Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
4 Institutional and Regulatory Frameworks In both the United States and China, air quality management (AQM) devel- oped as a response to health concerns, and typically began with research before progressing to regulatory actions. Today, the United States has an extensive AQM framework which has been successful in addressing serious air quality problems, but still faces challenges such as developing a more integrated, multipollutant approach, as well as an airshed-based approach (NRC, 2004). Chinaâs AQM history is comparatively short, but in recent years, as other state agencies were reduced in size, environmental agencies and organizations have enlarged their mandate. While China is still focusing on strategies to control criteria pollutants (defined below) such as PM10 and SO2, it is at the same time seeking to prevent future pollution, control other criteria pollutants, and help more cities improve air quality to emu- late the gains Beijing and a few other key cities have made. The following chapter traces the progression of AQM in each country and explains the roles of current institutions and regulatory frameworks. It will detail the related roles of research institutions and non-governmental organizations (NGOs) and their influence on policy and practice. The chapter concludes with a section on energy policy in the United States and China and its relations to air quality goals. ORGANIZATION OF AIR QUALITY MANAGEMENT IN THE UNITED STATES AND CHINA United States The U.S. government is comprised of three co-equal and independent branchesâthe legislative branch, the executive branch, and the judicial branch. 113
114 ENERGY FUTURES AND URBAN AIR POLLUTION All three of these branches of government play critical roles in the development and administration of environmental policy. Environmental laws such as the Clean Air Act (CAA) originate in the U.S. Congress. Under the American political sys- tem, only the elected national legislature can impose such broad and far-reaching limitations on economic activity, which could competitively disadvantage particu- lar industrial sectors or regions of the country. The executive branch is responsible for implementing these laws, and develops regulations for this purpose through authority that is delegated from the legislature. The judicial branch performs the role of enforcing laws enacted by the legislative branch, including ensuring that the executive branch acts within its statutory authority. In addition, courts in the United States play a major role as arbiters of disputes between citizens, which sometimes involve liability for environmental damage. In the United States, âjudge-madeâ or âcommon lawâ liability rules represent an important forerunner of, and adjunct to, statutory environmental law or regula- tion. In particular, through a private lawsuit based on the common law claim of nuisance, an injured party can either seek payment for property damage, or try to enjoin the activity that is causing harm. Alongside an extensive framework of environmental regulation, nuisance suits are still employed today to address dam- age caused by air or water pollution, especially in situations where government regulation has proven to be inadequate. However, prevailing in a nuisance suit is not easy. Private litigation is costly and time-consuming, and the injured party must generally prove that the defendant engaged in an âunreasonableâ activity that âsubstantiallyâ interfered with the enjoyment of his or her property (Powell, 1992). It may be especially difficult for someone injured by air pollution to show that a particular defendant caused quantifiable harm (Diamond v. General Motors Corp., 1971). This point was driven home in 1969 by a class action lawsuit filed on behalf of seven million residents of the Los Angeles area. The suit named almost 1,300 defendants and simply asked the court to âdo something about the air.â Therefore, while the right to use private lawsuits to address environmental damage is a vital principle of American law, government regulation is generally viewed as a more efficient mechanism for protecting public health and the envi- ronment, with the critical advantage that it can be used proactively to prevent harm before it occurs. Prior to 1970, state, county, and municipal governments in the United States undertook most air pollution regulation. Municipal smoke ordinances in the United States date back to the 19th century. State and local efforts to address air pollution intensified in many areas after World War II, in response to rapid growth in industrial activity that occurred during the war and continued afterwards. These state and local efforts are exemplified by those efforts undertaken in Pittsburgh and Los Angeles in the 1950s and 1960s, which are discussed in Chapters 8 and 10. The federal government also began to address air pollution after World War II, but began with a comparatively modest focus on research and technical assistance. The National Air Pollution Control Administration was created within
INSTITUTIONAL AND REGULATORY FRAMEWORKS 115 the Department of Health, Education, and Welfare (HEW) in 1955, in response to several air pollution crises that occurred in the previous decade, including a 3âday pollution episode in 1948 in the small town of Donora, Pennsylvania, where pollution from steel mills and stagnant meteorological conditions combined to cause a score of deaths and thousands of illnesses (Davis, 2002). The 1963 CAA required HEW to develop air quality criteria by studying relationships between air pollution levels and health and welfare effects; but these criteria were largely advisory and could be enforced only in cases where pollution directly endangered health or welfare. The 1963 Act also authorized the Secretary of HEW to ask the Justice Department to bring suit against polluters, under specified circumstances. Up until 1970, however, only a single enforcement action was taken (Stewart and Krier, 1978). The federal role in air pollution regulation was gradually strength- ened through the 1960s, culminating with the passage of the CAA amendments of 1970 (see timeline, Figure 4-1). The Environmental Protection Agency The year 1970 is widely recognized as the watershed year for national envi- ronmental regulation in the United States. In addition to the CAA amendments, the U.S. Environmental Protection Agency (EPA) was established as an indepen- dent agency. The mission of the EPA is to establish and enforce environmental standards across the air, water, and soil media, conduct research on environmental problems and their solutions, and assist the presidentâs Council on Environmental Quality in developing recommendations for new environmental policy initiatives (Lewis, 1985). The EPA was largely assembled from programs that already existed at other departments, including the National Air Pollution Control Administration at HEW. EPA now has 18,000 employees working nationwide, including 1,245 in the Office of Air and Radiation; these employees focus on national air quality policy (see Figure 4-2). A staff of 605 people in the ten regional offices interacts directly with state air pollution control agencies, to coordinate pollution-control efforts and to enforce federal requirements. When combined with researchers at EPAâs Office of Research and Development (ORD), nearly 4,000 EPA employees work specifically on issues of air quality. The 1970 CAA amendments authorized the new EPA to set National Ambi- ent Air Quality Standards and required states to develop and implement plans to meet them. Standards were required to be nationally uniform and to protect public health with an adequate margin of safety. The Act also authorized EPA to set emissions standards for large new stationary sources and for new motor vehicles. The CAA amendments of 1970 established a âcooperativeâ relationship between states and the federal government, in placing primary responsibility on the states Public Law 88-206, 77 Stat, 392 (1963). As of November 2006.
116 First efforts at federal legislation; emphasis Major legislation and No major legislation, Renewed focus on air Shifting focus to air toxics; on research to understand the problem; regulations established economic concerns pollution; criteria pollutants states lead movements to severe pollution events in California and dominate policy significantly reduced limit emissions, including CO 2 elsewhere 1960 1973 1995 2006 Motor Vehicle Act Oil embargo creates Lead phased out of California leads requires federal energy crisis for the gasoline; acid rain group of states research to address US, begins period of significantly reduced setting greenhouse pollution focus on energy as S02 emissions gas emissions 1967 efficiency 1977 decrease limits 1955 Air Quality Act CAA Air Pollution established; first Amendments Control Act legislation aimed at create New Source established reducing pollution Review (NSR) 1995 1963 1975 Reformulated Clean Air Act CAFE gasoline (RFG) (CAA) created standards required for urban areas with severe pollution 1970 1990 2003 EPA created; CAA CAA US Senate votes to extended and National Amendments roll back NSR; Ambient Air Quality propose emissions Clear Skies Act Standards (NAAQS) trading introduced to roll established back CAA 1990 FIGURE 4-1â Timeline of air quality regulation trends in the United States. 4-1
INSTITUTIONAL AND REGULATORY FRAMEWORKS 117 FIGURE 4-2â Organizational chart of EPA Office of Air and Radiation.
118 ENERGY FUTURES AND URBAN AIR POLLUTION to attain ambient air quality standards that were set by the federal government. However, the Act does not leave implementation to the individual states alone; it also assigns enforcement powers to the federal government. These include both direct enforcement actions against sources that are violating provisions of the CAA, and sanctions against states that fail to attain the standards by established deadlines, or states that fail to comply with other statutory requirements, includ- ing requirements to develop and administer the construction and operating permit programs for stationary sources, enforce permit limits, monitor air quality, and track emissions. State and local governments, environmental groups, and industry associations in the United States commonly use these provisions to seek the review of rules that EPA has developed, and to force the agency to undertake duties that Congress has assigned to it by statute. In addition to being incorporated explicitly into the statute, the CAAâs citizen suit provisions are in keeping with core principles of administrative law in the United States, which in turn trace back to English com- mon law principles of accountability of government officials to damage suits (Breyer and Stewart, 1979). The citizen suit provisions of the CAA augment the federal Administrative Procedure Act (APA) of 1946, which established modern requirements for the interaction between federal courts, regulatory agencies, and the interested public. The APA, which largely codified preexisting judge-made principles of administra- tive law, provides opportunities for the public to participate in the formulation of regulations, requires agencies to establish a reasonable basis for their decisions in the public record, and establishes procedures for judicial review of agenciesâ reasoning and compliance with their authorizing statutes. EPAâs administration of the CAA is thus overseen by the President as head of the executive branch, by the courts in response to citizen suits, and by Congress, which exercises ultimate oversight through the power to amend or replace EPAâs authorizing legislation. In fact, Congress has enacted two major sets of amend- ments to the CAA since 1970, in 1977 and again in 1990. Other Agencies The EPA is not the only U.S. government agency with responsibility for air quality. The U.S. Department of Transportation maintains an air quality unit that provides information related to air quality impacts of the nationâs transportation systems, and supplies advice to transportation officials regarding air quality plan- ning. While not all federal agencies have air quality-specific programs, several agencies target energy, largely because of energy consumptionâs impact on the environment, and in particular, on air quality. The U.S Department of Interior (DOI) runs a range of programs that are related to domestic energy production. As Americaâs principal conservation agency, DOI must ensure that air pollution does not degrade natural systems and that energy resources are used wisely.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 119 DOI oversees numerous smaller agencies that are tasked with managing specific resources such as the Bureau of Land Management, Fish and Wildlife Service, National Park Service, U.S. Geological Survey, and Bureau of Reclamation. All federal agencies, including the ones mentioned above, are governed by the National Environmental Policy Act (NEPA). NEPA requires that federal agencies include environmental values in their decision making, by considering both the potential environmental impacts of proposed action and the impacts of reasonable alternatives to those actions. The manifestation of this requirement is that federal agencies must produce detailed reports called environmental impact statements (EISs), before taking significant action. NEPA regulations are over- seen by the Council on Environmental Quality. Some actions are categorically excluded from needing a detailed assessment, if they meet certain requirements such as that type of action that has been previously evaluated by the agency as having no significant impact. The next level of complexity requires the agency to perform a preliminary environmental assessment. If the environmental assessment determines that no significant impacts are likely to occur, the agency issues a find- ing of no significant impact. If the environmental assessment suggests that more significant impacts may occur, the agency must continue with a more detailed EIS. EPA publishes EISs weekly in a âNotice of Availabilityâ in the Federal Register. The public can attend public meetings on EISs, and submit comments directly to the federal agency. It is the agencyâs job to consider comments from the public during the comment period. China Chinaâs history of AQM is comparatively short. The 1972 UN Conference on the Human Environment in Stockholm marked the first time that China officially addressed environmental issues. The conference, and the nascent environmental movements of industrialized countries such as the United States, provided the impetus for China and other developing countries to establish national environ- mental policies. Previously, the Chinese Ministry of Health oversaw environ- mental matters, but did so with little authority or motivation to regulate. Yet in spite of somewhat weak enforcement, environmental laws and regulations have resulted in improved air quality in many Chinese cities over the past few decades (Aunan et al., 2006). The real starting point for environmental protection in China is generally thought of as stemming from the first national conference on environmental protection held in 1973 (Editorial Board, 1994). The first organization concerned solely with environmental protection, the Environmental Protection Leading Group (Leading Group), was set up in 1974 under the State Council, which was formed to coordinate environmental protection at the national level. Since then, the institutions for environmental protection have developed and undergone changes several times (see timeline, Figure 4-3). In 1979, the provisional Environmental
