Reducing Air Pollution Cost-Effectively
AEI Newsletter

Image:Christine Todd Whitman, administrator of the Environmental Protection Agency
Christine Todd Whitman
On February 14, President Bush announced the Clear Skies Initiative as an alternative to
the Kyoto Protocol. The initiative would use a market-based approach to reducing substances harmful to our environment and cutting greenhouse gas intensity. The AEI-Brookings Joint Center for Regulatory Studies hosted an event on February 19 that examined the costs and benefits of cutting power plant emissions of nitrogen oxides (NOx), sulfur dioxide (SO2), and mercury—three substances that are the focus of the new initiative.

Administrator Christine Todd Whitman of the Environmental Protection Agency, as well as agency members Jeffrey R.Holmstead and Peter E. Tsirigotis, explained that the proposal aimed to cut power plant emissions of the three substances by 70 percent by 2018 (see figure on the next page), as well as cut greenhouse gas intensity by 18 percent over the next ten years. The initiative, based on past success with the EPA’s Acid Rain Program, which included an SO2 credit-trading program, would provide transferable credits to plants that reduce emissions. The Acid Rain Program reduced pollution more than predicted at costs lower than expected. Holmstead said that the overall benefits of the new initiative would be more than double the costs.

David G. Hawkins of the Natural Resources Defense Council was skeptical of what the initiative would look like in the future: “In the fine print of the administration’s announcement is a statement that those targets will be reviewed by the EPA and revised based on sound science,” he said. “What it basically will do is give the regulated industry yet another bite at the apple to try to make arguments for further relaxation or deferral of even those targets.” He also believed that the initiative did not go far enough in reducing emissions and greenhouse gas intensity.

The Clear Skies Initiative
Pollutant Current
Emissions
2010 2018 Total
Reduction
SO2 11 mil. tons 4.5 mil. tons 3 mil. tons 73%
NOx 5 mil. tons 2.1 mil. tons 1.7 mil tons 67%
Mercury 48 tons 26 tons 15 tons 69%

Anne E. Smith of Charles River Associates expressed uncertainty about the effectiveness of the technologies that plants would have to use to reduce mercury emissions. In addition, she said, the benefits of mercury control are uncertain and the proposed reductions seem somewhat arbitrary. Randall Lutter of AEI suggested that the EPA adopt only modest controls on mercury until there is better scientific evidence on the risks associated with the substance.

Lutter suggested that, since SO2 and NOx cause similar environmental problems, their permit markets should be integrated: “Carefully chosen exchange rates in principle could reduce both environmental damages and compliance costs.” In focusing on substances like SO2, C. Boyden Gray of Wilmer, Cutler & Pickering asked, “Are we shooting at the right target? That’s a lot of money to spend if we guess wrong.” A number of other emissions, such as aromatics and diesel fuel, also contribute to the fine particle matter that hurts our environment.

Whitman concluded by praising the discussion’s focus on costs and benefits. Many times, she said, “there’s a real temptation to embrace policies and proposals that promise much without any consideration of what the cost will be, and there are those who will criticize you and you criticize you loudly and clearly for being fundamentally antienvironment if you do take a moment to talk about the cost of something.”

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