This paper describes a method for determining reductions of SO2 emissions from coal- and oil-fired power stations, oil refineries and large industrial units in the UK taking into account their pollution potential. The method is based on the use of two gridded data sets: critical loads, which represent the sensitivity of the environment to acid deposition and modelled estimates of total (wet + dry) sulphur deposition for 646 point sources within the UK. An iterative method is used to identify and subsequently reduce emissions from point sources that contribute most to areas of critical loads exceedance. This paper demonstrates how the method may be used to determine an optimal allocation of emissions across the UK which yields the maximum amount of environmental protection per unit of emission. The paper then goes on to consider the changes that will have to take place within the UK power generation industry in order to meet the revised EC Large Combustion Plant Directive which comes into force on 1 January 2008. Particular emphasis is placed upon proposed emissions trading schemes and the environmental implications of allowing trading between stations with high and low pollution potentials. The paper concludes by suggesting that the emissions trading process should take into account the pollution potential of each source, irrespective of whether the proposed emission is within the plantâ��s agreed emission limit. An approach based entirely on minimizing environmental damage rather than one which takes cost into account, as in current integrated assessment modelling, could provide an interesting approach across the rest of Europe.