United States Environmental Protection Agency Office of Air and Radiation 430-S-93-002 December 1993 v>EPA Conference Proceedings The Clean Air Marketplace Conference and Exhibition Trie Clean Air Marketplace!] 993 New Business Opportunities Created by the Clean Air Act Amendments September 8-9,1993 • Sheraton Washington Hotel • Washington, D.C. Recycled/Recyclable Printed with Soy/Canola Ink on paper that contains at least 50% recycled fiber ------- This document is a summary of presentations made at an EPA-sponsored conference. The views expressed by individual authors are their own and do not necessarily reflect those of the U.S. Environmental Protection Agency. ------- Table of Contents Page September 8, 1993 Keynote Address — Carol M. Browner 1 Session 1 — Competitiveness, Jobs, and Exports 9 Session 2 — Pollution Prevention and the Clean Air Act 19 Keynote Address — Professor Michael E. Porter 31 Session 3 — Control Technologies and Services - I Session 3A — Electric Power Technologies 49 Session 3B — Stationary Source VOCs/Air Toxics Control 57 Session 3C — Vehicular Emissions Control Technologies 71 Session 3D — Alternative Vehicle Technologies 81 Session 4 — Control Technologies and Services - II Session 4A — Electric Power Services 93 Session 4B — Stationary Source NOX Control Approaches 107 Session 4C — Vehicular Emission Control Services 117 Session 4D — Alternative Fuels 123 September 9, 1993 Keynote Address — The Honorable Senator Max Baucus 139 Session 5 — Role of the Government in Supporting the Clean Air Marketplace Session 5A — Federal, State, and Local Regulatory Programs 147 Session 5B — Technology Development and Diffusion 159 Session 5C — Export Promotion 177 Keynote Address — Donald A. Deieso 189 Table of Contents Page i ------- Table of Contents (continued) Session 6 — Connections Among Clean Air Act/ISTE A/Energy Policy Act . . 197 Session 7 — The Global Clean Air Marketplace - Export Opportunities . .211 Session 8 — Looking to the Future - New Directions for Environmental Technology ... 223 Session 9 — Public/Private Partnerships in Cleaning the Air 231 Session 10 — Financing the Clean Air Marketplace Session IDA — Financing Companies and Projects 241 Session 10B — Financing Exports and Investments . . . . 249 Appendices Appendix A — Conference Program A-l Appendix B — Exhibitors B-l Appendix C — Participants . C-l Page ii Table of Contents ------- Clean Air Marketplace 1993 Page 1 Keynote Address by Carol M. Browner Administrator, U.S. EPA Introduction by Michael H. Shapiro, Acting Assistant Administrator, Office of Air and Radiation, U.S. EPA Septembers, 1993 Thank you very much Steve, and it is a pleasure to welcome all you to the Clean Air Marketplace. We are delighted that so many of you chose to attend and share our vision of clean air and a healthy economy. I would also like to acknowledge the outstanding work that Steve Harper has done in putting together this conference. Although he was very gracious in giving Rob Brenner and I some credit, really Steve has put this conference together — together with a dedicated team that he led. He has done an incredible job of overcoming the many obstacles that the Federal government puts in the way of organizing successful conferences. I think missing the coffee was a minor omission and will not effect your performance appraisal at all, Steve. The performance reviews take care of that problem; we well be in good shape for next year's conference. It is my pleasure today to be able to introduce my boss, Carol Browner, who will be giving the welcoming remarks for this conference. Carol was sworn-in in January 1993 as the Administrator of the U.S. Environmental Protection Agency (EPA). She brings to the Agency a career of experience in the environmental protection arena, including a blend of experience in the State and Federal arenas, that gives her important perspectives on the implementation of environmental programs, and in particular, implementation of the Clean Air Act. Prior to coming to EPA, Carol served as Secretary of the Department of Environmental Regulation for the State of Florida from 1991-1993, where among her many accomplishments was the early implementation of a permit fee program that would fund programs anticipated under the Clean Air Act. That is something that many states have still not yet completed, but which we are trying hard to get underway. Before that position, Carol served as the Legislative Director for Senator Al Gore where, among her other responsibilities, she assisted in drafting the provisions of the Clean Air Act Amendments of 1990. In introducing Carol Browner, President Clinton cited her record in building innovative partnerships to protect the environment while promoting economic growth. I think the oft-cited example of aDowing Walt Disney World to develop in exchange for setting aside a significant amount of wetlands for wildlife protection is just one example of the way in which Carol brings to the environmental arena a new perspective on how we can build partnerships among the regulated community, the environmental community, and state, local, and Federal governments to productively work Keynote Address — Carol M. Browner ------- Page 2 Clean Air Marketplace 1993 towards important, aggressive environmental goals, while at the same time being cognizant of the importance of economic development and prosperity. Since coming to EPA, Carol has initiated numerous activities, including a policy to protect children from harmful pesticide residues on food, tightened controls over hazardous waste incinerators, and a major expansion of the important toxics release inventory. She has played a leading role within the Federal government as an advocate for pollution prevention programs within the Federal community. She has also initiated a major reorganization of her Office of Enforcement, which is among the recommendations of the National Performance Review. We are therefore delighted that Carol has been willing to take time from her very demanding schedule to introduce this conference. Please join me in welcoming Carol Browner. Address by Administrator Carol M. Browner Good morning and thank you. I want to begin by thanking all of you who have joined with the Environmental Protection Agency to co-sponsor these two days. I think it is going to be a very productive use of your time. What we have in the room are the people at the forefront of air pollution control in this country. Everyone here has something to do with air pollution control — from my colleagues at the Environmental Protection Agency, to the people who are buying the technologies, to the people who are inventing the technologies. It is a group of friends — people who understand that environmental protection and economic growth go hand-in- hand. As I go around the country and talk to people about my job of promoting public health by protecting our air, our water, and our land, I run into a lot of people who do not really understand what it is we are all trying to do. And the most common, but false, debate that I hear is that people believe we must make a choice between environmental protection on the one hand, and economic growth on the other hand. I think too many people still believe that the world is divided into those who make a living off of our environment on the one hand, and those who care about it on the other hand. I hear this when I talk about food safety by regulating pesticide use. I hear it when we talk about improving the Superfund program to speed up the revitalization of our cities, and even when we talk about improving water quality by strengthening the Clean Water Act and the Safe Drinking Water Act. But I think you all in this room are living proof that environmental protection can protect public health, improve our environment, and at the same time create new businesses, new profit, new export opportunities, and new jobs. There are many who say that environmental regulations cost a lot of money: they are not wrong. The Clean Air Act Amendments have been projected to reduce air Keynote Address — Carol M. Browner ------- Clean Air Marketplace 1993 Page 3 pollution by 56 billion pounds per year at a cost of $20-$25 billion. It is a lot of pounds but it is also a lot of dollars. Many believe the conventional wisdom that the money is just going down the drain and represents a net loss of economic resources. I believe they are absolutely wrong, that the people who say this do not really understand what we are all doing, and that if we can inform them, they would come to appreciate the investments and the return that we get on those investments. The resources, the money, the energy that is spent on environmental protection just do not disappear. Very often, they go to firms like the ones represented in this room. Already, environmental protection is a $100 billion industry. By the year 2000, a conservative estimate says that revenues in just the air pollution control industry will rise by $50-$70 billion. These are very, very significant amounts of money. A recent report by the Environmental Protection Agency shows that stringent pollution regulations have put the U.S. air pollution control industry at the very top. Our exports of pollution control equipment outstrip all other nations, including Germany and Japan. And our lead is growing. It is not diminishing. We are getting even further ahead. As a direct result of the Clean Air Act, U.S. companies are at the forefront of clean diesel engine technologies, clean fuel development, improved monitoring technologies, alternate fuel vehicles, and cleaner paints and solvents. Our pollution control industry is ready to help the rest of the world improve air quality. Later this month, we will release a report on the domestic environmental protection industry. I expect that this report will supply us with further evidence of what we already know: that environmental technology creates jobs and substantial business growth. Nowhere is that fact more evident than in the area of air pollution control. Three years ago, Congress amended the Clean Air Act to reflect a new understanding of how to reduce pollution and promote growth. I had an opportunity to participate when the Senate was drafting amendments to the Clean Air Act, and I will tell you that if I knew then what I know now, I might have written a few of those amendments a little bit differently. It is quite a challenge to have been on the one side writing and now be on the other side, helping to implement. Everyone should have this experience of going back and forth. In the Clean Air Act Amendments of 1990, we tried to move toward performance standards instead of always specifying exactly what technology has to be used. We wanted to be uncompromising about our goal of providing the protection that is important to the public, but be flexible in how we achieved those goals. We set a strict standard of pollution control, but we increased the flexibility allowed to states and industries. I certainly saw that in my work at the state level in Florida. Economic incentive approaches are woven throughout the Act, which also makes the Clean Air Act Amendments of 1990 very different from almost any other major piece of environmental legislation to have been passed by the Congress. The Act sets up a system of trading air pollution allowances which will provide economic rewards to companies that cut their sulfur dioxide emissions Keynote Address — Carol M. Browner ------- Page 4 Clean Air Marketplace 1993 below the legal requirement. This trading system will cut acid-rain-causing emissions by electric utilities by one half in a way that is already saving utilities and their customers hundreds of millions of dollars a year. I think many of you are aware that the first public trading took place earlier this year and it is now ongoing. I also want to announce today that I will very shortly propose a new rule called the Opt-In Rule, which will allow other companies, in addition to the utilities, to opt into this credit emissions trading program and join utilities in trading sulfur dioxide emission allowances. This new phase of our acid rain program will create new market opportunities for companies in a variety of industries, not just the utilities who heretofore have participated in the program. I would think that for many of you here, that is good news. It expands the number of companies looking for the technologies that so many of you offer. We are also developing rules to encourage states to adopt the same kind of economic