Ronald Coase is famous for the Coase Theorem, which is based on the premise that there is an economically efficient level of pollution reduction

Many economists believe that the tradable emissions allowance program that has been used to deal with the problem of acid rain has been successful in reducing emissions of sulfur dioxide in an economically efficient manner. Why isn't this program an example of the Coase Theorem?

The Coase Theorem states that if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities. Tradable emissions allowance programs are one type of market-based solution to the problem of negative externalities, but these programs are initiated by government, not private parties.