The 1990 Clean Air Act Amendments initiated the first large-scale use of the tradable permit approach to pollution control. The theoretical case for this approach rests on the assumption of an efficient market for emission rights. Our empirical analysis shows that the emission rights market created by the 1990 Amendments had become reasonably efficient by mid-1994. We also show that the auctions specified in the Amendments to jump-start trading had become a small part of the overall market. Finally, we demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices.

As both a regulator and an academic, Fred Kahn argued that end-use electricity consumers should face prices that reflect the time-varying marginal costs of generating electricity. This has been very slow to happen in the US, even in light of recent technological advances that have lowered costs and improved functionality for meters and automated demand response technologies. We describe these recent developments and discuss the remaining barriers to the proliferation of time-varying electricity pricing.