Acid Rain Program

This document discusses acid rain, its causes, effects, and potential solutions. Acid rain is caused by emissions of sulfur dioxide and nitrogen oxides from burning fossil fuels. It affects the environment by creating acids like sulfuric acid and nitric acid when the emissions react with water and air. To remedy this market failure from spillover effects, the US EPA established the Acid Rain Program in 1995. It uses a cap-and-trade system to reduce sulfur dioxide emissions and a rate-based system to lower nitrogen oxide emissions. This internalizes the externality by putting a price on pollution from fossil fuel burning and manufacturing.