Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, March 29, 1993                   TAG: 9303290424
SECTION: EDITORIAL                    PAGE: A4   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

POWERFUL TOOL POLLUTION PERMITS FOR SALE

Yes, it's an unusual commodity, but the trading will mark a milestone in the development of a very promising approach to environmental protection.

What's being bought and sold are emission credits owned by electric utilities: in other words, the right to pollute.

Here's how the system works:

Under the Clean Air Act as revised in 1990, the Environmental Protection Agency has set national limits on utilities' sulfur-dioxide emissions - the pollutants that cause acid rain.

Under the old regulatory approach, each power plant might have to meet a specific pollution-control standard. Let's say that two utilities, Nos. 1 and 2, each would have to cut emissions by 100 tons. Let's say, further, that because of the varying technology each is using and other factors, it would cost Utility No. 1 $500 per ton to cut its emissions. The cost to Utility No. 2 is $2,000 per ton.

Under the new approach, Utility No. 1 can cut its emissions more than it has to - say, by 200 tons instead of 100. Then it can sell to Utility No. 2 a permit to discharge 100 tons of pollutants. This way, Utility No. 1 makes money. No. 2 saves money. And the country still has met its goal of reduced emissions - but at much less cost. Great idea!

Under this market-oriented system, industries have flexibility to seek the cheapest way to reduce pollution. And companies have an incentive to find innovative means of curbing emissions. If they make big gains - by, for instance, creating less pollution in the first place - they can sell surplus credits to less-innovative firms.

Some communities may be unhappy with the idea of their particular industries buying the right to pollute. But nationwide, this system has potentially enormous advantages over massive and stultifying regulation.

Indeed, some communities themselves are looking to adapt the idea at a regional level. Later this year, Los Angeles is expected to have a market in credits for nitrous oxide, sulfur oxide emissions and hydrocarbons.

Creating markets for such permits is a powerful tool which, if used carefully, could help address a host of problems beyond pollution.