120 ENERGY FUTURES AND URBAN AIR POLLUTION Protection Law was promulgated, stipulating that âwhosoever causes pollution is responsible for its elimination.â For the next decade, Chinaâs environmental protection policies were focused primarily on pollution control (Qu, 1991; SCIO, 1996). Environmental protection departments not only formulated control plans, but also applied for investment in facilities designed for pollution abatement. Environmental protection was proposed as one of Chinaâs national basic policies at the Second National Conference on Environmental Protection held in 1983. The government encouraged policies which combined pollution prevention and control measures (as opposed to the singular focus on control), and it also reinforced the principle of the âpolluter pays.â The basic spirit of these policies was to shift emphasis from control to prevention, but in a way that Chinese leaders considered to be suitable to their economic circumstance. In other words, pollu- tion prevention was not sought at the expense of economic development, which maintained primary importance (Qu, 1997). The Third National Conference on Environmental Protection in May 1989 was a landmark for environmental management in China. Key regulations and measures that were developed at that conference included: â¢ The Environmental Protection Objective Responsibility System; â¢ The Quantitative Examination System on Comprehensive Control of Urban Environment (QESCCUE); â¢ A pollution discharge licensing system; and â¢ Centralized control and deadlines for pollution elimination. Earlier approaches based on point-source pollution controls were insufficient to improve regional environmental quality; thus Chinese leaders established the goal of moving toward integrated regional pollution control (Qu, 1991). Encouraged by the outcomes of the Rio Summit in 1992, the Chinese gov- ernment approved and promulgated Chinaâs Agenda 21-White Paper on Chinaâs Population, Environment, and Development in the 21st Century, in March 1994. This document put forward Chinaâs overall strategy for sustainable development and served as a guide to various departments and regional governments, as they developed their own plans of action. Some policies and regulations flowing out of this were the Total Emission Control policy (1996), Acid Rain and SO 2 Control Zones (1998), and the Cleaner Production Law (2002). In March 1998, the Ninth National Peopleâs Congress radically reformed government administration. Amidst this massive effort to cut central govern- ment administration, the environmental protection administration emerged as a bureaucratic exception: after years of lobbying, it was finally upgraded from semi-ministerial status (as NEPA) to ministerial status (the current SEPA). In this reorganization, SEPA was the only agency which was elevated in terms of official rank. This unexpected promotion, during a time of strict administrative austerity,
National recognition of Early air pollution legislation developed; International organizations and NGOs Environmental protection office pollution problems environmental protection office increasingly influential; environmental further increases authority; established but lacks authority protection office gains authority shift to pollution prevention 2000 1979 1991 Second amendment to Air China promulgates the Law of China adopts WHO guidelines Pollution Prevention and Control the PeopleÃs Republic of China for ambient air quality Law, significantly strengthening on Environmental Protection the stateÃs regulatory capacity 1987 1995 1973 Air Pollution Prevention First amendment to 2005 First National Conference and Control Law Air Pollution Prevention Renewable energy on Environmental adopted and Control Law Law passed, requiring grid Protection held operators to purchase available renewable energy 1974 1982 1994 2002 Environmental Protection The Environmental Protection First environmental Cleaner Production Law Office created Bureau (EPB) is established NGO, Friends of Nature, promulgated, further under the Ministry of Urban and established encouraging energy efficiency, Rural Construction and pollution controls, and waste Environmental Protection recycling 1988 1998 Chinese EPO moves NEPA is elevated to directly under the ministerial status; State Council; renamed renamed the State the National Environmental Environmental Protection Protection Agency (NEPA) Administration (SEPA) FIGURE 4-3â Timeline of air quality and energy regulation trends in China. 121 4-3
122 ENERGY FUTURES AND URBAN AIR POLLUTION indicated that environmental problems were a serious central government concern in need of increased attention (Jahiel, 1998). In China, the National Peopleâs Congress enacts the laws, governments at different levels take responsibility for their enforcement, the administrative departments in charge of environmental protection exercise overall supervision and administrationâand the various departments concerned exercise supervision and administration according to the stipulations of the law. SEPA is the cognizant environmental protection administration agency under the State Council, whose task it is to exercise overall supervision and administration over the countryâs environmental protection work. The peopleâs governments at the provincial, city, and county levels have also successively established environmental protection administration departments to carry out overall supervision and administration of the environmental protection work in their localities (Figure 4-4). SEPA has a number of responsibilities related to air pollution monitoring and mitigation. In addition to helping formulate policies, laws, regulations, and administrative rules to be formalized by the National Peopleâs Congress, SEPAâs other primary duties include: Leadership Role State Advisory Role Council Cross-ministry meetings National SEPA Monitoring Stations Provincial Government Provincial Provincial EPB Monitoring Stations Municipal Government Municipal EPB City Monitoring Stations District County District EPB County EPB Government Government FIGURE 4-4â Chinaâs Environmental Protection Administrative System (adapted from Wang and Wu, 2004; Jahiel, 1998). 4-4
INSTITUTIONAL AND REGULATORY FRAMEWORKS 123 â¢ Conducting environmental impact assessments for major economic and technical polices, programs, and development plans; â¢ Organizing the formulation and supervision of pollution prevention plans and ecological conservation plans in key regions identified by the Central Government; â¢ Investigating major environmental pollution accidents and ecological damage; â¢ Formulating national standards of environmental quality and pollutant discharge; â¢ Approving Energy Information Administration (EIA) reports on develop- ment and construction activities; â¢ Organizing research and development, and technical demonstration Âprojects of environmental protection; and â¢ Environmental monitoring, data collection, and information dissemination. Although SEPAâs mandate is extensive and comprehensive, it is constrained by a limited staff (Fritz and Vollmer, 2006). Figure 4-5 illustrates the number of departments within SEPA with responsibilities for energy and air quality issues. SEPA employs approximately 220 people in its Beijing office, and while it has recently established five regional offices with approximately 30 staff in each, it still relies on provincial and lower-level Environmental Protection Bureaus (EPBs) to handle regional issues, both in monitoring and enforcement. This is the key divergence in responsibility between the central and local governments; enforcement is largely the job of provincial and local EPBs. Statistically there are nationwide more than 3,200 environmental protection administration departments with a total staff of 217,000 engaged in environmental administration, monitor- ing, inspection and control, statistics collection, scientific research, publicity, and education (SCIO, 2006). However, these numbers reflect all positions which could be construed as dealing with environmental protection; in reality, very few employees have responsibilities directly related to air quality monitoring and enforcement. Local-level action has nonetheless met with some success. Cities have led efforts to adjust their urban energy structure, in order to deal with air pollution issues, advocating clean energy use and central heatingâso as to reduce pollu- tion caused by burning coal. Many cities, such as Dalian, have also undergone industrial relocation to the benefit of the urban core, though this strategy does not necessarily reduce total pollution (Bai, 2002). To reduce dust pollution caused by construction, cities are using ready-mixed concrete; concrete mixing is already prohibited in some larger cities. The Chinese government regards industrial pollution prevention and control as the focal point of environmental protection. Chinaâs strategy in this regard is undergoing a major departure from the past, shifting from end-of-pipe solutions to comprehensive controls, from pollution concentration regulation to total pollutant
124 SEPA Nuclear Safety Bureau of Department of Planning Policies, Laws and and Science, Technology Pollution Control Environmental International and Finance Regulations Radioactive and Standards Supervision Cooperation Management â¢Division of Planning â¢Division of Policy â¢Division of Urban â¢Divisions of â¢Divisions of Nuclear â¢Division of â¢Division of Bilateral and Statistics Environmental Mgmt. Environment Power (2) Technology Policy and Cooperation â¢Division of Legislation Supervision (2) Standards â¢Division of Air and â¢Division of Research â¢Division of International â¢Division of Noise Pollution â¢Division of Reactors â¢Division of Human Cooperation on Nuclear Administrative Penalty Control Environmental Health Safety and Review â¢Division of Nuclear Inspection Materials Mgmt Responsible for â¢Division of Nuclear Responsible for Responsible for Responsible for organizing Power Equipment establishing ambient formulating national formulating pollution implementation of and emissions environmental levies; oversees environmental laws standards protection laws enforcement as well and regulations FIGURE 4-5â Departments within SEPA responsible for energy and air quality issues. 4-5 Landscape
INSTITUTIONAL AND REGULATORY FRAMEWORKS 125 amount, from point-source control to comprehensive regional control, and from addressing pollution at the enterprise level to adjusting the industrial structure, promoting clean production, and developing a circular economy (see Chapter 5, Box 5-1). During the Ninth Five-Year Plan period (1996-2000), the State closed down 84,000 small enterprises that had caused both serious waste and pollution. As a result, the discharged amount of principal pollutants has kept declining, while the economic output of these sectors has increased year by year (SCIO, 2006). AIR QUALITY REGULATORY MECHANISMS United States Standard Setting and Implementation Under the CAA, efforts to reduce air pollution in the United States begin with the specification of National Ambient Air Quality Standards (NAAQS) for six common air pollutants: particulate matter (PM), carbon monoxide, sulfur dioxide, ozone, nitrogen dioxide, and lead. These six pollutants are known as Ââcriteriaâ pollutants, because the standards that are required to be developed are based on âcriteriaâ documents that review the current state of scientific knowledge of these pollutantsâ effects on health and welfare. The CAA requires primary standards to be set to protect human health with an adequate margin of safety, without regard to the cost of achieving these standards. The Act also allows for secondary standards to prevent harmful welfare effects (e.g., visibility degradation or harm to materials or ecosystems). In practice, however, EPA has often set secondary standards that are equal to the primary standards. EPA is required by statute to review the NAAQS and to update air quality criteria every 5 years; but because of insufficient resources and the complexity of the undertaking, this requirement has not always been met in practice. The process of attaining the NAAQS begins by monitoring air pollution concentrations in communities across the country. EPA provides guidelines and a significant amount of financial support to the states to carry out this monitoring. The proposed FY 2007 EPA budget allocates $185 million for funding state and local air quality grants. EPA then uses the monitoring data to classify communi- ties according to whether or not they meet the standards. Those that do not, are designated as ânon-attainment areasâ and face statutory deadlines for reducing air pollution and for coming into compliance. Once non-attainment areas are desig- nated, the states that contain them must develop State Implementation Plans (SIPs) to lay out their approach for timely compliance, and they must contain enforce- able regulations for ensuring that emissions are reduced as necessary. The CAA provides for federal sanctions against communities that fail to achieve compliance with the NAAQS in the time allowed under the statute. However, these sanctions have been used only sparingly; more often deadlines for attainment have been
126 ENERGY FUTURES AND URBAN AIR POLLUTION extended when pollution problems have proven difficult to solve. Compliance with the NAAQS must ultimately be established, based on monitoring data that demonstrate that the standard is being met and maintained on an ongoing basis. Along with relatively ubiquitous criteria pollutants, the CAA also addresses a long list of other air pollutants collectively known as hazardous air pollutants (HAPs) or air toxics. Many but not all of these pollutants are known or suspected carcinogens. The 1970 CAA amendments required EPA to develop a list of HAPs and then to issue national emissions standards for each of the pollutants that it had listed. However, EPA made little progress in responding to this requirement, due in large part to protracted debates over scientific uncertainty about risks posed by potential HAPs and the costs and benefits of prospective emissions standards. Between 1970 and 1990, EPA listed only eight compounds as HAPs and issued national emissions standards for only seven of those eight compounds. In response to this slow progress, Congress amended the CAA in 1990 to fundamentally revise the HAP provisions. The 1990 amendments explicitly listed 189 hazardous air pollutants, and directed EPA to identify the categories of sources that contribute significantly to emissions of these pollutants. EPA is then required to set emissions standards based on the maximum reductions being achieved by sources within each cate- gory. Although control costs are a consideration in setting these technology-based standards, the new statutory scheme is designed to impose emissions reduction requirements relatively quickly, avoiding the contentious cost-benefit balancing exercises that had bogged down EPAâs efforts to implement the earlier provisions. Under the new HAPs provisions, risk assessment was moved to a second stage of the process. In this stage, which EPA began only recently, the agency is required to assess the âresidualâ risk that remains after the imposition of the first round of technology-based standards, and then to undertake additional regulation, if the residual risk is unacceptably high. Although states bear primary responsibility under the CAA for achieving compliance with the NAAQS, federal regulations have greatly assisted them in meeting this responsibility. In particular, the federal government has played a lead role in setting and in enforcing emissions standards for new motor vehicles and non-road engines, and in regulating the composition of motor vehicle fuels. The 1970 CAA amendments required automobile manufacturers to reduce light-duty- vehicle emissions of hydrocarbons and carbon monoxide emissions by 90 percent by 1975, and to reduce nitrogen oxides emissions by 90 percent by 1976. The 1977 CAA extended the deadlines for these reductions to be achieved, and reduced the stringency of the requirement for nitrogen oxidesâbut the standards were ultimately met and surpassed. Under its authority to regulate new mobile sources, EPA has subsequently set and enforced emissions standards for new heavy-duty on-road vehicles and for new non-road engines used in farm and construction equipment. The heavy-duty and non-road emissions standards are accompanied by limits on sulfur content of diesel fuel, which reduce the contribution of these