incentive programs. These programs create new markets for new technology. President Clinton believes very, very strongly in market-based incentives. In fact, in the National Performance Review report, there is a whole section on increasing the use of market-based incentives not just in the Clean Air Act, but in a number of other environmental laws. The President has also recently set up the President's Council on Sustainable Development, of which EPA is a member. When we were discussing with the White House the establishment of such a Council, I strongly encouraged the President to include all of those who have an interest in the environment in this country. The President agreed that it was important to have everyone at the table. So on this Council, government — state, local, and Federal — industry representatives, and environmental group representatives are all working together to look at how we can change, how we can do a better job of protecting our environment and allowing for economic growth. I have encouraged the Council to work with the Environmental Protection Agency to conduct a series of demonstration projects to identify how we can achieve environmental results as cheaply as possible. Some of you may have read about the work that we did with Amoco in Yorktown, Virginia. Several newspapers have reported on it. The Wall Street Journal did a lengthy piece on it. That project demonstrated the potential to get equivalent environmental results more cheaply. We worked in a cooperative manner with Amoco. We looked at the entire facility to see where we could get reductions and found that in some instances, they could achieve them in places where the regulations did not necessarily require reductions. In instances where the regulations did require reductions, those reductions would be more costly. But the effect in terms of air quality would be the same, one being more expensive than the other. We want to do more of these joint projects in the future. I think ail of you will benefit from the technological opportunities that will be created as we examine alternative ways of achieving better air quality. Keynote Address — Carol M. Browner ------- Clean Air Marketplace 1993 Page 5 The President has also set aside $36 million for the Environmental Technology Initiative at the Agency and will, I think, make available larger amounts of money in future years. This project is expected to provide significant impetus to the environmental goods and service industry by spurring the development and marketing of Innovative technologies for pollution prevention and control. This is essentially new money to the Agency. We have not had this level of funding before in this area and are very excited about the work that we'll be able to do in conjunction with you all. We are also working with the Small Business Administration. We are going to be training people at the Small Business Administration development centers across the U.S. to provide assistance to small businesses to help them comply with the Clean Air Act. We are also going to help small businesses that are making, or want to make, environmental technology, by linking them to businesses that need the technology. One of the things I was able to do in Florida was to set up a state trust fund to provide financial assistance to small businesses to comply with the Clean Air Act. Large numbers of small businesses across this country will be affected by the Clean Air Act. Environmental regulations are new for them; we want to work with them, to help them understand what the rules require, learn what technologies are available, and avoid future enforcement actions. I think what distinguishes this Administration from prior administrations is the recognition that a healthy environment and a healthy economy go hand-in-hand. You really can't have one without the other. As we come into the second year of this Congress, there are several opportunities for us — in the reauthorizations and legislation that Congress will be considering — to use what we've learned from the Clean Air Act to promote economic growth along with environmental protection. I want to briefly mention those. We will be working to propose legislation to Congress dealing with food safety issues, Superfund, water quality, both in terms of the Clean Water Act and the Safe Drinking Water Act, and the North American Free Trade Agreement. I feel an obligation to explain that while lawyers may be making a lot of money in the Superfund program, it is not taxpayers' money. It is not money that comes out of the trust fund that we manage. Nonetheless, I think we would all agree that the Superfund cleanups are not moving quickly enough. In November of this year, we will propose legislation to amend the law to spur economic growth rather than stifle it. Every one of us can probably point to a Superfund site in our home towns — a contaminated urban site that is just lying idle — that the developers and the bankers do not want to touch. They are afraid of becoming liable under the law. As a result, the developers go out into the farmlands and the woodlands and destroy those areas, rather than using the areas that already have all of the urban services like water and electricity. We want to address these problems in the Superfund law. We want to provide incentives for people to purchase these vacant sites, to clean them up, and return them to productive community use. The result would be a revitalization of our urban areas, a preservation of the green areas outside of our cities, and a bigger market for remediation technologies. We want to look at all of the technologies that exist, we want to be creative, we want to allow more people Keynote Address — Carol M. Browner ------- Page 6 Clean Air Marketplace 1993 to use all that great technology and innovation that exists in this country to get these sites cleaned up and put back into productive use for the citizens of those towns and cities. This same principle of encouraging innovation is also guiding our proposed amendments to the Clean Water Act. The Senate is currently working on revising the Clean Water Act, one of the original environmental laws passed by the Congress. What we'd like to do in the Clean Water Act is require communities in a given watershed region to identify the sources of water pollution in their area and then come up with the best solutions. Again, I believe that this will spur creativity and promote innovation and economic growth. Rather than suggesting that one solution works for every watershed, let us look at each individual watershed, figure out what works best, what is causing the biggest problem, and let us put our resources into solving that problem. Later today, I will announce the work that we will be doing on reauthorization of the Safe Drinking Water Act, which protects the water that you drink out of your tap every day. As the technologies have grown, and as our ability to measure what is in the drinking water supplies has grown, so have costs of compliance grown for the cities. The President has called for the creation of a $600 million fund in the first year, going to $1 billion in the outyears. We would give this money to the states and they would loan it to communities so that they could put in place the technologies to make sure that their water supply is safe. We also are asking that for the very small systems, for which the costs can sometimes be rather prohibitive, we give greater flexibility in choosing technologies. What is important in all of these areas is the environmental goal — we cannot compromise the standards. We cannot set standards that do not provide levels of protection to those people most affected in this country, whether it be people who live around a particular Superfund site or who live in an urban area, whether it be the elderly or the children. But at the same time, we must provide flexibility in how we reach those goals. We have to work with the industries, work with the companies such as those represented here who are developing the technology, work with our cities and our communities to give them the flexibility to meet the standards that protect the health of the people. A lot of people talk about how harsh environmental standards are and how stringent they have become. But when I can actually have a frank and open discussion with people, whether they be mayors or industry representatives, I always find that it is not the standard per se that is causing the problem; it is the methods by which they have to achieve the standards. I want to make sure that we give people the tools to find the very, very best and the most cost-effective way of achieving those standards. Let me say something briefly about the North American Free Trade Agreement. 1 would presume that everybody in this room is aware of what NAFTA is. It has certainly been in the newspapers enough recently. Someone said to me that they thought most people thought NAFTA was a place where you buy automobile parts. Not true. But let me explain to you why NAFTA is important to you, and maybe that is something that you have not had an opportunity on which to reflect. The most important thing about NAFTA Keynote Address — Carol M. Browner ------- Clean Air Marketplace 1993 Page 7 for the people here today is that it will expand the market for environmental technology, perhaps on a scale we have never seen before. NAFTA was negotiated in the last administration. When President Clinton came into office, he said we need to look at the environmental issues associated with opening up trade between the United States, Mexico, and Canada. We have just completed negotiating a side agreement to NAFTA, focusing specifically on the environment. This side agreement will make it harder to pollute in all three countries — United States, Mexico, and Canada. It will also increase the incentive for Mexico in particular to enforce its environmental laws, thereby creating a demand for technologies so that they can bring down the emissions and achieve compliance with their laws. NAFTA will create jobs all over this country, particularly in the field of environmental technology. I would ask each and every one of you to look at NAFTA to understand the opportunities created by the side agreement for the work you do, including the opportunity to export technologies to Mexico and perhaps Canada. Over the next two days, you are going to be able to participate in many interesting debates and discussions, which is only fitting in a field that is so vital, vibrant, and growing as this one. I would imagine that if we had had this conference 10 or 15 years ago, we would not have had 20 co-sponsors, nor quite the number of people attending. We have had several conferences similar to this one in other areas across the United States and they have all been very, very well attended. Over the next couple of years we would expect to see the numbers grow, and hopefully double. One of the opportunities in you all coming here is not just to hear about what we are going to be doing, but also to hear about what each other is going to be doing. It is an opportunity for those of you on the sell side to discover markets for your products and an opportunity for companies on the buy side to learn about the latest ways to comply with the law more cost-effectively. In the environmental debates that lie ahead, we need your help. You all benefit in many instances from the way the laws are written. You can also be hurt by how the laws are written. We really need you to help us. Together, we can get the flexibility that we believe is so important in protecting the environment and that I know you all need if your businesses are to grow and expand. In all of these areas — air, water, Superfund — there will be opportunity to work together. We encourage you to get involved. When I tell audiences about the huge opportunities that exist in this industry and the environmental technology industry, they are astounded. They have no idea about the opportunities that exist for this country, both domestically and internationally — the jobs that can be created, the return on investment that can be made. We need to do a better job of telling the public that environmental technology is something in which this country can be an international star and an international leader. It is true. It is happening. I encourage you to talk to the people in your communities, your members of Congress, and your colleagues in the business community. Keynote Address — Carol M. Browner ------- Page 8 Clean Air