Emissions Trading May Not Worsen Local Pollution

Study could weaken underpinnings of suit holding up AB 32

Trees killed by acid rain. (Photo: bdk)

In response to a court order, California regulators say they are working up a “very robust analysis” of alternatives to cap & trade, a critical part of the state’s AB 32 climate law.

Right now, the entire implementation plan is on hold, after environmental justice groups sued the Air Resources Board.

A lower court ruling has forced state officials to reexamine the carbon trading program, on the grounds that alternative ways of controlling emissions were not adequately considered.

The activists’ concern is that a market-based system of emission reductions will create “hot spots” in low-income communities of color as industrial polluters buy the rights (called allowances, or carbon credits) to emit more greenhouse gases, and potentially bring other more toxic forms of pollution into nearby communities.

But will that happen? Since carbon trading won’t start until at least next year, the argument is hypothetical. But another example of emissions trading has been well tested.

In 1990 the nation enacted a similar system of emissions trading for sulfur dioxide and nitrous oxides, pollutants released by power plants and industrial sources that create fine soot particles linked to breathing problems and heart attacks. The main concern at the time was controlling acid rain.

Environmental justice advocates at the time argued low-income communities of color would be harmed by the program. But a study out of Indiana University claims that hasn’t happened.

Author Evan Ringquist of Indiana University’s School of Public and Environmental Affairs examined sulfur dioxide trading activity across the country between 1995 and 2009, to find out where the pollution allowances ended up. Surprisingly, he found that low-income neighborhoods with high percentages of black and Hispanic residents were unharmed by the program. In other words, sulfur dioxide did not concentrate in these communities.

To the contrary, a 10% increase in the percentage of Hispanic households in a zip code was associated with a 4.1% decrease in the likelihood that a facility in the neighborhood would buy permits to emit sulfur dioxide.

“If there is an equity effect from allowance trading in this model, it works to the advantage of communities of color,” Riingquist wrote in the paper, which appears in the academic journal, Social Science Quarterly.

The communities impacted the most were those with high numbers of high school dropouts. It appears that education — but not income or color — was linked to where industrial polluters expanded their operations.

I contacted Ringquist to explain his results. He said he was surprised, too, given how strong opposition had been over “toxic hot spots” in minority communities. But here’s what he found: Older facilities are the ones that tend to buy more sulfur dioxide allowances to meet the requirements of the program.

“Poor and minority residents don’t tend to be concentrated around the oldest sources of sulfur dioxide pollution,” Ringquist wrote in an email.

As for lesser educated communities, a 10% increase in adult residents without a high school diploma was associated with a 5.6% increase in the likelihood that a facility will buy sulfur dioxide allowances. Why?

“It may be that there is less local opposition to purchasing large numbers of pollution allowances,” Ringquist said. Locals could also have less ability to monitor increases in pollution allowances, although he couldn’t say that for certain. “That’s a much tougher story to tell,” Ringquist said.

He also he couldn’t explain why facilities in Hispanic communities tended to sell more allowances, although the data confirms that.

Will California’s carbon trading program be similarly benign to communities of color, counter to environmental justice claims?

If the results of this sulfur dioxide trading study are any indication, California’s cap & trade program may be less harmful than some fear.

Emissions Trading May Not Worsen Local Pollution 13 April,2011Alison Hawkes

3 thoughts on “Emissions Trading May Not Worsen Local Pollution”

  1. In January, 2010, CARB’s “Economic and Allocation Advisory Committee” (EAAC) recommended a carbon-tax and 75-percent-dividend scheme to the CARB. Sometime between then and now that proposal, which I found the most equitable I’ve ever seen, got deep-sixed. How did that happen, to be replaced with a dull and conventional cap-and-trade system, which now has the CARB in a pile of legal trouble?

