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United States Experience with Economic Incentives for Pollution Control

Title II of the Clean Air Act Amendments of 1990 authorizes EPA to set standards for particulate matter, NOx, and other emissions from heavy-duty truck engines. The standards must represent the maximum degree of reductions achievable, taking cost and other factors into consideration. EPA has interpreted this provision to authorize the use of averaging, banking, and trading as part of the process of realizing the maximum degree of reductions achievable.

Under this program, there has been a great deal of averaging and banking but only one trade between firms, a 1996 exchange of rights to 5 tons of particulate matter from Navistar to Detroit Diesel. The averaging of emissions facilitates compliance, since not every class of engines has to meet the 75% reduction standard. How much engine manufacturers actually save is unknown. However, a recent paper examined a similar type of engine performance averaging program that was proposed in California for light-duty trucks. It concluded that the cost savings of the program were likely to be modest. (Rubin and Kling. 1993).

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