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Improving Transboundary Air Quality with
Binational Emission Reduction Credit Trading
• Should emission banking be allowed? Doing so provides
incentives for early abatement efforts but may also result in
temporal hot spots.
• Is emissions trading to be organized as a cap-and-trade system
or should a baseline-and-trade system be implemented? Indeed,
in the absence of strict enforcement of air quality standards in
Mexico, is a cap-and-trade program even possible?
• How are permits to be distributed initially? Are emissions
grandfathered or should permits be auctioned by the government?
• How exactly is the exchange of emission permits to take place?
Will there be an organized exchange? Will the government or
the private sector serve as a central clearinghouse?
• How are emission reductions certified and who does the certification?
Should government authorities certify them or
should private environmental auditors be used?
• Can permits be purchased by third parties and retired from
use? Allowing this will result in better air quality, but it will
also increase the cost of offsets, thereby reducing economic
activity. The result could be greater unemployment.
All of these questions are controversial and different commentators
have come to different conclusions, but in nearly every case the
controversy is made more complicated by the existence of an international
border. For example, take the issue of enforcement of air
quality standards. In the United States, air quality standards are set
by the national government, specifically EPA, but how those standards
are to be met is determined by state governments, each of
which submits a State Implementation Plan (SIP) and also occasionally
augments air quality standards. Many of these SIPs already use
emissions trading as a tool for achieving environmental goals. In
Mexico, both air quality standards and the methods by which these
standards are to be met are set by the national government.
In some cases, these issues can be resolved by unilateral action by
one government or the other; in other cases, international cooperation
is required. Much of the remainder of this volume will discuss
how to resolve the issues outlined above to promote the establishment
of active emissions trading along the U.S.-Mexican border.
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