INSTITUTIONAL AND REGULATORY FRAMEWORKS 127 sources to emissions of sulfur oxides, and which also enable the use of catalytic control devices that are susceptible to damage from sulfur in engine exhaust. The CAA expressly states that federal regulation of new motor vehicles preempts regulation by the states, with one exception. In recognition of its leaderÂ ship and technical capacity, California is allowed to set its own more stringent standards. Other states can adopt Californiaâs tailpipe standards in place of the federal standards, but cannot develop their own (NRC, 2004). States have greater responsibility and flexibility in devising and adopting measures to reduce emis- sions from in-use vehicles. In order to meet the NAAQS for carbon monoxide, ozone, and PM, the states have independently adopted in-use control measures such as fuel content specifications and vapor pressure limits, vehicle inspection and maintenance programs, and retrofit requirements for heavy-duty diesel trucks and buses. Under the CAA, federal and state governments in the United States also play complementary roles in regulating air pollution from stationary sources. The CAA requires EPA to set emissions limits for new stationary sources, based on best demonstrated technology. For some types of sources, such as wood stoves, these ânew source performance standardsâ (NSPSs) are enforced by the federal government through manufacturer certification rules, similar to those for new motor vehicles. For large stationary sources like power plants and industrial b Â oilers, the limits are enforced through construction and operating permits, which are generally administered by the states. In the case of large stationary sources, the nationally applicable NSPSs are supplemented and usually surpassed in stringency by control requirements developed through case-by-case review of the control technology available at the time that a project developer applies for a construction permit. This latter analysis is known as new source review (NSR). In essence, the national NSPS limits set the floor for emissions reductions, but sources in many areas must go further to match the state of the art in control technology identified through NSR. Cap-and-Trade Programs The 1990 CAA amendments adopted a major innovation in the regulation of air pollution from stationary sources, allowing the trading of sulfur dioxide emissions credits, subject to a national cap. The primary objective of this program was to cost-effectively mitigate acid rain caused by sulfur dioxide emissions from power plants. By 2010 the program will cap SO2 emissions from all power plants that are greater than 25 MW in capacity at 8.95 million tons, representing a 10 million ton reduction in emissions from 1980 levels. Allocations to indi- vidual power plants are made in the acid rain program based on historical rates of fuel consumption. To date, the acid rain program is credited with exceeding the targets for SO2 reductions at costs that are far lower than predicted when the 1990 amendments were enacted. Improvements in atmospheric concentrations of
128 ENERGY FUTURES AND URBAN AIR POLLUTION SO2 and sulfate, wet sulfate deposition, and haze have been seen in the eastern United States. Acid neutralizing capacity is rising in many of the northeastern lakes, where acidification prompted the original action. The acid rain program also included performance standards for nitrogen oxides emissions, but without emissions trading. Since the 1990 CAA amendments were adopted, EPA has acted under its statutory authority to regulate interstate air pollution to adopt three additional cap-and-trade programs. In 1994, a group of states in the northeastern United States, working together as members of the Ozone Transport Region committed to a cap-and-trade program to limit nitrogen oxides emissions from large stationary sources during the summer ozone season. The program ran from 1999 through 2002. In October 1998, EPA adopted a federal rule that replaced and expanded this program to 22 eastern states and the District of Columbia, where interstate transport of pollution had been complicating state and local efforts to meet and maintain compliance with the NAAQS for ozone. This program capped emissions on a state-by-state basis, and allowed, but did not require, states to achieve compli- ance through emissions trading. In March 2005, EPA finalized a cap-and-trade program for sulfur dioxide and nitrogen oxides, which is designed to further limit emissions of these two pollutants from power plants in the eastern United States, and thus is designed to address interstate transport contributions to fine PM and ozone pollution. This program, known as the Clean Air Interstate Rule, is being challenged in court primarily by industry groups, cities, and state agencies, who object to the way emissions allocations were granted, or to the inclusion of certain areas in the program. Also in 2005, EPA finalized a cap and trade program for mercury emissions from power plants. As proposed, the Clean Air Mercury Rule (CAMR) sets statewide caps on mercury that would reduce nationwide mercury emissions from coal-fired power plants from the current level of 48 tons per year down to 15 tons per year, by 2018. States can, but are not required to, allow sources within their borders to meet the statewide caps through emissions trading. CAMR is being challenged in court primarily by states and environmental groups, who argue that the rule falls short of achieving the emissions reductions needed to protect human health and the environment, and that trading should not be allowed for toxic air pollutants such as mercury, because trading allows some sources to increase their emissions and to potentially increase local impacts, even when the overall cap is met. Beyond these recent examples, which have been adopted using EPAâs exist- ing statutory authority, several bills have been introduced in the U.S. Congress Executive Office of the President of the United States, National Acid Precipitation Assessment Report to Congress: An Integrated Assessment, August 2005. 63 Fed. Reg. 57356 (October 27, 1998). 70 Fed. Reg. 25162 (May 12, 2005). 70 Fed. Reg. 15994 (March 29, 2005).
INSTITUTIONAL AND REGULATORY FRAMEWORKS 129 in recent years that would expand the use of emissions trading programs for conventional pollutants such as sulfur dioxide and nitrogen oxides, and in some cases would also establish cap-and-trade programs for carbon dioxide and other greenhouse gases. Existing emissions trading programs in the United States rely on continuous emissions monitors (CEMs) for nitrogen and sulfur oxides to track actual emis- sions and to compare them against allowances (see Box 4-1). The 1990 CAA amendments required the installation of CEMs for SO2 and NOx at power plants participating in the acid rain program. The EPAâs Clean Air Markets Database posts emissions data on a publicly available website. The CAMR requires either continuous emissions monitoring, or a sorbent trap system that can collect an uninterrupted continuous sample. Emissions Fees and Taxes Emissions fees or taxes present another economic means for controlling pol- lution emissions. Unlike trading scenarios, which permit emissions to a certain cap, emissions fees are assessed as a tax per ton of pollutant emitted. Polluting firms (or individuals) are able to decide whether and how to reduce costs. Emis- sions taxes are considered the most efficient way to internalize pollution costs, though that is not to say they are necessarily the most efficient way to reduce pollution. Setting appropriate fees is essential, and as China has experienced with its levy system, insufficient taxes will not bring about the desired effect. Emissions fees are one way to decrease the likelihood of pollution âhotspotsâ developing in a given area. This is one critique of the more flexible permit trading scenario, although previous research has not shown any problems with hotspots under the SO2 trading program (Burtraw and Mansur, 1999; Swift, 2000). Emis- sions fees could also be implemented regionally, as many states have explored. In this way, regional groups can better determine the costs of a particular pollutant (e.g., a metropolitan area on the U.S. east coast might consider a higher tax on NOx emissions than would an area in the western United States with traditionally lower ambient levels). A carbon tax is the often-cited example of an emissions fee, which could better incorporate the external costs of CO2 emissions. Given the global impacts of CO2 emissions, this option may be more efficient than implementing a global cap and trade system. As will be discussed in later chapters, U.S. cities and states have taken the initiative in curbing their CO2 emissions, in some cases devising carbon taxes. In the transportation sector, congestion fees represent another tax designed to reduce vehicular emissions. While not instituted broadly in the United States, they have met with success in metropolitan areas such as London. Some Chinese 70 Fed. Reg. 15994 (March 29, 2005).
130 ENERGY FUTURES AND URBAN AIR POLLUTION BOX 4-1 Components of an Emissions Trading Program Market-based approaches to pollution control can be highly cost-effective b Â ecause they help minimize the marginal costs of emission reductions among the regulated facilities, thereby reducing overall pollution control costs. Market-based approaches can also provide strong incentives for entities to implement innova- tive pollution-control technologies and best management practices, which may contribute to substantial cost savings and emissions reduction. The most common market-based approach is a cap-and-trade program in which relatively small quantities of pollutant emissions are traded among sources. âCap-and-tradeâ programs are conducted under an aggregate emissions cap that is based on a maximum amount of emissions that is possible while still protect- ing human health. These programs have been shown to be effective at achieving emission reductions at much less cost to the regulated facilities than traditional technology-based or performance-oriented standard. In a cap-and-trade program, a regulatory agency sets a limit or cap on the amount of a given pollutant that can be emitted within its jurisdiction. All entities within that jurisdiction that emit the pollutant are given an allowance or credit t Âowards the amount that they can emit. The credit represents the right to emit that amount, and the sum of all the credits among the regulated community should equal the cap for that pollutant in the jurisdiction. If a company emits more of the pollutant than its credit allows, it must buy credits from one or more other com- panies that do not exceed their allowances (the trade). Examples of successful trading programs in the United States include: â¢ The acid rain SO2 emissions trading programâwhich has served as the paradigm for many United States cap-and-trade-programs â¢ NOx emissions trading programs, including the South Coast Air Quality Management District program in Southern California â¢ The Northeast O3 Transport Region NOx Budget Trading Program â¢ The NOx SIP Call Trading Program A closer examination of the SO2 trading program indicates that its success appears to be the result of a combination of factors, specifically: â¢ Substantial emission reductionsâthe mandated 50 percent reduction en- sured that regional trading did not result in areas of emission increases â¢ Simplicityâa clear cap and few restrictions on implementation â¢ Effective monitoringâCEM systems aided compliance assurance, mitigat- ing disputes between environmental advocates and the regulated industries â¢ TransparencyâEPAâs allowance tracking system promptly updated transÂ actions and emissions data, lending transparency to the process â¢ Certain penaltiesânon-compliance led to financial penalty plus a loss of a Â llowances for the subsequent year â¢ Opportunity for banking allowancesâfirms were able to insure against a Â dverse conditions; this also led to âbuy-inâ by regulated parties, because banking gave them an asset whose value depended on a stable and successful program.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 131 cities are also considering implementing congestion fees, though most plans to date have been withheld over concerns of public backlash. Overall, this sort of tax presents equity issues, particularly for a developing country such as China, as it is viewed as unduly burdensome to poor vehicle owners. Enforcement of Environmental Laws In the United States, local, state, tribal, and federal agencies all have powers to enforce air pollution regulations adopted into law at their respective levels, and to impose penalties for non-compliance. When violations of air pollution regula- tions are initially found, government agencies generally have the option of work- ing with the violator to help them achieve compliance, assessing administrative penalties, or bringing suit against the company and seeking either civil or criminal penalties. EPAâs enforcement arm can levy civil penalties of up to $27,500 per violation per day for non-compliance with stationary source requirements. EPA also enforces fuel and motor vehicle emissions standards; it recently announced a $94 million settlement with DaimlerChrysler for defective catalytic converters and for on-board diagnostic systems on the companyâs1996 through 2001 model year vehicles. Criminal penalties, including jail sentences, are available in case of serious environmental violations. Additionally, the CAA provides for citizen enforcement of the Actâs provisions, through civil suits against the EPA admin- istrator or against a state, for failure to meet CAA requirements, or against any facility that constructs or modifies a major source without a permit, or in violation of its permit conditions. Long-Term Planning and Policy Revision The most significant driver for long-term planning and policy updates built into the CAA is the requirement for periodic reviews of air pollution effects on health and welfare and for corresponding adjustments to the NAAQS. Perhaps the most significant change these reviews have engendered is the shift in the size range of PM that is regulated in the United Statesâfrom total suspended particulate to particulate matter of less than 10 microns in diameter (PM10), and particulate matter of less than 2.5 microns in diameter (PM2.5). EPA is now considering a shift from using PM10 as the indicator for coarse PM, to the use of the size fraction between 2.5 and 10 microns. Significant shifts in regulatory approaches have also arisen from advances in the understanding of atmospheric chemistry and transport, especially the increased appreciation of the role played by interstate transport in ozone and PM2.5 pollution, and an understanding of the contribution of nitrogen oxides to regional-scale ozone pollution. U.S. EPA, Compliance and Enforcement, Cases and Settlements, http://Cfpub.epa.gov/compli- ance/cases (accessed June 12, 2006). 42 USC 7604.