Marketplace 1993 Keynote Address — Carol M. Browner ------- Clean Air Marketplace 1993 Page 9 Session 1 Competitiveness, Jobs, and Exports September 8, 1993 9:30 a.m. - 71:30 a.m. Moderator: Panelists: Jeffrey C. Smith Robert Brenner John Quarles Professor Paul Templet Dr. Richard Klimisch Daniel Noble Introduction Jeffrey C. Smith, Executive Director of the Institute of Clean Air Companies, summarized the issues of this session into three brief questions: • What impact do the Clean Air Act Amendments (CAAA) have on business profits? • Are there new business opportunities, or potential opportunities, created by the CAAA? • How do we quantify these impacts? Although it is difficult to measure the exact size of the air pollution control industry, this market has the potential to be one of the fastest growing sectors of the U.S. economy. Full implementation of the CAAA will create tens of thousands of high-tech, highly paid jobs a year. Moreover, by forcing U.S. businesses to take the lead in developing innovative pollution control technology, the CAAA will create important new export opportunities as other nations implement tougher environmental regulations. As an example, there is an increase in demand for U.S. pollution control technology in Asia. To date, however, the U.S. air pollution industry- while generating a trade surplus- has not experienced the growth predicted when the CAAA were enacted in 1990. Session 1 — Competitiveness, Jobs, and Exports ------- Page 10 Clean Air Marketplace 1993 Presentations Robert Brenner, Acting Deputy Assistant Administrator, U.S. EPA Office of Air and Radiation, reminded the audience that more regulations on business cannot be expected to necessarily result in more business opportunities. While keeping this in mind, it is clear that sound environmental regulation, by maximizing the flexibility allowed to business, potentially can be very compatible with fostering new market opportunities. There are numerous specific examples of companies taking advantage of opportunities created by the CAAA to increase their profits or expand their work force: Strict U.S. regulations encouraged a producer of diesel engines to invest heavily in the development of cleaner technology. This investment has allowed the firm to compete very favorably in nations that are beginning to implement tougher standards. • Numerous substitutes, either new compounds or new uses of old compounds, have been discovered for toxic chemicals in the production of many goods. The aerospace industry, for example, has developed new techniques to strip paint from planes. These techniques emit less air toxics and save $15,000 per plane. AT&T also has greatly reduced its emissions of toxic chemicals while reducing costs through the use of a natural substitute. The 3M Corporation is saving $3-$7 million a year through a program that substitutes cleaner solvents. • The CAAA have also greatly encouraged the development of whole new sets of innovative technologies to combat nitrogen oxide (NOX) emissions, which will help reduce urban ozone levels. Bechtel Corporation, for example, has developed scrubbing technologies that will reduce NOX emissions by 90 percent, and will reduce sulfur oxide (SOX) pollution as well. The corporation expects demand for this product to rise as a result of the CAAA. • The CAAA regulations on SO2 have also created significant business opportunities for firms producing scrubber technology and cleaner burning fuels. For instance, Custom Coals has recently developed a line of self- scrubbing coal, in which SO2 is removed as it is burned. This coal should be in high demand from electric utilities. • The costs of reducing CO2 emissions have also been reduced by the fact that some new powerplant technologies and processes have reduced utilities' consumption of electricity as well as SO2. These processes also often result in the production of gypsum, a marketable product. Session 1 — Competitiveness, Jobs, and Exports ------- Clean Air Marketplace 1993 Page 11 • Argonne National Labs has invested heavily in developing a potentially profitable system to convert solid waste to fuel, while separating out metal, glass, and plastic. • The restrictions on using chlorofluorocarbons (CFCs) in air conditioners has spurred investment in a number of companies as they race to develop competitive alternatives. For instance, some firms have been developing potentially profitable citrus-based substitutes for CFCs. Some CFC alternatives developed also help reduce the energy consumption of air conditioners. • In the auto industry, regulations have created new opportunities for the producers of new and improved catalysts and engine parts that help reduce emissions. In the longer run, the need to switch to alternative fuels will help create whole new markets and opportunities. Increased reliance on alternative fuels will also draw the domestic demand for energy away from imported oil to domestically produced forms of energy such as solar power, electricity, and natural gas. These examples of companies benefitting from the CAAA represent just the tip of the iceberg; EPA is still in the early stages of implementing the Amendments, and business opportunities will increase greatly as EPA strives to attain even tougher emissions reduction standards in the future. The compatibility of environmental regulation and economic growth should not be so much of a surprise. The efforts to reduce pollution and maximize profits in a business share many of the same basic principles, including using energy more efficiently, and recycling or reusing resources as much as possible. John Quarles, Esq., Partner at Morgan, Lewis and Bockius, helped develop the Clean Air Act when he was at EPA in the 1970s. It is obvious that there are going to be significant business opportunities created by the CAAA. A great deal of money is being spent — clearly going in someone's pocket — and jobs will therefore be created. This, however, is not the issue on which we should be focusing. We should focus on whether the jobs created by environmental regulation will be canceled out by the fact that the regulations create impediments to U.S. firms' ability to compete in a global market. There are two effects that regulation has on firms' competitiveness: (1) it increases U.S. firms' Session 1 — Competitiveness, Jobs, and Exports ------- Page 12 Clean Air Marketplace 1993 expenditures relative to foreign competitors; and (2) it imposes the additional burden of a cumbersome regulatory process. Both effects represent a drag on competitiveness, but the latter is more dangerous. The following are a few examples of how increased costs and regulatory red tape have hindered competitiveness: • Environmental regulations may have been a big factor in encouraging a number of industries to relocate overseas in the late 1980s and early 1990s. This represents a change from the 1970s, when studies indicated firms did not make relocation decisions on the basis of environmental laws. This effect will increase as regulations become more cumbersome. • A major petroleum corporation recently decided that a proposed expansion project was not economical due to EPA's required paperwork and red tape. The project would have increased revenue and jobs and, ironically, would have reduced the corporation's overall emissions. • The permitting system under Title V of the CAAA also represents a potentially significant drag on industry and its ability to compete. According to the permitting rules, any change or expansion that a company undergoes, no matter how little the potential effect on air quality, will require them to extensively revise their permit. Firms may be held back from expanding as a result of this regulatory morass, to which foreign competitors are immune. The permitting system is just one example of the complex and burdensome requirements of the CAAA. The crux of the CAAA program is that the public clearly mandates that clean air is important, and this program will help a great deal in providing it. However, along with these benefits comes a process that inherently hinders our ability to compete in a global economy. Moreover, many of the controls and requirements that are the most burdensome to industry provide very little marginal benefit. It is difficult to see much benefit from many of the expenditures of the Superfund program. Why, then have the CAAA and other regulations developed into such a burden on competition? Due to the sheer size and bureaucratic nature of EPA, the agency suffers from numerous inherent management problems: • There are layers upon layers of supervisors, and the people who actually make decisions are isolated from the specifics of the situations. • The Agency is not forced to confront the real implications of the costs that it is imposing. Session 1 — Competitiveness, Jobs, and Exports ------- Clean Air Marketplace 1993 Page 13 • The system is risk averse, which discourages experimentation and innovative ideas. • There are many battles over "turf". EPA is heading in some positive directions, such as the move toward marketable permits and other economic incentives. The effort that the Agency has made in recent years to work better with other governmental bodies is also a positive step. This does not change the overall problem, however, that certain aspects of EPA itself contribute to significant burdens on U.S. industry and its competitiveness. Professor Paul Templet of Louisiana State University, who was in charge of environmental protection in Louisiana Governor Roemer's administration, began his presentation by stressing that economic growth and environmental protection should no longer be seen as inconsistent but rather as complementary. Despite the traditional conceptions, the economy must be seen as functioning within a larger environmental context. The economy, for instance, is dependent on the environment as a source of materials and resources and as a place to dispose of waste. Because of this relationship, economic development must be consistent in the long run with the maintenance of the region's ecosystem. Having provided this theoretical underpinning for the complementary relationship between the economy and the environment, Professor Templet unveiled a series of graphs demonstrating how this has been reflected in U.S. economic data: • The first series of graphs showed how the top ten states in terms of disposable income, per capita education spending, and growth rates also have the highest levels of environmental protection. Although Professor Templet admitted this does not necessarily indicate causation, and that there are probably some other factors intruding into the data, he contended this does help refute the perceived incompatibility of the environment and the economy. • A study by the Bank of America shows a similar correlation between regions with healthy economies and strong environmental standards. According to the study, "strong" environmental states grew an average of 2.6 percent and "weak" states an average of 2.1 percent over a 14-year period, and an estimated 3.5 million jobs have been created by environmental regulation. The study identified some theoretical Session 1 — Competitiveness, Jobs, and Exports ------- Page 14 Clean Air Marketplace 1993 connections between a strong economy and healthy environment, including the fact that better management of resources and minimization of waste is integral to both, and that long run economic growth depends on a sustainable ecosystem. • The next series of graphs displayed how environmental regulations, and the funding to enforce them, multiplied greatly in Louisiana from 1988-92. As a result of these measures, Louisiana reduced toxics more than any other state in the country (50 percent by 1991, 75 percent by 1995). During this period, investment increased dramatically, from $1 billion to around $3 billion, and unemployment dropped from 12 percent to 6 percent. • According to the next graph, employment in the chemical industry began to stagnate in Louisiana by 1988, only to surge again during the next four years. This surge was a direct result of the aggressive environmental regulations that were being developed, and helped contribute to the plummeting unemployment rate in the period. For every $1 million spent in Louisiana on pollution control in the period, 25 jobs were created, which is close to the national ratio of 23 jobs created per $1 million spent. • Professor Templet introduced the concept of the emissions/job ratio, that identifies which