While the New Source Review rules are written on an input basis, that could easily be changed without either killing the whole program or amending the Clean Air Act.  In the late 1990s EPA was starting to recognize that output-based regulations were infinitely preferable, and there are now output-based standards out there for some industries.

I do believe that if Bush had never been elected, we would have made some important changes to NSR, including writing output=based regulations.  Instead, as is well-documented elsewhere, the Bushies came in laden with gifts to their big industrial buddies, one of which was a (later overturned in court) switch from a tons/year accounting under NSR to a lbs/hour emissions standard -- which would have allowed big emitters to tremendously increases emissions without tripping a regulatory threshold - exactly the opposite effect from what we'd want.

On the third point you make -- which grandfathering definitely pushes plants to keep old emitting equipment around indefinitely, this effect would not have been nearly so pronounced had the rules been fully enforced.  Again in the late 1990s, EPA finally began enforcing against all the huge utilities that had made equipment changes that should have triggered NSR.  Those cases were enormously successful -- until the Bush administration shut them down and again, tried to rewrite the rules to exempt big stuff forever ("routine maintenance" rules that were also overturned in court).

On the second point, confusing the path with the goal -- ok, that's true, and perverse, but again, it probably did encourage one particular big unanticipated change -- not to creative use of resources, but instead fuel-switching to natural gas.  I think creativity is a tougher nut to crack and it's somewhat unfair to lay too much blame at the doorstep of NSR.

Finally (for anyone still reading), the new source review rules were not written to cover carbon -- BUT as soon as EPA decides to regulate carbon under the Clean Air Act in any context, NSR rules will begin to apply, and in theory, carbon reductions (i.e. efficiency) will have to happen because of those rules.

1. Re: the fact that NSR could be changed, I agree.  Indeed, there was an abrupt about-face from the feds on output-based standards once Bush came into office, effectively derailing a train that was moving in the right direction.  When I asked a friend of mine (who shall remain nameless, but who works for certain federal environmental agency) why, his response was telling: "because I was told that if we went to an output standard, it would cause us to burn less coal".  You do the math.  That said, while you could switch NSR from input to output, that would still not fix its pass/fail grading system, nor it's failure to put any financial value on overcompliance, nor it's disincentive to make the kind of major modifications that would raise efficiency.

2. Re: grandfathering, allow me to split a few hairs.  Grandfathering does two negative things, but their immediate impact is in opposed directions.  They keep the bad stuff around forever (bad).  But they also stop people from doing good stuff to bad plants (also bad, but in this case for opposite reasons).  In this latter sense, when you write that:

Again in the late 1990s, EPA finally began enforcing against all the huge utilities that had made equipment changes that should have triggered NSR.  Those cases were enormously successful -- until the Bush administration shut them down and again, tried to rewrite the rules to exempt big stuff forever ("routine maintenance" rules that were also overturned in court).

We may be in disagreement.  I'm not suggesting that it is always good to change the definition of "routine maintenance".  However, there is a good case to be made for not blocking energy efficiency investments - even though to do so would go to the heart of the NSR failure.  

3. Re: gas, I don't entirely agree.  If you look at the timing of gas generation deployments, the big boon started when gas was $3, and was essentially a response to the deregulation of wholesale generation rather than NSR.  In other words, coal has never really made all that much sense unless you have guaranteed cost recovery, at least relative to $2 - $3 gas.  The many merchant power plants that dominated the gas investment boom of the 90s were driven primarily by a desire to make a buck, and a realization that the utlities weren't making economically rational investments.

4. Finally, re: carbon (yeah, I kept reading), I would not be quite so sanguine, since regulating carbon under NSR implicitly means either throwing out the old regs or writing new ones, since NSR compliance is directly opposed to energy efficiency.  (As a point of reference, a coal plant that is fully NSR-compliant burns 10% more fuel than one that doesn't to run all the parasitics associated with downstream pollution control.)  This is why the "4P" bills were so important, as you can't regulate one pollutant without thinking about carbon impacts.  The trouble with this is that air regulators, by their nature are exceptionally conservative, in the classic sense of the term.  They are motivated only indirectly by emissions reduction; their big motivation is a fear of change.  This is because to their way of thinking - which is not without justification - they have "one whack" at a project when they write the permit, and their great fear is not that some new idea isn't better than the old idea, but that something might slip through the cracks that makes their "whack" smaller.  This makes them extremely resistant to regulatory change.  So while in theory carbon regulation would get them to focus on efficiency, in practice it is going to have to take executive direction to force the EPA (and their state brethren) to adopt a more holistic methodology.

