NR2110

NEWS RELEASE                                                                                                                JULY 2015

Change Environmental Regulatory Policy to Foster R&D and Cost Effectiveness

The recent Supreme Court ruling in the U.S. remanding the air toxic rules due to lack of cost consideration is a wakeup call.  The message is that the whole system is flawed.  It discourages rather than encourages R&D. Invariably the cost estimates prior to regulation turn out to be wrong. So regulations are rarely cost-effective.

EPA recognized that setting arbitrary limits is not cost-effective and so created a “Cap and Trade” system. The trade aspect of this policy was sound, but the cap aspect merely duplicated the problems with conventional regulations where there is no incentive to do better than is required.

All that is needed is to move from “Cap and Trade” to “Create and Trade.” Those power plants ranking in the lower 50 percent would pay fees to be divided among those in the top 50 percent.  The payments and receipts would be based on ranking.  These payments provide great incentive for the industry to “create” cost-effective solutions.

Mercury reduction would be a very good demonstration of the power of “Create and Trade.”  There are new mercury removal technologies which are much more cost-effective than the ones available at the time of the cost determination.  It was concluded that to move from 85 percent mercury reduction to 95 percent reduction would cost $30,000/lb.  Now the cost may be as low as $1,000/lb.   If the “Create and Trade” rule stated that any company removing more than 85 percent of the mercury would be paid $15,000/lb. for each additional pound removed, there would be a great incentive for power plants to install the most efficient equipment. 

Ultimately the most cost-effective technologies would be installed.  Initially the bar would be set at 85 percent removal but, if it turns out that some companies are making huge profits by obtaining 95 percent efficiency, then it would be time to raise the bar to 90 percent.

There is almost no supplier generated air pollution control research in the U.S.  The creation of a back-end mercury module for high efficiency is a fortuitous anomaly.  The creation of a “Create and Trade” system would generate many new cost-effective technologies. It would also make the U.S. again the center of air pollution technology.  This is a position it is ceding to China presently.

The concept is equally valid for the upcoming EPA rules on CO2 emissions.  Coal-fired power plants can make effective reductions in CO2 emissions by increasing efficiency. So there are ways to make cost-effective reductions in CO2 emissions per unit of power produced.  Rather than set arbitrary limits a “Create and Trade” system would encourage R&D and use of the most cost-effective technologies.  The national strategy is to continue to operate some 200,000 MW of coal-fired power plants. An incentive program to increase efficiency would result in significant reduction of CO2 emissions and be positive rather than negative for the economy.

For more information on this subject click on 5AB Air Pollution Management