Economic Incentives for Pollution Control: by Table Of Contents

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1.1. PURPOSE OF REPORT

1.2. DEFINITIONS

1.3. ORGANIZATION OF REPORT

1.4. SCOPE OF REPORT

2. GOVERNMENT POLICIES ON ECONOMIC INCENTIVES

2.1. SOME RECENT POLICY DEVELOPMENTS

2.1.1. Reinventing Environmental Regulation

2.1.2. Economic Report of the President

2.1.3. Council on Sustainable Development

2.1.4. Vice-Presidential National Performance Review

2.1.5. Executive Order 12866 and Related OMB Guidance

2.2. SOME SIGNIFICANT EARLIER POLICY DEVELOPMENTS

2.2.1. Economic Incentives: Options for Environmental Protection

2.2.2. 1990 Clean Air Act Amendments

2.2.3. The Project 88 Report

2.2.4. Executive Order 12291 and EPA Guidelines for Performing Regulatory Impact Analysis

2.3. CONCLUSIONS

3. THE ECONOMIC EFFICIENCY AND ENVIRONMENTAL EFFECTS OF INCENTIVE SYSTEMS

3.1. BACKGROUND

3.2. COMMAND AND CONTROL

3.3. INCENTIVE-BASED MECHANISMS

3.3.1. Pollution Taxes, Fees, and Charges

3.3.2. Subsidies

3.3.3. Trading Systems

3.3.4. Deposit-Refund Systems

3.3.5. Information Programs

3.3.6. Liability for Health and Environmental Harm

3.4. RELATIVE ECONOMIC EFFICIENCY

3.5. ECONOMIC INSTRUMENTS AND TECHNOLOGICAL CHANGE

3.6. IMPACTS ON ENVIRONMENTAL QUALITY

3.7. FINDING THE RIGHT INSTRUMENT FOR THE PROBLEM

4. FEES, CHARGES, AND TAXES

4.1. INTRODUCTION

4.2. WATER FEES

4.2.1. Indirect Discharge and User Fees

4.2.2. Direct Discharge Fees

4.2.3. Examples of State Effluent Fees: Louisiana, California, and Wisconsin

4.2.4. Stormwater Runoff Fees

4.3. AIR FEES

4.3.1. Permit Fees

4.3.1.1. Air Emission Permit Fees in Maine

4.3.1.2. Air Emission Permit Fees in the South Coast Air Quality Management District

4.3.1.3. California "Hot Spots" Fees

4.3.2. Ozone Non-Attainment Area Fees

4.4. WASTE FEES

4.4.1. Variable Pricing Program

4.4.2. Landfill Taxes

4.4.3. Hazardous Waste Taxes

4.5. PRODUCT CHARGES

4.5.1. Federal Product Charges

4.5.1.1. Superfund Taxes

4.5.1.2. Taxes on Fuel-Inefficient Automobiles

4.5.1.3. Ozone-depleting Chemicals

4.5.2. State Product Charges

4.5.2.1. Tire Charges

4.5.2.2. Fertilizer Charges

4.5.2.3. Rhode Island Hard-to-Dispose Material Tax

4.5.2.4. Florida ADF

4.5.2.5. North Carolina ADF

4.5.2.6. Texas Clean Fuel Incentive Surcharge

4.6. ROAD USER FEES

4.7. WETLAND COMPENSATION FEES

4.8. GRAZING FEES

4.9. MINNESOTA CONTAMINATION TAX

5. DEPOSIT-REFUND SYSTEMS