I get defensive about the NSR program, because (1) it has been a favorite whipping boy for so long, especially (unfairly) for smug and often quite nasty lobbyists from very powerful polluting industries, and also (2) as a regulator I've seen the good it has done, bringing down NOx and SO2 emissions across industries that affect the health of a lot of people and the haze in many places.  It's not solely responsible, of course, but it has had some serious success over 30 years.

Your point about natural gas is well taken, and I also understand how efficiency investments are inhibited.  

I don't really think that NSR is the tool of choice to regulate carbon, which is why I said "in theory" carbon reductions would have to happen under NSR. God knows the lawsuits would tie us in knots. However I do think the idea of carbon being subject to NSR drives fear into some hearts and could help drive them to the negotiating table on cap and trade legislation.  And besides rewarding efficiency, a huge benefit of cap-and-trade legislation will be less likelihood of legal challenge tying up the rules.

And again, as a regulator -- I'm not sure "fear of change" is the issue (God knows we'd welcome change right now), but knowing you might only have one chance is an issue. People don't take kindly to being regulated piecemeal.

Anyway thanks for your very thoughtful comments, as usual -- it helps to hear your perspective.

In many ways, my personal feeling is that the one-whack model is a couple decades out of date.  Continuous emissions monitoring is so cheap now, along with the telemetry to pipe it up that there's really no good reason not to do real-time monitoring.  And with that, to finally get away from that one-whack model.  Once that's in place, one could envision regulatory structures that drove emissions ever downward, rather than just being stuck with 30 years of flat emissions.  And of course, then giving incentives out for good behavior based on real behavior rather than simply what you happened to be doing on the day the permit was verified.

All that said, I think the NSR deserves many of it's whips.  The overwhelming majority of our environmental regs were written in an era where the business community didn't trust the enviros and the enviros didn't trust the business community - and so we have a littany of regulations that agree only on the idea that someone must lose.  The environmental movement doesn't deserve all of the blame for that - but they do deserve half, since both halves failed to get the other to engage.  We thus end up with a whole bunch of regulations that are good for the environment but drive up operating costs (like NSR, excluding its GHG impacts) or bad for the environment but drive down operating costs (like grandfathering) and virtually none that are win/wins, for the simple reason that the two parties have never trusted one another long enough to sit at the table and collaborate.  I hope that era is coming to a close - and a part of getting on the right track requires knocking NSR down.  (And of course, trusting that the dude doing the knocking-down is well-intentioned about it, apropos of your Bush-basing at the start of this thread...)

Janszen pooh-poohs the current "morass of ad hoc deployment of various products and technologies, mostly improvements on what has been around for decades" like cogeneration, and your family business finds it convenient to scrap NSR, and please do not talk about water use.  The best thing you have working for you is leeching on to the market price of power going up.

Do you propose a policy about the pollution stream you mean to reinforce on the local population, or will you just do it for whoever pays?

I don't see these as black and white issues.  But I expect that Sean is honestly pushing a business model that we want to encourage from an environmental point of view.  Given that he's on this blog, I think we should give him the benefit of the doubt and assume he's got the common good in mind (and if he can make a buck at the same time, then more power to him.  As it were.)

It's a dodge.  It will never amount to real reduction.

Any market based plan would first have to establish fairly regulated markets.  That is such a huge step in itself that it would delay any action on climate change too long.

How would one have developed a market solution for WW 2 war production?  It couldn't have been acomplished.

And it won't work with the climate crisis and oil war(s).  The players that control oil and auto markets will control carbon markets.  It's inevitable.  They will manipulate the trading system, whatever form it takes, for their benefit.

To free markets.  Take subsidies away from big energy players, regulate markets to stop monopoly control, then distribute part of the tax savings to subsidize renewables and conservation.  Simple, incorruptable.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

An environmental marketing company recently surveyed six big-box retailers and found 1,000 consumer items that made 1,700 environmental claims. Every one of them had at least one hidden trade off, unproven generalization, irrelevant statement or outright fabrication.
Big change cries out for big leadership. People are being asked to alter their lives and downsize their expectations in return for uncertain benefits that won't even appear until many of us are gone.