132 ENERGY FUTURES AND URBAN AIR POLLUTION As discussed above, while EPA has revised air pollution regulations within existing statutory frameworks, Congress has also adopted major amendments to the CAA, in response to concerns about the cost and efficacy of air pollution control efforts, and recognition of new air pollution problems and impacts. For example, the 1990 CAA amendments extended deadlines for states to come into compliance with the NAAQS for PM and ground-level ozone, and also addressed two previously underappreciated problemsâacid deposition and depletion of the stratospheric ozone layer. No major amendments have been passed since 1990, but several bills have been introduced in recent years that would constitute significant changes if enacted. The common thrust of these bills has been moving toward increased reliance on market-based cap-and-trade programs, especially for power plant emissions. A more controversial issue has been whether to adopt mandatory limits on emissions of carbon dioxide and of other greenhouse gases. China Responsibility for the development and implementation of environmental policy in China is split between the national and local governments. In general, the central government provides policy direction and the general framework, while local governments are responsible for implementation and enforcement, and they have some flexibility in choosing appropriate measures. This division of respon- sibility is similar in some ways to that in the United States, where primary and secondary standards for criteria pollutants are established at the national level, and states are expected to come into compliance with these standards through State Implementation Plans. A key difference, however, and one that complicates the enforcement of most environmental regulations in China, is that the local govern- ments, specifically the local EPBs, are responsible for enforcing the laws. Chinaâs legal system is divided into seven types and three levels of law. The types are the constitution and constitution-related laws, civil and commercial law, administrative law, economic law, social law, criminal law, and the law on lawsuit and non-lawsuit procedures. The levels are state laws, administrative regulations, and local statutes. Additionally, canonical documents can be issued by the State Council and by responsible administrative departments. China pays great attention to environmental legislative work, and has now established an environmental statutory framework that takes the Constitution of the PRC as the foundation, and the Environmental Protection Law of the PRC as the main body of its environmental legislation. The pollution levy system (PLS) is one of the earliest environmental policies established and implemented in China. Building on the âpolluter paysâ principle, the Environmental Protection Leading Group of the State Council put forward the PLS in late 1978, and in 1979 the first pilot pollution levy program was implemented in Suzhou city, Jiangsu province. Following some additional pilot programs, the PLS was made effective in 1982. The original levy system made
INSTITUTIONAL AND REGULATORY FRAMEWORKS 133 21 airborne pollutants subject to discharge fees. When more than one type of pol- lutant was discharged at a single point, fees were collected only for the pollutant which was subject to the highest charges, and fees were calculated on the basis of how much the discharge exceeded the standard. In most cases, it was cheaper for a company to pay the pollution discharge fees than to invest in abatement measures. Therefore the levy system has been widely criticized because the fees prescribed under it are too low to induce companies to adopt cleaner technolo- gies. Implementation of the PLS has also been subject to criticism; originally the levies were assessed on large enterprises, and the levies were recycled back (80 percent after the local EPB took 20 percent for its own operating costs) to the polluting firms, ostensibly to invest in pollution abatement. However, there were no provisions to regulate the use of the discharge fees, and fees were often negotiated, mishandled, or misappropriated. In an effort to make the PLS more meaningful and to exert a greater impact on the behavior of companies, China revamped the system several years ago. The State Council issued the Regulations for the Administration of the Levy and Use of Pollutant Discharge Fees on January 2, 2003, and the Ministry of Finance, SEPA, the National Development and Reform Commission (NDRC), and the State Economic and Trade Commission (SETC), issued the Measures for the Administration of Rates for the Collection of Pollution Discharge Fees on Febru- ary 28, 2003. Companies make a filing each year before December 15 declaring the types, quantity, and density of pollutants that they will discharge during the next year under normal operating conditions, based both on their actual pollu- tion discharge experience in the current year and their production plans for the next year. Local EPBs must then examine and approve these declarations before January 15 of the next year. The pollutant discharge fee must be included in the EPBâs budget, managed as a special fund for environmental protection, and mainly used for allocating grants and subsidies for the pollution prevention and control projects of includ- ing regional control, technology development and demonstrations, application of new processes, and various control projects set forth by the State Council. Any amendment to the standard for levy of pollutant discharge fee shall be made after an advance notice. However, deficiencies in emission measurement often lead to negotiated payments only roughlyâif at allârelated to actual emissions. Negotiated payments are an effective and perhaps initially unavoidable way to raise revenue; however, for the pollution levy to significantly affect abatement b Â ehavior, the incidence of the levy must be closely correlated with actual emis- sions Â(Ellerman, 2002). The SO2 emissions levy has been a useful indicator of Chinaâs approach to environmental policy (see Box 4-2). First applied in 1982 and set at 0.04Â RMB/kg, the levy has continually been increased, often drasti- cally, based on experiences with pilot programs. Most recently, the government has decided to set the rate at 1.26 RMB/kg by 2010, doubling the prevailing rate, which had been tripled only 4 years earlier. This proposed rate is based on expe-
134 ENERGY FUTURES AND URBAN AIR POLLUTION BOX 4-2 Emissions Trading in China In China, emissions trading pilot programs are structured to use a cap-and- trade system similar to the system used in the United States. In April 2002 the Hong Kong SAR Government and the Guangdong Provincial Government reached a consensus to reduce regional emissions of SO2, NOx, inhalable suspended particulates (RSPs) and volatile organic compounds (VOCs) by 40 percent, 20Â per- cent, 55 percent, and 55 percent, respectively, by 2010, using 1997 as the base year. To achieve these emission reduction targets, the two governments are work- ing on a regional AQM plan that will set out the improvement measures that Hong Kong and Guangdong will take. The Hong Kong Environmental Protection Department announced in December 2003 that it is considering the feasibility of an emissions trading scheme in the Pearl River Delta region as one way of trying to achieve desired objectives. In 2006, high levels of air pollution and smog in Hong Kong focused much public attention on the need to finalize a plan for the Pearl River Delta region. The State Council issued a document at the end of 2005 calling for a strength- ening of environmental protection, using the cap-and-trade system. But contro- versy has arisen over whether the plants should have to pay the State for their allowance quotas. In September 2006, SEPA and the Ministry of Finance (MOF) began working together to start a cap-and-trade system to curb Chinaâs world- l Âeading emissions of SO2. riences in Beijing, as well as projected abatement costs, though these will range depending on sources and local conditions. Local Statutes To implement the Stateâs environmental protection laws and regulations, the local peopleâs congresses (or standing committees) at the provincial level or âthe comparatively larger citiesâ10 may enact and promulgate local laws on environ- mental protection, based on local conditions. For example, in 2000 the southern industrial province of Guangdong enacted two regulations addressing regional air pollution issues: the Guangdong Province Environmental Protection Regula- tion and the Guangdong Province Vehicular Emissions and Pollution Prevention Regulation. SEPA establishes the national standards for environment quality. The p Â rovinces, autonomous regions, and municipalities directly under the central 10A âcomparatively larger cityâ refers to a city where a provincial or autonomous regional peopleâs government is located or where a special economic zone is located, or a city approved as such by the State Council. There are 19 such cities.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 135 government may establish their own local standards for environment quality for items not specified in the national standards for environment quality, and shall report them to SEPA for the record. SEPA also establishes the national standards for the discharge of pollutants, in accordance with the national standards for envi- ronment quality and with the countryâs economic and technological conditions. Units that discharge pollutants in areas where the local standards for the discharge of pollutants have been established shall observe such local standards. Responsibility and Examination Systems According to the Environmental Responsibility System (ERS), each gover- nor, mayor, and county magistrate shall sign a responsibility contract that specifies the environmental objectives and tasks that he or she should meet at the end of the term. ERS aims to assign responsibility for overall environmental quality to officials in local government. Thus the provincial governor is held responsible for the overall environmental quality in a province, and the mayor of a municipality or magistrate of a county is responsible in their respective jurisdictions (Sinkule and Ortolano, 1995; Qu, 1991). This regulation was introduced in the early 1980s, due to the fact that responsibility for environmental quality lay with the EPB, but it had no power over the economic and social development decisions that affected environmental quality (Qu, 1991). The ERS is implemented through written contracts or agreements, each of which stipulates the environmental targets for a particular time period. There are two types of ERS contracts: contracts among heads of different levels of govern- ment and contracts between governmental officials and factory directors (Sinkule and Ortolano, 1995; Qu, 1991). ERS has its legal basis in the Constitution of PRC (Article 26), and in the Environmental Protection Law (Article 16; 24). The QESCCUE examination system mentioned earlier adopts quantitative methods to assess the performance of city governments in comprehensive urban environmental control (CUEC). CUEC refers to the work aiming at protecting and improving the urban environment through legal, economic, administrative, and technical means, under the unified leadership of city governments. The main components of CUEC (or treatment) include three aspects: prevention and con- trol of urban industrial pollution, construction of urban infrastructure, and urban environmental management. QESCCUE is managed at different levels. Key cities first carry out self- examination, and the results are submitted to the provincial EPB for review and examination, before final submission to SEPA. After examination, SEPA reviews the results and then reports to the public. SEPA takes charge of the examination on 113 national key cities for environmental protection. Apart from publicizing the evaluation results through major media, SEPA has also published the Annual Report on Urban Environmental Management and Comprehensive Urban Envi- ronmental Control of Key Cities for Environmental Protection. In 2004, SEPA
136 ENERGY FUTURES AND URBAN AIR POLLUTION reported for the first time to the public the quantitative examination results con- ducted by each province, autonomous region, and municipality directly under the Central Government. QESCCUE has been introduced in over 500 Chinese cities (more than 70 percent of all cities). Another program, prompted by a directive in the Ninth Five-Year Plan to establish âmodel cities,â is the National Model City of Environmental Protec- tion (NMCEP) program. NMCEPs provide examples for other cities in terms of improving their urban environment and implementing environmentally sustain- able urban development. This campaign meets the increasing requirements of the public for good living environment and brings benefits to the people. Therefore, it has received widespread support and participation by the public. The model cities have experienced an improvement in environmental quality. NMCEPs, like other cities in China, use the Air Pollution Index (API) to evaluate ambient air quality (Table 4-1). The number of days with an API under 100 increased by 5 percent, and the green space in urban areas increased nearly 12 percent. In 2003, the urban air quality of the NMCEPs was Grade II or better 92 percent of the time. The annual average concentration of SO2 in the air of those cities was 11 Âµg/m3 lower than the national average level, and the concentration of inhalable particles was 55Â Âµg/m3 lower than that of the national average level (SEPA, 2005). By the end of 2005, there were 53 cities and 3 urban districts achieving the distinction of NMCEP, with more than 100 cities (or districts) in the process of applying or under review (SEPA, 2006b). These examination indicators aim to reflect such contents as the ability and competitive power of sustained urban development, the socioÂÂeconomic development level, and the degree of harmony between economic growth and the environment. TABLE 4-1â Chinaâs Air Pollution Index (API) Pollutants and Concentrations (mg/m3) SO2 NO2 PM10 CO O3 Air Daily Daily Daily Hourly Hourly API Quality API Average Average Average Average Average Ranges Level Assessment 50 0.05 0.08 0.05 5 0.12 0â50 I Excellent 100 0.15 0.12 0.15 10 0.2 51â100 II Good 200 0.8 0.28 0.35 60 0.4 101â200 III Lightly polluted 300 1.6 0.565 0.42 90 0.8 201â300 IV Polluted 400 2.1 0.75 0.5 120 1 500 2.62 0.94 0.6 150 1.2 301â500 V Heavily polluted
