Clinton Hopes to Clean Up by Buying, Selling Right to Pollute

The concept may rankle some in the green movement, but the Clinton Administration is eager to expand a controversial approach to environmental regulation that allows private firms to buy and sell licenses to pollute like so many baseball cards.

The White House wants to increase the scope of an existing program targeted at utility power plant emissions to include other sources of air pollution, such as lead smelters and industrial boilers. In addition, the Administration hopes to establish a similar program that would set up a trade in pollution allowances among companies that dump pollutants into the nation’s rivers, streams and other water supplies.

The idea is appealingly simple: The government establishes an acceptable limit for pollutants, divides the limit into units, and sells pollution rights, by the unit, to would-be polluters. Those firms, in turn, are free to buy and sell their shares--just like commodities--in a secondary market.

The result, proponents hope, is to encourage companies to invest funds in anti-pollution technologies that could cut their emissions and allow them to sell off their valuable pollution allowances to firms that cannot afford to clean up their facilities.

Environmental Protection Agency Administrator Carol Browner announced plans Wednesday to expand the market for air pollution allowances beyond utilities--whose emissions account for 70% of acid rain--to the smaller class of polluters. That came a day after Vice President Al Gore’s report on “reinventing government” provided the first signal that the Administration would seek to encourage a market-based approach to the control of water pollution.

Browner said that efforts to reduce sulfur dioxide, the prime ingredient in acid rain, already have boosted the development of a $100-billion pollution-control industry in the United States as big utilities invest in smokestack scrubbers and switch to cleaner fuels so that they can sell their pollution allowances.

By the end of the decade, Browner projected, revenues from the air pollution industry alone will increase by as much as $70 billion. While limits do not take effect until 1995, the market in pollution allowances is designed to halve utilities’ emissions of sulfur dioxide by the year 2010--a 10-million ton reduction from 1980 levels.

The Chicago Board of Trade already has gotten into the act, kicking off the first nationwide marketplace for sulfur dioxide pollution allowances last March. At that time, American utilities bought up 150,010 shares, with each share allowing the purchaser to spew a ton of sulfur dioxide into the atmosphere starting in 1995.

In the future, said Joseph Goffman, one of the architects of the Clean Air Act emissions trade, the approach could be used to enforce national limits on another precursor to acid rain, nitrogen oxide. It also could be expanded to regulate the emission of so-called greenhouse gases.

“I think there is a trend” toward the more widespread use of such market mechanisms, said Goffman, a senior attorney with the Washington-based Environmental Defense Fund. “It’s anything but one-size-fits-all. But it certainly is a malleable tool. And as long as you’re careful about fitting it to the demands of the environmental problem you’re trying to solve, it can work.”

But the Administration’s approach is not uniformly admired within the environmental community. Some critics, including Todd Gitlin, a sociologist at UC Berkeley, have called it perverse--a case of the government selling the right to do harm to the highest bidder. Others say it is just ineffective.

“The only way to deal with the remediation of the environment is to prevent the production of the pollutant at its point of origin,” said Barry Commoner, director of the Center for the Biology of Natural Systems at Queens College in New York. “What the entire trading program is based on is the production of pollution--you can’t have a market unless you have a pollutant to trade. It’s an obsolete residue of the Reagan-era which violates everything we know from experience: that the only way we can reduce pollution is by preventing it.”