If there is a hint that the color green is just a thin veneer of marketing and misdirection, commitment will falter, change will fail, and the future will pay. http://www.alternet.org/environment/75775/

It puts me in mind of the degradation of market based corporate monopoly run chemical agriculture and it's health effects on humans as a part of the living biosphere.  

What can cure the climate problem, could cure the health problems.  Organic farming, without antibiotics, hormones, and 'cides that chemically mimic hormones, would allow the human body to adapt to naturally evolving disease organisms.  Give the immune system a chance, so to speak.

Furthermore, pollutants and radioactive contamination are added into the mix of toxic stew occupying areas of human industrial habitation.  

The same solution for GHG climate change and high energy costs and job outsourcing...  works for human and ecosystem, food chain health.  And high heath care costs.

It's renewable energy/organic farm policy.  That's healing for the biosphere.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

1. In no way do I suggest that the environmental regulation should be scrapped.  What I do suggest is that the NSR is poor environmental regulation, for the simple reason that it drives up CO2 emissions and forces us to preferentially pursue expensive emissions control.  I am not implying that economic concerns trump environmental concerns, but rather that if you can improve both simultanteously, policy ought to direct resources in that direction rather than deciding who wins.  NSR fails this test.  Unless you are arguing that NSR is perfect, I'm not sure I follow why you'd disagree.

2. I'll accept the point that my business would profit from this change, but I'm not sure why that's objectionable either.  Consider: about a decade ago, we looked at recovering steam from a power plant to run across the street and displace a boiler at a steel mill.  The project couldn't go forward, because the change to the power plant would have been classified as a major modification and thus triggered NSR.  We wouldn't have looked at this project if there wasn't a way to make money, but so what?  That's the way our economy works, and I don't see how such an investment would ever be undertaken by someone who didn't see a way to earn a buck from it.  But whether we make a buck or someone else makes a buck is beside the point - what's relevant is that a power plant could not take an action to shut down a combustion source across the street in the name of pollution control.  I don't care whether one is motivated by environmental or economic considerations: that is dumb policy.

3. Finally, to the larger objection that I think I read between the lines that if we're making $ at this, we shouldn't be trusted, I have no direct response other than to encourage you to read through our website and look at what we do.  I think you'll find that our motivations are much broader than simply making a fast buck from a bit of greenwashing.  I recall back in the 80s when David Lee Roth was asked why he was taking advantage of his position to trash hotel rooms/party too hard/hang out with too many party girls, he responded that "We don't act this way because we're in rock & roll.  We're in rock & roll because we are this way."  I'd put forth a parallel response to your assertion.  Over the past 3 decades, my father and I have set out to build businesses that profitably reduce greenhouse gas emissions, out of the deep belief that so long as one believes that one must favor the economy vs. the environment (or vice versa) we will waste our time on philosophical arguments rather than moving to address the single greatest environmental problem of our time.  I don't apologize for either the focus on profits or on greenhouse gas reduction.  If we can make $ at this, we'll bring competition into the space looking to make $ for themselves as well.  And while we've had a bit of financial success at this trough the years, the scale of the problem pretty well mandates that we get some more competitors on board to row the boat.  And given the scale of the capital investment required, they'll come a lot quicker in pursuit of dollars than they will in pursuit of morality.

CASTEN: We've estimated that there could be 350 billion dollars spent in the United States on new, efficient, local power plants that recycle energy, and that that would reduce U.S. energy costs by about 70 billion dollars per year, and it would slash total U.S. greenhouse gas emissions by 20 percent for the whole country. It would put the U.S. below the Kyoto level and we'd save 70 billion dollars. So this has the possibility of solving many of America's problems, not just the environmental problem, but defending against foreign energy supplies and keeping jobs here. One of the things that happens when you do this is that the manufacturer gets an extra revenue stream and cuts its costs. I'm just not willing to say 'well, the Chinese have lower standards and cheap labor and so they're going to do all the manufacturing and we're all going to be Wal-Mart greeters.' We have brains and a terrific entrepreneurial system and this is a way to apply those brains and return our manufacturers to competitiveness

GELLERMAN: Well Mr. Casten, thank you very much. Good luck.

CASTEN: Thank you, Bruce.

GELLERMAN: Thomas Casten is chairman of Illinois-based Recycled Energy Development: RED.http://www.loe.org/shows/segments.htm?programID=08-P13-00 ...