states and industries are polluting the most per worker. Regression analyses of the fifty states reveal that states with higher emissions/jobs ratios uniformly have higher poverty rates and employment rates, worse income disparity, slower growth, and lower levels of investment. On the other hand, as the emissions/job ratio declines among the states, the economic indicators consistently rise. Therefore, in states where business is allowed to pollute more and industries have less regard for natural resources, the economy is also suffering. To conclude, Professor Templet reiterated the conclusions of an OECD study that there is no connection between environmental standards and a loss of competitiveness. Session 1 — Competitiveness, Jobs, and Exports ------- Clean Air Marketplace 1993 Page 15 Dr. Richard Klimisch, Vice President of the Engineering Affairs Division of the American Automobile Manufacturers Association (AAMA), focused on the regulations on the vehicle painting industry and how its competitiveness has been affected. Painting is one of the most complex aspects of the automotive industry; there are a number of different stages including primer, base coats, clear coats, repair, and a number of different techniques, which are all regulated separately for Volatile Organic Compound (VOC) emissions. Japanese VOC regulations are very simple, flexible, and are generally a compromise between business interests and the government. U.S. regulations, on the other hand, are exceedingly complex and burdensome. The complexities of U.S. policy lead to delays, inflexibility, and competitiveness decay. Dr. Klimisch emphasized that the complexity of U.S. regulations has scared many operations away from areas of ozone non-compliance, typically cities — this has contributed to urban economic decay. Over the last decade, U.S. automobile manufacturers have made a great deal of progress reducing VOC emissions, which are now at about half the level of Japanese firms. Achieving further cuts will require higher and higher costs to industry; moving on to the next level of pollution control will result in a rise in cost from $500,000 per ton to $800,000 per ton. This level of control is not cost effective, so there will be little international demand for the technology and few jobs created. Therefore, there are a number of direct costs, capital costs, and indirect costs, such as a loss of time, that the vehicle painting industry suffers under as a result of regulations. Although the laws add only about $100 to the cost of production for each car, this is added to other regulatory differences between the U.S. and Japan. For instance, Super fund and water pollution regulations impose significant costs on domestic manufacturers that are not shared by foreign competitors. The AAMA has developed a series of recommendations designed to push EPA to acknowledge the impacts the CAAA have on international competition and develop a strategy for dealing with them. These ideas include: • A continued dedication to achieving the lowest costs by providing maximum flexibility • Enlarging bubbles • Streamlining state procedures • Expediting reviews • Developing a system which does constrain industries unnecessarily by forcing specific technologies on them. Session 7 — Competitiveness, Jobs, and Exports ------- Page 16 Clean Air Marketplace 1993 Daniel Noble, Vice President, Director of Research, Environmental Business International, Inc., presented an overview of the environmental industry and some of the changes that it is currently undergoing. The movement in the U.S. from a "linear" to a "circular" economy, among other factors, has driven the environmental industry to a state of transition and uncertainty. A linear economy, which has characterized our society up until the last decade, can be described as one in which we take out resources, put them to some productive capacity, and then throw them away. A circular economy, on the other hand, exists side by side with the marketplace of the environmental industry and puts more emphasis on sustainable development. The movement towards a circular economy has been driven by a number of factors. Rising prices for raw materials and waste disposal, for instance, have encouraged society to manage and preserve its resources better than under a linear economy. The trend in the environmental movement to discuss sustainable development and pollution prevention, as opposed to remediation, has also helped drive the development of a circular economy. This development, along with factors such as increasing globalization, will mold the future of the environmental industry. Mr. Noble provided an overview of the industry as it stands today and the possibilities for the future. • The environmental industry currently has a $134 billion market. In the latter half of the 1980s, the industry grew at a very fast pace, and has recently begun to slow down. The market will level off around the year 2000 at $200 billion. • The environmental industry is divided into three areas — equipment, services, and resources. The services area, a $61 billion market, is the largest of the three. The equipment and resources areas are $31 billion and $40 billion markets, respectively. The growth rate for each of these sectors varies. • Air pollution control comprises 17 percent of the equipment end of the environmental market, or $5.4 billion. The growth of this market has been relatively slow in recent years, although sales will rise as EPA further develops rules under the CAAA. • In the air pollution control market, the major product types in demand include electrostatic precipitators, and baghouse and flue gas desulfurization equipment. ABB Environmental and Research Cottrell are two of the major suppliers of these products; 47 percent of the customers are electric utilities. Session 1 — Competitiveness, Jobs, and Exports ------- Clean Air Marketplace 1993 Page 17 • Another emerging part of the air pollution market has been consulting. Charts Indicate that three companies — Radian, ENSER, and TRC — have reaped the lions' share of the assessment design business so far. Mr. Noble provided his view of how the air pollution control market might grow as a result of the CAAA: • Many analysts predict the market to reach $15 billion by the end of the century, but the actual slope of the growth curve will depend on a number of uncertain factors. For example, the degree to which the emphasis in environmental policy shifts from control to prevention and the pace of the development of alternative fuel technology will greatly impact the demand for air pollution control equipment. • Currently, the air pollution control industry employs about 35,000^40,000 people. An expansion to a $15 billion market would result in an additional 40,000-50,000 jobs. • Growth markets, in addition to air pollution control, include water reclamation, the shift from solid waste to resource recovery, and particularly the development of alternative energy technology. The environmental industry as a whole is facing transition and a great deal of uncertainty, but significant opportunities will nevertheless exist in the clean air marketplace. Questions and Answers How could EPA encourage moving to performance-based standards and further innovation? Mr. Brenner responded that EPA is trying to move one step beyond performance based standards. The first step in environmental regulation is "command and control," which is based on requiring facilities to use specific technologies. Performance-based standards, which require facilities to meet a certain level of pollution cuts using whatever means they choose, represents the next step in the maturation of environmental policy. EPA is trying to move to this step, which relies more on economic incentives and gives more flexibility to facilities. Firms will not be required to achieve 60 percent reductions at each individual plant, for example, but will be allowed to choose how they wish to achieve 60 percent reductions on average among all their plants. Session 1 — Competitiveness, Jobs, and Exports ------- Page 18 Clean Air Marketplace 1993 Are there any studies concerning the quality of jobs, not just the numbers, that will be gained as a result of the CAAA? Mr. Brenner answered that EPA has been involved in surveying companies to determine the kinds of jobs that will be gained and lost as a result of regulations. The results so far indicate that the jobs created by the CAAA will be more highly skilled and paid than those that are lost. What steps has EPA taken to grant more flexibility to businesses? Mr. Brenner responded that as EPA develops each rule, it tries to implement economic incentives. It gets difficult, however, to grant flexibility in many instances. To foster economic incentives, without sacrificing environmental goals, EPA is trying to set up cooperatives with businesses and pilot programs. This effort will help the agency gain experience and enable it to institute programs that are more sound economically and environmentally. L f% I * I ^"^™ Wliat can EPA do to use its leadership position in global environmental standards to help open up opportunities for U.S. firms abroad? Mr. Brenner replied that EPA has been aggressively promoting U.S. pollution control standards and techniques abroad. This is the best way to expand the market for the services and technology that U.S. firms offer. EPA has also developed an Innovative Technology Council to help advocate the development of new technology in every field of environmental policy. L f} I * | ~^^™«" Have there been any attempts to solicit the input of business at the level of writing statutes, not just at the regulatory level? Mr. Quarles explained that involving more parties at the level of developing the laws would not be practical. Businesses already have influence at that level, through the lobbying process. Session 1 — Competitiveness, Jobs, and Exports ------- Clean Air Marketplace 1993 Page 19 Session 2 Pollution Prevention and the Clean Air Act Septembers, 1993 9:30 a.m. - 11:30 a.m. Moderator: Panelists: John Seitz Dr. Thomas Mauser Amy Laspia Howard Klee, Jr. Dr. Dhiren C. Mehta Eric Shaeffer Introduction John Seitz, Director of the Office of Air Quality Planning and Standards, U.S. EPA, introduced pollution prevention as the panel's topic, commenting that the regulated community is at a critical point, particularly in terms of the history of EPA and implementation of the Clean Air Act. Mr. Seitz stressed that if environmental change continues to be approached in a command-and-control sense, the costs of meeting future goals will become increasingly higher. Focusing on pollution prevention, and not as much on remediation, is the most cost effective solution to our environmental problems. Presentations Dr. Thomas Hauser, Executive Director of the American Institute of Pollution Prevention, spoke on the historical and cultural barriers to pollution prevention and what can be done to overcome them. Dr. Hauser described himself as an old "command-and-control" type turned academic, who retired after 32 years at EPA. According to Dr. Hauser, we need to break the cycle of addressing pollution problems only after they occur, and focus instead on simply preventing them outright. Many significant decisions have been made in past years that have caused environmental disasters because of a lack of foresight (e.g., DDT, automobiles, and CFCs). We have to be able to think in advance or we will find ourselves in a costly pollution remediation situation. Since its formation in 1970, EPA has spent over 90 percent of its resources on end- of-pipe solutions. This is because the nation generally ignores or tolerates pollution until there is some drastic environmental event. When there is such an emergency, correction is often chosen in response to public concern, whether the concern is either real or perceived. Driven by this public concern, environmental laws emphasize the use of pollution control equipment to reduce health and environmental risks. Government Session 2 — Pollution Prevention and the Clean Air Act ------- Page 20 Clean Air Marketplace 1993 reliance on end-of-pipe solutions therefore results from the short-sightedness of the general public and the policy making process. Academia is also shortsighted, often driven by the necessity to bring in research dollars for survival. Instead of solving long-term problems, academics tend to focus on short-term, regulation-driven research projects. The evolution of the Clean Air Act from 1955-1990 