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Companies and Regulators in Emissions Trading Programs

Joseph Kruger

From the introduction: "In brief, I find that companies participating in the U.S. sulfur dioxide (SO2) and nitrogen oxides (NOx) trading programs have developed internal structures to handle the significant complexities of flexible compliance planning and to manage both price and regulatory uncertainties. Regulators at the Environmental Protection Agency (EPA) have developed their internal structures to ensure consistency and environmental integrity, but also to improve administrative certainty for companies. Although regulatory uncertainties are often beyond the control of both program administrators and companies, the focus of both parties on a routine and predictable administrative program has been mutually beneficial and has led to a reasonably harmonious relationship between industry and program administrators.2 Although it is far too early to make any definitive conclusions about the EU ETS, I find that many of these same features are present. However, companies in the European Union face significantly greater uncertainty about future environmental requirements than did their U.S. counterparts. Moreover, it will be worth watching whether the flexible system of emissions reporting and verification for the EU ETS will provide the administrative certainty required for the efficient and effective operation of the program."

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