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6.1.1.4. Netting

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Netting, the final component of EPA's emission trading policy, dates from 1980 and allows sources undergoing modification to avoid new source review if they can demonstrate that plant-wide emissions do not increase significantly. Netting is the most widely used of the emission trading programs; one source estimates that between 5,000 and 12,000 sources have used netting. Hahn and Hester (1989).

In each application netting is designed to have no significant impacts on environmental quality; however, with a large number of netting transactions a modest adverse impact might ensue. The total savings in control costs from netting are difficult to estimate because the number of transactions is not known precisely and the cost savings from individual transactions can be highly variable. Cost savings can arise in three ways. First, netting may allow a firm to avoid being classified as a major source, under which it would be subject to more stringent emission limits. Reductions in control costs in such a case would depend upon the control costs and emission limits which the firm must satisfy after netting. One source estimated that netting typically results in savings between $100,000 and $1 million per application (indicating aggregate savings of $500 million to as much as $12 billion). Hahn and Hester (1989). Second, the aggregate cost savings from avoiding the cost of going through the major source permitting process could range from $25 million to $300 million. Third, additional savings could arise from avoiding construction delays caused by the permitting process.

EPA's Office of Air and Radiation announced on April 3, 1996 a series of proposed revisions to new source regulations expected to reduce by more than one-half the number of permitting actions new sources and sources undergoing changes must take. Because the proposal shares many of the features of netting, it is described here. The proposed regulations would allow sources to use plantwide limits and also provide exemptions for pollution prevention activities and so-called "clean" emission sources in a facility.

Under the proposal, sources making changes could avoid new source review requirements by establishing a plantwide emissions cap (generally this would be the source's maximum potential emissions). Process changes could be made so long as the changes did not result in an increase in emissions beyond the cap

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