with new source performance standards, mobile source performance standards, new source review, and prevention of significant deterioration simply represents continued reliance on remediation solutions. It is necessary to change from remedying present-day problems to solving problems before they occur. Pollution reduction activities should be distinguished from pollution prevention activities. • Pollution reduction activities. Pollution prevention has become a part of major environmental concerns, such as ozone depletion and global warming. Although in general these activities are good for the environment, they are pollution reduction activities rather than pollution prevention activities. • Pollution prevention activities. An alternative approach is to treat pollution prevention as an entity unto itself, rather than as an afterthought. As environmental laws are passed, the pollution prevention concept is added to regulations first, before end-of-pipe control is generated. A culture seems to have developed in which everyone — from those writing regulations, to those in industry implementing the regulations — has a command-and- control emphasis. Perhaps the best way of changing this approach is to focus on pollution prevention activities. Environmental problems can often be avoided through the adoption of a "rigorous and vigorous" pollution prevention program. Amy Laspia, President, Environmental Management Consulting, described the results of a one-year study on the application of pollution prevention to industry. The one-year study involved 317 companies that ranged from a seven-employee company with one plant and one source, to a 22,000-employee firm with 36 plants and 42 sources per plant. The businesses included food processing, window and door manufacturing, flour milling, and hospitals. Session 2 — Pollution Prevention and the Clean Air Act ------- Clean Air Marketplace 1993 Page 21 Environmental Management Consulting, based in Minneapolis, Minnesota, was asked by EPA to conduct a survey of businesses studying what incentives are available for industry to engage in pollution prevention activities. It conducted one-on-one interviews with individuals in all phases of business, and found the following pollution prevention activities taking place: • Housekeeping management, which relies heavily on plant maintenance, is being conducted by all of the companies surveyed because of its cost effectiveness. The study recommended that EPA should not discount these activities, which are a major improvement for many plants and are low-tech methods for running a cleaner plant with less waste. In addition, the best pollution prevention ideas often come from maintenance personnel. • Process modification is being achieved, but takes a much longer time to implement than other pollution prevention activities and is very dependent on available funds for R&D. Most companies felt that some incentive should be given by EPA and states to increase R&D dollars for process modification. It is very difficult for middle managers to convince upper management of the need for R & D dollars dedicated to pollution prevention activities. • Material substitution is also heavily dependent on R&D dollars. Management is not likely to spend R&D money for material substitution when a process is operating successfully. The study recommended that there needs to be some joint EPA, academic, and industry standards for when material substitution might benefit the plant. These standards can then be used by managers seeking R&D dollars to justify and implement material substitutions. • Employee training is being conducted by many of the firms surveyed. However, most firms noted that they had a difficult time finding useful training resources. Although EPA has excellent training programs and ideas, the current distribution effort is lacking in getting them out to businesses. This issue was mainly of concern to small- and medium-sized companies. EPA recognizes its problem with distribution of its resources, and will work to improve this area. • Pretreatment is an option that is largely dependent on the industry. If a company can modify a process to accommodate or incorporate pretreatment, pretreatment will increase in use. However, this is one of the least practiced pollution prevention technologies because of time, the R&D dollars, and the aversion to unproven innovative technology, especially when regulatory compliance is not assured. Session 2 — Pollution Prevention and the Clean Air Act ------- Page 22 Clean Air Marketplace 1993 Environmental Management Consulting presented EPA with five key findings on what encourages or discourages pollution prevention throughout industry. These findings were: (1) Effective Communication; (2) Flexibility; (3) Major Impediments to Pollution Prevention; (4) Cross-Media Solutions; and (5) Involvement Level. Effective Communication Uniform permit forms. Businesses would like to see a uniform form for permits, at least for smaller businesses with simple processes. While business realizes that this is a huge undertaking, many suggested that EPA begin with small business, possibly in a single media (e.g., air). • Clear and definitive regulations. EPA should communicate clear and definitive regulations. Most permit applications are written for the environmental professional. However, the person responsible for implementing permits does not necessarily have an environmental/scientific background. An understanding of clearly defined regulations allows the environmental manager more understanding (and time) to seek out pollution prevention options. • Meaningful and consistent data. Data should be meaningful and be generated consistently. Businesses would like to work with EPA to develop hybrid measures or units commonly used in manufacturing for reporting requirements and measurements. This would allow businesses to use data already being generated in a plant environment, thereby cutting the time required to convert manufacturing data for reporting, thereby allowing time for more innovative technology development. Flexibility Performance standards. Industry believes that the only way to develop pollution prevention technologies and emissions reductions rapidly is for industry to work with EPA to develop industry-specific performance standards. Industry considers themselves to be the best ones to do this, because they know the processes better than anyone else. Individual Plant measurement. Apart from reporting requirements, manufacturers believe that they can assist EPA and state agencies in determining an accurate method for measuring their facilities. A great deal of trust is involved in this area, and industry is looking for a way to work together with EPA. Technical flexibility. Businesses of all sizes feel strongly that the EPA should avoid prescribing technologies. Being told what type of technology Session 2 — Pollution Prevention and the Clean Air Act ------- Clean Air Marketplace 1993 Page 23 to use to achieve compliance can tie the hands of creativity and improvement. Given parameters, a company would rather be challenged to look for a solution within a reasonable time frame. • Inspection and enforcement. Small- and medium-sized businesses need a "level playing field" in inspection and enforcement. They are concerned that inconsistencies hurt their ability to compete. Firms ignore environmental compliance, believing that they will never be inspected. As a result, one firm makes an investment in prevention/ control, while the other goes free and can afford to offer lower priced goods. Major Impediments to Pollution Prevention • Permitting time. Permitting time is the single largest impediment to companies trying to implement pollution prevention technologies. The length of the permitting process forces them to be conservative about trying new pollution prevention technologies, particularly when EPA does not provide some condition that, for trying the technology, they will achieve some level of compliance. • Cost. When pollution prevention is viewed as an extra program rather than a needed program, cost is an issue. When pollution prevention is integrated with the regulation, cost is viewed as less of an issue, or as no issue at all. • R&D resources. Companies are under pressure to commit R&D resources to reliable, end-of-the-pipe technologies. They maintain that there is no incentive to use R&D resources on an unproven pollution prevention technology, because EPA will not provide some level of compliance if the technology should fail. • Regulatory uncertainty. Companies are less willing to take risks on investments in pollution prevention technologies when they are unsure of how the regulations may change. • Process complexity. In some complex processes, there is no technology available for material substitutions. Significant improvements can be made in the process, but companies feel that they should not be penalized if those improvements are not necessarily in the "source reduction" category. • Business risk. For some companies, trying new technologies puts them at a potential competitive disadvantage. If a company is in a competitive bid process (especially for government projects), it must bid with the "proven" technology. Session 2 — Pollution Prevention and the Clean Air Act ------- Page 24 Clean Air Marketplace 1993 • Cost accounting. Businesses are trying to find a way to demonstrate to their management the cost of not preventing pollution that is acceptable to accounting and financial managers. Figures on such costs, however, are currently unreliable, and inconsistent. Businesses would like to work with accounting organizations to develop standards (e.g. quantifying cost of waste and reporting). • Fee structure. Businesses believe that the fee structure should be adjusted or flexible if they invest in additional equipment or new technology to reach emissions reductions below the current required level. Cross-Media Solutions • Cross-media permitting. Plants often deal with more than one environmental medium. In such cases, facilities are interested in cross- media permitting, and would welcome a joint EPA-industry pilot effort. Involvement Level • Motivation. Companies that motivated more employees had the most success in preventing pollution. The pollution prevention effort should not be limited to people responsible for source reduction and material substitution. The entire process benefits from downstream ideas, which are often the best catalyst to upstream changes. Based on these conclusions about the encouragements and impediments to pollution prevention, Environmental Management Consulting provided the following recommendations to EPA: • Improve EPA's distribution of information; • Provide additional on-site technical assistance; • Provide incentives such as matching grants and low-interest loans; • Ensure regulatory consistency; • Establish interagency cooperation to allow companies to use alternative materials to meet the standards; • Conduct consistent inspections and integrate pollution prevention. EPA and the states need to use the inspector as an agent of change; • Inspect regularly to provide a level playing field; and Session 2 — Pollution Prevention and the Clean Air Act ------- Clean Air Marketplace 1993 Page 25 Integrate pollution prevention options into enforcement actions using a flexible approach. Howard Klee, Jr., Director, Regulatory Affairs, Amoco Corporation, discussed the Amoco/EPA project in Yorktown, Virginia, designed to study pollution prevention opportunities, and barriers to innovation. Frustration with inabilities to implement innovative solutions to environmental problems within the regulatory framework led Amoco to initiate the joint pollution prevention initiative in Yorktown. An example of such frustration involved the rebuilding of a Texas facility to comply with the lead phase-down rules. Amoco had an opportunity to improve the efficiency of a certain furnace in this facility that would reduce the amount of fuel burned, reduce emissions, and save energy. Amoco was ready to make the necessary modifications when they discovered that changing the piece of equipment required a change in the permit. Although EPA agreed that Amoco's plans would reduce emissions and save energy, Amoco was told that it would be at least nine months before the Agency could look at the permit, and even then, there was no guarantee that it would be approved. At the same time, Amoco had a construction deadline to meet in order to comply with the lead phase- down rule, and