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Can A Little Transparency Put A Dent In Pollution?

For a variety of reasons, it's difficult to clamp down on air pollution without regulations or some sort of pricing mechanism. Factories and power plants and so on are always going to churn out more pollution than is socially optimal because they don't have to bear the full cost for the negative effects it causes. That's the undergrad-level economic theory, anyway. But are regulations and pricing the only tools that can have an impact? What about a little transparency?

Over at Grist, Jonathan Hiskes has a smart piece on a just-enacted (and little-noticed) EPA rule that forces the country's 1,200 or so largest polluters to take an inventory of the greenhouse gases they're emitting each year. The results will become public by March 2011. In theory, once everyone can see how much carbon individual polluters are putting into the air, and once stories start getting written, companies may feel pressure to reduce their emissions voluntarily—if only to avoid the negative p.r.

It's not a wholly crazy notion. Back in 1984, Congress created the Toxics Release Inventory, which forced various industries to measure and report discharges of toxic chemicals. The results were searchable in public databases. So what happened? Companies scrambled to reduce their toxic releases so that they didn't end up on a "Top Ten Worst Polluters" list somewhere. As this graph suggests, toxic pollution declined dramatically (click to enlarge):

Now, as Hiskes notes, it's not clear that the analogy to carbon-dioxide is perfect. For one, local communities care a lot if they're living near a plant that's disposing toxic chemicals. Greenhouse gases like carbon-dioxide, by contrast, pose a more diffuse threat—CO2 that's emitted anywhere in the world has the same effect. What's more, the reason many utilities are calling for a cap-and-trade system is that it's hard to make cleaner energy investments going forward without some certainty on the price of carbon. Transparency alone can't do that. Still, though, it's quite possible this new greenhouse-gas reporting rule could have an effect on the margins (and even if it doesn't, it's an initial first step that needs to be taken anyway, if greenhouse gases are eventually going to be priced or regulated).