SOMETIMES it seems we never reach any middle ground on environmental issues. Conservatives say we have to dig for more energy. Environmentalists claim conservation and solar can do the job. Energy companies argue we need liquid natural gas terminals. Environmentalists say they're too dangerous. Environmentalists worry about global warming. Conservatives say it's a false alarm.

There is one thing that environmentalists and their critics have finally been able to agree upon, however: Markets are by far the best tool for tackling pollution.

The system that has caught on is "cap-and-trade." The idea received another big boost this year when New Jersey and eight other Eastern states agreed to set up a cap-and-trade "market" for reducing their carbon dioxide emissions to deal with global warming. These days there are few pollution issues that aren't being looked at through cap-and-trade.

It wasn't always so. In the old days, the Environmental Protection Agency would set standards on an emission - particulate matter in coal, for example - and then go around the country trying to enforce its rules. Delays were endless. Companies would dispute the standards. They would argue somebody else was polluting worse than they were. They would complain that compliance would drive them out of business.

The EPA evolved a legal lexicon to try to carry out its will. "Best available technology" meant a company had to buy the priciest thing on the market. "Best practical technology" attempted to introduce an element of cost. "New source performance standards" were the worst stumbling block. If companies built anything new, it had to be top-of-the-line, no matter how expensive. So they'd stick with their old, dirty plants.

As a result, very little progress was made. Believe it or not, almost 60 percent of the coal burned in this country is still untreated for pollution. And that's before you consider carbon dioxide, which isn't even a "pollutant" - meaning a "resource out of place" - but the natural exhaust product of combustion. Carbon dioxide, of course, is believed to be causing global warming.

For years - decades - market-oriented conservatives argued there was a better way. In a 1977 Harper's article, George Schultz, who became secretary of state under Ronald Reagan, argued that the EPA ought to consider two economic strategies.

First, it might tax pollution. This would give companies a financial incentive to clean up, since it would be cheaper to clean up rather than pay the tax.

Second and more intriguing, the government could sell the rights to pollute. Place an imaginary bubble over a city, Schultz said. The government could pick a tolerable level of emissions and then sell rights to pollute for that amount. Companies would buy and sell among themselves to decide who got to pollute and who had to clean up. By pursuing economies, polluters would discover among themselves the cheapest way to clean up. Now there would be a reward for developing new technology. Companies could go beyond some arbitrary requirement and sell their leftover rights to someone else.

Environmentalists were horrified. A right to pollute! Buying and selling? This smacked of crass commercialism, whereas environmentalism was about nature and purity.

Gradually, however, they came around.

The turning point came with the Clean Air Act of 1990, when a Democratic Congress and Republican President Bush compromised on a "cap-and-trade" system for reducing sulfur dioxide, which causes acid rain.

At the time, the EPA was predicting the cleanup would cost $10 billion a year and take 20 years to put into effect. Instead, the system worked beyond anyone's wildest dreams. Sulfur emissions have been cut in half since 1990 at a cost of only $1 billion per year.

President Bill Clinton and Vice President Al Gore picked up on cap-and-trade and tried to introduce it to the Kyoto Protocols. Unfortunately, the rest of the world wouldn't agree - although Europe has set up its own "bubble" and is trading permits to meet its Kyoto requirements. President Bush has since continued the effort.

As a result, American environmental groups have become the most enthusiastic supporters of market-based systems. "A cap-and-trade policy for carbon, grounded in the traditional market principles of the American economy, represents a realistic achievable first step on global warming," says Fred Krupp, president of Environmental Defense. Environmentalists enthusiastically supported the McCain- Lieberman bill when it introduced a national cap-and-trade system for America's carbon emissions - although the bill unfortunately failed in the Senate.

Still, the news isn't always bad. Sometimes when we put our heads together, we can accomplish great things.

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William Tucker is an associate at the American Enterprise Institute. His column appears Tuesdays. Contact him at billtucker@nyc.rr.com. Send comments about this column to opedpage@gmail.com.