From the Answer Desk: Monitoring Cap and Trade

Reader Jason Welker received the following question from a high school student:

It’s very interesting how this whole marketing pollution rights works. In this way the “commons” in the tragedy of the commons becomes privatized, and companies are forced to take responsibility for their pollution which is being dumped into the atmosphere.
I do have one question, though, and that is how does one regulate the amount of pollution a factory dispenses into the air? How can the government be sure that a firm is not violating the law by dumping more than its licensed amount?

My question:  Why do Jason's high school students ask better questions than my PhD students? 

Anyway, I'm getting ready for a lecture on the EPA's Acid Rain Program and I happened across this answer...

Emissions monitoring and reporting systems are critical components of a successful program. Since the Program’s inception in 1995, the emissions data – continuously monitored by sources, verified and recorded by EPA, and posted for public review on the Internet – has been among the most complete and accurate ever collected by EPA. Unlike traditional emissions limitation programs, the Acid Rain Program requires an accounting of each ton of emissions from each regulated unit to determine compliance. The Acid Rain Programrequires units to install Continuous Emissions Monitoring Systems (CEMS) to continuously measure and record emissions. In order to ensure accurate emissions monitoring and reporting, regulations specify equipment certification procedures, periodic quality assurance and quality control procedures, record keeping and reporting, and procedures for filling in missing data periods. All affected units are required to report hourly emissions on a quarterly basis to EPA’s tracking system. EPA invests substantial time and resources into assuring that both the monitoring and reporting of emissions are occurring properly and efficiently. Conservative “missing data” procedures help ensure that emissions are never understated. Real-time electronic auditing by EPA helps to ensure that emissions data are accurate, consistent, and complete.

Comments

[joshua corning]

How can the government be sure that a firm is not violating the law by dumping more than its licensed amount?

Manufacturing profits are razor thin....if you are a manufacturer and the government presses charges the cost of defense you will go out of business and your wife will leave you and your kids will all end up in public school.

[Jason Welker]

Thanks for the great answer, Tim... have posted it for my AP Econ students to read...