could not afford to wait. Hence, the old, inefficient equipment is still in place. In another example, Mr. Klee discussed Amoco's production of terphthalic acid, which is used to make polyester. One of the outputs is a wastewater stream that is very difficult to treat. Over the years, Amoco has developed a wastewater treatment technology that consumes less energy, generates natural gas, produces less solid waste, and takes up less land. Although the multi-media benefits of this process reportedly far outweigh the EPA-approved process, it does not quite meet the existing water quality standards, and cannot be constructed in this country. These examples illustrate the types of issues that come up at facilities attempting to use innovative technologies. In the Yorktown project, EPA and Amoco conducted an inventory of the facility, identified sources, identified ways to reduce them, and then ranked and identified priority alternatives according to the uniqueness of the facility. The "rule-book" was "set aside" for the entire process. The site chosen was a small, 35-year old refinery in Yorktown, Virginia. The refinery is in an environmentally sensitive area on the York River, about one-half mile from where the River empties into the Chesapeake Bay. Emissions samples were collected Session 2 — Pollution Prevention and the Clean Air Act ------- Page 26 Clean Air Marketplace 1993 over the course of one year at a cost of approximately $1 million. Almost 90 percent of the releases were found to be going into the air. Some of the pollution prevention projects that Amoco and EPA looked into were inexpensive and effective, such as a leak detection and repair program. In this program, an employee uses an electronic detector to identify hydrocarbon leaks around valves, flanges, and pumps, and then repairs them. Over 90 percent of the leaks were repaired immediately by the person who conducted the initial check. Interestingly, Amoco discovered that emissions from a barge loading operation (80 percent of the product is shipped out by marine barge) were the single largest source of the emissions that were having an impact (or potential impact) on the surrounding area. However, there are currently no controls required on those emissions, since the refinery in question is located in an ozone attainment area. EPA and Amoco then looked at the eight things that they thought would be required under statutory requirements and calculated that they could capture about 7,300 tons a year of hydrocarbon emissions from multiple sources at an average cost of $2,400 per ton. They then looked at alternative technologies, such as those that are not currently regulated, as well as other sources of releases and multimedia effects. The net effect was a different series of projects, which, once implemented, could capture about 7,500 tons of emissions at a cost of $500 per ton. This was a slightly different set of emissions, including some hazardous solid waste that the plant was generating. However, by reducing solid waste generation, the facility was able to increase their processing capacity, and reduce the amount of waste that was sent off-site to a landfill. Lessons Learned • Government and industry can work together. However, current institutional practices discourage innovative solutions to environmental problems. The biggest concern is not the goals, but rather the means to achieve the goals. • Improved data can improve environmental management decisions. Too many decisions are made without enough accurate data. Although obtaining data is expensive now, it is cost effective in the long run. • Risk-based decisions, while complex, offer the ability to focus resources on significant problems and more effective solutions. Risk-based decisions allow industry to determine the benefits of different choices in terms of impact on human health and environmental quality. Many opportunities exist for EPA to be flexible and to promote innovation under current Federal statutes, including: Session 2 — Pollution Prevention and the Clean Air Act ------- Clean Air Marketplace 1993 Page 27 Reliance on performance standards instead of technological design standards. The people who have to work with facilities should determine the best way to meet standards. A safety net to encourage people to try new things must be created. Currently, if a company tries something new and comes up with 95 percent success instead of 100 percent, they are essentially back to ground zero and have to start over. This is an expensive proposition. If a facility shows an overall net reduction of emissions for sources at a particular site, EPA should consider the reduction to be valid. This is cost-effective because it allows facilities to over-control some sources and under-control others. Dr. Dhiren C. Mehta, Manager, Technology Applications, Hughes Environmental Systems, discussed pollution prevention opportunities in the electronic sector. Hughes is an aerospace/electronics company that does a substantial amount of work for the defense industry. The job of Dr. Mehta's division, Environmental Systems, is to develop new technologies that are used internally and marketed to other companies. Dr. Mehta discussed the way in which Hughes is responding to Title I (Ambient Air Quality Standards), Title III (Hazardous Air Pollutants), and Title VI (Ozone Depleting Chemicals) of the Clean Air Act Amendments. Title I — Ambient Air Quality Standards Hughes is currently working on a project that will allow different manufacturers to come up with the most cost effective technology for a given facility. This project will not only reward innovation, but will also allow companies to bank their reductions so that they can use them for other sources or sell them. Hughes is trying to better understand the problem of air emissions from mobile sources. It is developing technologies to better identify high polluting cars, and it is working with the city of Los Angeles. The project will use Hughes Smog Dog, a device that can remotely and accurately determine which vehicles are the high polluters. It consists of an infrared source, a remote sensor, and a computer that gives percentages of CO, HC, and CO2 emitted. At the same time, a video camera captures the license plate of the moving vehicle. All of this is done within the fraction of a second that it takes for Session 2 — Pollution Prevention and the Clean Air Act ------- Page 28 Clean Air Marketplace 1993 a car to pass. This information would allow states to identify high emission vehicles, and take appropriate corrective actions. Title III — Hazardous Air Pollutants One of the first MACTs (maximum achievable control technologies) being developed by EPA is for the electronics industry. Hughes is working with the EPA to assess the technological options and choose the right ones. Some market opportunities, however, should come out of the new standards. Title VI — Ozone Depleting Chemicals Because Hughes uses ozone depleting chemicals very heavily, the ozone depleting chemical (ODC) phase-out by 1995 will impact them the most of any of the regulations. Hughes has pledged to delete all ODCs from manufacturing processes by 1994, although it faces several problems in finding alternatives to ODCs. Hughes has been assessing new technologies since 1988. Ideally, Hughes would prefer to develop pollution prevention techniques because they are a long-term solution. Hughes does not want to create hazardous waste, or transfer pollution from one medium to another. However, solutions also have to be cost effective. In recent years Hughes has developed different cleaning systems, some of which have been licensed to outside companies that are now marketing them to other customers. In summary, the CAAA have significant impacts on the electronics and aerospace industries. Hughes is attempting to develop cost-effective solutions that they can use and also market to other companies. Eric Shaeffer, Director, Pollution Prevention Policy Staff, U.S. EPA, spoke of EPA's opportunities to promote pollution prevention and source reduction. Several of EPA's options in this area are: Invest in research. This option, however, is constrained by EPA's limited research budget. Session 2 — Pollution Prevention and the Clean Air Act ------- Clean Air Marketplace 1993 Page 29 • Provide people companies with information and technical assistance. To do this EPA would have to rely heavily on states and their technical assistance programs. • Encourage voluntary programs such as Green Lights. EPA's role in designing and implementing rules through permits and enforcement actions should create a positive investment climate for prevention. In the end, EPA is a regulatory agency with a mission to carry out environmental statutes that they are given by Congress. Technology-based standards and deadlines are two of the main components of the rulemaking process that EPA faces once legislation has been mandated by Congress. EPA attempts to identify the best performing technologies and then convert them into a performance standard. Ideally, companies should have the option of selecting the optimal way of complying with that standard. The pressure of deadlines also greatly impacts the rulemaking process. If EPA misses a deadline, the courts will write the regulations. Industry has very limited opportunities to provide input into a rule. By the time a proposed rule gets to the Federal Register, many basic decisions have already been made. EPA does its best to provide companies with options, but the analytical process for pollution prevention is intense. There is a lot of information that has to be sifted through, analyzed and understood. By the time a proposed rule reaches the Federal Register, there is a fairly short time period between proposal and when the rule is supposed to take effect. This makes it hard for EPA to fully respond to comments. Source Reduction Review Project EPA is currently working on a project that focuses on key industries and trying to put some of the questions concerning pollution prevention to the public arena. EPA identified 17 industrial categories that included fairly large industries such as pulp and paper, small manufacturers like printers, and high-tech industries like pharmaceuticals. All 17 industries face deadlines and are all generally facing multiple rules converging on the same issues. To make this project possible, EPA only picked industries with a regulatory proposal date far enough away that sufficient time is available to have an impact on the industrial process. The goals of the project include: • Designing and implementing rules in which source reduction is the optimal method of compliance; • Eliminating cross-media transfers of pollution by eliminating single medium decisionmaking; and Session 2 — Pollution Prevention and the Clean Air Act ------- Page 30 Clean Air Marketplace 1993 • Providing, through a public dialogue, as much predictability and certainty with regard to all the compliance requirements. Although EPA is compelled to adopt with deadlines [can we clarify?], there is some flexibility. For example, EPA recently adjusted the timing of the air rule for the pulp and paper industry so that it will coincide with the rule for water. This will allow the industry to see the dual impact of the rules and plan its investment appropriately. Technological advance often occurs so rapidly that it is impossible for every Agency to reflect the latest technological developments in each of its rulemaking processes. It is therefore important to build flexibility into implementation. Although EPA offers flexibility in theory, in practice, permit writers have proven to be conservative. If a company attempts to use a new technology, they are often discouraged by the permit process. For smaller manufacturers, information is critical. Because small manufacturers are not going to read the Federal Register, it is important to convey quickly and simply the necessary information. No matter how much cooperation is achieved, there is always going to be a debate over the amount of pollution prevention that is necessary. In order to accomplish some of the above goals, EPA needs participation from industry before the rules are published in the Federal Register. Industry also needs to be patient as EPA attempts to move from "end-of-the-pipe" control to the complicated world of pollution prevention. Session 2 — Pollution Prevention and the Clean Air Act ------- Clean Air Marketplace 1993 Page 31 Keynote Address by Professor Michael E. Porter