Tradable smoking pollution permits

As an alternative to smoking bans, some economists have proposed a system of tradable smoking permits as a solution to the problem of cigarette-smoking "externalities" in public bars and restaurants. Tradable smoking pollution permit systems work similar to other cap-and-trade emissions trading systems successfully used by the Environmental Protection Agency since the 1970s to curb other types of pollution. The proposal has been suggested by Profs. Robert Haveman and John Mullahy of the University of Wisconsin-Madison.

Emissions trading systems allow lawmakers to define the overall level of pollution that is socially acceptable, and then issue tradable permits corresponding to that amount. Companies who wish to pollute must hold permits equal to their emissions. This market-based approach to pollution control provides firms with economic incentives to minimize pollution -- as they can sell unused permits to other firms -- rather than direct regulatory penalties, which tend to have high administrative costs.

Tradable pollution permits as a market-based alternative to smoking bans have been suggested as follows: Lawmakers decide the optimal level of smoking establishments for an area. The total fire occupancies -- or some proxy based on alcohol sales receipts -- for those establishments is totaled up, and smoking pollution permits are issued accordingly. Establishments are required to hold permits equal to size -- fire occupancies or level of alcohol receipts -- if they wish to allow smoking. In essence, they are required to own the property rights over the clean air space of all occupants before any can smoke. Establishments with unused permits can sell them on the open market to smoking establishments, providing economic incentives to reduce smoking in bars and restaurants.

Criticisms
One criticism of tradable smoking pollution permits is that employees and customers should not be required to expose themselves to unnecessary health hazards, even when employees voluntarily seek employment. However, proponents sometimes point out that customers are not required to expose themselves to unnecessary health hazards because they are not required to go into the establishment in the first place. Another criticism is that emission permits may not work well in all contexts, and there has been little study of the costs and benefits of using them to curtail public smoking.