New Source Commentary

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CURWOOD: The Bush Administration is expected to make major changes to a portion of the Clean Air Act called New Source Review. New Source Review requires power companies to modernize their pollution controls when they make major upgrades to their plants. The White House has called the rule into question, saying it costs industry too much and hinders new power generation. Two key federal agencies are at odds over how, and even whether, New Source Review should be changed. The Department of Energy favors the president's plan, while some employees at the Environmental Protection Agency say the proposals are biased toward industry and don't go far enough to protect public health. Robert Stavins is a Professor at Harvard's Kennedy School of Government. He says those who want to protect our air should welcome the end of New Source Review.
STAVINS: New Source Review dates back to the 1970s. The lawyers and engineers who wrote the law thought they could secure environmental progress by imposing tougher emission standards on new power plants than on existing ones. The theory was that emissions would fall as old plants were retired and replaced by new ones. But the past 25 years have shown that this approach is both excessively costly and environmentally counterproductive. The reason is that it motivates companies to keep old and dirty plants operating, and to hold back investments in new and cleaner power technologies. It also discourages companies from maintaining power plants. Because the line distinguishing routine upkeep from new investment is notoriously murky, plant owners face protracted legal wrangling over whether they've crossed the threshold that requires them to meet new standards. So maintenance is deferred and reliability compromised.
Research has demonstrated that the entire New Source Review process drives up costs tremendously, not just for electric companies but for their customers and shareholders - that is, for all of us. Most important, New Source Review has resulted in fewer environmental gains than would have occurred if firms had not faced this disincentive to invest in new, cleaner technologies.
It's time to replace New Source Review. The solution is a level playing field where all electricity generators have the same environmental requirements whether plants are old or new. The best approach is to cap total pollution and use an emissions trading system to assure that any emissions increases at one plant are balanced by offsetting reductions at another. Then plant owners will face the correct incentives with respect to retirement decisions, investment decisions, and decisions about the use of alternative fuels and technologies to reduce pollution. It is not only possible, but eminently reasonable, to be both a strong advocate for environmental protection and a strong advocate for the elimination of New Source Review.
CURWOOD: Robert Stavins is professor at Harvard's Kennedy School of Government. A version of this commentary first appeared in The Boston Globe, and was co-authored by Howard Gruenspecht, a resident scholar at Resources for the Future.
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