The U.S. acid rain program created by the 1990 Clean Air Act Amendments is a pioneering application of the tradable permits approach to controlling pollution. We examine the historical evolution of federal clean air legislation that led up to the 1990 acid rain law and then focus on the political process that governed the allocation of the initial endowments of tradable sulfur dioxide emissions permits-- called "allowances"--Among electric utilities. In the relatively simple allocation of allowances to the dirtiest generating units during Phase I (1995-1999), a few high-emissions states received disproportionate shares of allowances, while high-sulfur coal-mining interests benefited from incentives to clean emissions rather than to switch to low-sulfur coal. The more complex and economically significant Phase II allocation, covering all generating units beginning in 2000, reveals rent-seeking on several levels. Hypothetical Senate and House votes on alternative Phase II allocation suggest that the actual allocation would have prevailed against plausible alternatives, though it probably did not minimize aggregate abatement cost in the presence of barriers to interstate trading. Statistical analysis of differences between actual and benchmark allocations in Phase II confirms the complexity of the political process involved and fails to support any simple model of distributive politics. control of key Senate and House leadership and committee positions did not systematically increase allowance allocations. There is some evidence that states with competitive races for Senator, Governor, or the President received more allowances, consistent with partisan theories of distributive politics, although the effects are weak. Most surprisingly, the well organized coalition of states that produced and burned high-sulfur coal which heavily influenced the inefficient results of the SO2 controls in the 1977 Clean Air Act Amendments, did poorly in 1990, both because their decade-long effort to block acid rain legislation failed and because they received relatively fewer Phase II allowances than states with more diffuse interests. There is evidence, however, that some high-emissions states traded additional allowances in Phase I for fewer allowances in Phase II and that major high-sulfur coal-producing states focused their attention on obtaining incentives to install scrubbers to allow them to continue burning high-sulfur coal and benefits for miners.