5.1. INTRODUCTION

5.2. BEVERAGE CONTAINERS

5.2.1. Maine Bottle Bill

5.2.2. California Beverage Container Recycling Program

5.3. LEAD-ACID BATTERIES

5.4. MAINE PESTICIDE CONTAINER DEPOSIT SYSTEM

5.5. OTHER PRODUCTS

5.6. VOLUNTARY DEPOSIT SCHEMES

5.7. PERFORMANCE BONDS

6. TRADING SYSTEMS

6.1. TRADING OF AIR EMISSIONS

6.1.1. EPA's Air Emission Trading Program

6.1.1.1. Offset Program

6.1.1.2. Bubble Program

6.1.1.3. Banking

6.1.1.4. Netting

6.1.1.5. Evaluation of Emissions Trading Program

6.1.2. RECLAIM

6.1.3. Other State Air Emission Trading Programs

6.1.3.1. Illinois

6.1.3.2. Delaware

6.1.3.3. Massachusetts

6.1.4. NESCAUM/MARAMA Demonstration Project

6.1.5. OTC/OTAG Regional NOx Reduction Program

6.1.6. Open Market Trading

6.1.7. Acid Rain Allowance Trading

6.1.8. Chlorofluorocarbon Production Allowance Trading

6.1.9. Lead Credit Trading

6.1.10. Gasoline Constituents

6.1.11. Heavy Duty Truck Engine Emissions

6.1.12. Hazardous Air Pollutants

6.1.12.1. Early Reduction Program

6.1.12.2. Petroleum Industry NESHAPS

6.1.12.3. Hazardous Organic Chemical NESHAP

6.1.13. Corporate Average Fuel Economy Standards (CAFE)

6.1.14. Wood Stove and Fireplace Permit Trading

6.1.15. Grass Burning Permit Trading

6.2. TRADING OF WATER EFFLUENTS

6.2.1. Effluent Bubble

6.2.2. Effluent Trading (point-point)

6.2.3. Effluent Trading (Point-nonpoint)

6.2.3.1. Dillon Reservoir

6.2.3.2. Cherry Creek

6.2.3.3. Tar-Pamlico Basin

6.2.3.4. Other Point-Nonpoint Trading Proposals

6.3. LAND PROTECTION TRADING

6.3.1. Wetland Mitigation Banking

6.3.2. Transferable Development Rights

6.3.2.1. Montgomery County, Maryland

6.3.2.2. Talbot County, Maryland

6.3.2.3. Maryland Purchase of Development Right (PDR) Program

6.3.2.4. The Pinelands, New Jersey

6.3.2.5. Palm Beach County, Florida

6.4. INTERNATIONAL TRADING ACTIVITIES INVOLVING US GOVERNMENT

6.4.1. Joint Implementation

6.4.2. Proposed Cross-Border Trading Program: El Paso Region

7. SUBSIDIES

7.1. INTRODUCTION

7.2. POLLUTION PREVENTION AND CONTROL

7.2.1. Tax Benefits

7.2.2. Louisiana Environmental Scorecard

7.2.3. Supplemental Environmental Projects

7.2.4. Loans and Tax-exempt Bonds

7.3. BROWNFIELDS PROGRAMS

7.3.1. EPA Pilot Project Grants

7.3.2. Tax Incentives and Loans

7.4. FARMING AND LAND PRESERVATION

7.4.1. Conservation Reserve Program

7.4.2. Wetlands Reserve Program

7.4.3. Agricultural Conservation Program

7.4.4. Compliance Provisions

