CHAPTER

13

A New Approach to Air Quality Management

by Alan J. Krupnick and Jhih-Shyang Shih

Mr. President, we recommend altering the geographic approach to managing air quality in this country to match the realities of long-range transport of air pollution. It makes little sense to have localities responsible for attaining air quality standards when on average about 75 percent of the problem is not of their own making. Either this responsibility should shift to new regional air quality management institutions, backed by EPA, with ultimate responsibilities still lodged within the states, or it should be lodged at the federal level, with a dramatic reduction in state responsibilities. We recommend that a presidential commission be set up to consider these two quite different options for improving the management of our nation’s air quality.

Background

Although air quality generally has improved over the last three decades, some areas, including a big portion of the eastern United States, have a poor record on attainment, and the number of counties in nonattainment has increased with EPA’s new tighter ambient air quality standards. For ozone, 474 counties now violate the new standards, up from 125 under the old standards. EPA has yet to issue its final list of counties violating the new fine-particulate standards, but it clearly will add to this list.

To meet these standards, the federal government has been issuing a number of important new national and regional regulations, including the proposed Interstate Air Quality Rule, which mandates an even tighter sulfur dioxide (SO₂) and nitrogen oxide (NO_x) cap-and-trade program; the NO_x SIP Call; the NO_x Trading Program; and several rules that reduce particulate and other emissions from off-road and diesel engines.

Even so, it is unlikely that these rules will be enough to meet the standards in some nonattainment areas, which raises the questions of how best to decide on and implement further control measures. In particular, continuing to follow the Clean Air Act’s state implementation plan (SIP) process has some fundamental problems. One of the main ones is that the process is local while the air quality problem is regional.

The SIP process provides each state with the responsibility for developing an EPA-approved plan for reaching the National Ambient Air Quality Standard (NAAQS) by the mandated deadline. For most areas, this involves developing an emissions inventory, implementing a host of emissions reductions measures to apply at the local level, and conducting air quality modeling to show that the measures are enough to meet the standards.

This process is likely to be inefficient to meet stringent air quality standards, because scientific evidence shows that air pollutants, such as ozone, fine particulates, and their precursors, can be transported long distances across state boundaries. For example, recent research at RFF and Georgia Tech has shown that, on average, local emissions account for only 23 percent of local ozone and fine-particulate concentrations (Table 13-1). Thus even if one state reduced its ozone, ozone and its precursors still would be transported across its borders from other states. Because the pollution control efforts of upwind states affect the air quality in the downwind states, one state cannot tackle the ozone problem by itself; it will take multiple states’ efforts to solve the problem.

Table 13-1 Summary of State Contributions (%) to Local Air Quality Per Unit Emissions Reduction (July Episode, Area-weighted)

In spite of these findings, under the current regulatory system and SIP design, an individual nonattainment state is required to submit only its own SIP for approval; hence the upwind state is not likely to account for the beneficial impact of its pollution control policy on its downwind neighbor, nor the fact that it may be cheaper to reduce emissions in an upwind area than in the area itself. However, cap-and-trade programs can “automatically” address this problem to some extent.

Previous Attempts to Address the Issue

Regional approaches to solve air quality problems are not new. The Clean Air Act (CAA) provides states with the authority to sue for problems of “overwhelming transport” and gives EPA the authority to set up organizations to address air pollution problems spanning multiple states or tribes. Specifically, petitions under Section 126 of the CAA, the formation of the Ozone Transport Assessment Group (OTAG), and the creation of the Ozone Transport Commission (OTC) are good examples of attempts—albeit incomplete ones—to address this issue.

Lawsuits are a clumsy way to implement policy, however, so this approach should not be relied on to reach attainment. Lawsuits cannot address how states will meet their own attainment problems or those of the region on a cost-effective basis.

OTAG was a partnership among EPA, the Environmental Council of the States, and various industry and environmental groups, which assessed the long-range transport of ozone and its precursors. Although it was successful as a means of information exchange among the states, it lacked regulatory authority and failed to recommend measures to address the problem.

Finally, OTC, a multistate organization comprising government leaders and environmental officials from 12 northeastern and mid-Atlantic states, has developed cap-and-trade strategies to help states in the region attain and maintain the NAAQS for ozone, and do so cost-effectively. However, recent research has shown that the states covered by OTC are mostly the areas violating air quality standards, in other words, downwind states. By limiting the universe of allowable trades within the Ozone Transport Region, the trading restrictions make it difficult for sources to find trading partners; the smaller the trading region, the smaller the potential for lowering the cost of meeting a given cap.

