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Making Environmental Markets Work: Lessons from Early Experience with Sulphur , Carbon, Wetlands and Other Related Markets

By Ricardo Bayon
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Ever since the passage of the 1990 amendments to the US Clean Air act and the creation of a market
in sulfur dioxide (SO2), it has become clear that market mechanisms can be effectively used to
achieve environmental policies. But markets are neither infallible nor automatic. They have blind
spots and they need to be designed effectively if they are to effectively achieve environmental ends.
This paper defines markets as regular gatherings of people for the purpose of buying and selling
goods or services. Such markets are distinguished from public payments to private landowners for
ecosystem services, or private deals between a few buyers and sellers.