Tradable Discharge Permits For Industrial Users

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0 height="100%"><tr> <td valign="top" width=200 BGCOLOR="#003333" TEXT="#F7F7FF" background="040d4c00dduajq.gif"> <div> <TABLE BORDER="0" CELLPADDING="2" CELLSPACING="0" WIDTH="95" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 46 WIDTH="91"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="46" ALIGN="bottom" WIDTH="91" HSPACE="0" VSPACE="0"></tD> </tR> </TABLE></div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="077b7d50.jpg" border=0 width="183" height="213" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> </td> <td valign="top" BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <FONT SIZE="5" COLOR="#003333" FACE="Arial" ><B>Tradable Pollution Discharge Permitting for Industrial Users</B></FONT>     |     <A HREF="index.htm" TARGET="_top" TITLE="Tradable Pollution Discharge Permitting "><U>home</U></A></div> <div> <A HREF="id17.htm" TARGET="_top" TITLE="About Me"><U>About Me</U></A>   |   <B>Tradable Discharge Permits For Industrial Users</B>   |   <A HREF="id18.htm" TARGET="_top" TITLE="Equimarginal Principal (a simplified app"><U>Equimarginal Principal (a simplified application using two firms)</U></A>   |   <A HREF="id25.htm" TARGET="_top" TITLE="Treatment Technologies"><U>Treatment Technologies</U></A>   |   <A HREF="id19.htm" TARGET="_top" TITLE="Segregation of Wastestreams"><U>Segregation of Wastestreams</U></A>   |   <A HREF="id24.htm" TARGET="_top" TITLE="News Items"><U>News Items</U></A>   |   <A HREF="id22.htm" TARGET="_top" TITLE="Favorite Links"><U>Favorite Links</U></A>   |   <A HREF="id20.htm" TARGET="_top" TITLE="Contact Me"><U>Contact Me</U></A></div> <div> Tradable Discharge Permits For Industrial Users</div> <div> Tradable Discharge Permits For Industrial Users</div> <div> <B>Pollution Problem as it Currently Exists</B></div> <div> It is necessary to consider both sides of the pollution problem... </div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The industrial users (IU's) must achieve a level of production that will be cost-effective as well as meet customer needs, while at the same time control the level of pollution created during the production process.</div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The wastewater treatment plant (WWTP) problem is that it must treat concentrated industrial effluent to a standard that is environmentally acceptable.</div> <div> <B> </B></div> <div> <B>Objectives of the Study</B></div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The goal of this study is to develop a politically feasible, incentive-based pollution control system for metals/industrial users in the wastewater industry, in order to address the pollution control problem as it currently exists. To accomplish this end in terms of policy development, it is necessary to establish criterion categories so that a set of objectives are met in an effort to satisfy specific<B> </B><FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>criteria</I></FONT><B>:</B></div> <div> <B>1. Technical Feasibility</B> - the objective under this criteria is to review the pollution control technology currently being used by IUs, so that we can determine its <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>effectiveness</I></FONT> and how that effectiveness will influence the alternative policy model.</div> <div> <B>2. Economic Possibility</B> - the objective here is twofold; 1) to evaluate the private and public costs of control under the current system<B> </B>and 2) to develop a quantitative framework for characterizing the least-cost distribution of pollution control between IUs and the control authority; the evaluation criterion may include <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>cost/benefit</I>, <I>tangible/intangible cost</I></FONT> and <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>cost effectiveness</I></FONT> types of analysis. </div> <div> <FONT SIZE="4" COLOR="#000000" FACE="Arial" ><B>3. Political Viability</B> - the objective is to determine what can be done in order to overcome any institutional, political or legal barriers associated with the TDP/alternative policy; </FONT><I>acceptability</I>, <I>appropriateness</I>, <I>legality</I><FONT SIZE="4" COLOR="#000000" FACE="Arial" > and </FONT><I>equity</I><FONT SIZE="4" COLOR="#000000" FACE="Arial" > are the criteria questions that must be answered here.</FONT></div> <div> <FONT SIZE="4" COLOR="#000000" FACE="Arial" ><B>4. Administrative Operability</B> - the objective is to determine whether or not the control authority will be able to implement the TDP/alternative policy; does the existing administrative system have the </FONT><I>organizational</I>, <I>institutional</I><FONT SIZE="4" COLOR="#000000" FACE="Arial" > and </FONT><I>economic capability</I><FONT SIZE="4" COLOR="#000000" FACE="Arial" > to implement the TDP/alternative policy.</FONT></div> <bR> <div> <B>Alternative Policy Regime</B></div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The TDP proposal being developed in this research was prompted by the successful EPA program for SO<FONT SIZE="2" COLOR="#000000" FACE="Arial" ><B>2</B></FONT> permit trading in air pollution control. The basic theory behind the TDP system in air, is that permit trading will result in the most <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>cost-effective</I></FONT> reduction of emissions. For purposes of this study, in economic terms this means that as a result of market forces, the social costs (firms and agency control costs) associated with industrial users/metals pollution will be minimized, utilizing the <FONT SIZE="4" COLOR="#0000FF" FACE="Arial" >equimarginal principal...</FONT><FONT SIZE="2" COLOR="#000000" FACE="Arial" >(click this title/page next)</FONT></div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The TDP system provides a way to increase benefits to society through reduced pollution control costs. Reduced treatment and compliance costs at the publicly owned treatment works (POTW), coupled with firms increased pollution control efficiency as a result of market forces, will reduce the overall cost to society. The TDP system also provides an important piece in the puzzle of sustainable development. The key factor in achieving any sustainable development is that growth occur at a rate that is <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>less-than</I></FONT> the environmental ability to <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>assimilate</I></FONT> that growth and associated pollution. This provides a more balanced approach in that the TDP system offers firms the ability to realize gains from trade while at the same time, increase the control authorities ability to reduce industrial pollution. The <B>Market for TDP's</B> will work to allocate permits away from the low marginal cost plants (those with newer technology) toward the high marginal cost plants (those with older technology) and this allocation will result in minimum production costs for the regulated industry.