INSTITUTIONAL AND REGULATORY FRAMEWORKS 137 RESEARCH, MONITORING, AND EDUCATION United States Energy and Air Pollution Research Energy and air pollution research receives funding from both the private sector and from government sources. Federal agencies providing funding include EPA, the National Science Foundation (NSF), and the U.S. Department of Agri- culture. EPAâs funding is coordinated through the National Center for Environ- mental Research and much of it is carried out âin-house,â through the ORD, for example, the Mercury Research Strategy. The NSF runs numerous funding programs under the general category of environmental engineering research, several of which address air quality and energy issues. The USDA provides state- level funding through the Cooperative State Research, Education, and Extension S Â ervice. Energy and air pollution research programs are also prominent at numer- ous universities throughout the United States. The Department of Energy (DOE), with primary responsibility for the nationâs energy research, is increasingly giving importance to improving air quality through cleaner alternatives. As one example, the Fossil Energy Research & Development program is developing pollution-control technologies and generation processes to virtually eliminate criteria pollutant emissions from fossil-fuel power plants. Clean Cities, another program, was developed to help local Âdecision makers adopt practices which reduce petroleum consumption. DOE runs or oversees 21 national laboratories and specialized offices, including Argonne National Laboratory, the National Renewable Energy Laboratory, and the National Energy Technology Laboratoryâthe only U.S. laboratory devoted to fossil fuel technologies. More than 30,000 scientists and engineers perform research in these laboratories; and while their research may not always directly address air quality, changes to the nationâs energy system that result from the work of DOE have a major influence on the ability of various regions to meet the NAAQS. Air Pollution Monitoring Systems EPA runs several air pollution monitoring programs. The National Air Toxics Program includes maximum achievable control technology standards, residual risk standards, area source standards, mobile source rules, the utility mercury reductions rule, local-scale projects, and the Great Waters project. The PM Super- sites program is a research program that monitors ambient air and provides valu- able data for the benefit of human health, exposure research, and the atmospheric sciences community. Additional EPA programs include the Photochemical Assessment Monitoring Stations program, the Interagency Monitoring of Protected Visual Environments program, and the Environmental Technology Verification Program. The EPAâs
138 ENERGY FUTURES AND URBAN AIR POLLUTION overall strategy for air pollution monitoring is outlined in the National Ambient Air Quality Monitoring Strategy. The EPA also maintains a database of emission inventories, emission factors, emissions modeling, and emissions monitoring knowledge, and runs an Emission Measurement Center. The EPA mandated a network of approximately 4,000 monitoring stations, referred to as the NAMS/ SLAMS network (National/State and Local Air Monitoring Stations), to assess NAAQS attainment status. Most of these are state and local monitoring stations, and thus size and distribution are up to the state. However, a subset (~1,000 sta- tions) are NAMS, and are located in areas with the highest expected pollutant concentrations and population exposures (NRC, 2004). Air Pollution Modeling EPA is the primary federal agency responsible for air pollution modeling. The EPAâs Air Quality Monitoring Group operates the Support Center for Regulatory Atmospheric Modeling, to provide direction in the full range of air quality models and to conduct modeling analyses to support policy and regulatory decisions. The site contains links to detailed information on air quality models, modeling appli- cations and tools, modeling guidance and support, and meteorological data and processors. The three most common types of air pollution modeling are dispersion modeling, photochemical modeling, and receptor modeling. Preferred dispersion models include the AERMOD Modeling System and the CALPUFF Modeling System. The website also lists several recommended modeling systems for photoÂ chemical and receptor models with links to more information on each model. Air Pollution Control Technology A wide range of air pollution control equipment is available in the United States and can be selected based on the requirements of the project. The New and Emerging Environmental Technologies Clean Air Technologies Database is an online source for useful information on new and emerging technologies designed to prevent, destroy, remove, monitor, sample, or model air pollution emissions from stationary or mobile sources. Listings include both technologies that are commercially available and those that are still in the development stage. Additionally, the Air Pollution Control Equipment Selection Guide has a primer on air pollution control, followed by listings for technologies such as biofilters, electrostatic precipitators, and fluidized bed scrubbers. Other useful information on control technologies can be found at the air pollution control equipment retailer page and the Air Pollution Control Equipment Selection Guide.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 139 China Research and Education In China, on-the-job training has been an essential aspect of environmental management capacity building. In 1981 the Environmental Administrative Per- sonnel Training College was established for the purpose of offering on-the-job training, continuing education, and academic-level education to administrative personnel in the environmental protection departments throughout the country. Theses trainees are playing an important role in promoting the nationâs environ- mental protection work. Research into environmental science and technology in China began in the 1970s. For some major environmental research subjects the Chinese government has formulated corresponding research programs and plans for environmental protection, while organizing forces to tackle key scientific and technological prob- lems. Additionally, China has expanded its research into comprehensive preven- tion and control of regional environmental pollution, environmental background values and environmental capacity, pollution control technology, and global environmental problems. As a result, the country has made substantial scientific and technological achievements in some research areas, such as the capacity of the atmospheric environment, and acid depositionâs impact and control strategies. Public Education The Chinese government regards it a strategic task to popularize enviÂronÂ mental protection knowledge among the people and to raise their consciousness about environmental protection and gradually to cultivate fine environmental e Â thics and codes of conduct. Virtually all newspapers, radio, and TV stations offer environmental protection programs, and, in particular, the media pays special attention to severely polluted areas and units. Meanwhile, the various provinces and cities have also developed such activities. In 1983 China established the first national-level professional newspaper on environmental protection in the worldâthe China Environment News, with an annual circulation of nearly 300,000 copies. In 1980 the China Environmental Science Press was established. Since 1990 the China Environment Yearbook has been published, and its English version has been published since 1994. Besides, there are more than 30 local environmental newspapers and several hundred professional periodicals. In April 1992, China set up the China Council for International Cooperation on Environment and Development composed of more than 40 leading specialists and well-known public figures from China and other countries. The Council has put forward valuable concrete proposals on energy and the environment, resources accounting and the pricing system, public participation, and the implementation
140 ENERGY FUTURES AND URBAN AIR POLLUTION of the environment laws and regulations, which have aroused the attention and response of the Chinese government. Air Pollution Monitoring Systems SEPA is responsible for national ambient air quality monitoring in China. In addition to establishing a monitoring system, SEPA formulates the monitoring norm and, in conjunction with relevant departments, organizes the monitoring network. The China National Environmental Monitoring Centre (CNEMC), estab- lished in 1980, is an institution directly affiliated to SEPA. It provides technical support supervision and technical service for the environmental supervision man- agement of SEPA, plays a role as network center, technical center, information center and training center of national environmental monitoring, and provides professional management and guidance for the national monitoring system. It is responsible for collecting, verifying, and managing environmental monitoring information and environmental data. There are 2,389 environmental monitoring stations directly under the govern- ment, including one state-level station, 41 province-level stations, 401 city-level stations, 1,914 county-level stations, and 32 radiation monitoring stations. The national network includes more than 1,000 air quality monitoring sites now. SEPA and upper-level EPBs regularly issue reports on environmental situations. Local EPBs at or above the county level, in conjunction with relevant depart- ments, investigate and assess the environmental situation within areas under their jurisdiction and draw up plans for environmental protection which shall, subject to overall balancing by the department of planning, be submitted to the peopleâs government at the same level for approval before implementation. Local EPBs at or above the county level or other departments invested by law with power to conduct environmental supervision and management shall be empowered to make on-site inspections of units under their jurisdiction that discharge pollutants. As of 2003, there were 631 urban automatic air quality monitoring sites and by the end of 2004, more than 45,000 people were employed nationwide in environmental monitoring stations (CNEMC, 2006). An ambient air quality daily report is issued according to Chinaâs API (see Table 4-1), along with a forecast using the API range. Reported pollutants are SO2, NO2 and PM10. Each pollutant reported has an index ranging from 0 to 500, with 50 corresponding approximately to Class I of the CNAAQS, 100 corresponding to Class II, 200 corresponding to Class III, and 500 corresponding to significant harmful effects. Cities are expected to meet Class II standards. Air Quality Reporting Chinaâs urban air quality reporting system has played an active role in raising pubic environmental awareness and in intensifying environmental monitoring.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 141 The main practice of this system is to report the API that reflects the extent of air pollution. In 1997, 13 key cities11 including Beijing, Shanghai, Chongqing, Dalian, and Xiamen started issuing urban air quality weekly reports. Forty-two additional environmental protection key cities began issuing ambient air quality daily reports in June 2000, including 32 provincial capitals, municipalities directly under the Central Government and municipal capitals, ten coastal cities, and key tourist destinations. In June 2001, they were joined by 47 more key Â cities. At present, there are 180 cities including all 113 key cities implementing the air quality reporting system. The ambient air quality daily report and ambient air quality forecast of 47 environmental protection key cities are sent to CNEMC every day; the ambient air quality daily report is sent to CCTV, CETV (China Education TV), Peopleâs Daily, China Daily, Xinhua news agency, and related websites (most importantly, SEPAâs). Recently, some Chinese cities have cooperated to develop regional reports on air quality. In southern China, the Guangdong Provincial EPB and Hong Kongâs Environmental Protection Department (EPD) issued a regional air quality report in 2006, the first such effort in China. The report presents results from the Pearl River Delta Regional Air Quality Monitoring Networkâs Regional Air Quality Index and includes data on ozone, available on both the EPB and EPD websites. 12 NON-GOVERNMENTAL ORGANIZATIONS United States Hundreds of NGOs in the United States are involved in shaping and in pro- moting the enforcement of air pollution laws. These groups include environmental and public health groups that generally advocate for more protective regulations and enforcement policies, regulated companies, and industry associations that often seek to ensure that regulatory burdens are minimized, but may also support science and engineering research of mutual interest to their members, and pro- fessional societies of engineers, scientists, lawyers, or other professionals, who work in the field of environmental management and join together primarily for purposes of continuing education and information exchange. Environmental and public health advocacy organizations in the United States range from groups with a few members that focus on issues of local interest, to national organizations with hundreds of thousands of members and broad portfolios. National organizations that actively work on air pollu- tion issues include the Sierra Club, the National Resources Defense Council, Environmental Defense, and the American Lung Association. These groups have professional staffs that number in the hundreds, and budgets of millions 11Key cities are nationally designated âkey cities for environmental protection.â 12Guangdong EPB: http://www.gdepb.gov.cn; Hong Kong EPD: http://www.epd.gov.hk.
