ABSTRACT
Over the past 30 years the environmental policy instrument “permit trading” has left the ivory tower of academic research and entered into concrete fields of applications. The field where it was first successfully introduced was air quality management. Based on the experience of innovative flexible instruments for air pollution control in the United States in the late 1970s – bubble, netting, offset and banking policy – emissions trading entered the environmental policy arena in the 1990s with the amendment of the US Clean Air Act. This “second-generation” type of tradable permits (Stavins 1998; Fromm and Hansjürgens 1996) marked a totally new generation of market-based instruments in environmental policy: instead of firms being allowed to trade additional credits, that still had to be certified by regulatory authorities, they were now free and responsible to choose to abate emissions on their own, thus receiving a degree of flexibility that had not been anticipated before. A uniform emissions price emerged that gave clear signals to all market participants. Companies invested in abatement technologies and found new and innovative ways to abate emissions. In a nutshell: “A star was born” (Ellerman et al. 2000: 3).