    Here’s the link to the CARB’s press release – http://www.arb.ca.gov/newsrel/nr011110.pdf Note the link at the end of the release that leads to the full report. And, find the roster of the EAAC members on that page. Some members of the EAAC may be able to supply you with the answer to my question. There’s a story here, which I hope you can dig out.

  2. I previously read this forthcoming article and the following is an excerpt of my draft response to it. It is embarrassing that it has received any attention, much less is being published.

    Anyone with a basic understanding of the applicable air pollution laws should have immediately realized that the article’s analyses were based on fundamental fallacies that made them irrelevant.
    To summarize what the article explained, beginning in 1995 certain facilities were required to reduce their sulfur dioxide (SO2) emissions to address the problem of acid rain. Facilities that emitted less SO2 than permitted could trade their excess emission allowances to other facilities that might find it less expensive to buy such allowances rather than reduce their own emissions. The article examined if these allowances were more likely to be traded to facilities in areas with disproportionately minority or poor residents, thereby producing environmental injustice by supposedly concentrating SO2 emissions in those areas.
    The article’s fatal flaw was using SO2 allowances in an area as a measure of the risk to its residents. By definition, environmental injustice exists only if some people are environmentally disadvantaged. A National Ambient Air Quality Standard (NAAQS) for SO2 has existed since 1971, establishing the allowable level of SO2 in the air that protects public health, with an adequate margin of safety (42 U.S.C. § 7409(b)(1)). According to a U.S. Environmental Protection Agency (EPA, 1996:128) report, only 2% of the nation’s population was in areas that had not attained the SO2 NAAQS by 1995, the start of the article’s study time period. According to that same EPA report (1996:129), “[t]here were no counties containing major SO2 point sources that failed to meet the ambient SO2 NAAQS in 1995.” According to an EPA report (2010:1), by the end of the article’s study time period less than 0.1% of the nation’s population was in areas that had not attained the SO2 NAAQS. No area in attainment of the SO2 NAAQS in 1995 thereafter lapsed into nonattainment, but almost every area in SO2 NAAQS nonattainment in 1995 achieved attainment by 2009. According to an EPA (2005:3) report that the article itself cited, “there have been no violations of the SO2 health-based national ambient air quality standard since at least 2000.”
    Thus, the obvious question is if essentially no one was exposed to unhealthy levels of SO2 during the study time period, how could there be any environmental injustice in how SO2 allowances were distributed? Even if SO2 allowances and the resulting emissions were concentrated in disproportionately minority or poor areas, it obviously did not produce unhealthy air. Therefore, the article made as much sense as examining if a drug prescribed for some patients over the preceding 15 years might have dangerously increased their cholesterol levels, even though tests of all of those patients had shown very healthy levels of cholesterol during that time. No analysis was needed to answer the article’s question, because air quality, not SO2 allowances or emissions, was the pertinent criterion. Indeed, a 1995 article correctly made this very point:

    Emission levels, however, are not the same as air quality. People do not breathe estimated emissions – they breathe actual concentrations of atmospheric pollutants. This is why the … [NAAQS] of the [EPA] … are based on pollutant concentrations, rather than on pollutant emissions. If we want to determine whether pollution control regulations have actually improved air quality, our dependent variable must be actual pollutant concentration levels, not estimated emission figures.

    Ringquist (1995:71). If Dr. Ringquist had followed his prior article’s dictum, he would not have pursued his latest article.
    Even people oblivious to the pervasively healthy SO2 levels should have recognized the article’s other major fallacy, unless they also were oblivious to the fundamentals of the CAA program. Realistically, government regulators would never allow the trading of SO2 allowances to meaningfully degrade air quality. This point was emphasized in EPA’s environmental justice analysis (2005:5) of the Acid Rain Program (ARP) that the article itself cited:

    The ARP works closely with other aspects of the CAA, particularly the NAAQS program that sets the ambient air quality standards to protect everyone’s health. State compliance with the NAAQS will guarantee that no minority, low-income, or any other population will experience disproportionate and adverse human health or environmental effects as a result of programs aimed at lowering criteria pollutant emissions. … Therefore, public health is protected through federal efforts to reduce long-range transport of pollution (such as through the ARP) and state and local efforts to achieve the NAAQS by reducing local sources of pollution (such as through siting and operating permits for sources). Sources covered by the ARP are also subject to the other applicable CAA requirements; for example, the ability of a source to buy allowances under the ARP does not alter the requirement that every area must meet the NAAQS or alter any emission limits set under a [State Implementation Plan].

