THE RECENT forest conference in Portland was, as expected, both well-attended and highly publicized. The scene, however, was more impressive than was the substance. Virtually nothing was resolved.

Unfortunately, this is a predictable consequence of political decision-making. And the conference's politicking and posturing overshadowed that week's true environmental milestone: the inaugural sale of pollution rights by the Chicago Board of Trade.

Economists had long awaited this event. It initiated an efficient strategy to reduce pollution from powerplants and factories.

The theory is straightforward: Government sets an acceptable overall emissions level for a pollutant, in this case the sulfur dioxide emitted by electrical utilities and factories. It then creates tradable permits and gets out of the way to let the market process produce the best way to achieve the reductions.

From 1995 onward, industrial plants must have an allowance to emit sulfur dioxide. The government grants pollution allowances to plants based upon their emissions history. For example, those which emitted an average of 100 tons over the past four years were given grandfathered permits for 75 tons in 1995. (The amount drops to 50 tons in the year 2000.) Each grandfathered permit was subtracted from the national emissions limit. The remainder were then auctioned to the highest bidder by the Chicago Board of Trade.

This system has highly positive environmental and economic implications. First, it encourages utilities to find the most efficient way to comply with the law. They may either buy permits at auction or find money-saving ways to cut emissions. A highly successful plant may be able to cut emissions for less than the going price of an emissions permit. It can then cut pollution further, selling or retiring its extra permits.

The result is a market which provides incentives for innovative pollution-control techniques. The emitters with the lowest cost of control will reduce their emissions the most. Those who find ways to emit less save money, just what our environmentally conscious nation increasingly desires.

The early results seem promising. Illinois Power Company expects to save at least $250 million over the next 20 years by buying permits as opposed to building a new scrubber. But this is not an increase in pollution. Rather, it is a transfer, for a utility somewhere must now emit less. So Illinois ratepayers save money, the nation moves toward its emissions goals, and the government raises revenues by selling permits.

In future years the total number of permits offered, and hence the amount of pollution, will be reduced. Illinois Power will continually reassess its emissions costs and control strategies. It may even build a new scrubber. But the expectation is that, when faced with options and competitive pricing of permits, companies will find innovative, and less expensive, ways to reduce their own emissions. So we all get a cleaner environment at lower cost.

And since anybody can bid on permits, the system also enables those who most value clean air to enter the market. At least one environmental group, National Healthy Air Exchange, bids on permits, hoping to buy and "retire" them.

Northeast Utilities donated 10,000 tons of its 140,000-ton annual allowance to the American Lung Association. Eastern coal miners may buy some to package with their "dirty," or high-sulfur, coal, and hence save their jobs.

These are just some of the possibilities created by tradable permits. Environmental and business entrepreneurs will surely find more. This process unleashes the innovation and creativity which make markets such successful institutions.

This sale also illustrates another advantage of market-based environmental solutions: The sale was not the lead story on the evening news. Market solutions promote adjustment and compromise without political grandstanding and public recriminations.

In an honest market, there is no angling for a favorable exemption from clean-air laws, no political payoffs for special treatment. The market solves the social problem of distribution efficiently, at low cost and with minimum fuss.

As President Clinton grapples with conflicts over old-growth forests, he should learn from the example offered by the Chicago Board of Trade. Markets can be harnessed to help the environment, perhaps through a national biodiversity trust fund which would buy habitat and development rights to important ecosystems.

Our president may be the best political salesman in history. Surely if the Chicago Board of Trade can get people to buy pollution, President Clinton can devise ways to sell the spotted owl's recovery.