Environmental_Pollution

Pollution Rights Trading SCI 207 /Dependence of Man on the Environment Introduction The problem is environmental pollution. It is contaminating the air, water and land. Pollution leads to reducing the ozone layer, global warming and climate change. The Clean Air Act of 1970 empowered the federal government to set emission standards that each state was required to enforce. The Clean Air Act was revised in 1977 and in 1990 to include incentives to encourage companies to lower emissions of chemicals responsible for the production of acid rain. The Act today identifies 189 pollutants for regulation (Cassils, J.A). One solution is to trade Pollution Rights to effectively control the environmental problems. There is reason for concern that the emissions trading can easily be abused and does not help the environmental pollution act. The government came up with tradable pollution rights. Tradable pollution rights and emissions trading are being increasingly used as an environmental policy tool for pollution control. It allows firms to trade the right to emit specific pollutants. Tradable pollution rights were originally developed in the USA to cut costs to industry and enable economic growth to continue in highly polluted areas but they are increasingly being used in other countries for air (Moore 1994). The government figured it could control pollution by allowing companies to pay emission charges to emit pollution of certain pollutants. A company that emits less than the specified level of a pollutant is given a credit that allows them to emit more than the standard at some time in the future. The company is also allowed to sell these credits for cash to other firms who want to exceed the standards. Any facility that continued to pollute more than its allocated amount (roughly half of its 1990 rate) would then have to buy allowances from someone who is polluting less. The 110 most polluting facilities (mostly coal burners) were given five years to comply, while all the others would have until the year 2000. Emissions allowances were expected to begin selling for around $500 per ton of sulfur dioxide, and have a theoretical ceiling of $2000 per ton, which is the legal penalty for violating the new rules. Companies that could reduce emissions for less than their credits are worth would be able to sell them at a profit, while those that lag behind would have to keep buying credits at a steadily rising price. For example, before pollution trading every company had to comply with environmental regulations, even if it cost one company twice as much as another to do so. Under the new system, a company could instead choose to exceed the mandated levels, purchasing credits from the second firm instead of implementing costly controls. This exchange would save money, but in principle yield the same overall level of pollution as if both companies had complied equally. Thus, it is argued, market forces will assure that the most cost-effective means of reducing acid rain will be implemented first, saving the economy billions of dollars in "excess" pollution control costs. (Easton, 107) But pollution credit trading did not prevent pollution growth. In the first instance of allowance trading the US EPA, in March 1993, allocated allowances to emit sulphur dioxide, which is a primary cause of acid rain. A small percentage of the allowances (2.24%) were also auctioned off. $US21 million was raised by selling 150,000 ‘allowances’ mainly to electricity companies. Each allowance allowed the company which paid for it to release 1 tonne of sulphur dioxide into the air after 1995. The price for each allowance was between $122 and $450, much cheaper than paying for flue gas scrubbers to remove sulphur dioxide from their emissions (Kiernan 1993: 10; Tietenberg 1997). This allowed credits to be tradable at open market or bank them for future transactions. This gives other, higher-polluting facilities a choice: either buy allowances and continue releasing the same pollutant or clean their own emissions-whichever is cheaper. The only stipulation is that regional environmental quality continues to meet mandated standards. There are two main types of economic instruments used in environmental policy, both of which aim to provide an incentive to use resources sustainably: 1) Price-based measures use charges, taxes and subsidies to persuade polluters to reduce their discharges. 2) Rights-based measures "create rights to use environmental resources, or to pollute the environment, up to a pre-determined limit, and allowing these rights to be traded" (Commonwealth Government 1990: 14). The tradable pollution rights program did not provide incentives to seek a less expensive way to reduce emissions. It allowed companies the maximum allowable concentration for pollution which was already way over to begin with. Some companies avoid making any changes in reductions of emissions. It was cheaper to buy permits than to reorganize their way of business. Another problem was with emissions trading in setting the level of emissions that each company could emit so that trading would be beneficial. Every company was treated the same regardless of location. Some companies were too close to an already polluted area. Yet others did not pollute enough to use permits. The companies were taking control over their credit trading to pollute the air. Driving the cost down and making it cheaper to buy credits. Many environmentalists believe that if industry is left to set the standards for emissions allowances and not the regulatory agency, then abuse will occur (Easton, 2008, p. 98). The environment is a global problem that all should be concerned about. If we continue to allow companies to buy credits instead of finding other solutions to reduce emissions then they control what they emit. Tokar point out that the value of credits has fallen and that is why these companies are buying so many of them (Easton, 102-103). These chemicals are still being released into the atmosphere. They can cause acid rain which can contaminate the land and water. The government needs to reduce the allowable emissions to zero because by trading rights it has not solved any problems. These chemical still are not safe for the environment and they are still being emitted. Conclusion The benefits of trade able pollution rights are ideological and financial rather than environmental. They were developed to reduce the costs of environmental protection to industry, to enable continued economic growth and to keep decision-making power in the hands of industry. They have not led to significant environmental quality improvements. Health problems are still a concern due to air pollution. References: Cassils, J.A. (1991) Exploring Incentives: An Introduction to Incentives and Economic Instruments for Sustainable Development, National Round Table on the Environment and the Economy, Ottawa, Ontario Commonwealth Government of Australia (1990) Ecologically Sustainable Development: A Commonwealth Discussion Paper. Easton, T. (Ed.). (2008). Taking sides: Clashing Views on Environmental Issues. Moore, W. (1994) Using Economic Instruments to Control Air Pollution from Stationary Sources, EPA, Chatswood