Will regulation impede the market for emissions allowances

Title IV of the Clean Air Act Amendments of 1990 allow for trading of allowances for SO[sub 2] emissions. For this process to be efficient and to achieve the goal of reducing emissions by 10 million tons from 1980 levels, a freely functioning market in allowance trading needs to exist. This market could be threatened by some state regulations that require utilities to obtain prior approval from state commissions before selling property. There are several solutions for state regulators to employ to avoid inadvertently interfering with the allowance trading market. This article describes some of those possible solutions.