I know what you’re thinking: Acid Rain is so 1980’s!

The reason we can even consider Acid Rain a “vintage” environmental problem, is because the US and Canadian governments in power at the time, in concert with big business, got creative – then followed through.

To those who think the challenges of climate change are too overwhelming to solve, we need only look to the Acid Rain Accord, signed into law by the US and Canada in 1991. It’s unprecedented success at cutting sulphur dioxide (S02) emissions is an inspiration and an international, bi-partisan template for economic and environmental success that works.

How? By showing that market incentives can be levers for change. The Acid Rain Accord set a price on S02 emissions, capping them at a reduced level while permitting companies to trade extra reductions, thereby turning those pollution reductions into marketable assets.

The result? The first Cap & Trade system in the world.

Acid Rain: A History

Through the 1970’s and 1980’s sulphur dioxide pollution was creating acid rain and snow that was killing aquatic life and forests and causing buildings and sculptures made of marble and granite to disintegrate. But what to do? The majority of S02 emissions were caused by coal and power plants, and acidifying pollutants were being carried long distances from their source by prevailing winds. The solution to this complex problem required action locally, provincially, nationally and internationally.

It led to the 1991 Canada-United States Air Quality Agreement, which included specific commitments by both countries to cut Sulphur and nitrogen oxides emissions; ensure visibility protection; prevent the deterioration of clean areas; and conduct regular emissions monitoring.

The Agreement, however, needed an economic vehicle to drive change. In response, business and government worked together to devise something completely new: A Cap and Trade approach to emissions. The system required aggressively cutting all emissions in half, but individual companies could decide on their own how they’d get there. It also allowed plants that lowered emissions more than required, to sell those extra allowances to other plants to offset their excesses.

Flexible and innovative, a new commodities market was born.

In the end, sulfur emissions not only dropped faster than predicted – 30% less S02 pollution than the law allows, in fact – but did so at a quarter of the projected cost.

“Thanks to the cooperation between our nations over the last 20 years, Canada and the United States have made great strides in the ongoing effort to reduce harmful air pollution and prevent serious health challenges for our people.”

– Lisa P Jackson, Environmental Protection Agency

Since 1991, both the US and Canada have made substantial progress in reducing S02 emissions.  As of 2010, S02 emissions in the US have dropped 67% from 1990 levels. Power plant emissions alone have decreased by over two-thirds from 1990, cutting more than 7M tonnes of S02 beyond their initial allotment from the US Environmental Protection Agency. In Canada, S02 emissions declined by 55% overall, mainly due to reductions from base metal smelters (down 72%) and fossil fuel-fired power plants (down 45%).

It’s worth noting that S02 pollution has dropped dramatically, despite strong and consistent growth in both the US and Canadian economies: Proof that an economy can grow while pollution levels shrink. Cap and Trade is good for business and good for the planet.

The innovation of the 1991 Cap and Trade solution to mitigate S02 pollution and its overwhelming success is the inspiration behind one of the most powerful tools we have to fight a warming planet and motivate change to reduce GHG emissions and Carbon Markets.

“Programs that harness the power of the market, like the US acid rain program, can help create large-scale pollution reductions quickly and affordably.”

– Joe Goffman, Environmental Defense, senior attorney