P O W E R & P O L LU T I O N

A SUCCESSOR TO THE CLEAN AIR ACT

RESEARCH PAPER

PHILIP ADOLWA PAUS 8531

 S U M M A RY

Electrical power generation through coal fired plants accounts for 55% of
the total electricity consumed in the United States. (DOE 2004) This process
of electrical power generation also produces significant amounts of pollution
which result in both health and environmental damages to society. These
costs are not accounted for in the price of electricity.

In 2002, President George W. Bush proposed the Clear Skies Initiative

(CSI). This legislative framework was intended to provide a platform for
achieving significant health and environmental benefits through pollution
reduction and provide the energy sector with predictability in pollution
abatement costs and requirements. The initiative’s outcomes would be better
health and environment, cheaper electricity, and a sustained diverse fuel mix
in electricity production. (White House, 2002). The CSI is one of the pending
legislations that attempt to replace the Clean Air Act Amendments of 1990,
which are widely viewed by both the environmental community and the
energy industry as successful. The Clean Air Act introduced the use of
market based instruments in power plant pollution control.

The Clear Skies Initiative provides excellent legislative framework for

enhanced market efficiency, that will minimize the legal challenges to
pollution regulation and agency action currently experienced, but the
proposed legislation falls short on the pollution reduction targets proposed.
The pollution caps are set to be lower than the goals under the existing law.
The role back in emission reduction targets will not be viewed favorably by
the environmental community. This challenge to the proposed law’s
environmental benefits will hinder its chances of adoption.

This paper provides an analysis of the viability of Clear Skies Initiative as a

successor to the. Clean Air Act Amendments of 1990. The analysis states the
objectives of CSI, describes the cap and trade market based mechanism and
the multi pollutant approach proposed in the CSI. The analysis also will
highlight the major deficiencies of the CSI, as put forward by its critics. The
analysis provides a definition to the power plant pollution problem describing
the scope and impacts of power plant pollutants. The analysis proposes
efficiency, cost effectiveness environmental performance, equitable
distribution and the political feasibility as evaluation criteria for CSI. CSI is
evaluated against the existing legislative framework to determine if it will be
an improvement in power plant pollution control.
 INTRODUCTION

Under current technology, electricity is critical to economic development,

security, education, health, entertainment and almost all other facets of life -
as we know it today. While electricity powers economic growth, unintended
results from the preferred means of power generation can have undesirable
effects to health and the environment. According to the Department of
Energy more than 5000 coal-fired power plants are responsible for ensuring
reliable and sufficient power supply. (DOE, 2005) These power plants emit
significant amounts of air pollution: 67 percent of all sulfur dioxide (SO2)
emissions, 40 percent of carbon dioxide, 37 percent of mercury (Hg)
emissions and 25 percent of all nitrogen oxide (NOx) emissions. (EPA, 2004)
These pollutants significantly contribute to fine particle and ozone pollution
associated with a variety of environmental problems, such as smog, acid rain,
nitrogen deposition and visibility impairment. An American Cancer Society
study (Pope et al, 2002) has linked respiratory and cardiovascular mortality to
the fine particulate (PM25) levels.1 These pollutants have been associated
with reduction in air quality, global warming, public health concerns and
environmental and infrastructure degradation.

Coal provides a cheap source of energy. The U.S has a quarter of the
world’s coal reserves and at current extraction and usage rates coal will last
for centuries. The burning of fossil fuel is the predominant method of power
generation in the U.S. Coal burning generates 55% of the electricity in the
U.S. About 10% of electricity currently comes from natural gas, which pollutes
the air at far lower levels than coal. Oil provides only about 2% of electricity
in the U.S.2 (DOE, 2004). The rest of the electricity demand is met mainly
through nuclear power generation and green alternatives like wind and solar
power. (DOE, 2004) The total costs including damage to the environment and
human health are borne by society, but are not reflected in the cost of
electricity. These costs are paid for in other ways: higher health insurance
premiums, long-term depletion of resources and infrastructure. Reducing the
extent of theses external impacts or incorporating these external costs into
the price of electricity to give consumers accurate information on the true
costs of electricity is one of the most important challenges in creating an
efficient market and sustainable energy future.

