Pollution Credits

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Pollution credits

Pollution credits emerged from the federal Clean Air Act of 1990 (CAA) as a way for businesses to deal with the regulations that attempt to lower air pollution . The Environmental Protection Agency (EPA) and individual states have created a "cap and trade" system (in practice since 1995) allowing utilities and manufacturers allowances to emit a certain amount of specific pollutants. This system offers companies some flexibility in their compliance while helping to maintain the standards required for cleaner air.

A company can earn pollution credits by voluntarily reducing polluting emissions below limits dictated by the EPA. Earned credits can then be sold to another company that has trouble keeping its emissions within permissible limits, or saved for future use. According to Dean S. Sommer writing for The Albany (New York) Business Review in March 1999, "The 'cap' portion of the system refers to the specific amount of emissions that may be discharged within a state, region or the nation as set forth by the EPA and the CAA. The 'trade' portion refers to a participant's ability to buy or sell the allowances. States, or the EPA, allocate emission allowances to affected sources in specified amounts to ensure that the cap is not exceeded by emissions from all participants."

Different "cap and trade" allowances apply to the most common pollutants, sulfur dioxide and nitrogen oxides , which contribute to acid rain , smog , and ozone depletion. Each allowance, or credit, is a trading unit equivalent to one ton of air emissions. The EPA exacts annual penalties to those companies whose emissions exceed the number of allowances.

According to the EPA, the practice of pollution credits bartering has proven beneficial not only in reducing air pollution, but in providing an incentive for companies to meet environmental goals. For example, the EPA's national acid rain program to reduce sulfur dioxide resulted in a decrease of six million tons of emissions a year compared to 1980 levels. Nitrogen oxide levels were reduced by 50% compared to 1990 levels as a result of a program undertaken by numerous northeastern states.

Critics of the trading program, however, have suggested that the system is flawed. They contend that although it was meant to be a way of encouraging industry to find ways of producing less pollution, the system provides a way of merely transferring responsibility—the one polluting is not held responsible for the poor quality of air it has affected.

In 2000, for example, the state of New York identified several midwestern and southeastern states—Delaware, Illinois, Indiana, Ohio, Michigan, Kentucky, Maryland, New Jersey, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, and Wisconsin—as the major sources of its acid rain, a serious problem undermining natural resources and wildlife . Between 1995 and 2000, the state had accumulated more than 700,000 pollution credits—providing the New York businesses selling them with a total of approximately $37.5 million. The result was that pollution within New York had declined only to be blown back over state lines by other states that had purchased the credits. According to a May 2, 2000 report of the Environment News Service (ENN) by writer Cat Lazaroff, "Despite the state's efforts to reduce sulfur dioxide emissions, many high altitude lakes in New York's Adirondack Mountains remain too acidic to support many native species . Some government studies estimate about half of the region's 3,000 lakes and ponds may become too acidic to support life if acid rain is not reduced." The state fought back with legislation authorizing the fining of utility companies that sell their pollution credits to the polluting states.

Attempts to regulate less and provide more incentives have been met with suspicion by program critics, who fear an increase in pollution, and applause by businesses, who view the reduction in standards as a possible financial relief. In any case, pollution credits had become a valuable commodity on the open market by the early twenty-first century, in the United States and throughout the world.

[Jane E. Spear ]

RESOURCES

PERIODICALS

"Big Cities a Headache U.N. Summit wants to Address." Environmental News Network June 6, 2002 [cited July 7, 2002]. <http://www.enn.com/news/wire-stories/2002/06/06062002/reu_47462.asp>.

Borenstein, Seth. "Bush Vows to Cut Pollution with more Incentives, Fewer Regulations." Knight Rider Newspapers, February 14, 2002.

"Environmentalists, EPA Disagree Whether Current Law or Bush Plan would Help Air More." Environmental News Network, February 21, 2002 [cited July 7, 2002]. <http://www.enn.com/news/wire-stories/2002/02/02212002/ap_46452.asp>.

"Industry Still Failing on Environment, says U.N. Report." Environmental News Network, May 16, 2002 [cited July 7, 2002]. <http://www.enn.com/news/wire-stories/2002/05/05162002/reu_47235.asp>.

Kahn, Joseph. "Whitman Begins to Consider Streamlining Pollution Checks." New York Times, July 28, 2001.

Kranish, Michael. "The Politics of Pollution." Boston Globe Magazine, February 18, 1998.

Lazaroff, Cat. "New York Fights Acid Rain Through Curb on Pollution Credits." Environment News Service, May 2, 2000.

Max, Arthur. "Pollution Trading a Contentious Issue at Climate Talks." Associated Press, November 15, 2000.

"Oil Spills in the Sky." December 9, 1997 [cited July 7, 2002]. <http://www.enn.com/features/1997/12/120997/1209fea_20122.asp>.

"Pollution Credits: The Science Isn't In Yet." Environmental News Network, February 2, 1999 [cited July 7, 2002]. <http://www.enn.com/news/ennstories/1999/02/020299/co2findings_1423.asp>.

Sommer, Dean S. "'Retiring' Pollution Credits helps both Business and Environment." The Business Review, March 22, 1999.

"States Ready to Trade Air Pollution Credits." Environmental News Network, January 3, 2001 [cited July 7, 2002]. <http://www.enn.com/news/enn-stories/2001/01/01032001/pollution_41007.asp>.

"Trading for Clean Air just got Easier." December 5, 2001 [cited July 7, 2002]. <http://www.enn.com/news/enn-stories/2001/12/12052001/s_45776.asp>.

"Trading Credits Does not cut Pollution." Houma Today, November 28, 2001.

"U.S. EPA Proposes Pollution Credits to Clean Up Rivers." Environmental News Network. May 16, 2002 [cited July 7, 2002]. <http://www.enn.com/news/wire-stories/2002/05/05162002/reu_47230.asp>.

OTHER

Environmental Protection Agency. "The Plain English Guide to the Clean Air Act." May 13, 2002 [cited July 7, 2002]. <http://www.epa.gov/oar/oaqps/peg_caa/pegcaain.html>.