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3.3.5. Summary of Cost Savings from Existing Incentives to Reduce Water Pollution

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Savings from Economic Incentives


Effluent charges in the form of sewerage fees and fees for state NPDES permits are likely the most important source of savings from existing incentives for water pollution control, accounting for an estimated $1.5 billion in savings in the mid-1990s rising to $2.0 billion by the year 2000. Liability rules also likely are producing major cost savings, since this particular regulatory mechanism leaves industry free to select the nature and amount of care. The alternative, dictating in detail how oil and other materials must be transported is notoriously inefficient. Oil pollution liability rules may save $2 billion annually (less than one-half of one cent per gallon for all crude oil and petroleum products transported) relative to a command and control system that has an equal impact on pollution. Reporting requirements already have had a significant impact on quantities of hazardous wastes discharged to water and likely produced cost savings during the mid-1990s on the order of $200 million annually through voluntary efforts to reduce toxic effluent discharges. These voluntary actions reduced the need for expenditures to satisfy command and control regulatory requirements, placing some dischargers below regulatory thresholds, allowing others to discharge to POTWs and in other ways reducing compliance costs. By 2000 or shortly thereafter, cost savings of $400 annually may result from pollution reductions made as a result of reporting requirements. Effluent trading provisions may save $10 to $100 million annually by the year 2000 (take $50 million as mid-range estimate), particularly if these mechanisms are more widely implemented.

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