On 14 February 2002, President George W Bush proposed the Clear Skies

Initiative (CSI). This initiative is meant to provide a platform for achieving 70
percent cuts below year 2000 emission levels in power plants more quickly,
and in a more cost-effective manner, than the current Clean Air Act programs.
1
An American Cancer Society study by Pope et al in 1995 established a
significant correlation between exposure to fine particulate matter at PM25
with mortality. This study formed the basis for the mortality reduction
benefits under Clear Skies Act.
2
See Energy Information Administration, Official Energy Statistics from the US
Government available at http://www.eia.doe.gov/fuelelectric.html

2
The Clean Air Act is widely viewed as successful by both the environmental
community and the energy industry. The Environmental Protection Agency
(EPA) and the White House describe CSI as “by far, the most aggressive
action ever proposed by any President to reduce emissions from power
plants” The outcomes of the new proposal would be, improve air quality
throughout the country, using a proven market-based approach that will save
American consumers millions of dollars, spur economic growth and preserve
a diverse fuel mix. This evaluation will use the impacts on market efficiency,
cost effectiveness, environmental performance and political feasibility to
evaluate this proposal against the existing legislation that this proposal seeks
to replace.

BACKGROUND AND PROBLEM DEFINITION

The air we breathe contains many impurities that are produced through
industrial, agricultural and transport processes. These impurities affect
human health, damage fragile ecosystems, reduce visibility, and even
damage property. There is also evidence though disputed that these
anthropogenic additives to air have profound impacts on global climate.
(Jones et al, 1986)

The earth’s atmosphere consists mostly of nitrogen (78%) and oxygen

(21%), has always contained many trace chemicals and particles.3 Natural
processes have always had an impact on the composition of our atmosphere,
volcanoes release large amounts of ash and sulfur dioxide into the air and
lakes produce green-house gases such as methane and carbon dioxide4, wind
and other natural processes raise dust into the atmosphere, and even the
natural botanical and zoological growth processes emit small amounts of
chemicals into the atmosphere. (USGS, 2004)

But when the word “pollution,” is used, it generally applies to human-

related emissions that degrade the environment or cause harm to humans.
These human activities include agricultural, industrial, commercial,
transportation and residential processes. The common and most significant
air pollutants include:

Mercury

Mercury moves through the environment as a result of both natural and

human activates and the highest emitting source for anthropogenic mercury
is the burning of coal by electrical utilities. This group accounts for at least

3
See Introduction to the Atmosphere, Atmospheric composition
Physicalgeography.net available at
http://www.physicalgeography.net/fundamentals/7a.html
4
See U.S. Geological Survey Fact Sheet 002-97: What Are Volcano Hazards?
Available at http://pubs.usgs.gov/fs/fs002-97/ , Last modified: October 13,
2004

3
40% of the human generated emissions of mercury in the U.S. 5 (EPA, 2006)
Typically, the air concentrations of mercury is low, but through deposition in
water and a process known as bioaccumulation in aquatic life, mercury can
reach toxic levels. Human exposure to mercury primarily occurs thorough
eating contaminated fish. Exposure to mercury contamination has been
associated with neurological and developmental disorders ranging from
subtle loss of sensory or cognitive ability to convulsions and death. (USGS,
2002)

Nitrogen oxide

Nitrogen oxides (NOx), are mixture of gases that contain nitrogen and
oxygen in varying amounts. Nitrogen oxides are released to the air from the
exhaust fumes of cars, the burning of coal, oil, or natural gas, and during
various industrial processes. The main pollution sources of NOx are transport
emissions and electric utilities. According to the EPA, electrical utilities
account for 22 percent of the NOx emissions. Negative impacts of NOx range
from health and environmental to visibility impairment causing accidents on
roads in large cities (smog). Smog has been associated with asthma in
children.6 Individuals with extended outdoor activity susceptible negative
effects such as damage to lung tissue and reduction in lung function. (ATSDR-
CDC, 2002) Other impacts from ozone include damaged vegetation and
reduced crop yields. NOx and sulfur dioxide react with other substances in
the air to form acids which fall to earth as acid rain. Acid rain causes
deterioration of cars, buildings and historical monuments; and causes lakes
and streams to become acidic and unsuitable for many fish.7

