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3.2.8. Summary of Cost Savings from Existing Incentives to Reduce Air Pollution

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Savings from Economic Incentives


Air emissions trading constitutes the largest source of currently-achieved incentive based savings, an estimated $150 million to $2.1 billion in annual savings (midpoint $1.1 billion). Allowance trading of Phase I acid rain control requirements add another $200 to $300 million in current savings. CFC trading, now over, may have constituted the third largest source of savings during the mid-1990s according to these calculations, accounting for up to $500 million annually in savings. SARA Title III reporting is another significant source of cost savings, accounting for an estimated $170 million annually. RECLAIM might save an additional $50 to $100 million annually. The total current savings from existing incentives to reduce air pollution are estimated at $1.7 billion, nearly all of which concerns stationary sources. Corporate Average Fuel Economy requirements may be viewed as an incentive mechanism for air pollution control, since emissions of hydrocarbons tend ot fall as fuel economy rises. Careful analysis might reveal CAFE provisions to save considerable sums on mobile source pollution control relative to a hypothetical command and control alternative.

By the year 2000 or shortly thereafter, a number of additional incentive programs for stationary sources will begin to have an effect: Phase II acid rain trading will save an estimated $700 to $800 million annually (an increase of $500 million over Phase I); SARA Title III some $1.3 billion annually, RECLAIM perhaps $300 million annually and scrapping older vehicles $100 million annually. Air emissions trading other than RECLAIM, such as the regional NOx program, could yield additional savings comparable to current savings from air emission trading, or $1.1 billion annually. The total cost savings for existing stationary source programs in the year 2000 is thus about $3.5 billion. Potential mobile source savings in the year 2000 include oxygenated fuels, heavy duty truck engines and clean fuel vehicle trading programs; collectively these provisions could produce cost savings as large as $300 million annually.

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