Emissions Trading Programs

1. Reduces over reliance on centralized bureaucratic procedures that sometimes defy common sense.

2. Reduces the cost of achieving environmental goals. Costs of pollution control are reduced if sources are permitted to find the most efficient way of reducing emissions.

3. Essential in harnessing self-interest to promote the common good.

4. Promotes flexibility and freedom of choice.Minimizes the need for coercion.

5. Less information about the production process is needed by regulatory agencies.

6. Efforts are aimed at achieving environmental goals, not complying with procedures - the burden is redirected toward industry engineers to devise ways to reduce emissions efficiently.

7. The regulatory agency tasks (i.e., estimating how much pollution exists in an air shed; auctioning rights to pollute; permitting rights to be transferred; monitoring and penalizing polluters who exceed limits) are still considerable, but overall less demanding than under the command and control approach to regulation.Disadvantages/Concerns

8. The emphasis on buying and selling "permits to pollute" (credits) reduces the powerful moral and symbolic appeal of pollution control.

9. One of the most serious problems is distributive. Environmental quality will improve for some people, since some sources are cheaper to clean up than others, but for those who reside near facilities that are more expensive to clean up, emissions might increase.

10. Calculating baseline emissions.

11. Plant shutdowns.

12. Interpollutant trading.

13. Requires precise monitoring and vigorous enforcement. The three main types of trading programs currently in use are budget/allowance trading (e.g., state NOx Budget, EPA’s Acid Rain Program), open market emission trading (e.g., New Jersey’s OMET program), and offset trading (e.g., New Source Review program). Look for more trading programs covering additional pollutants in the future as both government and industry becomes more comfortable with the various systems. For more information regarding emissions trading programs or other economic incentives in environmental regulation, please contact Tom Petersen of EES at (215) 704-1506 or tom@eesolutions.net.