Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 3
As the EPA website presents it, this looks good to me. I think what I had a problem with was Dubya's "Clear Skies Act", which although that was an emissions trading program, too, his version was that he would allow total pollution to increase based on the growth of GDP. He didn't even want to attempt to lower emissions at all. If the proposed CSA addressed reduction in this trading program, then I'd go for it.

Indeed, as far as I presented it, the market based solution DOES NOT tell you what the right amount of pollution is to allow. The number of allowances initially issued in which the market then trades is, at least as far as we discussed here, a separate question.

Let me spin off into the weeds here. An extension of the market concept in pollution allowances could be to allow the fed gov't to issue more allowances if the going rate for them is very high, and to buy allowances back off the market if the going rate for them is rather low. The effect of this would be as follows. Suppose a particular pollutant is particularly expensive to clean up. Then allowances for this pollutant will trade at a very high price. Maybe the EPA sees allowances for some reasonably benign pollutant trading at a very high price because this pollutant is difficult to scrub out, while a more noxious pollutant trades at a lower price. Then the EPA could sell ADDITIONAL allowances into the first market to raise cash, and use that cash to BUY allowances out of the second market. In this sense, assuming the EPA can make a reasonable cost-benefit tradeoff of the relative value of eliminating different pollutants, the mix of accepted pollutants could simultaneously be brought down to a healthy level at minimum cost to industry overall. But this is just me getting clever.

There was one problem brought up, though, but I can't remember the article or link. This kind of trading program (according to the article) doesn't work well on ALL pollutants. The mercury from coal-fired plants doesn't disperse regionally or nationally like sulfur-dioxide does with acid rain. Mercury emissions deposit VERY locally, like within 15 miles of the source. So a site could still be kept totally "dirty" as long as it doesn't affect the operator's trading credits and/or profitability. I think the problem was that a program like that had the potential of unintentionally theoretically causing some sites to be get even dirtier yet, or allowing a dangerous site to "stay" in a dangerous state. I'm not nit-picking or claiming this is 100% true, I'm just regurgitating what I think the article stated.

Remeber in Stossel's book, where he talks about Dioxin and PCBs? And how in the USA, we closed at least two towns, (Times Beach MO and Love Canal near Buffalo, NY)? Whereas in Italy with the same problem, they simply buried all the contaminated stuff and built a park (!) on top of the burial mound?

The answer MIGHT be, if the industry blowing mercury into the environment is valuable enough, for them to find a location where they can afford to BUY 15 miles around their site, and run their factory there, and simply not worry about the Mercury. If the stuff is that localized, who cares if it soaks into a bunch of death valley or some such other landscape where it couldn't possibly matter? The point is there is ALWAYS a cost benefit tradeoff to be made, and that markets are EXCELLENT mechanisms for making those tradeoffs. The point is that an absolute statement "we shouldn't have mercury in the land" is, if implemented going to kill people, in at least the sense that resources that go to pulling mercury out of the land at the savings of perhaps zero lives, cannot be devoted to pulling other pollutants out of air, water or land at the savings possibly of more lives, or even more directly, cannot go into providing more medical care and better quality nutrition to people, at the savings of MANY lives.

The short answer is: it ALWAYS makes sense to look at the details. We claim the markets do a great job. It is RIGHT to bring up stuff like Mercury and its different spreading pattern when reading about a market solution that works for airborne or waterborne pollutants.

The next big problem of a trading program is, of course, how much reduction is enough (or too much) for each industry? But seeing how the Acid Rain Program worked, it appears they might have solved that issue.

Well this is actually a problem whether or not you are using a trading program. If you are going to declare that no smokestack can put out more than X, and there are 10000 smokestacks in the country, you are passing a law limiting annual emissions to 10000 X. The point of a market solution is that you might wind up with a stronger economy AND only 10000 X of annual emissions if you trade the allowances rather than mandating on a smokestack-by-smokestack basis some cookie cutter solution.


My pleasure!

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.