By stressing in its statements about bubbles the reductions achieved in allowable emissions, EPA has made itself vulnerable to allegations that the credits being claimed exist only on paper. Some bubbles (for example, 3M-Bristol and du Pont Chambers Works) yield both substantial reductions in actual emissions from previous levels and reductions below levels that would be achieved by conventional controls. But other bubbles (for example; du Pont-Kinston, 3M-Guin, and Sohio) simply reflect administrative recognition of past emission reductions and do not result in additional reductions in emissions. Additional reductions do not have the importance in attainment areas that they have in nonattainment areas. However, uncertainty about the reductions required to attain national ambient standards in areas where attainment has been in doubt has intensified conflict over specific bubble proposals (for example, Sohio and Ashland).

Some administrative accounting changes enable companies to forgo reductions that otherwise would be required. Regulatory reformers generally regard these adjustments as unobjectionable if they are shown not to jeopardize statutory goals of attaining national ambient standards and protecting PSD increments. They reflect a more cost-effective approach to attaining clean-air goals and use companies' superior knowledge of their own facilities to encourage better control methods and to improve the inventories on which state implementation plans are based.* To critics, forgone controls represent squandered opportunities to minimize emissions, because companies are able to avoid previously established abatement requirements. One of the harshest characterizations of industry actions can be found in a letter from NRDC soliciting funds for a project to monitor emissions trading. Citing the Great Lakes bubble, a bubble proposed by the Monsanto Corporation that relied partly on shutdowns, and an emissions trade involving mobile sources, NRDC wrote:

The changes in inventories resulting from bubbles described in this chapter are only a sample of bubbles' informational impact. EPA's Regulatory Reform Staff, trying to document information impacts, has reported that one bubble proposal disclosed a plant that had been left out of a state's emission inventory. A second proposal, for a plant in a nonattainment area, revealed the plant's permit to be 30 times less demanding than the area's projection of attainment assumed. The mobile source trade did not occur pursuant to policies established in the Emissions Trading Policy Statement. Rather, it was an effort by General Motors

NRDC has discovered that for the past several years you and I have been victims of pollution scams run by some of America's most reputable corporations! These companies have used trading scams to avoid installing air pollution controls that are required by federal law.°

Development of Attainment Projections and Actual Reductions Beyond RACT Requirements

Two bubbles in areas that previously had failed to project attainment (Armco-Middletown and Shenango) helped such projections to be developed. One bubble in an area that had yet to develop- a detailed projection (du Pont Chambers Works) provided reductions beyond those otherwise required by "reasonably available control technology," at reduced cost. Preliminary, incomplete, nonpeer-reviewed results of an air programs office study of 37 bubbles, conducted in mid-1985, suggest there have been several more such bubbles, producing improvements beyond RACT.

Cost Savings

Bubbles produce significant cost savings. Even if one were to discount claims of savings by a 20 to 50 percent "skepticism factor," the savings from many bubbles (for example, Armco-Middletown, Shenango, and miscellaneous fuel switches) remain considerable. Regulatory reformers see these savings as one of the prime purpose of the bubble policy&emdash;achieving emission reductions at reduced cost. But this "cost-rationalizing" element of bubbling is vulnerable to criticism where costs are saved by forgoing previously identified control opportunities in areas whose ability to attain ambient standards is in doubt. In such circumstances, cost-saving approaches are not necessarily more cost-effective ways of meeting a goal; instead, they may be ways to avoid costs that may be necessary to meet the goal. Suspicions multiply if a recalcitrant polluter is involved. But, even if additional reductions ultimately will be needed, it makes sense to schedule the most inexpensive reductions first.

Corporation to avoid recalling autos violating auto emission standards. General Motors promised instead to produce new cars that would emit pollutants at levels below those required by federal law. EPA agreed to the proposal, but a federal court reversed the EPA action, holding that recalls were the only remedy provided by the Clean Air Act for cars violating emission standards.'

Technological Innovation

Sometimes bubble opportunities facilitate technological innovations. A prime example is 3M-Bristol. Similar operations involving low solvent and solventless coatings likely have been approved under state generic rules. However, most innovations under bubbles merely are rearrangements of conventional technologies, better accounting for conventional technologies, or fuel switches. Yet, as one advocate of bubbles has argued, emissions trading ''has promoted more pollution control for less money and that is the only kind of innovation that matters.''

