Regulators to Study Rewards for Clean Air

On a smoggy day in the City of Industry, the idea of using the marketplace to clean up Southern California’s air got a boost.

Executives of the South Coast Air Quality Management District Friday announced a proposal to collaborate with a business-oriented public policy group to study more broad-based economic incentives as part of the district cleanup plan, currently under revision.

“One of the things the last year and a half has told us is that we need every tool at our disposal,” said Patricia Nemeth, a deputy executive officer at the district.

James M. Lents, AQMD executive officer, announced the plan to 350 business leaders, government representatives, consultants, researchers and environmentalists at a workshop on the use of market incentives in pollution control. The study must be approved by AQMD’s governing board.

Most laws to reduce pollution have used what economists often call command-and-control mechanisms. That is, standards are set for lower emission levels and fines imposed on firms that don’t make the mark.

Advocates say market incentives would allow industry more room for innovation while still achieving overall lowered emissions. One method is to provide direct rewards for conservation. “Imagine if every agency of the federal government that came in under budget were allowed to distribute 10% of that savings to its employees,” said economist Arthur B. Laffer, a workshop speaker. “The federal budget would be balanced in five minutes.”

In a less theoretical example, Unocal Corp. recently spent $6 million to buy more than 8,000 older, higher-polluting cars in its South Coast Recycled Auto Program, or SCRAP. Roger C. Beach, a Unocal senior vice president, called for a market-based scheme that would allow refineries to decide how to remove their share of pollution as their emission goals tighten. An approach like SCRAP would be highly cost effective, said Beach, since it would have cost much more to achieve the same goal by installing additional pollution-control machinery at a Unocal refinery.

Some market incentives have been studied and even incorporated into the AQMD cleanup plan, but business has long called for more such schemes.

“I think the district’s approach in the past has been relatively narrow,” said Victor Weisser, president of the California Council for Environmental and Economic Balance, the business-labor coalition that would co-sponsor the research. “This could bring the first broad-based use in the district.”

Environmentalists and government regulators, while they see market incentives as valuable supplementary control methods, are generally more cautious.

“People don’t always realize that there is still a price that will be paid to clean up the air,” said Mary Nichols of the Natural Resource Defense Council, which has long advocated some use of market incentives.