isting institutional structures and well-organized interest groups ready to whittle away or even reverse the policy reforms. The Tax Reform Act, hailed as a landmark at the time, was virtually nullified over the next 20 years by legislation enacting exceptions and changes. The market-oriented reforms of the “Freedom to Farm” Act were largely reversed 6 years after enactment.
In contrast, airline deregulation enhanced efficiency, destroyed the old institutional structure (centered on the Civil Aeronautics Board), and fostered a market-led reorganization of the industry. Old carriers entered bankruptcy; new low-cost carriers, empowered by a deregulated environment, were created. It soon became clear that it would be pointless to try to reverse deregulation, discouraging efforts to do so.
Most directly relevant to climate change policy, Title IV of the 1990 Clean Air Act (CAA) Amendments, establishing a cap-and-trade system for SO2, has transformed this policy area and become self-sustaining, with no prospect of returning to command-and-control regulation. It has persisted for at least three reasons. First, it achieved its environmental objective and did so in a cost-effective fashion. Second, firms preferred to make their own decisions and face emissions prices rather than have command-and-control regulations imposed on them. Third, Title IV created what were in effect (if not strictly in law) property rights in emissions allowances, which gave their holders incentives to support continuation of the program. The banking provisions of Title IV were politically important, because firms that had banked allowances had particularly strong incentives to favor continuation of the system (Patashnik, 2008).
Successful reforms create or rely on government structures that are designed to support the reforms. They change the agents (or coalitions of agents) that dominate policy implementation. Specifically, reforms are sustainable when the major players have interests in their continuation. A key lesson for ensuring policy durability is to create a constituency that benefits from the policies and therefore has a vested interest in maintaining them. As explained in Chapter 4, this rationale may, in some cases, provide a basis for preferring a cap-and-trade scheme, which creates property rights in holders of emissions allowances. Similarly, regulatory policies that spur technological innovation can create a constituency for ongoing federal regulation, something that has occurred previously, for instance, with hazardous waste regulation and reformulated gasoline requirements (Lazarus, 2004; Revesz, 2001). For example, if Congress provides ambitious incentives and funding to stimulate the development of carbon capture and storage, firms that have developed the needed technological advances are likely to advocate federal policies that require the use of such technology.
Although policy instrument choice can enhance policy stability, even the best-crafted legislation can face significant impediments that undermine its support in the imple-