7.4.5. Highly Erodible Land Conservation Compliance and "Sodbuster"

7.4.6. Swampbuster Program

7.4.7. Acreage Reduction Program

7.4.8. Subsidy Programs Created under 1996 Farm Bill

7.4.8.1. Environmental Quality Incentive Program

7.4.8.2. Farmland Protection Program

7.4.8.3. Conservation Farm Option

7.4.8.4. Wildlife Habitat Incentives Program

7.4.9. State Initiatives

7.4.10. Purchase of Development Rights

7.5. CONSUMER PRODUCT WASTE MANAGEMENT

7.5.1. Advance Disposal Fee Systems

7.5.2. Deposit Handling Fees

7.5.3. Recycling Loans and Grants

7.5.4. Tax Incentives

7.5.5. Preferential Procurement of Recycled Products

7.5.6. Recycled Content Policies

7.6. NEW JERSEY INFORMATION AWARDS PROGRAM

7.7. ALTERNATIVE FUELS AND LOW-EMITTING VEHICLES

7.7.1. Federal Subsidies

7.7.2. State Subsidies

7.7.3. Car Buyback Schemes

7.8. RENEWABLE ENERGY AND CONSERVATION

7.9. MUNICIPAL SEWAGE TREATMENT PLANT CONSTRUCTION

7.10. ENVIRONMENTALLY HARMFUL SUBSIDIES

7.10.1. Subsidies for Timber, Minerals, and Water Extraction

7.10.2. Agriculture

7.10.3. Mortgage Interest Tax Deduction

8. LIABILITY APPROACHES

8.1. LIABILITY FOR CLEANUP COSTS

8.2. LIABILITY FOR DAMAGE TO NATURAL RESOURCES

8.3. CIVIL AND CRIMINAL LIABILITY

8.3.1. Resource Conservation and Recovery Act (RCRA)

8.3.2. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

8.3.3. Clean Water Act (CWA)

8.3.4. Clean Air Act (CAA)

8.4. TORT LIABILITY

9. INFORMATION APPROACHES

9.1. INTRODUCTION

9.2. EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT (EPCRA)

9.2.1. Trends in Toxics Release Inventory (TRI) Data

9.2.2. Incentive Effect of the Toxics Release Inventory (TRI)

9.3. STATE EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT (EPCRA) PROGRAMS

9.3.1. Massachusetts Toxics Use Reduction Act

9.3.2. New Jersey Reporting Requirements

9.4. PROPOSITION 65

9.5. HOT SPOTS ACT

9.6. ENVIRONMENTAL POLICY ACTS

9.7. LABELING SCHEMES

9.7.1. Federal Trade Commission Guidelines for Environmental Marketing Claims

9.7.2. Green Seal and Other Seals of Approval

9.7.3. Single-Attribute Seals of Approval

9.7.4. Report Cards and Information Disclosure

9.7.5. Energy-Efficiency Labeling

9.7.6. Hazard Labels

9.8. ENVIRONMENTAL PERFORMANCE AWARDS

9.9. SECURITIES AND EXCHANGE COMMISSION (SEC) DISCLOSURE REQUIREMENTS

9.10. RADON AND LEAD PAINT DISCLOSURE REQUIREMENTS

10. VOLUNTARY PROGRAMS

10.1. GREEN LIGHTS AND ENERGY STAR

10.2. WASTEWI$E

10.3. 33/50 PROGRAM