Sulfur dioxide

Sulfur dioxide is a colorless gas, which is odorless in low concentrations,

but pungent at high levels.8 (ATSDR-CDC, 1998) On a global scale, most of
the sulfur dioxide (SO2) is produced by natural sources, mainly volcanoes and
decaying organic material. This natural sulfur dioxide is mainly emitted high
into the atmosphere or far from populated centers; therefore concentration of
gas in ground level air is quite small. 9Sulfur is prevalent in many raw
materials, including crude oil, coal, and ore that contains common metals.
5
See Environmental Protection Agency, Mercury, Basic Information available
at http://www.epa.gov/mercury/about.htm Last updated on Friday, March 3rd,
2006
6
See LA Times Article by Miguel Bastillo; Smog harms children’s lungs for life.
Available at http://healthandcleanair.org/resources/latimesarticle.pdf
7
See Clean the Air, The National Campaign Against Dirty Power, Sulfur
Dioxide and the Environment. Available at
http://www.cleartheair.org/relatives/18780.pdf
8
See Agency for Toxic Substances and Disease Registry (ATSDR). 1998: U.S.
Department of Health and Human Services, Public Health Service available at
http://www.atsdr.cdc.gov/toxprofiles/tp116.html

4
Sulfurous gases are formed when fuel-containing sulfur, such as coal and oil,
is burned, and when gasoline is extracted from oil or metals are extracted
from ore. sulfur dioxide dissolves in water vapor to form acid, and interacts
with other gases and particles in the air to form sulfates and other products
that can be harmful to people and their environment. The main
anthropogenic source of sulfur dioxide in the United States of America is the
combustion of coal. Coal contains 1 to 9% sulfur, depending on the
geographic region from which it was mined. 10According to the Environmental
Protection Agency over 65% of sulfur dioxide released to the air, or more than
13 million tons per year, comes from electric utilities, especially those that
burn coal. (EPA, 2003)

According to the Center for Disease Control (CDC), the major health
concerns associated with exposure to high concentrations of sulfur dioxide
include effects on breathing, respiratory illness, and aggravation of existing
cardiovascular disease. Children, the elderly, and people with asthma,
cardiovascular disease or chronic lung disease, are most vulnerable to
adverse health effects linked with exposure to sulfur dioxide. (CDC Public
Health Statement, 2004)

Additionally, there are a varieties of environmental concerns associated

with high concentrations of sulfur dioxide. Because sulfur dioxide, along with
NOx, are the major components of acid rain it contributes to the acidification
of soils, lakes, and streams and the resulting impacts on soil and water
organisms and ecosystems. Sulfur dioxide exposure to vegetation can
increase leaf injury, decrease plant growth, and yield, and decrease the
number and variety of plant species in a given community.11 (EPA, 2006)

Particulate matter,

Not all air pollutants are gases. Particulate matter is a collective term used
for very small solid and/or liquid particles found in the atmosphere. The EPA
defines Particle pollution as the “term for a mixture of solid particles and
liquid droplets found in the air”. (EPA, 2006) One of the major characteristics
of particulate matter is particle size. Particles can range in size from 0.005 -
500 micrometers or microns (um), which is equal to one-millionth (10 -6) of a
meter. Particles less than 2.5 microns in diameter are known as "fine"
particles; those larger than 2.5 microns are known as "coarse" particles. 12
9
See U.S. Department of the Interior, U.S. Geological Survey, Menlo Park,
California, USA http://volcanoes.usgs.gov/Hazards/What/VolGas/volgas.html
Contact: VHP WWW Team Last modification: 10 January 2006
10
See the US Department of Energy, Energy Information Administration, US
Coal Reserves: An Update by heat and sulfur content., Feburary 2003.
Available at http://tonto.eia.doe.gov/FTPROOT/coal/052992.pdf
11
See Environmental Protection Agency, Sulfur dioxide, Basic Information
available at http://www.epa.gov/air/urbanair/so2/chf1.html Last updated on
Thursday, March 2nd, 2006
12
See Environmental Protection Agency, Fine Particulate Matter, Basic
information: Available at http://www.epa.gov/air/particlepollution/basic.html

5
Particulate matter impact both heath and visibility. Power production
significantly contributes to the production of both primary and secondary
particles. As mentioned previously both NOx and SO2 play critical roles in the
development of particulate matter and the study by America Cancer Society
established correlations between fine particulate pollution (less than 2.5
microns) and mortality. (Pope, et al, 1995)