Recommendations

A couple of very different approaches are possible for dealing with the long-range transport issues. You could build regional air management partnerships (RAMPs) via expansion of existing regional institutions or establishment of new ones, or you could eliminate most parts of the SIP process—except for assuring that local emissions do not increase—and shift responsibility for attainment primarily to the federal government.

Building Regional Air Management Partnerships (RAMPS)

Economists generally argue that the geographic reach of institutions regulating environmental pollution should be coincident with the geographic reach of the pollution. In the case of ozone and fine particulates, such an institution would need to be composed of all the states and tribes in an airshed working collectively to address these regional air pollution problems. A collective process could provide the states an opportunity to jointly consider the issues and to explore strategies that are not only cost-effective, but also equitable for every state within the entire airshed.

To pursue this option, we recommend establishing a new institutional mechanism to address the regional air quality management issue. The RAMPs concept is consistent with the recommendation made by the Subcommittee for Ozone, Particulate Matter, and Regional Haze Implementation Programs and in a 2004 National Research Council report, Air Quality Management in the United States. RAMPs could be implemented by either expanding the current OTC or creating a new regional organization to address the long-range transport problem.

The CAA gives EPA authority to establish transport commissions and air quality control regions. EPA would be able to establish RAMPs using this statutory authority, relying on its general rulemaking authority to provide direction and schedules. RAMPs could act as a forum for information sharing, reaching agreement and developing recommendations on how to solve regional air pollution problems. The new regional organization could provide technical support and assessment, and create areas of influence (AOI) and areas of violation (AOV) using air quality modeling and tracer experiments. Institutional mechanisms also could be structured to support the development and implementation of incentive- and market-based approaches to managing regional pollution problems, including developing positive incentives for upwind areas to reduce precursor emissions, such as emissions trading and air pollution funds. The organization also may endow areas of violation with some power to compel actions from areas of influence. Under RAMPs, states would retain primacy, subject to EPA oversight and Federal Implementation Plan (FIP) authority, to the greatest extent consistent with air quality and equity goals, with responsibility assigned at the lowest level of government practicable.

Assuming that the preferred approach to attaining the new NAAQS involves establishing regional emissions cap-and-trading programs, RAMPs could oversee the orderly transfer of emissions credits between jurisdictions, including developing protocols for tracking, verifying, recording, and otherwise overseeing the conditions of interstate and other interjurisdictional emissions reduction credit transactions. RAMPs also could be responsible for reviewing and approving each state’s regulations into its SIP for attaining the NAAQS for ground-level ozone.

For this idea to work with the current regulatory system, state SIPs would need to incorporate policies consistent with their RAMPs. EPA could compel states to do this by rejecting the SIPs of all states in the airshed unless they had satisfactory measures enforcing this incorporation. Unless RAMPs have some authority, this arrangement is unlikely to be efficient, because there is no guarantee that a state will agree to bear more costs than other states.

Federal Responsibility with a Diminished SIP Process

A much more radical option would be to dismantle much of the SIP process, except for assuring no net increase in local emissions, and transfer authority for meeting standards to the federal government. This option has several advantages over the first approach. First, federal measures for reducing emissions, such as regional trading options and fuel quality regulations, are almost universally accepted as both the most effective and the most cost-effective. Conversely, state and local measures, such as transportation control measures, have performed poorly. Second, the alternative of establishing RAMPs is problematic, because our federal system does not favor conferring authority to regional, as opposed to state, institutions.

Third, eliminating much of the SIP process reduces costs and contentiousness. This overly bureaucratic and legalistic process draws attention and resources away from the more germane issue of ensuring progress toward the goal of meeting the NAAQS. Furthermore, the enormous modeling uncertainties in demonstrating attainment of the ambient standards could be eliminated and transferred instead to the federal government, which has the expertise, money, and economies of scale to do a better job. And given the large role for regional transport, the federal or regional level is the appropriate one for modeling and demonstration of attainment.

Fourth, forcing localities to demonstrate that their emissions are not increasing is a much more tractable and measurable task than requiring them to demonstrate attainment. Localities likely would still keep their inspection and maintenance programs in place, for instance, and could be required to show that the program was being well implemented. Fifth, the public’s attention could turn to the government body that actually has the power to address the problem—the federal government—rather than the localities, which are largely helpless to further reduce concentrations.

The main drawback to this approach stems from its radical departure from the CAA. Congress probably would need to act. Also, many stakeholder groups would be skeptical of such a change at first, with perhaps the greatest concerns being about delay, backsliding on local emissions reductions, and the process by which transportation planning and air quality planning are required to be coordinated. This is why the nondegradation requirement would be so important.

A.J.K.

J-S.S.