Are green markets an alternative to pollution laws?
Why? In part because we’ve been taught that pollution is a prime example of “market failure.” This is false. Except for a handful of recent experiments, pollution markets have not been tried. Something that doesn’t exist cannot logically be said to have failed. Market absence is not market failure. Like stock markets and future markets, “green markets” will work, but certain systems must be put in place before trading can begin. For example, Congress could set up a new environmental trust fund called the “EcoTrust.” The EcoTrust would be authorized to auction off EcoTrust pollution permits. Ownership of a permit would grant its holder the legal right to emit a specific quantity of a certain pollutant. For instance, a one-ton sulfur-dioxide (SO2) permit would allow a company to discharge one ton of that chemical each year. If the Environmental Protection Agency caught the firm releasing an amount in excess of its permit quantity, it would be slapped with stiff penalties. EcoTrust permit