    Indeed, the article itself essentially restated the last sentence (Ringquist, 2011:8). “Regardless of how many allowances are held by the owners of a particular facility, emissions from this facility may not exceed the standards established by Title I of the 1970 [sic] CAA or by relevant state regulators.”1 Title I of the CAA includes the NAAQS and the requirements for emission controls on facilities to achieve the NAAQS. It is impossible to rationally simultaneously claim that having SO2 allowances would not authorize facilities’ emissions to exceed their permitted levels or the NAAQS, but that people nearby could be harmed by the emissions associated with the SO2 allowances, which by definition would require facilities’ emissions to exceed their permitted levels and the NAAQS.
    This point also was concisely made in a 2000 article (Swift, 2000:955) whose title – “Allowance Trading and SO2 Hot Spots – Good News From the Acid Rain Program” – made it clearly pertinent to, though it was ignored by, Dr. Ringquist’s research, even though it was cited by the EPA environmental justice analysis of the ARP mentioned by Dr. Ringquist.

    The first issue is to determine the meaning of hot spots, which requires that the total regulatory context for a pollutant be viewed. For SO2, entirely apart from the Acid Rain Program, there is a set of ambient and source-specific pollutant standards enforced under the Clean Air Act, state regulation, and occupational health and safety laws. Their objective is to limit sulfur emissions to levels that would not endanger human health in the vicinity of a plant. All reductions made under the Acid Rain Program are over and above these localized standards, which were inadequate to solve long-range and ecosystem effects. Therefore, there is a strong argument that no amount of trading under the Acid Rain Program could create a hot spot that would cause emissions to exceed limits necessary to protect human health.
    In addition, the Acid Rain Program makes a major 50 percent reduction in SO2, so concerns about trading are only about relative degrees of benefit, since all are better off.

    Consequently, although whether the trading of emission allowances could lead to environmental injustice is a legitimate concern in other scenarios, it is a question that was definitively answered for the ARP without any analysis.

    1 This requirement was imposed by Congress when it enacted the ARP (42 U.S.C. § 7651b(f)). “Nothing in this section relating to allowances shall be construed as affecting the application of, or compliance with, any other provision of this chapter to an affected unit or source, including the provisions related to applicable National Ambient Air Quality Standards and State implementation plans.” EPA subsequently incorporated this requirement in its regulations (40 C.F.R. § 72.9(h)(1)).


    Ringquist, Evan J. 1995. Is “Effective Regulation” Always Oxymoronic?: The States and Ambient Air Quality, Social Science Quarterly 76:69-87.

    Ringquist, Evan J. 2011. Trading Equity for Efficiency in Environmental Protection?: Environmental Justice Effects from the SO2 Allowance Trading Program Social Science Quarterly __:___-___.

    Swift, Byron. 2000. Allowance Trading and SO2 Hot Spots – Good News From the Acid Rain Program. BNA Environment Reporter 31:954-59.

    U.S. Environmental Protection Agency. 1996. National Air Quality and Emissions Trends Report, 1995. Research Triangle Park, NC: U.S. Environmental Protection Agency.

    U.S. Environmental Protection Agency. 2005. The Acid Rain Program and Environmental Justice: Staff Analysis. Washington, DC: U.S. Environmental Protection Agency.

    U.S. Environmental Protection Agency. 2010. Our Nation’s Air: Status and Trends Through 2008. Washington, DC: U.S. Environmental Protection Agency.

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