Administration

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Announcements

• Homework 1 due on Friday.
• This weeks discussion section reading now
  online Betting on the Planet
• Paper assignment
• Handout Laws vs. Rules
• Homework 2 will be handed out on Friday.
• No class on Monday, Feb. 16.

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Discussion section

• If you are doing a write-up in place of
  attendance, you must turn that in within one
  week.
• Check your grades (this afternoon)
• Curve
• 25 A
• 21 B
• 17 C

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Todays class

• Clean Air Act
• Goals
• Means
• Existing sources
• New sources
• Current events
• Does the Clean Air Act do what you want?
• Some of last nights posted slides have moved.

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• Salzman and Thompson has a very good discussion
  of the CAA.
• The Plain English Guide to the Clean Air Act.

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• Sample exam questions
• What is a criteria pollutant? Who determines
  which pollutants will be classified as criteria
  pollutants Congress or the Administration?
• Why was the responsibility for this decision
  assigned to that branch of the government?

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• Sample exam questions (harder)
• Explain how the NAAQS approach, used by the Clean
  Air Act, reflected the understanding of pollution
  science at the time of passage.
• Explain how developments in our scientific
  understanding led to problems with the Clean Air
  Acts goals.

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• NAAQS (Ambient air quality standards)
• Attainment versus non-attainment.
• Pollutant-by-pollutant
• Year-by-year
• County-by-county
• Existing sources (all 3 types) covered by State
  Implementation Plans (SIPs).

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• The Metropolitan Washington Council of
  Governments has approved a plan to reduce one
  kind of harmful air pollution in the region,
  officials said yesterday. The plan deals with
  fine-particle pollution particles just a few
  microns wide, which can lodge themselves deep
  inside human lungs and exacerbate heart disease
  and other health problems.
• The region was declared out of compliance
  with EPA standards for fine-particle pollution in
  2004. It now must meet new federal standards,
  limiting the amount of pollution produced in a
  year, by 2009.
• The plan calls for reductions in the amount
  of fine particles emitted from power plant
  smokestacks in the area.
• (Washington Post, March 11, 2008).

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New sources

• These do not belong to any particular state.
• Level playing-field.
• No political clout. So we can be very tough.
• We should also be tougher because
• Also includes major modifications.
• So. Two-pronged, Federal approach

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• New Source Performance Standards (NSPS)
• Technology standards
• Technology standards specify the kinds of
  technologies that must be installed in new
  plants.

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• New Source Performance Standards (NSPS)
• New plants
• Lowest Achievable Emissions Rate (LAER)
• Modified plants
• Reasonably Available Control Technology
  (RACT)
• Tougher standards in non-attainment areas.
• Not true performance standards
• Refers to stationary sources (large)

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• Wallace and Gromit using the latest
  technology.

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NSPS, cont.

• This was meant to be the meat of the Clean Air
  Act for stationary sources.
• Get tough with new sources.
• Focus on large polluters, smokestack industries
• Nationwide. Power of the Federal government

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NSPS, cont.

• These are called Command-and-Control regulations.
• Command-and-Control A regulation that is highly
  prescriptive about what polluters have to do,
  and that requires all polluters to do the same
  thing regardless of their individual
  circumstances.

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• New Source Review
• How will the new (or modified) source affect air
  quality in a region?
• - Requires prediction of other emissions.
• Must arrange offsets from existing sources.
• Tougher requirements in non-attainment areas.
• Requires pre-construction approval of new plants.

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What problems do you foresee?Did Congress
foresee these problems?Should Congress have
foreseen them?

• NAAQS-related problems
• New plants open mainly in attainment areas. (Good
  or bad?)

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Clean Air Act seems reasonable but

• NSPS problems
• Older plants do not have to clean up
• But older plants are more polluting!
• Older plants are kept around longer - not
  replaced by new, cleaner plants!
• Congress expectation at time of passage
• NSPS Grandfathering

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This all sounds reasonable but

• New Source Review problems
• Long delay to open new plants
• Lawsuits over what counts as a major
  modification. (Level of pollution vs. pollution
  rate?)
• Uncertainty
• Will expansion count as new source?
• How strict will pollution control requirements
  be?

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• Understanding the law (and the news)
• The Bush administration needs to enforce the
  law
• Exam q What does this sentence mean?
• The Bush administration needs to enforce the
  law, hold polluters accountable, and require them
  to use today's technology to protect our health
  and safety (Source)

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• Kinds of questions (and lawsuits!) that arise
  under the Clean Air Act
• Is the NAAQS appropriate?
• Does a modification qualify as a new source?
• What is the Lowest Achievable Emissions Rate?

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• Implicit questions Could we have done better?
  Can we do better?
• In 1990, Congress amended the Clean Air Act to
  deal with acid rain and the high costs of
  pollution control.

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Acid Rain Trading Program of 1990(Title IV)

• Cap-and-Trade
• Sulfur dioxide
• Electric generating units (power plants)
• Allowance the right to emit one ton of SO2.
• Must install continuous emissions monitoring.
• Allowances can be traded.
• Allowances can be banked (but not borrowed.)
• Background reading (EPA website) This is as far
  as we got in class.

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• New and grandfathered sources treated equally
  (eventually).
• But new sources still subject to NSR.
• Overall cap.
• Cap-and-trade
• What are the advantages of this approach?
• How is this approach different from the rest of
  the CAA?

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Subsidies?

• The Clean Air Act should be changed to provide
  subsidies for plants that install pollution
  control technology. (Student memo.)
• General strengths/weaknesses
• Congress has more power with subsidies (in
  theory)
• To subsidize is to tax. (Milton Friedman)

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Subsidies?

• The Clean Air Act should be changed to provide
  subsidies for plants that install pollution
  control technology. (Student memo.)
• Subsidize what?
• Subsidize pollution control technology
• Subsidize pollution reductions
• Subsidize research into new technologies

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Subsidies for pollution control equipment

• Subsidies are very inflexible
• Buying certain kinds of pollution control
  equipment is subsidized but
• New, innovative technologies generally are not.
• No subsidy for encouraging consumers to conserve
  (use less electricity.)

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Subsidies for pollution control equipment

• Some plants would have adopted pollution control
  anyway.
• This makes the policy more expensive, though not
  necessarily distortionary.
• This drawback does not occur for explicit
  regulation.
• Very susceptible to subsidizing questionable
  technologies.

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Subsidies for pollution reduction

• These are better than subsidies for technology.
• Polluters have flexibility over how to reduce
  their pollution.
• Problems with determining each plants baseline
• This is especially a problem for new plants with
  no pollution history.
• Pollution monitoring was primitive at the time
  of CAA passage.

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Subsidies for research (new technology)

• The economic argument for subsidizing RD is
  stronger than for subsidizing pollution control.
• The market may not always provide optimal levels
  of RD.
• What is the incentive for polluters to adopt the
  new technology? (Back to square one?)
• Milton Friedman To subsidize is to tax.

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• Instead, Congress took a different approach