142 ENERGY FUTURES AND URBAN AIR POLLUTION of dollars per year, funded by donations from private individuals, foundations, corporations, and government grants. Their history of involvement in environ- mental issues in the United States dates back more than a century; for example, the Sierra Club was founded in 1892 and the American Lung Association in 1904. These groups work on all stages of development and implementation of air pollution regulation at local, state, and national levels. Their primary activities related to environmental regulation include commenting on regulatory proposals as local, state, and federal agencies develop them, and challenging the regulations in court when they deem them to be unsatisfactory. These orga- nizations may also seek to initiate regulatory action, for example, by suing to force EPA to act on statutory duties that it has failed to undertake. Non-profit environmental and public health organizations are generally organized as chari- table â501(c)(3)âorganizations for tax purposes, meaning supporters can deduct their contributions, but the organizations are limited in the amount of legislative lobbyÂing that they can undertake. Industry stakeholders that participate in public processes to develop and implement air pollution regulations include both individual companies and associ- ations of companies that are impacted by these regulations. Trade associations like the National Mining Association and the Edison Electric Institute (an association of shareholder-owned electric companies) are most often funded by dues assessed to their members. Alongside environmental and public health organizations, these industry groups are entitled to have their views heard as regulations are developed, and to utilize the citizen suit provisions of the Administrative Procedures Act and the CAA to gain judicial review of EPAâs compliance with their provisions. Industry associations also lobby state and federal legislators, seeking to advance their interests through this arena. Non-profit industry associations (â501(c)(6)â organizations for tax purposes) can undertake Â unlimited lobbying, but cannot offer charitable deductions to their contributors. While industry associations and environmental groups are often viewed as adversaries, this is not always the case. These groups sometimes work together to advance their joint interests, for example in seeking federal funding to support research and development of cleaner engine or power plant technology. A third category of NGOs that contribute to air quality management efforts in the United States involves those professional societies whose mission is to foster the exchange of technical information, while remaining neutral on most direct policy debates. The U.S.-based Air and Waste Management Association (AWMA) is a prime example. Founded in the early 1900s (under a different name), the AMWAâs main activities are the publication of a peer-reviewed journal covering engineering, science, and management-focused air pollution research, and the organization of an annual conference on air pollution and waste management that is attended by thousands of environmental professionals from countries around the world. AWMA has nearly 10,000 individual members from 65 countries,
INSTITUTIONAL AND REGULATORY FRAMEWORKS 143 including academics, consultants, industry, and government employees, working on air pollution and waste management issues.13 NGOs are also actively involved with the development of energy policy. For example, the NGO energy caucus is an international assembly of NGOs that are working on issues related to sustainable development and, in particular, on issues or projects directly affected by energy production and consumption. The caucus works to develop consensus policies and to present these policies to the United Nations. The caucus contains several U.S.-based NGOs engaged in energy- related work, including the Center for Energy and Environmental Policy, Citizensâ N Â etwork for Sustainable Development, Communities United for Responsible Energy, Rocky Mountain Institute, and the World Resources Institute. An example of how NGOs attempt to influence energy policy can be seen through the Union of Concerned Scientists (UCS). The UCS is actively engaged in the debate sur- rounding the development of the Energy Policy Act of 2005, by deploying and organizing advocacy, analytical, and media tools in an attempt to influence the direction of the bill. NGOs provide a crucial pathway for the public to influence the policy-setting process in the United States with regard to air quality and energy policies. China NGOs are starting to play an important role in environmental protection in China. The mass media, too, has been involved by exposing cases of violation of environmental laws and regulations, providing environmental data and informa- tion to the public, and reporting on pollution episodes and accidents. This helped to mobilize the public to exert pressure on business behavior and governmental decision making. The 1996 State Council Decision Concerning Certain Environ- mental Issues signaled a turning point, strongly encouraging both the media and citizens to expose illegal actions that caused environmental damage. By the late 1990s, the media and environmental NGOs had become increasingly influential. NGOs worked with the media to cover environmental affairs, to publicize NGO activities, and to gain public support. The campaign for the selection of Beijing as a venue for the 2008 Olympic Games contained a highly visible environmental aspect due to public pressure. NGOs respond to political conditions as well as to opportunities offered by the media, the Internet, and international NGOs (Yang, 2005). All Chinese NGOs must be registered and approved by the government. Indeed, many are established to meet the objectives of government authorities. Some administrations at the subnational level still limit freedom of speech, or the right to associateâeffectively making it impossible to form a voluntary group. The laws regulating the registration of civic organizations change frequently. 13http://www.awma.org.
144 ENERGY FUTURES AND URBAN AIR POLLUTION BOX 4-4 A Brief Introduction to Friends of Nature (FON) The first Chinese environmental NGO, formally registered in March 1994 as the Academy for Green Culture, is an affiliate to the non-governmental Academy for Chinese Culture. FON is the first membership-based, non-profit, public welfare NGO in China, and is funded wholly by membership fees and public support. Mission: To promote environmental protection and sustainable development in China by raising environmental awareness and providing a vehicle by which ordinary citizens can express their concerns about Chinaâs deteriorating environmental situation. Objectives: To develop informal environmental education, such as field trips and vacation camps for students, lectures, seminars, and training classes for teachers, and publications and activities for the general public. Anyone who agrees with FONâs mission and volunteers to help in its activities may become a member upon application. Foreigners may also be admitted as âassociate members.â Since its founding, FONâs membership has grown quickly and steadily to include over 8,000 membersâ3,000 of which are activeâand 30 group members. Chinaâs 1998 Registration Regulations for Social Organizations imposes a number of requirements to establish NGOs. These include the need to have a sponsoring institution, more than 50 members, and a minimum level of financial resources. The regulation also disallows the existence of two organizations in the same field or sector, and in the same jurisdiction. Those organizations that choose to avoid these restrictions and remain unregistered, are unable to enter into contractual relations, such as obtaining telephone lines or leasing office space. Nor can they offer personnel benefits like pensions and medical insurance, or have their own bank accountâmaking it harder to attract staff and funding. Environmental NGOs in China can be divided into four types. The first type is government-sponsored NGOs, including research institutions, training centers, and other academic organizations such as the All-China Environment Federation (ACEF), but also includes regional environmental science institutes, environÂmental protection industrial associations, and some wildlife conservation societies. The second type consists of the independently established organiza- tions, which are registered in civil departments. The original one of these, and still the best known, is Friends of Nature (see Box 4-4). The third type of NGO is made up of university student associations and their unions. Finally, some
INSTITUTIONAL AND REGULATORY FRAMEWORKS 145 international environmental NGOs maintain regional offices in China, most of these in Beijing. By the end of 2005, there were 2,768 environmental NGOs in China. Among these, 1,382 are government-sponsored environmental NGOs, accounting for 50Â percent; 1,116 are university student associations and its union, accounting forÂ 40 percent; 202 are independently established environmental NGOs, account- ing for 7 percent; and 68 are international environmental NGOs with a regional office in China, accounting for slightly less than 3 percent (ACEF, 2006). The Chinese government has endeavored to boost public participation in environmental protection. The Environmental Impact Assessment Law requires public participation in the work, and demands that appraisal meetings or hear- ings be held or that other means be pursued to collect the opinions of the relevant authorities, experts, and the public on the EIA report for any plan or construction project that may cause an unfavorable impact on the environment. In February 2006, the environmental authorities released the Provisional Measures for Public Participation in Environmental Impact Assessment, which clearly stipulates the scope, procedure, and form of organization regarding public participation. CONFLICT AND CONSENSUS United States In the United States, members of the public influence the development and implementation of environmental and energy law and policy through their votes for elected officials at local, state, and federal levels. However, the ability of the general public to influence policy through the ballot box is diluted by the number of voters who participate in elections at any level of government, by the number of issues that may weigh into an election, and by the extent to which media atten- tion and campaign financing reduce the accountability of elected officials to the public at large. Particularly at the national level, special interest groups that can afford to focus time and money on environmental and energy issues have much more than representative influence in shaping policy. Those interest groups in the United States that are not precluded from lobbying (because of tax-exempt status as charitable organizations) may seek to gain influence with public officials through campaign contributions and by brandishing their ability to influence how their members vote in public elections. Additionally, much of the information that members of Congress receive on policy issues comes via interest groups, who may filter the information through their particular perspectives. Once a statute is enacted and the scene shifts to the development of imple- menting rules, the general public and interest groups in the United States are guaranteed an opportunity to participate in rulemaking processes. EPA and other regulatory agencies must give notice of pending rules, publish proposed language, and accept and respond to public comments submitted on the proposal. Agencies
146 ENERGY FUTURES AND URBAN AIR POLLUTION may also hold public hearings to present proposals and to take oral comment. Environmental groups, industry groups, and state and local regulatory agencies actively comment on EPAâs regulatory proposals. The number of comments received by the agency on important or controversial rules may number in the tens of thousands. State law generally provides for similar opportunities for public participation in state-level rulemaking. Once a final rule is published, interested parties (including individual Âcitizens) may seek judicial review of whether the rule comports with the authorizing statute and whether the rationale for the agencyâs decision is sound. Again, environmental groups, industry groups, and state and local governments commonly seek judicial review to challenge environmental regulations that they dislike. The CAA pro- vides explicitly for citizen suits to challenge final actions by the EPA. However, access to the courts for judicial review is not unfettered. A party wishing to challenge a regulation is required to establish standing to sue, meaning that the individual or group has a particular stake in the outcome of the rulemaking. The doctrine of standing is designed to implement the constitutional principle in the United States that the role of the courts is to protect the rights of individuals, while the elected legislative and executive branches have the prerogative of deciding how best to advance the public interest. Consequently, petitioners in court must demonstrate that they have a particularized stake in the outcome of litigation, not just an interest shared by the general public. Under the CAA, citizens and public interest groups play a role in the enforce- ment of regulations, as well as in their development. As mentioned above, the CAA authorizes citizen suits to directly enforce the statuteâs requirements. Addi- tionally, EPA and state, local, and tribal agencies look to the public to report environmental violations. EPA encourages the filing of tips and complaints from the public through its enforcement website.14 China There is a well-established policy framework and institutional structure for environmental management in China. However, there are some major Â factors affecting their effectiveness, for example, whether the policies have been designed to reflect and address existing local and regional conditions, whether enough monitoring instruments are in place, whether an enforcement scheme has been set up for non-compliance, or whether all the target groups have been fully informed. Additionally, at an institutional level, SEPA must coordinate with numerous other agencies, some of which exert considerably more authority over energy, environ- mental, and general development issues (Figure 4-6). As a result, SEPA has tended to focus primarily on issues not requiring coordination (Wang and Wu, 2004). Environmental protection is often faced with pressure from local governments 14http://www.epa.gov/compliance/complaints/index.html (accessed June 12, 2006).
INSTITUTIONAL AND REGULATORY FRAMEWORKS 147 NPC Standing State Committee Council Laws Regulations NDRC MOST SEPA MOF Industrial R&D policy Environmental policy policy Technical policy Incentives Local Governments Local policy Monitoring & enforcement FIGURE 4-6â Main national institutions impacting Chinaâs environmental management. NOTES: NDRC is National Development and Reform Commission, MOST is Ministry of Science and Technology, MOF is Ministry of Finance. to ease environmental regulations for the sake of economic development. This further compromises enforcement efforts; 4-6 EPBs, though guided by national local standards, ultimately answer to the local government, and economic growth still tends to trump local environmental concerns. Moreover, slight adjustments to smokestack heights, monitoring station locations, and industrial siting may satisfy the local requirements without fully addressing the air pollution problems. Enforcement The transfer of polluting industries and wastes from one region in China to another is a subject that the Chinese are hesitant to discuss. Nevertheless, there is evidence that over the past decade, polluting firmsâparticularly when banished from prosperous coastal citiesâhave relocated to less-developed inland locales. In many of these areas, local government officials have courted any kind of invest- ment, regardless of environmental impact, so long as it appears profitable, and opposition by environmental officials has been thwarted. Several areas in China, particularly poorer, rural ones, have now become the repository for wastes from wealthier urban areas where consumerism has taken hold. Though this transfer often involves Chinaâs richer coastal regions, it is not restricted to these areas.
