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Savings from Economic Incentives

The 1990 Clean Air Act Amendments require states to impose permit fees to recover the administrative costs of their EPA-approved operating permit programs. The Amendments set the minimum presumptive level for such fees at $25 per ton of emissions of criteria air pollutants (excluding carbon monoxide) and air toxics and specified that this amount should be adjusted for inflation. Each state is required to set fees to completely cover operating permit program costs. If the fees are greater than or equal to $25 per ton adjusted for inflation (currently about $30 per ton), EPA assumes that they are adequate. States with lower fees must present detailed evidence that fee revenues are sufficient to cover their operating permit program costs. Several state permit programs have been denied EPA full approval because of insufficient information on fee adequacy. These states have received interim approval pending submission of better evidence.

Although states can meet the revenue-raising requirement through flat fees, most have chosen volume-based fees of approximately $20-30 per ton. Some states base fees on the pollutant's potential harm to the environment. New Mexico, for example, charges fees of $150 per ton for air toxics but only $10 per ton for criteria pollutants. Fee structures in Maine and Southern California are discussed here for illustrative purposes.

Air emission permit fees in Maine

In November 1993, Maine set its air emission permit fees at $5.28 per ton for emissions up to 1,000 tons, $10.57 per ton for emissions between 1,001 and 4,000 tons, and $15.85 per ton for emissions in excess of 4,000 tons. The minimum charge is $250, and the maximum charge $150,000. The fees cover sulfur oxides, NOx, VOCs, and particulate matter. The fees apply to all permit holders, of which there are approximately 500.

Maine has also imposed an air quality surcharge based on toxicity of emissions. The magnitude of the surcharge is determined on the basis of several criteria. Approximately 85 facilities are subject to the tax, which is capped at $50,000. Before the adoption of the surcharge, the Director of Maine's Air Quality Bureau said it would give polluters an incentive to identify methods of reducing their emissions of the most toxic substances. An Air Quality Bureau official says that surcharge revenues have fallen and that the surcharge has had a slight incentive effect, but the impact is difficult to isolate from other potential factors such as the Toxic Release Inventory. Annual revenues are approximately $1.8 million from permit fees and $0.6 million from toxicity surcharges. Revenues are used for the air permit program and other air quality activities. (DEN, June 22, 1993, p. B-6 and Limouze.

Air emission permit fees in the South Coast Air Quality Management District

The South Coast Air Quality Management District (SCAQMD, located in Southern California) levies the highest unit air emissions fees in the United States. In 1997, the fees ranged from $281 to $682.70 per ton of organic gases, and from $214.90 to $521.20 per ton of particulate matter, depending upon the magnitude of emissions. For annual carbon monoxide emissions in excess of 100 tons, the fee is $3.50 per ton.
(1997, in $/ton)
    Emissions in tons per year
    Organic gases
    Specific organics
    Sulfur oxides
    Particulate matter
    4 - 25
    over 75
source SCAQMD Rule 301

Through provisions of Rule 301, the SCAQMD also levies fees on a variety of air toxics and ozone-depleting substances. The fees for 1997-1998 vary from a low of $0.05 per pound to a high of $5.00 per pound.

Facilities that temporarily exceed their allowable emissions levels must pay excess emissions fees. For most pollutants, the excess emissions fees are about the same as the regular fees. For carbon monoxide, however, they are approximately twice as high. In addition, SCAQMD imposes fees for visible emissions and various administrative procedures. SCAQMD, Rules 303, 304, 306, 307.

Given the presence of command-and-control regulations and other factors that might influence air pollutant emissions, the incentive effect of the SCAQMD emissions fees would be difficult to determine. In most cases, these fees are lower than marginal pollution abatement costs. The main purpose of the fees is to recover the administrative costs of SCAQMD's activities.

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