Carbon dioxide

The EPA originally viewed carbon dioxide as a product of "perfect"

combustion, but now views CO2 as a pollution concern. Carbon dioxide does
not directly impair human health, but it is a greenhouse gas that traps the
earth's heat and contributes to the potential for global warming. (EPA, 2002)
Most of these emissions, about 82%, are from burning fossil fuels to generate
electricity and power our cars.13 Rising global temperatures are expected to
raise sea level, and change precipitation and other local climate conditions.
Changing regional climate could alter forests, crop yields, and water supplies.
It could also affect human health, animals, and many types of ecosystems.
Unfortunately, many of the potentially most important impacts can not be
reliably projected for specific areas.14

Challenges to the Impacts of power plant pollution

A significant number of related, unintended negative impacts arising from

pollution have been sited in the process of electricity generation using fossil
fuels. The EPA tracks the emission sources and the amount of these
pollutants through established national emission monitoring and inventory.
Therefore the quantities of the pollution produces are not challenged. The
common challenge is on the impact of the pollution levels and placing
monetary value on these impacts. The energy industry contends that the
impact of these pollutants on health and environment has not been
scientifically established. The George W. Bush administration has made
attempts to uncouple carbon dioxide and global warming and challenge the
science behind global warming.15 (PBS, 2004) With no regulation for CO2 there
has been an increase in the quantity of CO2 emitted, according to the EPA the
annual CO2 emissions from power plants increased by 9 percent nationwide
from 1995 to 2003, with an increase at 59 percent for the nation’s “dirtiest”
power plants.16 (EPA, 2003) The EPA highlights the uncertainty relating to
the impact of green-house gases on the earths complex systems.

(Last updated on Thursday, March 2nd, 2006)

13
See Environmental Protection Agency, In Brief; Greenhouse Gas Inventory.
Available at
http://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR5CZK
VE/$File/ghgbrochure.pdf
14
See Environmental Protection Agency, Global Warming, Climate,
Uncertainties. Available at
http://yosemite.epa.gov/oar/globalwarming.nsf/content/ClimateUncertainties.
html Modified on Friday, January 7th, 2000
15
See PBS, Newshour: Environmental Reversal, March 14, 2004 Available at
http://www.pbs.org/newshour/bb/environment/jan-june01/co2_3-14.html

6
Uncertainties in both the effects of air pollution and its valuation are a
constant issue in clean air regulation. Uncertainty comes into play in
translating emissions into ambient air quality in estimating the costs of the
adverse effects on health, agriculture, and the environment. A second
challenge is estimating the compliance costs incurred by the power plants in
meeting any standards legislated. Power plants have an incentive to
overstate the costs to comply with regulation reducing the perceived cost
effectiveness of any regulatory action

G OA L S A N D C R I T E R I A

Success in pollution control within the energy industry can be measured in

four ways. One is cost-effectiveness - does the policy facilitate attainment of
environmental standards at minimum abatement costs? The second is market
efficiency - does the policy internalize of resulting social costs of energy
production into the prevailing prices of electricity? The third being distributive
– does the policy unfairly distribute the environmental and health benefits
within society or the compliance costs to the individual plants. Finally,
environmental performance - does the policy facilitate acceptable
environmental performance under current knowledge of environmental and
health damages? Both the energy industry and the environmental community
would provide ample challenge to any legislation that is viewed to either
weak on environmental performance or involve high compliance costs. These
are the criteria used in the paper to compare the two power plant pollution
control alternatives.

P O L I C Y A LT E R N AT I V E S

Prior to the Acid Rain Programs of 1990 under the amendments of Title IV
of the Clean Air Act, the regulations for electric power plants were exclusively
prescriptive in nature, employing first an emissions-rate standard (prohibiting
each regulated generating unit from exceeding a certain uniform emissions
rate) and then a technology standard (mandating that each unit remove a
certain percentage of pollution from emissions, essentially requiring an end-
of-pipe abatement technology). Experience with these programs of
prescriptive regulation highlighted the limits or inability that regulators have
to prescribe source specific emission reduction. The information requirements
for this approach are restrictive; the regulating body would need to determine
the appropriate pollution levels, the best technology to employ to reduce the
pollution in addition to monitoring the compliance of each pollution source to

