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New source review. (Mercatus Reports).

STATUS: EPA conducting review as part of new "comprehensive strategy."

In May of 2001, the National Energy Policy Development Group (NEPDG) recommended that federal officials conduct a careful review and analysis of New Source Review (NSR) regulations. The regulations require that, prior to construction, major new and refurbished air pollution emission sources (typically power plants and refineries) receive Environmental Protection Agency certification that they will meet stringent air quality regulations. The regulations are not enforced against older plants that are not retooled. (See "Rationalizing Air Pollution," p. 13.)

NSR critics charge that the regulations discourage firms from modernizing or replacing outdated, heavily polluting plants because, even though the new or renovated plants would emit less pollution, they still may not pass the rigorous review requirements. With that criticism in mind and in the wake of the recent California energy crisis, NEPDG requested that the EPA administrator, together with the secretary of energy and officials from other agencies, examine NSR to determine its effect on "investment in new utility and refinery generation capacity, energy efficiency, and environmental protection."

EPA subsequently announced that it would not produce a specific study of NSR, but would include a review of the regulations in a soon-to-be-released comprehensive strategy to reduce air pollution and protect public health.

As a recent Mercatus public interest comment on NSR noted, EPA has the opportunity to allow oil refiners and power generators to improve capacity, energy efficiency, reliability, and environmental performance. To do that, the agency should decouple the NSR process from firms' investment decisions by requiring that lower emissions rates be achieved at a fixed time after a modification has been made. What is more, EPA could increase the flexibility of the NSR system by expanding emissions trading programs.
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Title Annotation:air pollution emission regulations
Article Type:Brief Article
Geographic Code:1USA
Date:Mar 22, 2002
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