10.4. PROJECT XL

10.5. ENVIRONMENTAL LEADERSHIP PROGRAM (ELP)

10.6. WAVE

10.7. CLIMATE WISE

10.8. METHANE RECOVERY PROGRAMS

10.9. STATE PROGRAMS

10.9.1. Massachusetts Recycled Newsprint Program

10.9.2. Texas Clean Industries 2000

10.9.3. Adopt-a-Highway

11. FOREIGN EXPERIENCES WITH INCENTIVE SYSTEMS

11.1. FEES, CHARGES, AND TAXES

11.1.1. Waste

11.1.2. Air

11.1.2.1. Sweden's Nitrogen Oxide Charge

11.1.2.2. Charges in Less Industrialized Countries

11.1.3. Water

11.1.3.1. User fees

11.1.3.2. Effluent Charges

11.1.3.3. Effluent Charges in Germany

11.1.3.4. Effluent Charges in the Netherlands

11.1.3.5. Effluent Charges in France

11.1.3.6. Effluent Charges in Less Industrialized Countries

11.1.4. Noise

11.1.5. Charges on Environmentally Damaging Products and Activities

11.1.5.1. Charges on Agricultural Inputs

11.1.5.2. Energy/carbon Taxes

11.1.5.3. Preferential Taxation of Environmentally Friendly
Products

11.1.5.4. Road User Fees

11.1.5.5. Singapore Road and Vehicle Taxation

11.1.5.6. Other Measures to Curb Congestion

11.2. DEPOSIT-REFUND MECHANISMS

11.3. MARKETABLE PERMIT SYSTEMS

11.3.1. Air Pollution

11.3.2. Water Pollution

11.3.3. Water Use Rights

11.3.4. Water-energy Trading

11.4. SUBSIDIES

11.4.1. Subsidies for Environmentally Friendly Agriculture and Land Management

11.4.2. Subsidies to Reduce Vehicle Emissions

11.4.3. Subsidies for Resource Conservation

11.4.4. Environmentally Harmful Subsidies

11.5. PRODUCT LABELING

11.6. INFORMATION DISCLOSURE REQUIREMENTS

11.7. VOLUNTARY PROGRAMS

11.8. DEBT-FOR-NATURE SWAPS AND JOINT IMPLEMENTATION

11.9. TREND OF INCREASING USE OF ECONOMIC INSTRUMENTS IN FOREIGN COUNTRIES

11.10. CONCLUSIONS

12. CONCLUSIONS

BIBLIOGRAPHY

FIGURE 3-1: INCREMENTAL DAMAGES AND COSTS OF CONTROLLING POLLUTION

FIGURE 3-2: CONTROL OPTIONS FOR A SOURCE

FIGURE 3-3: MARGINAL DAMAGES AND COSTS FOR TAX PER UNIT OF EMISSIONS APPROACH TO POLLUTION CONTROL

FIGURE 3-4: COSTS FOR EMISSIONS CONTROL FOR FIRMS UNDER EMISSIONS TAX AND COMMAND AND CONTROL APPROACHES

FIGURE 4-1: 1994 WATER CHARGE STRUCTURES

FIGURE 4-2: MONTHLY WATER AND WASTEWATER CHARGES

FIGURE 4-3: HOUSEHOLD WASTE LANDFILLING AND RECYCLING IN SAN JOSE

FIGURE 4-4: GRAZING FEES UNDER THE PUBLIC RANGELANDS IMPROVEMENT ACT

FIGURE 5-1: U.S. MARKET SHARE OF REFILLABLE BOTTLES

FIGURE 5-2: ESTIMATED DISTRIBUTOR COSTS OF MAINE DEPOSIT SCHEMES

FIGURE 5-3: BATTERY LEAD RECYCLING AND LEAD SCRAP PRICES IN THE U.S.