I will confess to a vested interest in energy efficiency - as, I would argue, do all of us who buy energy or breathe air, since tolerating low efficiency (or worse, driving it lower) only gives us more expensive, dirtier air.

I would also add that you confuse my opposition to our environmental policy with an opposition to environmental regulation.  I do not for a moment suggest that we throw out NSR and leave nothing in it's wake.  Rather, we ought to replace it with regulation that does not regulate one pollutant at the expense of another.  This is effectively what NSR does, since it mandates lower SOx, NOx and particulate via greater CO2 emissions.  The problem is the structure of NSR itself.  When I describe the need for holistic climate medicine, that is my point - not that we ignore all causes of environmental sickness, but that we stop ignoring the side effects of our current treatment regimen.  Heating the globe in order to prevent acid rain is simply dumb.  Go to output-based standards, give clean folks an economic incentive to be as clean as possible and you will find that we can lower both CO2 emissions and criteria pollutants.  I see no reason why either one of us would object to that goal.

That said, we may disagree on whether economic incentives are superior to top-down command and control, but this is a matter of tactics.  I take your emotion on this post to mean that at core, we do not disagree on the overarching strategy to reduce all pollutant emissions.  And my point is that until we overhaul NSR, we cannot do so.

I would point out two comments, one general and one specific.

1. The general point is that when you write about "market based corporate monopolies" I think you are conflating terms that - at least to my way of thinking - are oxymoronic.  A market is, at core, incompatible with a monopoly.  In other words, pro-business is not the same as pro-market.  Our present electric regulatory system is a government sanctioned monopoly, with no incentive to control costs (since those costs are all pass throughs) and huge incentives to build expensive plants (because that's how dividends are set).  And that model is directly responsible for the collapse in fuel-conversion efficiency in the electric sector, falling by 50% from 1910 to today.  Since this sector accounts for 42% of our total US GHG emissions, this means that simply returning to 1910 efficiency levels would reduce GHG emissions by a greater amount than if we removed every single passenger car from the road.  (Currently 19% of US GHG emissions.)  And we'd lower power prices, by burning half as much fuel.  If this doesn't serve as an indictment of top-down regulation, I wouldn't know what one looked like!    However, when I use the word regulation here, I am talking about governments setting price and supply based on regulators theories of the public good, in lieu of economic incentives for thousands of individual actors to do the same.  A functioning market does the latter.  Full regulation gives us our electric regulatory model, which is functionally indistinguishable from the way the Soviets decided how much bread to put into Moscow bakeries - and has had similar results.

2. Now the specific.  Yesterday, I met with a large investor owned utility to talk about ways we might constructively and jointly encourage regulatory reform such that they could finally profit from doing the right thing.  (Details withheld to protect confidentiality, but the jist of what we were trying to do was more or less as I outlined here.)  Their primary objection was that in their history, every time they have told a rate commissioner how they can save money, they have found that the commission then immediately says "great; we will lower rates by the same amount".  In other words, every time they try to do something good (e.g., lower power costs), they have gotten slapped and can't keep any of the resulting gain.  Now think about what this does to the country, spread across 50 states, hundreds of utilities and - at $400 billion/year - the single biggest industry in the country.  It's like a high school biology experiment.  How many times do you shock a mouse when he turns left before he only turns right?  This regulatory paradigm has created a system where all our utilities have been deeply indoctrinated not to control costs.  In the name of the public interest!  We can do better.

You still don't address the localization of your pollution stream you seek to reinforce and what standards your family has to address that when it installs its efficiency regime.  I must say, when you talk efficiency, the name Eichman comes to mind and the banality of evil.  You should have a tag here that advertises your ties to dirty efficient asthma inducing mountain destroying landfill sludging water wasting industry (did I forget anything?).

On one hand we see monopoly forces at work in markets and on the other we see so called free trade globalization creating booming economies.  This is a titanic struggle and a struggle to try to understand.

I tend to like simple subsidies as solutions.  taking bad ones away, making new ones.  It's something politicians can understand.

On hedge fund trading?  Berananke had to get hedge fund guys in to try to explain the crisis it has so many complicated deals going worldwide.  Even the fed chairman does not get it.

It's hard to trust unknowns that have yielded debt crisis in the present.  that's a lot to ask of environnmentalists, place the future of the planet in the hands of traders.

I would rather see 10 cents per kwh in subsidy to renewables than some kind of complicated carbon trading scheme, gone global.  It just seems safer and more sensible somehow.

http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin