A major barrier to a carbon cap-and-trade market in the US now appears permeable. It has not been well recognised by the environmental activists and their Congressional allies that they will have a hard time attracting capital to carbon cap and trade if the existing air-pollutant markets, for “acid rain” chemicals, are on the verge of having their value wiped out.

While there has been an active market in Europe for carbon credits, the main precedent for the US carbon trading proposals has been the US Environmental Protection Agency’s market in sulphur dioxide and nitrous oxide pollution allowances. The Sox and Nox markets, as they are known, set a high price for emissions of the chemicals that cause acid rain. The Sox and Nox emitters – coal burning utilities – were given an incentive to earn credits, and avoid paying for emissions, by building smokestack “scrubbers” to remove the chemicals.