FIGURE 6-1: PHASE I SO2 EMISSION

FIGURE 7-1: WISCONSIN NEWSPAPER RECYCLING AND RECYCLED CONTENT REQUIREMENTS

FIGURE 7-2: STATE REVOLVING FUND INVESTMENT FY 1988-95

FIGURE 7-3: U.S. POPULATION SERVED BY MODERN SEWAGE TREATMENT FACILITIES

FIGURE 9-1: MASSACHUSETTS TOXICS USE AND BYPRODUCTS

FIGURE 10-1: ENERGY SAVINGS IN SHOWCASE BUILDING

FIGURE 10-2: RELEASES AND TRANSFERS OF 33/50 PROGRAM CHEMICALS

FIGURE 11-1: ANNUAL CHARGE PAYMENTS FOR HYPOTHETICAL INDUSTRIAL DISCHARGE

FIGURE 11-2: POINT SOURCE EFFLUENT CHARGES IN GERMANY

FIGURE 11-3: EFFLUENT CHARGES IN THE NETHERLANDS

FIGURE 11-4: EFFLUENT CHARGE REVENUES IN THE NETHERLANDS

FIGURE 11-5: FERTILIZER CHARGES AND USE IN SWEDEN

FIGURE 11-6: SALES OF DIFFERENT CLASSES OF DIESEL FUEL IN SWEDEN

FIGURE 11-7: SINGAPORE ANNUAL ROAD TAX

FIGURE 11-8: PRIVATE CARS ENTERING SINGAPORE CENTRAL BUSINESS DISTRICT

FIGURE 11-9: MODES OF TRANSPORTATION IN SINGAPORE

FIGURE 11-10: ALUMINUM CAN RECYCLING RATES

FIGURE 11-11: CARS SOLD AND SCRAPPED IN SWEDEN

FIGURE 11-12: PET BOTTLE RECYCLING RATE IN TAIWAN

FIGURE 11-13: ELECTRIC POWER PRICES, 1988

TABLE 3-1: QUANTITATIVE STUDIES OF POTENTIAL SAVINGS FROM USING ECONOMIC INCENTIVES TO CONTROL AIR POLLUTION

TABLE 3-2: QUANTITATIVE STUDIES OF POTENTIAL SAVINGS FROM USING ECONOMIC INCENTIVES TO CONTROL WATER POLLUTION

TABLE 3-3: QUANTITATIVE STUDIES OF POTENTIAL SAVINGS FROM USING ECONOMIC INCENTIVES TO REDUCE SOLID WASTE

TABLE 3-4: QUANTITATIVE STUDIES OF POTENTIAL SAVINGS FROM USING ECONOMIC INCENTIVES FROM OTHER POLLUTION-RELATED ACTIONS

TABLE 3-5: USES OF ECONOMIC INSTRUMENTS

TABLE 4-1: OVERVIEW OF FEES, CHARGES, AND TAXES IN ENVIRONMENTAL POLICY

TABLE 4-2: STATE EFFLUENT FEES AS OF DECEMBER 1993

TABLE 4-3: AIR EMISSIONS PERMIT FEES IN MAINE

TABLE 4-4: EMISSION FEES IN SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

TABLE 4-5: AIR TOXICS AND OZONE-DEPLETING CHEMICALS FEES IN SCAQMD
($ PER POUND)

TABLE 4-6: VARIABLE RATE STRUCTURES IN SELECTED COMMUNITIES

TABLE 4-7: CHANGES IN WASTE DISPOSAL IN RESPONSE TO VARIABLE RATE PRICING PROGRAMS

TABLE 4-8: HAZARDOUS WASTE LAND DISPOSAL FEES IN CALIFORNIA, FY 1996

TABLE 4-9: HAZARDOUS WASTE GENERATION FEES IN CALIFORNIA, CY 1996

TABLE 4-10: PRODUCT CHARGES ON TIRES

TABLE 5-1: STATE BEVERAGE CONTAINER DEPOSIT SYSTEMS

TABLE 5-2: ESTIMATED COLLECTION AMOUNTS AND COSTS OF CURBSIDE AND DEPOSIT PROGRAMS IN MAINE COMMUNITY OF 25,000 INHABITANT S

TABLE 5-3: MANDATORY LEAD-ACID BATTERY DEPOSIT SYSTEMS

TABLE 6-1: EMISSION TRADING ACTIVITY IN THE LOS ANGELES AREA

TABLE 6-2: RECLAIM TRADING CREDIT PRICES

TABLE 6-3: ESTIMATED AND AVERAGE REALIZED ALLOWANCE PRICES

TABLE 6-4: EXAMPLE OF EMISSION BENEFITS OF EARLY REDUCTION PROGRAM

TABLE 6-5: PROJECTED COST SAVINGS FROM EFFLUENT BUBBLE (IN THOUSANDS OF 1978 DOLLARS)

TABLE 7-1: THE USE OF SUBSIDIES IN U.S. ENVIRONMENTAL PROTECTION

TABLE 7-2: POINTS AWARDED AND SUBTRACTED UNDER LOUISIANA SCORECARD SYSTEM

TABLE 7-3: U.S. DEPARTMENT OF AGRICULTURE CONSERVATION SUBSIDY PROGRAMS

TABLE 7-4: CONSERVATION RESERVE PROGRAM ACREAGE AND RENTAL PAYMENTS FOR FIRST 12 ENROLLMENTS

TABLE 7-5: PROJECTED SOCIAL BENEFITS AND COSTS OF CONSRVATION RESERVE PROGRAM (IN BILLIONS OF DOLLARS)

TABLE 7-6: WETLAND RESERVE PROGRAM (WRP) FIRST ENROLLMENT (1992)

