The Market-Based Lead Phasedown
Richard G. Newell & Kristian Rogers
One of the great successes during the modern era of environmental policy was the phasedown of lead in gasoline, which took place in the United States principally during the decade of the 1980s. The phasedown was accomplished in part through a tradable permit system among refineries, whereby lead credits could be exchanged or banked for later use. The lead trading program represents the first large-scale implementation of a tradable permit program for the environment, predating the well-known sulfur dioxide trading program by more than a decade.
Unlike sulfur in coal, however, lead does not occur naturally in petroleum. Refiners in the United States started adding lead compounds to gasoline in the 1920s to boost octane levels and improve engine performance by reducing engine knock and allowing higher engine compression.1 Lead was used because it was inexpensive for boosting octane relative to other fuel additives (i.e., ethanol and other alcohol-based additives) and because people were ignorant of the dangers of lead emissions, including mental retardation and hypertension. In the early 1970s, before legal requirements for reducing lead came into force, lead levels in gasoline were a little over 2 grams of lead per gallon of gasoline, amounting to about 200, 000 metric tons of lead in total. The reduction in lead in gasoline in the United States came in response to two main factors: (1) the mandatory use of unleaded gasoline to protect catalytic converters in all cars starting with the 1975 model year, and (2) increased awareness of the negative human health effects of lead.