</div> <bR> <div> <B>Review of Past Research</B></div> <div> In the study done by Opaluch and Kashmanian, they looked at pretreatment standards for electroplating IU operations of the Rhode Island jewelry industry as part of a TDP model. Their conclusion was that the EPA standards based command-and-control methodology achieved concentration objectives at a cost that was nearly 50% greater than the least-cost TDP model. A TDP system with permit cost of $40 per pound would achieve the standard at a cost of  $12.5 million compared to the $19.3 million cost of the EPA proposal.</div> <div>   </div> <bR> <div> <B>Methodology</B></div> <div> <B>Hypothesis</B></div> <div> The general <U>hypothesis</U> being developed in this study is that the TDP alternative policy will <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>reduce total control costs </I></FONT>by at least 50%. Three basic <U>propositions</U> being put forth are that: 1) the TDP model can be implemented <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>utilizing the current permitting system</I></FONT> framework; 2) there are <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>no significant barriers</I></FONT> to hinder transition to TDP regulatory system; and 3) there is <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>movement towards TDP</I></FONT> at all policy levels.</div> <bR> <div> <B>      Model</B><FONT SIZE="2" COLOR="#000000" FACE="Arial" >          </FONT></div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">In developing the model, there are generally three accepted method of distribution: (1) outright sale of permits by the control-authority to the firms (or other interested parties/environmental groups), (2) sale by auction, and (3) free distribution to firms (subject to equity/qualification concerns). It is probable that the existing permitting system (which excludes tradability) could some how be incorporated into the new TDP system. Other questions involve who will qualify to purchase the permits, how many permits should be sold, what will be the desired level of reduction, and what happens if the target reduction goal is not met. </div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The cost minimization model includes the objective function(s) subject to certain constraints and the <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>Kuhn-Tucker</I></FONT> optimal conditions.</div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The concept of <FONT SIZE="4" COLOR="#FF0000" FACE="Arial" ><I>game theory</I></FONT> plays an important part in describing the level of interaction between the agency and the firms. Game theory brings into play the “behavioral” aspects of economic modeling that if left unaccounted for, could leave researchers and analysts with a flawed model. Thus, by including game theory in the research we can to some degree, predict the movements of players and enhance our efforts to develop a successful market based approach to pollution control.</div> <bR> <div> <B>Data</B></div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">Data needs are basically quantitative and qualitative. Most all quantitative data will be primary/self-acquired in nature. We will identify each POTW treatment technology and the associated processes, in order to determine plant costs. Benefits must be measured and quantified through reduced operational cost, reduced penalty costs, etc. </div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">In terms of the firms costs, a questionnaire will be distributed to all firms in order to develop an industry profile. With this information, we can identify the IUs treatment technology and quantify estimated costs. The profile will also help to determine each firms acceptance or resistance to an alternative control policy.</div> <div> <IMG BORDER="0" SRC="Symb075c00b7011800000000.gif" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">The qualitative data will be of a secondary nature and collected mostly from published material, while some of the data will be acquired through contacts with the agency consulting firm of Hazen & Sawyer. The questionnaire survey should provide answers to some qualitative questions associated with equity and political uncertainty.</div> <bR> <div> <B>Analysis</B></div> <div> The analysis will either confirm or refute the hypotheses being presented. In order to prove or disprove the hypothesis that this TDP system will reduce total control cost by at least 50% we will need to quantify cost data and technical parameters for each unit process in use for both the IUs and the POTW, using quantitative information. To prove or disprove the proposition(s) that this TDP system can be implemented utilizing the current permitting framework, that there are no significant barriers to hinder transition to TDP regulatory system, and that there is movement towards TDP at all policy levels, it is necessary to use both the quantitative and qualitative information in order to answer questions concerning institutional barriers, acceptability and equity for all the actors involved.</div> <bR> <div> <A HREF="id17.htm" TARGET="_top" TITLE="About Me"><U>About Me</U></A>   |   <B>Tradable Discharge Permits For Industrial Users</B>   |   <A HREF="id18.htm" TARGET="_top" TITLE="Equimarginal Principal (a simplified app"><U>Equimarginal Principal (a simplified application using two firms)</U></A>   |   <A HREF="id25.htm" TARGET="_top" TITLE="Treatment Technologies"><U>Treatment Technologies</U></A>   |   <A HREF="id19.htm" TARGET="_top" TITLE="Segregation of Wastestreams"><U>Segregation of Wastestreams</U></A>   |   <A HREF="id24.htm" TARGET="_top" TITLE="News Items"><U>News Items</U></A>   |   <A HREF="id22.htm" TARGET="_top" TITLE="Favorite Links"><U>Favorite Links</U></A>   |   <A HREF="id20.htm" TARGET="_top" TITLE="Contact Me"><U>Contact Me</U></A></div> <bR> </td> </tr></table></body>