TABLE 7-7: BENEFITS AND COSTS OF CONSERVATION COMPLIANCE

TABLE 7-8: IMPACTS OF CONSERVATION PROGRAMS ON EROSION AND CHEMICAL USE, FISCAL YEARS 1988-93

TABLE 7-9: STATUS OF PURCHASE OF DEVELOPMENT RIGHTS PROGRAMS AS OF APRIL 1996

TABLE 7-10: SUBSIDIES FOR USED TIRE MANAGEMENT

TABLE 7-11: WISCONSIN RECYCLING FINANCIAL ASSISTANCE PROGRAMS

TABLE 7-12: STATE LOAN FUNDS FOR RECYCLING BUSINESSES

TABLE 7-13: ALTERNATIVE FUEL AND ALTERNATIVE FUEL VEHICLE SUBSIDIES

TABLE 7-14: ALTERNATIVE FUEL VEHICLE PROCUREMENT REQUIREMENTS

TABLE 7-15: ANNUAL ALTERNATIVE FUEL AND ALTERNATIVE FUEL VEHICLE SUBSIDIES IN THE OZONE TRANSPORT REGION

TABLE 7-16: U.S. BUREAU OF RECLAMATION WATER SUBSIDIES

TABLE 8-1: LARGEST FEDERAL NATURAL RESOURCE DAMAGE SETTLEMENTS

TABLE 9-1: TOXICS RELEASE INVENTORY (TRI) RELEASES BY INDUSTRY

TABLE 9-2: TOXICS RELEASE INVENTORY (TRI) WASTE TRANSFERS

TABLE 9-3: CLASSIFICATION OF ENVIRONMENTAL LABELING SCHEMES

TABLE 10-1: EPA VOLUNTARY PROGRAMS

TABLE 10-2: WAVE INVESTMENTS AND SAVINGS

TABLE 11-1: NOTEWORTHY INCENTIVE MECHANISMS OUTSIDE THE UNITED STATES

TABLE 11-2: WASTE DISPOSAL BAG PRICES IN SEOUL METROPOLITAN AREA

TABLE 11-3: CHARGES ON LANDFILL OPERATORS IN THE CZECH REPUBLIC

TABLE 11-4: SWEDISH ESTIMATES OF THE NET BENEFIT OF THE NOX CHARGE

TABLE 11-5: AIR POLLUTION CHARGES IN EASTERN EUROPE

TABLE 11-6: INDUSTRIAL EFFLUENT CHARGES IN THE EUROPEAN UNION

TABLE 11-7: DISCHARGE SCENARIOS FOR FIGURE 11-1

TABLE 11-8: WATER EFFLUENT CHARGES IN EASTERN EUROPE

TABLE 11-9: IMPACT OF SEWAGE CHARGES ON POLLUTION IN SAO PAULO STATE, BRAZIL

TABLE 11-10: ADVANCE DISPOSAL FEES IN SOUTH KOREA

TABLE 11-11: FERTILIZER CHARGES IN SWEDEN

TABLE 11-12: ENERGY/CARBON TAXES

TABLE 11-13: 1994 ENERGY TAXES IN DENMARK

TABLE 11-14: CARBON/ENERGY TAXES IN THE NETHERLANDS

TABLE 11-15: CARBON/ENERGY TAXES APPLIED TO FUELS IN THE NETHERLANDS

TABLE 11-16: DIFFERENTIAL TAXATION OF LEADED GASOLINE

TABLE 11-17: 1992 CLASSIFICATION OF DIESEL FUELS AND TAX REBATES IN SWEDEN

TABLE 11-18: BEVERAGE CONTAINER DEPOSITS IN SELECTED COUNTRIES

TABLE 11-19: DEPOSITS IN SOUTH KOREA

TABLE 11-20: ENVIRONMENTAL LABELS IN SELECTED COUNTRIES

TABLE 11-21: KOREAN ECO-MARK PRODUCT CRITERIA

TABLE 11-22: SHARE OF ENVIRONMENTAL TAXES IN TOTAL TAX REVENUES IN OECD COUNTRIES

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