Accelerated Compliance

Bubbles speed compliance in two ways. One way is by bringing levels of actual emissions down to or below the levels required by existing regulations and by doing so in a speedier fashion than through use of conventional control strategies. This has been done, for example, with the du Pont Chambers Works. A second way (used by du Pont-Kinston, Sohio, Ashland Oil, and BF Goodrich) is by adjusting regulatory requirements so that allowable emissions are raised to levels of actual emissions at points whose actual emissions previously exceeded allowable emissions. Where this second method has been used in attainment areas, it happens to be less problematic than in nonattainment areas. This second method appears to occur frequently. In those instances where regulators have invested considerable resources in initiating an enforcement action against a noncomplying source, company efforts to "bubble into compliance" may well cause considerable frustration for enforcement personnel.

Added Flexibility

Bubble opportunities add useful flexibility to administration of the Clean Air Act, as demonstrated by the General Electric-International Harvester trade. They supplement the existing repertoire of delayed compliance orders, variances, conventional SIP revisions, and other traditional approaches designed to adjust previously adopted requirements. Delayed compliance orders provide flexibility for sources encountering difficulty in meeting emission reduction deadlines. Conventional SIP revisions have been used to allow sources to increase their emissions legally. To the extent that all these techniques involve extensions of deadlines, increases in actual emissions, and other apparent backsliding from the goals established in the Clean Air Act, they have been criticized by environmentalists on grounds that the goals of that act are being threatened. Bubbles have a significantly higher profile, however, than many of those other administrative techniques, so they draw an especially intense level of criticism.

Public and Administrative Scrutiny

Careful public and administrative scrutiny of bubble proposals is vitally important. NRDC's views of how bubble decisions should be made have not always been adopted by EPA, but NRDC's monitoring activities have helped reveal questionable calculations by industries proposing bubbles and have raised important policy questions deserving further attention by EPA. In some instances, NRDC has identified shortcomings in data that had escaped regulators' attention.

More Varied Involvement of Industries

The steel industry, which earned a reputation for environmental recalcitrance in the mid-1970s, was an early beneficiary of the bubble policy. During the bubble policy's earliest years, the steel industry's proposed or approved bubbles outnumbered those of any other industry whose bubbles were approved or considered for approval by EPA. The industry benefited from increased knowledge about the contribution of unpaved roads and storage piles to ambient concentrations of pollutants, enabling it to use open dust trades for compliance purposes. The industry also benefited from opportunities to trade sulfur dioxide emissions. However, most bubbles approved or proposed for approval under state generic rules and many more pending at EPA involve coating industries and other sources of volatile organic compounds, so the predominant role of the steel industry in bubble activity has been declining rapidly.

Judging"Standard Industry Practice"

The Sohio and Ashland Oil bubbles demonstrate how substantially better than state emissions standards for RACT the technologies at overcontrolled points can perform. If these companies' technologies represent what the command expansionists characterize as "standard industry practice" for complying with RACT requirements, then many industries may already be reducing emissions by substantially more than RACT. The command minimalists are correct, however, that making administrative judgments about what is standard practice for a given industry would be a difficult, time-consuming process, one that would create considerable uncertainty for those wishing to bubble.

The Role of Shutdowns

As noted in the preceding chapter, state attitudes vary regarding use of bubbles in shutdowns. Jefferson County, Kentucky, found credits from International Harvester's closing useful for accommodating General Electric's compliance problems. Union Carbide is using shutdowns to avoid controls in an area where critics have argued that additional reductions will be needed for attainment. In New Jersey, where credits from shutdowns are not used in bubbles, 26 bubbles have been approved, and 10 are under review. New Jersey's experience suggests that, in states where no shutdowns are permitted for bubbling, bubble opportunities may still be plentiful, yielding reductions beyond those accomplished merely by shutting old facilities.

Determining Crucial Standards

Determinations of emission rates, RACT and other baselines, modeling requirements, and attainment status are critical elements of bubble decisions, and for these reasons have been the focus of tugs-of-war between the command minimalists and expansionists. At first glance, the disputes over these determinations have an other-worldly character, because the arguments often are over assumptions and estimates as much as they are over actual conditions. These theoretical disputes sometimes appear to have little or no relationship to actual environ mental conditions. But, in fact, the arguments are quite important, because such determinations govern the degree of difficulty industries have adjusting regulatory requirements through emissions trading. Disputes over bubbles have highlighted some of the difficulties in making important judgments about standards, baselines, and related matters and have underscored some of the many uncertainties associated with the Clean Air Act's implementation. The closing chapter of this report offers recommendations on how administrative prac tices might be changed, and the final Emissions Trading policy State ment drafted, to eliminate or reduce some of the worst fears critics have of emissions trading while enhancing its environmental benefits. But before offering those conclusions, this report turns to trading for new and modified sources.

Back...