148 ENERGY FUTURES AND URBAN AIR POLLUTION In documents such as the 11th Five-Year Plan, China recognizes that it lacks adequate technology and the research funding required to properly implement a clean energy policy. Aside from setting general emissions-reduction targets, the PRC has begun experimenting with emissions trading systems in pilot locations. The pilot programs have mainly focused on SO2 emissions. In 2003 and 2004, the Chinese government implemented emission trading programs in four prov- inces (Henan, Shandong, Shaanxi, Jiangsu) and three cities (Shanghai, Tianjin, Liuzhou). A separate pilot project was developed in Taiyuan, in cooperation with the Asian Development Bank, SEPAâs research wing (CRAES), and international NGOs, to implement a cap-and-trade system (Morgenstern et al., 2004). While these pilot programs have been in operation for the past few years, little data are publicly available to determine progress toward their goals. Most pollution data in China are still considered confidential, and this above all else fundamentally limits progress in developing an air quality management regime. Data are classified and distributed only to high-level government offi- cials.15 Although many cities now report their daily API, the data used to calculate this API, as well as more specific information on sampling sites, are withheld. This information, however, is crucial to understanding the true characteristics of the local air quality, in order to make informed decisions. Moreover, NGOs have limited ability to obtain information. Notwithstanding the limited access to information and other restrictions faced by NGOs, they have undertaken cam- paigns to stop polluting activities and have conducted studies of environmental issues aimed at influencing national leaders. Some NGOs are also carrying out research that explores new approaches to environmental planning and decision making (ACEF, 2006). ENERGY POLICY AND THE RELATION TO AIR QUALITY Although energy and air quality are inextricably linked, energy policy and air quality policy are not consistently developed together. However, both countries have shown progress in developing policies which can further both energy and air quality goals. United States The energy supply chain in the United States is occupied by both private firms and federal, state, and local government agencies, but is dominated by pri- vate industry. Mining companies and power generators and distributors, although highly regulated, are completely privatized. Natural resources and the lands from which they are extracted are generally privately owned, but the federal government 15This refers to two regulations in particular, issued by SEPA: Ordinance on the Administration of Nationwide Environmental Monitoring, and Report System on Environmental Monitoring.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 149 does own approximately 30 percent of the countryâs land; it leases a portion of it to private firms for mineral exploration and mining. Energy distribution and transmission lines in the United States are primarily owned by private entities. The DOE is the cabinet-level agency responsible for ensuring the supply and delivery of energy. It was created in 1977 in response to the energy crisis of 1973. The Federal Energy Regulatory Commission (FERC) is an independent regulatory agency within DOE. FERC reviews and approves proposals for siting oil and natural gas pipelines, hydroelectric projects, and energy storage facilities. EPA also works with DOE on issues related to energy policy. On the regulatory side, EPA is responsible for ensuring compliance with the new Renewable Fuels Standard mandated by the Energy Policy Act of 2005. On the technology side, EPA and DOE jointly administer the Energy Star program to promote energy- efficient appliances and practices. U.S. Government Incentives The U.S. federal government has historically had a de facto energy policy in that it encouraged, promoted, and supported the development of domestic U.S. energy resources in many diverse ways. It is estimated that federal financial incentives totaled $644 billion through 2003 (in 2003 dollars), classified within the six generic categories defined below, and listed in Table 4-2, which illustrates the distribution of incentives among the different policy options and support mechanisms. These incentives sometimes favor the development of energy sources which support improved air quality: â¢ Research and Developmentâfederal R&D funding. â¢ Regulationâfederal regulations and mandates. â¢ Taxationâspecial exemptions, allowances, deductions, credits, etc. related to the federal tax code. â¢ Disbursementsâdirect financial subsidies such as grants. â¢ Government Servicesâassistance provided by the federal government without direct charge. â¢ Market Activityâdirect federal involvement in the marketplace. Research and Developmentâ Of the $644 billion in total federal incentives, R&D funding comprised about 18.7 percentâ$120.7 billion. These R&D funds were not distributed evenly among technologies, and from Table 4-2 it is clear that three energy technologiesânuclear energy, coal, and renewable energyâhave received 86 percent of all R&D support. Between 1976 and 2003 the federal government spent six times as much on coal R&D as it had the previous quarter century, and more than ten times as much on renewables R&D. Most recently, major new energy R&D initiatives have been implemented and proposed that are
150 TABLE 4-2 The Total Cost of Federal Incentives for Energy Development Through 2003 (billions of 2003 dollars) Nuclear Hydro Coal Oil Natural Gas Renewables Geothermal TOTAL Percent Research and Development 60.6 1.2 27.3 6.7 5.6 16.4 2.9 120.7 18.7 Regulation 9.9 4.1 6.2 106.1 2.9 0 0 129.2 20.1 Taxation 0 10.5 26.7 155.4 75.6 11.7 1.4 281.3 43.7 Disbursements -8.3 1.4 6.4 2.1 0 1.5 0 3.1 0.5 Government Services 1.2 1.3 12.6 27.2 1.3 1.7 0 45.3 7.0 Market Activity 0 54.1 1.7 4.5 1.7 1.3 1.4 64.7 10.0 TOTAL 63.4 72.6 80.9 302.0 87.1 32.6 5.7 644.3 Percent 9.8 11.3 12.6 46.9 13.5 5.1 0.9 100 SOURCE: Management Information Services, Inc., 2006.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 151 related to climate change, fuel cells, and hydrogen. These have been primarily targeted toward renewables and coal. Regulationâ Federal mandates and regulatory actions have been an important part of energy policy, accounting for $129.2 billion (20.1 percent) of energy incentives. There are essentially two types of regulatory actions that the Federal government can undertake to promote energy development: (1) exemption from federal regulations; (2) payment by the federal government of the costs of regulat- ing the technology. An example of the latter type of regulatory incentive relates to nuclear energy, and through 2003 the federal government expended $9.9 billion on regulating the nuclear energy industry. These expenditures include the cost of administering the Nuclear Regulatory Commission and are net of the regulatory user fees paid by utilities. Federal payments for regulating the nuclear energy industry were phased out during the 1980s, and since 1991 the industry has been paying for the costs of regulation. Taxationâ Tax policy has been, by far, the most widely used incentive mecha- nism, accounting for $281 billion (43.7 percent) of all federal incentives. One example of this policy relates to the oil and gas industries, which have utilized the percentage depletion and intangible drilling provisions of the federal tax code as an incentive for exploration and development. Federal tax credits and deductions have also been utilized to encourage the use of renewable energy. Disbursementsâ Direct federal grants and subsidies have played only a small role in energy policy, accounting for only $3.1 billion (0.5 percent) of incentive costs. An example of federal disbursement subsidies has been, for the oil industry, subsidies for the construction and operating costs of oil tankers. Government Servicesâ This category refers to all services traditionally and historically provided by the federal government without direct charge, and totaled $45.3 billion through 2003, representing 7 percent of total incentives. Relevant examples pertain to the oil industry; the policy of the U.S. government is to pro- vide ports and inland waterways as free public highways, and in ports that handle relatively large ships, the oil tankers represent the reason for deepening channels. They are usually the deepest draft vessels that use the port and a larger-than- p Â roportional amount of total dredging costs are allocable to them. Market Activityâ Federal energy incentives consisting of direct federal govern- ment involvement in marketplace activities totaled $64.7 billion through 2003â 10 percent of all energy incentives. Most of this effort was expended on behalf of hydroelectric power, and, to a much lesser extent, on behalf of the oil industry. Market intervention incentives for hydroelectric energy include the prorated costs of federal construction and operation of dams and transmission facilities.
152 ENERGY FUTURES AND URBAN AIR POLLUTION BOX 4-5 Natural Gas Regulation in the United States Historically, the use of natural gas has been favored in the United States Âbecause it is cleaner burning fuel. However, the net results of a network of legislation, regula- tions, and financial incentives to use a fuel are not always internally consistent and can lead to outcomes which distort supply, demand, and market dynamics. When governments artificially lower energy prices by regulation or subsidies to make them more affordable for consumers, demand and, consequently, the resulting environmental emissions can increase, particularly in countries without modern pollution control equipment and regulations. From the 1930s until the 1980s, most of the interstate natural gas industry was highly regulated in the United States. Many of these regulations were in conflict, and low, regulated prices constrained supply growth while demand grew rapidly. During the 1970s these policies resulted in gas shortages. Additional regulations in the late 1970s attempted to allocate and curtail gas deliveries to some customers, such as industrial consumers and electric generators. These regulations exacted a significant cost on U.S. industry and consumers, and ultimately on the U.S. economy. Price controls on natural gas were effectively removed during the 1980s and competitive markets emerged. At present, many U.S. regulations and policies affecting natural gas are still in conflict. Public policies promote the use of natural gas as an efficient and environ- mentally attractive fuel, leading to restrictions on fuels other than natural gas for the siting of power generation and industrial facilities, restrictions on fuel switching, and fuel choice limitations. Other laws and regulations have been enacted that limit access to gas-prone areas, and there are outright bans on drilling in certain r Â egions. There are laws and regulations that restrict pipeline and infrastructure sit- ing or interfere with the functionality of the market in ways that lead to Âinefficiencies. Overall, these conflicting policies, encouraging use, but not addressing supply, have contributed to the current tight natural gas supply/demand balance in the United States, with higher and more volatile prices. EIA data show that U.S. natural gas prices were relatively stable in constant dollars from 1987 through 1998.a However, as shown in Figure Box 4-5 beginning in 2000, prices began to escalateâthey were roughly 50 percent higher in 2000 compared to 1998. Prices in late 2003 and early 2004 further increased 25 percent over 2000, and by early 2006 prices were three times higher than in 1998. These higher prices have had a particularly adverse impact on the U.S. manu- facturing sector, which is highly dependent on natural gas. The U.S. Department of Commerce estimated that from 2000 to 2004, higher natural gas prices caused an average of 489,000 civilian jobs to be lost each year, 79,000 of these in the manu- facturing sector. Employment in industries such as chemicals, foundries, glass, paper, and fertilizer has been significantly reduced or, in some cases, virtually eliminated as facilities have closed or moved overseas, in some measure to areas with secure, long-term natural gas supplies. Natural gasâonce a strength of the U.S. energy portfolioâis now characterized by highly volatile and increasing prices.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 153 In 2005 alone, natural gas prices for industrial consumers ranged from $6.84 to $11.92. This volatile situation makes it very difficult for many manufacturing firms to effectively plan energy costs, and undercuts their cost competitiveness in world markets. These problems will become even more serious as domestic supplies continue to decline and demand increases. Supply and demand will balance at a higher range of prices than historical levels. That price range will be primarily driven by demand response moderated by efficiency, conservation and fuel flexibility, the ability to increase conventional and non-conventional supply from North America including the Arctic, and increasing access to world resources through LNG. aNatural Gas Markets and EIAâs Information Program, March 2000. 350 300 250 Natural Gas #2 Distillate 200 Motor Gasoline Electricity 150 Coal 100 50 97 98 00 04 05 99 03 95 96 01 02 19 19 19 20 20 20 19 19 20 20 20 FIGURE Box 4-5 Indices of selected energy price levels in the United States, 1995-2005 (1995 = 100). SOURCE: U.S. Energy Information Administration and Management Information Services, Inc., 2006. Box 4-5
