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Market-Based Approaches to Environmental Protection
have led to the traditional scenarios, such as technology restriction, costly
and timely permitting, and numerous enforcing jurisdictions, have resulted
in far less funding for environmental technology than for telecommunications, health, and general industrial sectors. In addition, a declining trend
of funding for environmental technology has been seen within just the past
10 to 20 years.
As noted in the PPI report (Swift 2000), the following case study presents the
benefits of applying second-generation policy to mercury reduction: More than half
of the mercury releases to the environment are from the intentional and typically
nonessential use of mercury in processes and products (e.g., in older chloralkali
plants [160 tons], wiring [57 tons], dentistry [40 tons], lamps [29 tons], and measurement instruments [24 tons]). Substitutes are available for most products, and
recycling programs that do exist only capture a small percentage of the mercury
that is used. Current regulations to control mercury pollution derived from these
uses focus on air emissions from waste incinerators, which is expensive and fails
to address major releases through product breakage, leakage, and disposal. There
have been some focused efforts to reduce mercury at its source (e.g., elimination of
mercury in paints and most batteries and through some industry-driven volunteer
programs), however, not on a comprehensive scale due to the control-oriented Clean
Air Act regulations for air toxics. By focusing more on source reductions of mercury
by all intentional users instead of focusing on emissions reductions as is done today,
the environmental effectiveness would be more permanent, resulting in 100 percent
elimination of mercury waste (vs. none) and would be significantly more cost effective as the regulation of waste incinerators imposes costs of $500 to $3,000 per
pound of mercury reduced.
CAP AND TRADE
A wider application of the cap-and-trade approach is the United States Environmental
Protection Agency (USEPA) acid rain program, which allocates emissions of oxides
of nitrogen and sulfur that are combined with water to produce nitric and sulfuric
acid across the dischargers in the United States. An overall “cap,” or total emission
level that all companies can collectively discharge, is set, and the cap is reduced over
time through phases in the program. Subsequently, discharge limits are allocated
to individuals across their operation as a whole instead of for individual pieces of
equipment within the operation. The program lets companies decide how to achieve
their allocation. For example, a company can convert some power plants to burning
low-sulfur coal or can install scrubbers on one plant that achieves much lower levels
of emissions than required and use that reduction as a credit against another plant
with higher emissions. Finally, companies have been able to achieve lower overall
emissions and sell excess emission credits to other firms. Buyers of the emission
credits have found that the cost of buying credits is less expensive than installing
and operating new pollution control equipment. This type of program harnesses the
power of the marketplace. For industry, the program provides increased flexibility
and a financial incentive to reduce air pollution beyond what laws and traditional