The Environmental Defense Fund (EDF) has actively promoted tradeable pollution rights and carbon offsets. Several EDF staff including Krupp were involved in Project 88, chaired by Senators Heinz and Worth, which was aimed at "harnessing market forces to protect the environment".
As early as the late 1970s the EDF began to cooperate with industry, looking for "win-win" opportunities which benefited both the environment and business.
This focus on a potential economic common ground between industry and environmentalists, encouraged by the growing numbers of staff economists within the organization, evolved during the Reagan and Bush years into an overarching EDF strategy to promote market incentives, replacing regulation as a primary tool for reshaping enviornmental policies... the EDF would ultimately become... the organization most wedded among the mainstream groups to the idea that environmental change was a matter of reinforcing rather than restructuring a market-driven urban and industrial order.
During the 1980s the sulphur dioxide (SO2) emissions from power stations was causing an increasing problem of acid raid that was damaging ecosystems throughout North America. Efforts to regulate these emissions had been successful opposed by the electric utility companies.
The way forward, EDF experts argued, was to harness the power of the marketplace... A new commodities market was born.
Krupp and Dan Dudeck from the EDF are credited with promoting the idea of tradable pollution rights for acid rain reduction and getting them included into the 1990 Clean Waters Act.
The opportunity came with the 1988 election of George H.W. Bush. EDF president Fred Krupp phoned Bush's new White House counsel—Boyden Gray—and suggested that the best way for Bush to make good on his pledge to become the "environmental president" was to fix the acid rain problem, and the best way to do that was by using the new tool of emissions trading. Gray liked the marketplace approach, and even before the Reagan administration expired, he put EDF staffers to work drafting legislation to make it happen.
The US Acid Rain emissions trading scheme is consistently cited as a success because it has achieved some reductions at minimal cost but how do those reductions compare with what can be achieved with traditional regulation? ‘US sulphur emissions now exceed those from the EU Member States by 150%’.
Despite the overall national reductions in the SO2 that causes acid rain, SO2 increased in 16 states and 252 out of 600 power stations increased their emissions. Even according to its champion, the US EPA:
The Acid Rain Program has enjoyed an unusually high level of emission reductions and near-perfect compliance. However, it is becoming increasingly clear that the program’s emission targets may not be sufficient to achieve its environmental goal of ecosystem recovery. For example, some Adirondack and other sensitive ecosystems remain acidic, and visibility in the East, including the Great Smokies, remains impaired. Scientists believe that emissions from electric generating facilities that cause acid rain must be reduced by two-thirds or more beyond current requirements to allow ecosystems to recover.
In contrast the aim of the German programme was a 90 percent reduction in SO2 between 1983 and 1998. In comparison, the aim of the US emissions trading program was only a 50 percent reduction by 2010. This meant that in the US there was much more scope for power stations to find cheaper ways to reduce their emissions, whereas in Germany, every power station had little choice but to retrofit their plants with flue gas desulphurisation and selective catalytic reduction for nitrogen oxides. This meant that there was no scope for trading.
SO2 allowances are now auctioned every year by the Chicago Board of Trade. Before 2005 they cost around $150-200/ton, much cheaper than paying for flue gas scrubbers to remove SO2 from plant emissions. It is claimed that this program saves industry hundreds of millions of dollars each year compared with legislation aimed at cleaning up SO2 to the same level. Limited reductions in SO2 emissions have been made using cheaper methods such as using low-sulphur coal.
In 2006 EDF cosponsored a bill in California to create an emissions trading (cap and trade) scheme for greenhouse gases and defended it in court. It began operation in 2013.
Over the past two decades, EDF Vice President Dan Dudek and his team have helped China establish a variety of market-based incentives to trim emissions, and increase enforcement of environmental laws.
EDF also claims to have pioneered a scheme known as REDD, or reducing emissions from deforestation and forest degradation, which has been backed by the United Nations. REDD involves a state or region getting carbon credits that they can sell as offsets by committing to reduce their future rate of deforestation from past rates. EDF is trying to get REDD credits included in California's emissions trading market.
In 2003 the EDF launched the Centre for Conservation Incentives (CCI) with a $5 million grant from the Doris Duke Charitable Foundation and another $5 million from one of its board members. Its goal was to promote conservation on privately owned land through the use of incentives provided by the US Department of Agriculture and the Department of Interior.
The CCI was featured in Terry Anderson's book, Greener Than Thou: Are You Really an Environmentalist?, as a good example of free market environmentalism.
EDF has developed a scheme called "Habitat Exchange" to balance wildlife protection against economic growth:
From oil wells to wind farms, developers have to launch new projects to meet demand, sometimes in areas where vulnerable species or habitat exists. This can lead to years-long arguments and litigation that delays construction.
In a habitat exchange, developers benefit from a predictable value for credits they must buy to offset the impacts of development, and a standard set of rules and regulatory assurances, even if a species is listed, to ensure projects move forward.
The credits/offsets come from landowners who are paid for "conducting certain conservation activities that improve habitat for species, such as managed grazing or prescribed fire".