsets and bubbles existed, and the lead program's roughly 20 percent savings is an EPA estimate.
