It's Clear Skies for Dirty Air

When the Environmental Protection Agency launched its highly publicized Acid Rain Program in the early 1990s to cut sulfur-dioxide emissions, environmentalists were skeptical. The Clean Air Act amendments of 1990 introduced a nationwide emissions-trading system: Factories and utilities whose emissions were cleaner than the law required could sell their "excess" to dirty plants. Over time, the law required progressively lower emissions levels. The trading system rewarded clean plants, punished dirty ones by compelling them either to clean their emissions or to buy pollution rights from clean plants, and thus created an incentive for all plants to invest in new, clean technology.

At first, greens were repulsed by the very idea of marketing the right to pollute. One environmentalist commented, "What's next, the L.A. Police Department trying to buy civil-rights credits from Wisconsin?" But more than a decade later, having seen sulfur dioxide cut by millions of tons and some of the worst-hit lakes and rivers slowly recovering, most environmentalists now praise emissions trading as an effective strategy to cut sulfur-dioxide output.

The plan worked for three reasons. First, the law was mandatory and it set concrete goals for the reduction of total sulfur-dioxide emissions over time. Second, the source of sulfur-dioxide emissions was well-known and relatively cheap to monitor. Third, sulfur dioxide was not highly toxic in the immediate area where it was emitted. All of this made it technically feasible to use a trading system to carry out a public-policy goal. But now, thanks in part to this success, the Bush administration is touting trading as the wave of the regulatory future, pushing market-based strategies to complement -- or, many fear, to replace -- long-standing environmental laws.

But are other pollutants like sulfur dioxide? And can a market system really provide the intensity and rigor of enforceable regulation? Finally, is the administration prepared to design the tough, science-based plans that our nation's disastrously polluted air and water systems require in order to recover? The answer seems to be a resounding "no" on all counts. Even environmentalists who support emissions trading are dubious about George W. Bush's proposed pro-business changes in environmental law.

The president's Clear Skies proposal, introduced in the House by Rep. Joe Barton (R-Texas) on July 30, would radically alter the Clean Air Act. (The Senate version of the plan is expected soon.) "This new approach will harness the power of markets, the creativity of entrepreneurs and draw upon the best scientific research," Bush said in his February speech announcing the plan. The administration is considering adding pollution trading to its interpretation of the Clean Water Act, too. (The EPA issued a draft guidance this past April encouraging states to explore trading options to pursue cleaner water.)

At first blush, the administration's approach appears to follow closely the acid-rain program. In addition to capping sulfur-dioxide emissions, Bush would add caps for nitrogen oxide and mercury, and those caps would decline over time. However, unlike sulfur-dioxide limits set under the existing acid-rain program, the proposed caps on total sulfur-dioxide, nitrogen and mercury emissions are much higher than the current Clean Air Act would allow over the same period, and they are set to fall more slowly., a joint project of the Clean Air Task Force, the National Environmental Trust and the U.S. PIRG Education Fund, estimates that the Clear Skies Act would allow 850,000 more tons of nitrous oxide, 2.5 million more tons of sulfur dioxide and 21 more tons of mercury than the Clean Air Act mandates over the next 10 years. In the case of mercury alone, this would be a stunning 420 percent increase over current law.

Mercury is a well-known neurotoxin. The acid-rain program, in contrast, dealt with a pollutant that isn't particularly harmful in the short term or in the immediate area where it's released. So regulators didn't need to worry about a utility loading up on emissions credits and creating a dangerous concentration, or "hot spot." An elevated mercury output, however, could pose an immediate threat, not just to fish and plant life (as is the case with acid rain) but to humans, especially children.

Perhaps most importantly, Clear Skies would ignore carbon dioxide, a pollutant regulated under the Kyoto Protocol and a greenhouse gas that environmentalists and industry types agree is ripe for regulation in coming years. Joe Miakisz is the associate director of the Clean Energy Group, an organization representing eight energy companies across the nation. "The CEOs of our companies think it's inevitable that within the next 10 or 15 years, there will be control of greenhouse gases [including carbon dioxide]," he says. "The question is what levels of reduction will be required. We'd rather know now than find out later."

The Clean Water Act is an even less plausible candidate for pollution trading -- although it's certainly an enticing one, considering that some of the main water polluters, including agriculture, currently operate with no federal regulation at all. But water pollution comes in so many varieties, and from so many sources, that designing an effective emissions-trading program poses an almost intractable puzzle. It's easy to find out how much waste is entering a river from a given pipe at a power plant, for instance, but how do we measure what's oozing from the banks of the chicken farm downstream? And how do we compare the two? Also, the EPA will likely allow trading in toxic chemicals, which by definition carries the potential to create toxic hot spots.

Rena Steinzor of the University of Maryland Law School warned of the pitfalls of trading in her June testimony before the House Subcommittee on Water Resources and the Environment. For example, she said, a California plan had nitrogen and sulfur-dioxide caps set so high that it achieved almost no results until the 2000 energy crisis, at which points credits suddenly became so expensive that regulators exempted utilities from the program in order to keep the lights on. Another California project in which polluters bought up old, high-emissions cars created giant hot spots where the cars were stored. Or did, until the vehicles were illegally sold and put back on the road.

In principle, market-based systems are both ideologically fashionable and broadly appealing: Industry can save money while meeting or even exceeding environmental goals. Trading can also spur technological innovation. The prospect of making money (or at least of cutting costs) by finding new ways to reduce pollution will get industry's synapses firing faster than a do-or-die mandate from the EPA. Not only that, proponents insist, but the legal structure of trading guarantees a specific pollution reduction. That reduction isn't based on installing a certain pollution-control technology, then crossing your fingers in hopes that it reduces pollution to some projected level. It's an amount of total emissions that can't be exceeded, however polluters may choose to divvy up the allowable tonnage.

But design, everyone agrees, is key. Environmentalists point out that although trading can be an effective tool for battling some kinds of pollution, it's not a silver bullet. The way it's implemented makes all the difference, and Bush's approach has been blindly pro-industry. The successful acid-rain program used emissions trading as a means to a tough regulatory end. The administration, by contrast, is pushing trading in the service of another agenda -- one of weakening existing clean-air and clean-water goals. Polluters love it. Few other people are fooled.