154 ENERGY FUTURES AND URBAN AIR POLLUTION These costs are prorated because, beginning in the 1930s, federal dams and water resource projects have been multipurpose. The results of these investments include flood control, navigation, recreation, regional development, and other benefits in addition to hydroelectric power. It is thus necessary to estimate that portion of the net investment in the construction and operation of dams that is allocated to power development and to the relevant transmission facilities. Relevant Energy Legislation The Energy Policy Act of 2005 (Public Law 109-58, 42 USC 15801)â The Energy Policy Act of 2005 established energy research and development pro- grams covering energy efficiency, renewable energy, oil and gas, coal, Indian tribal energy, nuclear matters and security, vehicles and motor fuels (including ethanol), hydrogen, electricity, energy tax incentives, hydropower and geothermal energy, and climate change technology. The Act extended tax credits until 2008 for renewable energy facilities (i.e., wind, closed- and open-loop biomass, geothermal energy, small irrigation power, landfill gas, and trash combustion facilities). It also provided tax credits for investment in bonds funding clean renewable energy and investment in advanced coal projects and certified gasification projects. The Act also repealed the Public Utility Holding Act of 1935. Public Utility Regulatory Policies Act (Public Law 95-617)â Also known as PURPA, this Act was promulgated to promote the use of renewable energy. It created a market for non-utility electric power producers, such as small power production facilities and cogeneration plants, by requiring large electric utilities to purchase power from these âqualifying facilitiesâ at avoided cost (the utilitiesâ incremental cost to produce the power), in an attempt to provide equitable rates for consumers. Congress encouraged the entry of qualifying facilities into the market by exempting them from rate and accounting regulations enforced by FERC and by the Securities Exchange Commission. PURPA was amended by the Energy Policy Act of 2005. National Energy Conservation Policy Act (Public Law 95-619)â This Act sought to encourage conservation of non-renewable energy resources and to reduce growth in demand for energy without limiting economic growth. Power Plant and Industrial Fuel Use Act (Public Law 95-620)â This Act pro- moted the greater use of coal and other alternate fuels over oil and natural gas as primary energy resources, and encouraged the use of coal as the primary energy source for existing and new electric power plants. The goals of the Act were to increase the nationâs energy self-sufficiency by promoting the use of domestic energy resources in lieu of petroleum imports.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 155 China The NDRC, formerly known as the State Development Planning Commis- sion, was established in 2003 under the State Council of China, to develop national macroeconomic policy and strategies and to implement the Energy Conservation Law. The SETC was originally responsible for implementing the Law, but was discontinued in March 2003 when its responsibilities were assigned to the NDRC. Among its responsibilities, the NDRC is tasked with developing a strategy for sustainable development, including cleaner power production and pollution prevention. The State Bureau of Quality and Technical Standards (SBQTS) developed energy-efficiency standards for consumer appliances such as refrigerators, air conditioners, and fluorescent lamps. SBQTS also created the Energy-ÂConserving Products Certification Commission to award an energy conservation label to products that meet its standards, similar to the EPAâs Energy Star label. SBQTS is now a part of the General Administration of Quality Supervision, Inspection and Quarantine of the Peopleâs Republic of China, which oversees industry standards. The State Electricity Regulatory Commission (SERC) was established in 2003 as a law enforcement agency under the State Council of China. Its primary task is to regulate the electric power sector and to monitor market competition in the electricity industry. It issues licenses to electric power generators, monitors operations and pricing, and will develop an electricity trading market. SERC has authority to enforce environmental laws and regulations as well as safety and technical standards. In practice, though, SERC has had to compete with the powerful NDRC. The original reform plan which established SERC dictated that SERC and NDRC share responsibility in areas such as electricity price setting. As a result, NDRC has typically exercised most control over the power sector (IEA, 2006). Relevant Energy Legislation Coal Law of the Peopleâs Republic of Chinaâ Chinaâs Coal Law, promulgated in August 1996 and enforced in December of that year, promotes the use and pro- tection of the nationâs coal resources and the development of its coal Âindustry and provides for the standardization of coal production and management. It establishes that coal resources are owned by the state. Electricity Law of the Peopleâs Republic of Chinaâ Chinaâs Electricity Law, promulgated in December 1995 and enforced in April 1996, regulates the con- struction, production, supply, and utilization of electric power and specifies that utilities should protect the environment, adopt new technologies, minimize discharge of poisonous waste, and prevent pollution and other public hazards. The State encourages and supports electricity generation by using renewable and
156 ENERGY FUTURES AND URBAN AIR POLLUTION clean energy resources. And the planning for electric power development shall reflect the principles of rational utilization of energy, coordinated development of the power sources and power networks, increasing economic benefits, and being conducive to environmental protection. Energy Conservation Lawâ Chinaâs National Peoplesâ Congress (NPC) created the Energy Conservation Law (ECL) in 1997 to address energy conservation management, rational energy utilization, technology progress, and legal liabilities. It applies to all energy sources in China, including coal, oil, and oil by-products, natural gas, electricity, coke, heat, liquid petroleum gas, and biomass. The ECL regards energy conservation as managing energy use in a manner that limits energy loss and waste in the production and consumption chain. Article 4 emphasizes that conserving energy is a âlong-term strategyâ for developing the nationâs economy. In response to the ECL, some provinces wrote energy conservation regulations that granted authority to provincial agencies to enforce energy conservation and these provincial regulations are more stringent than the ECL. The NPC Standing Committee is currently researching the effectiveness and enforcement of the ECL, with the goal of strengthening its legal framework. The government is also working to incorporate approaches taken by other countries, such as the United States in its Energy Policy Act of 2005. Cleaner Production Promotion Lawâ The Standing Committee of the NPC c Â reated the Cleaner Production Promotion Law in June 2002. The comprehensive law was enacted to promote cleaner production of energy, increase the efficient use of raw materials in generating energy, minimize pollution, protect the environ- ment and human health, and promote sustainable development of the economy. It is administered by the NDRC. The law requires the State Council to develop fiscal and tax policies that will provide an incentive to implementing cleaner production of energy. It also requires the State Council to establish a system to periodically identify obsolete production technologies, processes, and equipment that are hazardous to the environment and that utilize resources inefficiently. When technology is upgraded, the law requires that enterprises select processes and equipment that have high resource utilization rates and reduced generation of pollutants. Renewable Energy Lawâ The Renewable Energy Law was adopted by the NPC on February 28, 2005, and came into effect on January 1, 2006. The Renewable Energy Law defines ârenewable energyâ to include the following: wind energy, solar energy, hydropower, biomass power, geothermal energy, ocean energy, and other types of non-fossil energy. It sets forth a framework under which the NDRC is designated as the authority in charge of the regulation and formulation of policies for the development, use, and pricing of renewable energy. Under the Renewable Energy Law, scientific research associated with the development of
INSTITUTIONAL AND REGULATORY FRAMEWORKS 157 renewable energy is to be included in technology and industry development plans, and hence will be supported by designated funding. All reports and plans are to be shared with the public. Significantly, the Renewable Energy Law imposes a mandatory obligation on energy distributors to purchase renewable energy. For instance, power grid opera- tions are obliged to enter into grid-connection agreements with renewable energy generation enterprises, to purchase all of the on-grid electricity generated from renewable energy within the coverage of their grids, and to feed such electricity to the grid. Gas and heat network operators as well as petroleum distributors are required to feed gas, heat, and/or fuel generated from biomass resources into their network, as long as the technical standards for grid connection are met. The Law outlines penalties for failures to comply with the requirements set forth within it. Vehicle Pollution Controls Under Chinese law, as in most countries of the world, controlling emissions from new vehicles is the responsibility of the national government, specifically SEPA. Local governments can petition the State Council to allow earlier introduc- tion of the national standards, but only after SEPA has adopted them. Therefore, SEPA has a very important ongoing role in controlling one of the major pollution sources in Chinese cities. In response to the growing air pollution problems related to motor vehicles during the 1990s, China initiated a serious motor vehicle pollution control effort. It moved aggressively in the late 1990s to eliminate the use of leaded gasoline and quickly followed this with the introduction of EURO I standards for new cars and trucks.16 Since prohibition of leaded gasoline, lead emission has been reduced by 1,500 tons each year. Most recently, it phased in the EURO II standards in 2003-2004 for cars, trucks, and buses, and lowered the sulfur content of both gasoline and diesel fuel to 500 ppm maximum.17 Nevertheless, the emissions requirements for new vehicles across China lag behind those of the industrialized world by almost a decade. In an effort to narrow this gap, SEPA decided to introduce Euro III, EuroÂ IV, and (for heavy-duty trucks only), Euro V standards in 2007, 2010, and 2012, respectively,18 These emission standards will require advanced vehicle 16This is the same set of standards introduced in Europe in 1992. 17Beijing introduced Euro II standards one year earlier than the rest of the country in 2003. 18In December, the State Council approved the implementation of State Phase III and IV (similar to Euro III and IV) vehicle emission standards in Beijing. From December 30, 2005, Beijing Âapplies Phase III requirements for light-duty gasoline and gaseous fuels vehicles, and for heavy-duty diesel and gas-fueled engines. From January 1, 2007, Beijing will apply Phase IV emission requirements for light-duty diesel vehicles. The State Council requires Beijing to prepare qualified diesel fuel in a Â dvance, and before this date, Beijing is allowed to take appropriate measures to discourage light- duty diesel vehicles.
158 ENERGY FUTURES AND URBAN AIR POLLUTION emission control technologies, which, in turn, require much better fuel quality for gasoline and diesel. Without additional improvements in fuel quality, greater tightening of new vehicle standards will not achieve their full benefits and some advanced pollution-control technologies will be precluded. Beyond new vehicle controls, there has been recognition of the need to intro- duce improved vehicle inspection and maintenance programs to maximize the air quality benefits of stringent new vehicle standards. This is the responsibility of the local governments. Beijing, for example, has mandated the requirement that all in-use vehicles undergo an annual loaded mode (ASM) emissions inspection, and is considering a further tightening to a VMASS based system. However, most if not all other I/M programs in the country remain quite weak with only limited improvements in a few cities such as Shanghai. Some cities have also started clean vehicle campaigns, actively promoting the use of low-pollution vehicles fueled by natural gas and liquefied petroleum gas. References ACEF (All-China Environment Federation). 2006. Report on the Development Situation of Environ- mental NGOs in China. Aunan, K., J.H. Fang, T. Hu, H.M. Seip, and H. Vennemo. 2006. Climate change and air qualityâ Measures with co-benefits in China. Environmental Science & Technology 40(16) 4822-4829. Bai, X. 2002. Industrial relocation in Asia: A sound environmental strategy? Environment 44(5):8-21. Beijing EPB (Beijing Municipal Environmental Protection Bureau). 2005. Report on the State of the Environment in Beijing 2004. Breyer, S.G. and R.B. Stewart. 1979. Administrative Law and Regulatory Policy. Little Brown and Co. Burtraw, D. and E. Mansur. 1999. The Environmental Effects of SO2 Trading and Banking. Environ- mental Science and Technology. 33(20):3489-3494. CNEMC (China National Environmental Monitoring Center). 2006. Official website, http://www. cnemc.cn. Davis, D. 2002. When Smoke Ran Like Water: Tales of Environmental Deception and the Battle Against Pollution. New York: Basic Books. Editorial Board. 1994. Chinaâs Environmental Protection Administration Over 20 Years. Beijing: China Environmental Science Press. Ellerman, A.D. 2002. Designing a tradable permit system to control SO2 emissions in China: Prin- ciples and practice. Energy Journal 23(2). Fritz, J.J. and D. Vollmer. 2006. To what extent can technology compensate for institutional failure in an urban environmental setting: The case of China. Technology in Society 28(1/2):95-104. He, K., H. Huo, and Q. Zhang. 2002. Urban air pollution in China: Current status, characteristics, and progress. Annual Review of Energy and the Environment 27(1):397-431. IEA (International Energy Agency). 2006. Chinaâs Power Sector Reforms: Where to Next? Paris: IEA/OECD. Jahiel, A.R. 1998. The Organization of Environmental Protection in China, The China Quarterly 156 (Special Issue: Chinaâs Environment). 757-787. Lewis, J. 1985. The Birth of EPA. EPA Journal, November. Washington, D.C.: U.S. Environmental Protection Agency.
INSTITUTIONAL AND REGULATORY FRAMEWORKS 159 Meng, F., F.H. Cai, J.X. Yang, and Y.F. Pu. 1999. Management and Monitoring of SO2 Emissions Sources in China. Paper presented at the First SEPA-EPA Workshop on SO2 Emissions Trading, Beijing, China, November 1999. Morgenstern, R.D., P. Abeygunawardena, R. Anderson, R. Greenspan Bell, A. Krupnick, J. Schreifels, C. Dong, W. Jinan, W. Jitian, and S. Larsen. 2004. Emissions Trading to Improve Air Quality in an Industrial City in the Peopleâs Republic of China, Resources for the Future, Discussion Paper 04-16. NRC (National Research Council). 2004. Air Quality Management in the United States. Washington, D.C.: The National Academies Press. Powell, F.M. 1992. Trespass, nuisance, and the evolution of common law in modern pollution cases. 21 Real Estate Law Journal 182. Qu, G. 1991. Environmental Management in China. Beijing: China Environmental Science Press. Qu, G. 1997. We Need a Transformation. Changchun: Jilin Peopleâs Publishing House. SCIO (The State Council Information Office). 1996. Environmental Protection in China. SCIO. 2006. Environmental Protection in China (1996-2005). SEPA (State Environmental Protection Administration). 2005. China Urban Environment Manage- ment. http://www.zhb.gov.cn/eic/650501886859804672/20050602/8240.shtml. SEPA. 2006a. State Environmental Protection Website. Retrieved Oct. 1, 2006 from http://www.zhb. gov.cn. SEPA. 2006b. Annual Report of Quantitative Examination System for Comprehensive Urban Envi- ronment Control 2005. Sinkule, B.J. and L. Ortolano. 1995. Implementing Environmental Policy in China. Westport, Conn.: Praeger. Stewart, R.B. and J.E. Krier. 1978. Environmental Law and Policy, 2nd Ed. Bobbs-Merrill. Swift, B. 2000. Allowance Trading and SO2 Hot SpotsâGood News from the Acid Rain Program. Environment Reporter. 31(19):954-959. Wang, H. and C.H. Wu. 2004. Environmental Institutions in China. In Urbanization, Energy, and Air Pollution in China: The Challenges Ahead. National Research Council, National Academy of Engineering, Chinese Academy of Sciences, Chinese Academy of Engineering. Washington, D.C.: The National Academies Press. Wang, M., Y. Jiang, D. He, and H. Yang. 2005. Toward a Sustainable Future: Energy, Environment and Transportation in China, edited by W. Zhou and J. Szyliowicz. Beijing: China Communica- tions Press. Yang, G.B. 2005. Environmental NGOs and institutional dynamics in China. China Quarterly (181):46-66. Zhang, S.Q. 2001. Environmental regulatory and policy framework in China: An overview. Journal of Environmental Sciences-China 13(1):122-128.