16
See EPA, Inventory of Greenhouse gases emissions and sinks 1990 – 2003;
available at
http://yosemite.epa.gov/oar/globalwarming.nsf/UniqueKeyLookup/RAMR69V52
8/$File/05executivesummary.pdf

7
ensure that these requirements are met. Experience with approach was
riddled will legislative challenges to agency action. (Winters, 2002)

Market Based Instruments

Acid Rain Program initiated an experiment in incentive-based

environmental regulation by tradable allowances for emission of sulfur
dioxide by electric generating facilities. Under Acid Rain Program, the EPA
distributes allowances (permits) equal to the cap amount while the sources
(that is the power plants) have flexibility to choose how to meet their limits –
by reducing their own emissions or purchasing allowances from other
sources. Electricity generators must continually monitor and report their
emissions, and must have sufficient allowances to cover their emissions or
significant automatic penalties will apply for noncompliance. The number of
allowances that are distributed are reduced over time. 17 Market-based
instruments are advocated because of their presumed lower economic cost in
comparison with prescriptive regulatory instruments. (Ellerman, 2003) These
allowances can be traded freely therefore providing an incentive for
innovation in the market. Power plants that cannot reduce emissions have the
flexibility in this market framework to buy additional allowances without
undermining air quality. Incentives for electricity generators to reduce their
emissions further and more quickly than the law requires through early
implementation and over-compliance are created through the banking
aspects of the trading program, where power plants will do more now as an
investment for the future (Winters. T, 2002). There are a variety of
mechanisms for compliance under Acid Rain Program in addition to allowance
trading including intra-firm reallocation of emission allowances, fuel switching
and/or blending, installing scrubbers (flue gas de-sulfurization), retiring
plants, re-powering plants, energy conservation, reduced utilization and
substitution among facilities. (EPA, 2006) Therefore, an active allowance
market was not a necessary condition for cost effectiveness.

Success of Clean Air Act Amendments

The Acid Rain program has been overwhelmingly successful from a market
efficiency, cost effectiveness and environmental performance perspective: a
vigorous trade in allowances, widespread benefits, and lower-than expected
compliance costs. The pollution hotspots expected due to uneven distribution
in pollution reduction have not been evident therefore challenging the notion
that MBI will result in the inequitable distribution of damages. Four features
best described environmental effectiveness of the Acid Rain Program. A large
reduction in emissions was achieved relatively quickly. Second the schedule
of emission reduction was accelerated significantly because of banking, and
17
See, Environmental Protection Agency, Air Markets; Acid Rain Program
available at http://www.epa.gov/airmarkets/arp/overview.html Last updated
on Thursday, March 2nd, 2006

8
third, no exceptions or relaxation from the programs requirements were
granted. Fourth and finally the pollution hot-spots resulting from a
concentration of allowances purchased into a region as a result from emission
trading that were feared did not appear. (EPA, 2004), (Ellerman, 2003)

One of the four aspects of environmental performance noted above can be

attributed to a specific design feature in Acid Rain Program. The over
compliance can be attributed to the banking provision of the amendments.
The remaining environment features-quick implementation, 100% compliance
and the absence of hot spots reflect a more fundamental characteristic of the
program namely a flexible decentralized property rights system. (Ellerman et
al., 2000)

Critics of MBI argue that adoption of the incentive-based regulation such

as in the Acid Rain Program reflect a public policy experiment in an
inappropriate domain - the environment. The challenges of valuing
environmental and health benefits, the impact of uncertainty are viewed by
the environmental community as sufficient reasons to minimize pollution to
its lowest minimum possible level. The result of the cap-and-trade program
under Title IV suggests that this form of MBI is more environmentally effective
than the prescriptive regulation is in addition to being more economically
efficient. (EPA, 2003)

The Clear Skies Act as a Successor to the Clean Air Act

Clear Skies Initiative is meant to provide a platform for achieving 70

percent cuts below year 2000 emission levels in power plants more quickly,
and in a more cost-effective manner, than the current Clean Air Act programs.
The Environmental Protection Agency (EPA) and the White House describe CSI
as “by far, the most aggressive action ever proposed by any President to
reduce emissions from power plants.” The benefits of the new proposal would
be, improve air quality throughout the country, using a proven market-based
approach that will save American consumers millions of dollars, spur
economic growth and preserve a diverse fuel mix. The EPA describes four
main approaches to achieving these objectives through CSI:

