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♪ [music] ♪ - [Narrator] When gasses like sulfur dioxide and nitrogen oxide are emitted into the atmosphere, they react with water, oxygen, and other chemicals to form sulfuric and nitric acid, and when these acids precipitate, we get acid rain. Acid rain can kill trees, plants, and fish, as well as erode automobile paint, buildings, and stone. The Clean Air Act Amendments of 1990 introduced a novel way to combat acid rain -- tradable permits. Heres how they work. Lets consider two power plants or factories that are polluters. They emit this much polluting gas. The government could control pollution by just commanding that all factories install certain technologies, like scrubbers. Using this command and control method, suppose that pollution would be reduced to this. Okay, but now imagine that one of the plants can reduce pollution at a lower cost than the other. Perhaps its newer or it uses a different type of coal or maybe there is some other technology for reducing pollution th
