There's a lot of debate about the limits. What if you had a town, a city, and they had a factory and a power plant, they were using the local coal, and at that point they were above that, let's say, they are making three pounds of SO2. Do you just go in and set your fine so high a level that they just shut it down? "No more electricity tomorrow guys, the EPA law was passed sorry, we're turning off the power plant. I don't know what you're going to do for electricity. Maybe someone will sell it to you really expensively. Oh, and all the people working at the factory and the power plant, you're out of jobs, bye." I think the local politicians and the state's politicians are going to say, "Wait a minute, wait a minute, you can't just come in and say boom this is what it is. Yes we agree it's a good idea." But clearly you need some phasing time and you need a system. I think a good example of cooperation in government was the system they came up with, cap and trade emission trading. They wanted to create an economic incentive for companies to produce less sulfur dioxide than they would have otherwise and give them an economic reward for doing so. So let's say 2.4 is my limit and I am in some factory and we make three. But there's some other factory that says, "You know, I think we can install this new scrubber system and we can do things to try to reduce our sulfur dioxide emission." And let's say they only make 1.8 pounds. The government will issue people credits for this. This is part of the cap and trade thing, the thing called pollution credits. "You could have admitted this much, so we're going to give you something of economic value because you produce less pollution." That's right, you're rewarding people for making the investment to produce less pollution. And you can turn around and sell it to these guys and they can use your credits to get the amount they emit down to the legal limit. Some people said, "Oh this is terrible. You're letting people pay their way out of polluting the world." Remember it's called cap and trade, right. So we're going to say this is the limit we want to achieve but we're going to let the market place determine this because this plant is going to have to pay money, right, to buy those credits and those credits will cost so many dollars per ton. This gives the economic incentive because you get money for having these credits, and the other people have to pay money and then they can say, "You know, we're going to start out buying the credits, we don't want to throw everyone out of work. But in our next retrofit let's add a pre-scrubber, let's add a regular scrubber, let's add some fuel upgrading, let's do a few things to produce less sulfur." It gives us an economic reason to do so. This system worked. In 1980 there was a certain level of SO2 production, OK, overall in the U.S. By 2007, this number had to cut in half, 50 percent reduction. In fact, in the intervening time that limit was changed not 2.4, but 1.2 pounds per million BTU. So this is the limit today, and in between here they were able to do this and by 2007 even that half a limit was done. And by 2012 this had gone down to an 80 percent reduction. So the power plant scheme of saying cap and trade, and even changed the cap, was a success. Environmental groups could buy up sulfur dioxide credits and decide not to trade them, right, this just takes some out of the system. By letting this be traded in the free market, it also gave an economic incentive to have this actually happen. Let's make a chart of the date versus the dollars per ton for one of these credits. In 2005, shortly after that lower limit was instituted, this was $1,600. Pretty pricey. By 2009 this had dropped to $88. By 2012 it was around $2, and today, here in 2015, this is 86 cents? Why so cheap? Because pretty much everyone is under the limit and nobody needs to buy the credits. We're producing 80 percent less SO2 in the air as we were doing before. In 2003 a similar system was enacted for nitrous oxide, and it's also had quite a dramatic effect in the reduction of nitrogen oxides into the atmosphere. This brings up an interesting debate on whether one should adopt a similar policy for carbon dioxide. Since people are concerned, rightly so, of global warming, should we institute a economic policy that so clearly worked to reduce our SO2 burden with CO2. On the face of it it seems like a great idea, but there are some very important differences to understand. Nobody wants to create SO2, if you could get rid of all the sulfur and the coal ahead of time, you'd do so. The problem is that CO2 is the end product of burning our fossil fuels, it's the whole reason you're doing it. You're taking those atoms and rearranging them into a more stable state. You're actually getting the energy out by making carbon and burning it with the oxygen in the air to make carbon dioxide. So really the amount of CO2 you make is equal to the amount of energy you're producing. If you're capping and trading on that you're basically saying, "Don't consume any more fossil fuel energy." So, this would be quite a boon to the types of energy sources that don't make carbon dioxide. Nuclear power would benefit, most of the renewable energy systems would benefit, they represent less than 20 percent of the global energy use. When we look at countries like India and China who are rapidly industrializing, or beyond industrializing, and going into a modern era producing electricity at a higher standard of living for their people because they're using more energy. To say, "I'm sorry, next year can't use any more carbon-based fuels or you've got to pay this cap and trade." They're not going to sign up for that. And countries that could, like Europe or the U.S., there's already economic incentives in place that each year we're producing more goods and services producing less CO2 in the first place. So perhaps you don't need this specific cap and trade policy, although it's a wonderful economic model that perhaps will work. It's also much more difficult to institute. How many players were in the SO2 market? Well unless you owned a coal power plant or a major coal producing factory- coal consuming factory, you had no need to do this. The number of people that this concern, the number of entities it concerned, was limited in the thousands. Everything, every use of fossil fuel, everybody's car, everyone's business, makes CO2. How extensive does this regulation become? How huge of a bureaucracy do you need to track it? How do you make sure the rules are fair and equitable? Will you create unintended consequences by regulating something so immense? I'm not sure what the answers are to those questions but I do want to point out that when we think of cap and trade in a limited situation where you're making a waste product, not an essential component of what you are trying to do in the first place, is different than the CO2 solution. Not saying we don't need a CO2 solution, but I'm just say that we've got to, it's a more difficult question.