• First establishing federally enforceable emissions limits (or "caps") for

three pollutants NOx, SO2 and Mercury. CSI NOx and SO2 requirements
affect all fossil fuel-fired electric generators greater than 25 megawatts that
sell electricity. Mercury requirements affect only the subset of these units
that are coal-fired. The caps will be reduced in two phases by 2018. The
second phase reduction in 2018 will be subject to review for new scientific
technologies and cost information. Two trading zones have been
established based on the reduction needs. (EPA, 2003)

•Secondly, a key goal of the proposed multi-pollutant legislation is to

improve on the current regulatory framework by giving industry greater
regulatory predictability and certainty about compliance requirements. By
adopting a, multi-pollutant approach as opposed to current law which tends
to address each environmental problem independently. The national

9
 program would take advantage of the benefits that would result from
controlling multiple pollutants at the same time. Whereas in the past each
pollutant was addressed through a separate regulatory program. (EPA,
2003)

•Thirdly, the EPA will apply the Cap and Trade mechanism used successfully
in the Clean Air Act programs. In the Acid Rain program, this approach
produced near perfect compliance (99%), early implementation and huge
cost saving running up to 75% below the projected cost. The EPA distributes
allowances equal to the cap amount while the sources (that is the power
plants) have flexibility to choose how to meet their limits – by reducing
their own emissions or purchasing allowances from other sources. (EPA,
2003)

• Lastly by setting firm caps while offering flexibility in how utilities can
meet those caps, the CSI would preserve a diverse fuel mix, more so
enabling continued use of abundant domestic fuel sources – coal.
Therefore providing reasonable prices energy and supporting economic
growth. The firm caps also provide adequate lead time creating a
predictable climate for long term planning and capital investment in power
generation. (EPA, 2003)

The main criticisms of CSI focuses on the move to end the distinction
between old and new sources of emissions found in New Source Review and
the level of the caps placed. The existing law holds plants built after 1970
had to have the best emission control technology available at the time they
were built, and old plants that were substantially upgraded would have to
meet the same standard. The goal in 1970 was that large future reductions in
emissions would be made as old plants were retired and replaced by new
plants. (Smock R., 2002) But two problems hindered implementation. Existing
plants increased in value due to more stringent requirements on new plants.
The difficulty of setting new plants has made old plants less likely to be
replaced, coupled with dramatic technological advances have reduced
maintenance costs and made it possible to extend the life of old plants.
Determining when an updated old source should have to meet new source
standards has also proved difficult. NSR mechanism, reviews the
expenditures on existing plants to see whether a plant has crossed the line
between old and new. The lack of clarity on this distinction discourages power
plant owners from improving existing units for fear of triggering the new
source requirements. It has also led to lengthy litigation over what is and isn't
"new." (Winters T, 2002).

The emission reduction targets set by the Clear Skies Initiative are far less
aggressive if compared to the mandates found in the current Clean Air Act.
Analysis of reductions to SO2, NOx and mercury, by the Clear The Air indicate
that enforcing the Clean Air Act requirements would reduce pollution
emissions more quickly than the cap and trade plan in the Clear Skies
legislation. Current law requires that power plants reduce mercury, sulfur and
nitrogen no later than 2010. Clear Skies Initiative sets new emission targets
for pollutants, allowing five times more mercury emissions, one and a half

10
times more sulfur dioxide emissions and hundreds of thousands more tons of
the smog-forming nitrogen oxides than allowed under current law and
extends the period for compliance to 2018. In eliminating the NSR the Clear
Skies Legislation would allow an extra decade for the more than 400
grandfathered power plants built before the Clean Air Act, to be retrofitted
with pollution controls technologies. (NRDC, 2004), (Winters, 2002)

Pollutant Cap comparison of the Clear Skies Act against the

existing programs under the Clean Air Act 18

P Nitrogen Sulfur Dioxide Mercury

has Oxides
e

Clean Air 1.25 million ton 2 million ton cap 5 tons per year
Act (CAA) cap by 2010 by 2012 by 2008
Existing
Programs
Clear Skies 1 2.1 million 4,5 million ton 26 tons per year
Act (CSI) ton cap by 2008 cap by 2010 by 2008
Two step 2 1.7 million tons 3 million ton cap 15 ton by 2018
Approach by 2018 by 2018
Pollution 1 850,000 tons 2.5 million ton 21 tons
Increase
allowed by 2 450,000 1 million 10 tons
CSI over CAA tons

