‘Cap and trade’ offers businesses profits if it reduces its emissions, Lynchburg profess

“Green” can be the color of the environment and of money, according to an economist at Lynchburg College.

Professor Joe Prinzinger says it’s possible to implement environmental standards and pollution controls without driving businesses and jobs out of the country.

A pollution policy called “cap and trade” actually makes it profitable to not pollute, giving companies incentives to innovate and reduce their emissions.

The trick is balancing the regulations so they don’t cost the nation too much in terms of jobs and business.

“Clean air is a (product), just like shirts,” Prinzinger said. “If we want clean air, it’s going to cost us. But we need to understand what that cost is going to be.

“The question is, is the cost worth it?”

Appalachian Power officials say one cost of environmental regulation is taking a toll that could be passed on to customers.

The company has applied for permission from Virginia’s State Corporation Commission to increase its base rates by about 24 percent later this year.

Dan Carson, vice president of Appalachian Power, said the company is spending $2 billion to meet new rules from the Environmental Protection Agency.

The EPA’s Clean Air Interstate Rules, going into effect from 2009 to 2015, will limit emissions of sodium dioxide, nitrogen oxide and mercury.

Those rules could just be the beginning.

“Even though these environmental costs are huge, they pale in comparison to what climate change (will) cost,” Carson said.

The U.S. Senate dropped a piece of legislation in early June that would have restricted emissions of greenhouse gasses such as carbon dioxide, aiming to reduce total U.S. emissions by 66 percent by mid-century.

Critics of the bill said it would cost too much.

It would have required the development of new equipment — Carson said there’s no commercially proven technology for catching carbon dioxide — and the expense of putting the equipment to use.

The bill would also have established a cap and trade market for pollution. Prinzinger said such a market is what makes it profitable to limit pollution.

In such a market, each business receives a certain number of pollution allowances.

Those allowances can be sold or traded. Prinzinger said if one company doesn’t need all of its pollution allowances, it could sell the allowances to another company that needs more.

Just like in a regular market, supply and demand would set the price, Prinzinger said.

The market for excess pollution credits would provide an incentive to find ways to reduce pollution.

“You unleash the market for finding new technologies,” Prinzinger said.

Once new technologies are being rolled out, pollution caps could be decreased.

But Prinzinger cautioned that setting caps too low and tightening them will increase the cost of doing business and could drive businesses overseas.

That would be a double negative for the nation: a loss of jobs and income without a decrease in global pollution, he said.

“You have to be real careful where you set your caps. … You can’t keep turning up the EPA and OSHA rules,” he said.

Every other year, Prinzinger teaches an environmental economics course at Lynchburg College. It opens the eyes of both environmental majors and economics majors.

“It’s really worthwhile to get these two groups together,” he said. “The econ majors learn that the environmental majors are not the enemy, and the environmental majors learn that the econ majors are not the bad guys.”