EPA tries incentives to get US to obey emissions rules

Not even the air is free anymore. Since the advent of air pollution cleanup efforts, Americans have been paying for clean air through taxes and increased prices on a number of products.

Now the US Environmental Protection Agency (EPA) wants to go a step further and convert clean air into a "new commodity" which can be bought and sold, banked, and even traded on a futures market.

"The object," explains Michael Levin of EPA, "is to create a dynamic process where it is in the economic self-interest of everyone to reduce their emissions to the lowest practical level."

This is the bottom line of a three-year effort by EPA to find alternatives to the traditional "command and enforcement" philosophy of environmental regulations. This is essential, they feel, to increase the efficiency and decrease the cost of pollution control. Otherwise, "we are headed up a blind alley," believes William Drayton, the agency's assistant administrator for planning and management.

Industrial growth, resulting in more sources of pollution, is forcing tighter and tighter emission standards in order to meet or maintain air-quality standards, Mr. Drayton explains. This means higher costs for consumers and more red tape for industry. The most likely outcome, Mr. Drayton says, is a political backlash against tough standards that will jeopardize air cleanup efforts if nothing is done.

The traditional approach to regulation involves setting standards for allowable emissions from every type of pollution-generating equipment, inspecting all polluters, and taking those to court who do not comply. But this approach has a number of drawbacks, EPA experts maintain.

Administrative costs are substantial; regulations often are too general and do not apply equally well to every situation; there is no incentive for industry to reduce emissions below the required levels. Similar sources of pollution are treated the same despite costs for reducing emissions which range dramatically. (The cost for removing particulates, for example, varies from 14 cents to $104 per pound, the EPA has found).

As a result of these problems, the EPA is experimenting with new methods of regulation.

The first, instituted last December, is called the "bubble concept." In place of a rigid approach in which allowable emissions are determined for every process within a factory, the EPA now puts an imaginary "bubble" over the entire plant and sets allowable emissions for the entire operation.

Thus, if the plant can come up with a less-expensive approach for meeting emission standards that is "environmentally equivalent and equitably enforced" the EPA will OK them.

"This gives the plant engineer more incentive for making basic changes in his operations, rather than simply adding pollution-control equipment on the stack," Mr. Drayton explains.

In another approach, begun in 1977, the EPA is granting pollution "offsets" in areas where pollution standards are not being met. If a new factory wants to move into such an area, for instance, then it must induce other polluters in the area to reduce their emissions by more than the amount the new factory will contribute. Or, if a company has two similar factories in one air basin, it can offset higher-than-standard emissions at one plant by lower-than-standard emissions at the other.

So far the EPA has OK'd 630 such offsets, but only 27 involved two or more companies. To facilitate trading between two companies, the EPA is fostering the establishment of banks to buy, sell, and broker pollution "credits." If it is less expensive for one factory to reduce its emissions, or if a plant engineer comes up with an innovation that reduces a factory's pollution, then the company can sell a credit for a certified reduction to the bank. For new plants that find pollution control expensive, the bank will provide a central source for buying pollution credits.

By discounting these credits -- making buyers "pay" for more emission reductions than they can use -- the net effect of such commerce is expected to be an overall decrease in air pollution.

Two pilot pollution banks have been set up: one in Louisville, Ky., and the other in San Francisco. The Gulf Coast Waste Disposal Authority in Houston is attempting to get a third started.

"This will put private enterprise in the business of figuring out the most effective way of reducing pollution," Mr. Drayton argues. Such operations could provide pollution "loopholes" for "hard-core polluters," he concedes. But he says the EPA has put in a year of intensive effort to plug loopholes. The potential benefits greatly outweigh the risks, he says.