Pollution Swap

CAPITALISM HAS CREATED MARKETS FOR SOME BIzarre products: pet rocks, pieces of the Beatles' hotel bed linens, even Edsels. But last week a market to amaze even Adam Smith opened up: the buying and selling of the right to pollute, which proves that anything anyone wants to buy will be sold.

One of the nation's cleanest utility companies, Wisconsin Power & Light, agreed to sell pollution "credits" to two other companies, among them one of the nation's dirtiest utilities, the Tennessee Valley Authority. This innovative, market-based deal, made possible under the 1990 Clean Air Act, will allow T.V.A. and the Duquesne Light Co. of Pittsburgh to spew larger quantities of sulfur dioxide into the air while WP&L reduces its emissions. The arrangement is probably the first of many, and it should help lower the overall cost of curbing acid rain, since some utilities may opt to buy less costly rights now and delay more expensive efforts to cut back pollution.

Despite drawing praise, this marketplace has drawn fire. "Clean air should be protected, not traded and sold like a used car," says Christopher Blythe of the Citizens Utility Board, a Wisconsin consumer-protection group. "What's next, the L.A. police department trying to buy civil rights credits from Wisconsin?" While this trading system may increase the chance that some regions will suffer from more acid rain, it should encourage a nationwide cleanup of SO2, which the Clean Air Act wants to reduce by 10 million tons a year. "I'm not quite sure what people are complaining about," says Daniel Dudek, senior economist for the Environmental Defense Fund. "We want to accomplish our environmental goals with the least pain possible to the economy."