Percentage 1 68% 125% 420%

increase of
2 36% 50% 200%
CSI over CAA
Delay in Up to 8 years Up to 6 years Up to 10 years
achieving the
CAA levels
allowed by
CSI
Courtesy of the Clear the Air, 2003

18
Analysis by Clear the Air – A national public education campaign to combat global
warming available at http://www.cleartheair.org/relatives/20340.pdf

11
 COMPARATIVE ANALYSIS MATRIX

POLICY ALTERNATIVES

Goals Impact Category Clean Air Act (Current Clear Skies Act
policy) (Proposed)
Efficiency Property Rights Good Excellent improvement
Provides a market for on the status quo
SO2 but has Assigns property rights
prescriptive regulation and creates a market for
for NOx and Mercury NOx and Mercury
Maintains the existing
SO2 market
Ease of Medium – Process Excellent – power plants
Enforcement riddles with legal own the right to pollute
challenges against based on permits and
agency action the NSR requirements
slackened
Flexibility Medium – Prescriptive Excellent - The emitters
component maintained are allowed varying
in the control of NOx pollution rates based on
and Mercury the Cap established the
technology used to
abate pollution is left to
the emitters
Effectiveness

Abatement Costs Medium - prescriptive Low and determined by

regulation will reduce market mechanisms
Cost

the incentive for

innovation and will
maintain higher
abatement cost.

Emission High - Law has been Low- Caps set lower

Environmental
Performance

reduction successful in reducing than those that would

all pollutants with the be achieved under
exception of CO2 which existing law
is not regulated

Pollution No evidence of pollution Possibility of Mercury

Distribution
Equitable

Hotspots hotspots has occurred hot spots in plants with

with this legislation. older technology
exempted from the NSR
Political Feasibility

Likelihood for High – this is the Medium - With the

successful existing law pollution cap set at
adoption lower levels than those
of the existing law this
proposal will face a
steep challenge from
the environmental
community

12
 R E C O M M E N D AT I O N A ND C O N C LU S I O N

The multi-pollutant approach and expansion of the Cap and Trade to

include NOx and Mercury under the Clear Skies Initiative provides a better
legislative platform to achieve market efficiency, cost effectiveness and the
environmental performance required, while avoiding the reliance on courts
for resolution. Once the property rights for ambient air are assigned through
the permits and rules for the rights to pollute are established through caps
and a permit market is established, then market based decisions will price
the right to pollute.

The Clear Skies Initiative maintains the status quo and signals the George
W Bush Administration’s approach to emission control. The proposed law
provides greater flexibility to the energy industry in controlling pollution in a
cost effective way. There is little for the environmental community to support,
knowing that the elements of enforcement under the New Source Review will
be taken from the EPA. A promise to go beyond the current requirements with
the reductions in Phase Two by 2018 is a distant objective of little current
value. This is particularly true since many of the original deadlines for the
1990 Clean Air Act have already passed by. (Winters T, 2002) Waiting another
20 years to achieve the new objective is unlikely to be interpreted as “the
most aggressive” by the environmental community.

Adjusting the caps to reflect more aggressive reduction in pollution

would move closer to accounting for the existing social costs or reduce
environmental and health damages. In its current state the Clear Skies Act
would be a step back from the Clean Air Act in terms of environmental
performance. The analysis recommends an attempt to amend the Clear Skies
Act to reflect the more aggressive reductions. In the absence on these
adjustments, adoption of this excellent framework that will have significant
impact on cost effectiveness and efficiency will be an uphill task due to its
weak environmental performance.

13
 REFERENCES

1. Electric Power Annual 2004: USA Department of Energy, November

2005 http://www.eia.doe.gov/cneaf/electricity/epa/epa_sum.html

2. Technical Addendum: Program elements in the Clear Skies Act of 2003,

U.S. EPA, July 2003

3. Pope CA, Dockery DW. Health Effects of Particulate Air pollution: Time
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