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6.1.14. Wood Stove and Fireplace Permit Trading

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Economic Incentives for Pollution Control

During the 1970s and 1980s a number of mountain communities in Colorado experienced unacceptably high levels of particulate pollution during winter months due to the use of wood-burning stoves and fireplaces. The growing popularity of skiing and other winter activities has exacerbated the problem in some of these areas.

Telluride tried to combat the problem through traditional command and control regulations. In 1977 the city passed an ordinance limiting new residential construction to one stove or fireplace per unit. While this might have slowed the deterioration in air quality, continued new construction virtually guaranteed that air quality would continue to worsen, which it did into the 1980s.

In 1987, the city adopted a program, part command and control and part modeled on air pollution offsets, that would guarantee improvements in air quality. Existing wood stove and fireplace owners were grandfathered with operating permits, but required to meet stringent performance standards within 3 years: 6 grams of particulate matter and 200 grams of CO per hour. During the first two years of the program these individuals converting their fireplaces and wood stoves to natural gas could earn a rebate of $750, partially defraying their costs. For new construction, no new permits would be issued for wood-burning stoves or fireplaces. To install such an appliance in new construction, the owner must produce permits to operate two fireplaces or stoves. The only place these permits could be acquired was from existing permit owners.

In a matter of months a lively market in second-hand permits developed, with potential buyers and sellers making contact through classified advertisements. By the mid-1990s transaction prices for permits were in the $2,000 range. In the years after Telluride adopted the program, it has reported no violations of the ambient air quality standard for particulate matter.

Other communities in Colorado soon implemented similar programs that combined performance-based standards that encouraged the retirement of older inefficient fireplaces and wood stoves. The programs all aimed at reducing the burning of wood, but some offered no rebate for conversion to natural gas. From the available evidence, the programs appear to have been a success, achieving air quality goals quickly and at a relatively modest cost. A project for future research would compare and contrast the approaches taken by different communities in limiting the use of heavily-polluting wood stoves and fireplaces, as well as assess the effectiveness of the programs.

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