Harvard Business School Introduction by Michael P. Vandenbergh, Associate Deputy Administrator, U.S. EPA Septembers, 1993 It is always a challenge speaking immediately after lunch. I had a friend who had gone out to a big business lunch and returned to his law firm after the big lunch and put his head down on his desk... just for a moment. Luckily, he popped his head up just before a partner walked into his office to give him an assignment. After a long discussion, the partner turned around and walked out. The guy felt like relaxing when a paper clip fell off his forehead and hit the desk. I always thought about the dangers of that. I do not know what that means — either do not sleep after lunch or, if you do, sleep on the side of your head. I am very honored to introduce our keynote speaker today. As we consider the Clean Air Act and its far-reaching impacts on the U.S. economy, we are contributing to the critical debate that is very important to this Agency and is taking place across the country on the relationship among environmental protection, economic growth, and environmental technology. Few have advanced that debate more than Professor Porter. Professor Porter is an international leader in the field of competitive strategy. His work on the interface between the environmental regulation, business innovation, and the competitiveness of industries provides a perfect context for discussions here today. Professor Porter received his undergraduate degree from Princeton University, and a Ph.D. in Business Economics from Harvard, which he received in 1973. He then went on to become the C. Roland Christensen Professor of Business Administration at the Harvard Business School — one of youngest tenured professors in its history. Professor Porter's work at Harvard has been exceptional. His ideas are the basis for one of the school's required courses and he is rumored to be — and we will find out sometime during his lecture — one of the school's absolute best teachers. In addition, his independent contributions are equally impressive. Professor Porter is the author of 14 books and over 45 articles. His recent works, including, Competitive Advantage: Creating and Sustaining Superior Performance, and the well-known Competitive Advantage of Nations form the basis for competitive strategy in both government and the private sector. Professor Porter's April 1991 Scientific American article entitled "America's Green Strategy" is particularly related to this conference. One of his most important conclusions in that article — that environmental regulation, under the right circumstances, can spur innovation and increase competitiveness — is reenforced by your presence here today. Keynote Address — Professor Michael E. Porter ------- Page 32 Clean Air Marketplace 1993 Professor Porter also serves as a consultant to many leading companies and has shared his thoughts throughout the government, including with Administrator Browner and the top management at EPA. His contributions to EPA are greatly appreciated. 1 can think of no better expert to address this group on the issue of business competitiveness and environmental technology. Please join me in welcoming Professor Michael Porter. Address by Professor Michael E. Porter — Towards a New Conception of the Environment-Competitiveness Relationship This conference is probably the single biggest manifestation that some of the ideas I am going to talk about today can really work, and can really make a difference. So I could not resist the opportunity to come here this afternoon and talk to you about some of my ideas about competitiveness in general, and about the role of environmental regulation in impacting competitiveness. As you know, there still remains a raging debate in our nation about environmental policy — about how fast we should go, about how we should approach this issue. The private sector is still deeply divided on how to think about environmental issues — new issues that face the agenda of virtually every corporation. What I would like to do this afternoon is to contribute to that discussion from the perspective of one who has spent approximately 20 years deeply concerned with the problems of international competition in industry I would like to cover three subjects. First, I would like to talk about what it takes to be internationally competitive. The question that many have asked is, "Is environmental regulation diminishing the ability of U.S. industry to be internationally competitive?" In approaching this, one must examine the prior question of what it takes to be internationally competitive. Second, if we understand what makes an industry or firm internationally competitive, what is the link between this and the environment? How do we think about that relationship? How do we frame that relationship? How do we understand whether the environment or environmental regulations contribute to competitiveness, or erode competitiveness, or perhaps both? I would like to draw on my joint research with Dr. Claas van der Linde to explore these questions. And finally, if we can reach a clear understanding of the link between the environment and competitiveness, what does that imply for the strategies of companies, the EPA, and of environmentalists (all of whom have a keen interest and large stake in addressing this issue)? What I would like to argue is that we have been framing the environment- competitiveness debate using the wrong perspective. There is another way to frame the issue that is much more constructive, both for the environment and for companies. I would like to persuade you this afternoon that the directions in which many of you are already moving — because you are here — are the right directions and that the notion of the world community must find ways of speeding up this transition to a new perspective. Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 33 What Creates International Competitiveness Let us begin, however, with the prior question of what creates international competitiveness in industry? There has been a long-standing interest in the question of international competitiveness. There are some old paradigms that have shaped our thinking about competitiveness historically, but they are rapidly fading and, indeed, are becoming counterproductive ways of thinking about the issue. Comparative Advantage The most established of the old paradigms is comparative advantage. This says that competition is fundamentally based on cost, and the company notion the companies with the lowest cost will win. Costs are principally determined by the cost of inputs: the cost of energy, labor, raw materials, other cost of doing business, and so on. According to the paradigm of comparative advantage, the nation that is competitive is the one that enjoys the most favorable endowment of what economists call "factors of production" (i.e., the lowest cost inputs). The nations that will win in labor-intensive industries will be those that have low labor costs. Similarly, the companies and countries that will win in industries that rely on raw materials will be those that enjoy favorable local supplies of their materials. The comparative advantage paradigm has defined much of our thinking about competitiveness. However, it has been superseded. Why? • Globalization. In a world of global competition, companies no longer need to have low cost inputs at home to get access to them. They can source raw materials cheaply on global markets, thus not needing them at home. The global firm can locate selected activities in other countries to tap into those low cost inputs, wherever they might be. For example, a company could be based in Germany, but the labor intensive parts of its process can be located in a low-wage country such as Mexico. This company can remain vibrantly competitive despite the fact that it has high wages at home. • Role of Technology. Even more importantly, the old paradigm of competitiveness has been superseded by the power of technology. In industry after industry, we find that the companies/nations that win are not those that have access to inexpensive, abundant inputs but those that are able to use technology to use the inputs productively. For example, if a company has high labor costs at home, it can simply automate away the need to use unskilled labor. If a company has a shortage of a raw material at home, it can find an alternative raw material or a synthetic one. If a company faces high costs of space (e.g., as companies do in Japan) this does not make it uncompetitive. Instead, Japanese companies have pioneered Keynote Address — Professor Michael E. Porter ------- Page 34 Clean Air Marketplace 1993 dozens of space-saving innovations that have allowed them to be more productive than foreign rivals even accounting for the high cost of space. That is what just in time production is. Just in time production, for example, is an invention that avoids the need to store inventory on the factory floor and consume space. Why did the Japanese come up with just in time production? Because they were forced to deal with the high cost of space. In this illustration, as in hundreds of industries we have examined, the concept of comparative advantage has been superseded. But it is more than this. Today, if all a company has for its comparative advantage is low input costs, it is in a very precarious position. It is likely to lose competitiveness to rivals with even cheaper inputs or those who are more innovative in using them. Economies of Scale Another paradigm of competitiveness that is becoming obsolete is the paradigm of scale. In this paradigm, the principal source of comparative advantage is being big — big enough to amortize R&D costs, big enough to reap scale economies in production. Europeans, I find are particularly enamored with scale. Unfortunately, just when many European companies are merging because they want to be bigger, the paradigm of scale has been made obsolete by the same forces that have undermined comparative advantage. There is growing evidence that being big does not necessarily make a company more competitive. Why? Firms that are more innovative, and that have better technology can make scale economies obsolete. A large company may be very efficient in making its traditional products, or producing them in the traditional ways. But today's winner is the company that can come up with new products or new means of producing them. The world industrial landscape is heaped with piles of big companies that had economies of scale but have been superseded by smaller ones. The Paradigm of Innovation A new paradigm is driving international competitiveness, one based on innovation. What we have verified from looking at hundreds of industries, based in dozens of different countries, is that, the competitive industry is not the one with the cheapest inputs or the largest scale but the one with the capacity to continually improve and innovate. Innovation is defined broadly, to include the product itself, how the product is serviced, how the product is marketed, how the product is designed, and how the product is produced. Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 35 In industries, and segments of industries, that support high wages, relying on cheap inputs will fail. Today, innovation can no longer be inward looking. It can no longer merely reflect local or domestic needs. The internationally competitive companies in every industry are those whose innovations anticipate international needs at the same time as they serve local needs. If an American company can come up with a new product or service that is a little bit ahead of where the world market is going, it can emerge as an international leader. On the other hand, if a company is innovating in ways that are peculiar to U.S. circumstances, it will ultimately lose — international competitors who are innovating in more globally useful and relevant ways will come out ahead. In global competition, early movers often win. Companies that can see new market segments and discover new process technologies do not have direct opposition. They can enter new segments of the market without any opposition. Underpinnings of International Success Why do that nation's companies innovate? Why is it that competitiveness emerges in a particular nation, in particular fields? My research, first published in the Comparative Advantage of Nations found four elements of the national (and often regional and local) environment underpin the capacity to be internationally successful in an industry: (1) access to specialized inputs; (2) demanding and trend setting home customers; (3) a critical mass of local suppliers and related industries; and (4) a context of local competition. Access to the Right Kind of Inputs General purpose inputs, such as unskilled labor or basic infrastructure are no longer a competitive advantage. Many nations and states have those, and firms can readily access them. Today, competitiveness comes from having highly specialized inputs tailored to the needs of a particular business and having these inputs nearby. One of the reasons America is the world leader in software and why Japan is uncompetitive, for example, is because of the shortage of software engineers in Japan. Software engineers are scarce in Japan because Japanese universities are so bureaucratic and centralized that it takes years to change the curriculum. Japanese universities are good at training electrical engineers, but not very good at training software engineers. My favorite illustration of the role of specialized inputs in international competition is the Dutch flower industry. The Dutch are responsible for 65 percent of all the world exports of live and cut flowers. (I will use this example again when I talk about the environment because it is quite an interesting example.) The two most important inputs to the flower business are land and climate. Anyone who has been to Holland knows that it fails on both counts. The Dutch literally have to reclaim land from the ocean, and the weather is dreadful. Yet the Dutch are the world's leaders in the industry. How could that be? Keynote Address — Professor Michael E. Porter ------- Page 36 Clean Air Marketplace 1993 The answer is that they have created unique pools of highly specialized inputs for that particular business. They have major research centers dedicated to flower technology: growing, shipping, handling, packaging. That is an advantage. Having a good university, strong in basic research is great for the world's scientific community, but does not create competitive advantage. Basic scientific knowledge flows freely around the world. Having specific expertise in how to apply technology to growing flowers is an advantage. The only way to gain such an advantage is to actually be there, in Holland. Holland also has five auction houses tailored to handling, selling, shipping, and processing flowers. In those auction houses, one can see carts of flowers being towed around by computer-guided vehicles, passing through a Dutch auction room. The buying process occurs in about 3 seconds. There are buyers sitting with buttons and the auction clock goes down (Dutch auctions start at the high price which falls until someone pushes the button). The first person to push the button buys the flowers. That person's code is attached to the cart, which is routed to that buyer's shipping and handling facility. Within 20 minutes, those flowers are at Schipol Airport in a container bound to the United States. It is an awesome, specialized infrastructure, and it represents a competitive advantage. Simply having highly developed airports, water ports, and roads, however, is not. Paradoxically, having a shortage can sometimes be an advantage. One of the reasons that the Dutch are so good in the flower business is that they do not have good weather. If the weather was good, the Dutch would plant flowers outside and pray for good weather. Not having good weather forced the Dutch to come up with a different way to grow flowers. Their solution was to cultivate flowers in greenhouses all year round. Adopting such a strategy would pose a tough tradeoff for a nation with a good climate (i.e., why build a greenhouse that you are only going to use three months a year?). For the Dutch, it was easy. Once the Dutch committed to greenhouses, however, they could control every single thing about the environment of the flowers. Going into a Dutch flower greenhouse is kind of like being in a spaceship — high technology, sensors, automatic shutters to control the sunlight, and the sprinklers to regulate humidity. Competitiveness comes from the ability to create unique, specialized technology and keep advancing that technology over time. When a nation has an abundance of labor, an abundance of land, and an abundance of natural resources, conversely, it does not normally create unique, specialized technology. Abundance leads firms to use the input inefficiently and unproductively. Competing on cheap inputs alone used to work when we had an insular, closed economy. Now, when the U.S. competes with many other countries with even cheaper labor and even cheaper raw materials, this strategy fails. The only way to succeed is through innovation. And to innovate, one needs specialized inputs. Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 37 Demanding and Trend Setting Home Customers If home customers will accept whatever you already provide, and if they do not push you, your firm will never be internationally successful. To be internationally successful, companies need home customers that are very demanding. You need home customers who have problems early — before customers elsewhere in the world. This way, firms can understand those problems better and you can keep adapting your products and services to address them. A Critical Mass of Local Suppliers and Related Industries Internationally competitiveness depends on a critical mass of local suppliers with which to work. While machines, components and services can be bought from around the world, a company needs a critical mass of suppliers that are based nearby to work with interactively, on a continuous basis, and in the same language. Otherwise firms will have a hard time being innovative enough to be truly competitive. Firms hold on in the price-sensitive segments, and in the less sophisticated parts of the market, but without local suppliers firms will have a hard time being truly competitive. A Context of Vigorous Local Competition Finally, competitiveness is crucially affected by local competition. We found very few internationally successful industries where there is only one company based in a particularly successful country. Much more typical is an example such as the German auto industry, in which we find companies such as Mercedes, BMW, Audi, and Porsche, all located within a relatively small geographic area. Why is local rivalry necessary? In a static view of "low cost", having a number of rivals divides up the home market and causes duplication — a word heard often in Washington these days. But in a world where innovation puts pressure on local rivals, there is much more rapid improvement. The best analogy I have been able to come up with was given to me by a German CEO: // you are trying to become a really good runner, one way to improve is to run against a dock. Your coach is there with a stop watch. Ready, set, go. Run around the track. Click... look at your time. Tell yourself you can do better. But, if you really want to be a world class runner, you need somebody breathing in the next lane. You need someone there who is sort of like you, that is in similar circumstances, that is showing you that it can be done and is forcing you to improve. Particularly in sports, science, and the arts, the power of local rivalry is pervasive all forms of human endeavor. Good sprinters, for example, occur in Keynote Address — Professor Michael E. Porter ------- Page 38 Clean Air Marketplace 1993 clumps. There are three or four of them at the same time at UCLA, or some other location, they all become Olympic medalists — because they push each other, because they challenge each other. We find the same thing to be true in business competition. Competitiveness and the Environment Now what does all this mean for the environment? This perspective about competitiveness has a profound implications for how we must think about the environment. It also suggests that we have been framing the environment-competitiveness issue in a way that is not advancing either company or environmental goals as rapidly as they could be. The tendency in thinking about the environment has been to view it as a tradeoff. On one side of the tradeoff are some social benefits through strict environmental standards. There is a debate about how big the social benefits are: about how much improvement in life expectancy results, and how big the health risks are, etc. I will put this issue aside. Let us assume we know what the social benefits are. Sustainable development concepts are giving us a broader perspective on the social benefits of a clean environment might be. On the other side of the tradeoff is industry competitiveness. The idea here is that obtaining environmental benefits will involve private costs. Industries must bear costs in order to improve environmental outcomes. The prevailing view is that there is an inherent tradeoff. To get the social benefits, a nation or state inherently and inevitably must bear private costs. There are numerous problem with framing the issue this way. First, it means that the process of environmental improvement becomes a power struggle. Using this perspective, there are two sides with diametrically opposed objectives. Progress on the environment becomes a kind of an arm wrestling match. The struggle goes a little bit one way when Republicans are in power, and the other way when the Democrats are in power. The problem is that the wrestling match itself consumes enormous amounts of energy and resources. If we had the data, I would submit that it would show that a substantial fraction of the revenues from environmental products and services industry is consumed in the struggle, not in cleaning up the environment. Struggle Metaphor The struggle metaphor (i.e., "we must push harder to get tougher standards", "we must beat standards back", also creates a lot of uncertainty in the minds of industry. This is the true enemy of progress. If companies are uncertain about what environmental regulations are going to be, and think they can be delayed or modified, they will hold back investment. They will not push forward on programs to really deal with environmental issues. The arm wrestling match guarantees that progress will be quite slow. Both sides will battle over one inch of territory, not unlike World War I. Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 39 Now as you have probably already guessed, I do not believe that the struggle perspective is the right way to frame the issue. The focus should not assume a fixed inherent tradeoff, but on how we can relax that tradeoff as much as possible, and perhaps even eliminate it. This framing of the problem provides an opportunity for what economists call a "positive-sum game" Making the environment-competitiveness nexus into a positive-sum game, however, will require some profound changes in just about every aspect of the way in which we think about environmental issues, craft regulations as well as in the way companies, EPA and environmentalists behave. The Static View of Environmental Regulations The struggle metaphor grows out of what I would call a static view of environmental regulation. A static view is one in which everything is held constant, but environmental regulations are imposed. Technology, products, and customer needs are held constant. In this static world, environmental regulation raises costs and, with a downward sloping demand curve, reduces profits in the private sector. In a static world, environmental regulation inevitably reduces competitiveness. Assuming that the U.S. is more regulated, and more strictly regulated than a variety of other countries, compliance in a static world will inevitably inflict higher costs on U.S. industry that will lower domestic profitability, and/or lost sales if competition is international. Regulation will create some demand for environmental products and services; so although regulation will inflict costs on the affected industries, environmental products and services suppliers will benefit. That will provide a partial private offset against the cost, assuming that there are capable domestic suppliers of pollution control services and equipment. But the two will not balance, and the economy will be worse off. The nation may gain a cleaner environment, but at the expense of private costs that can be substantial. The Dynamic View My previous discussion should suggest to you that we are not in a static world. And indeed, the static mentality represents the old view of competition which we must shed. What we are in, instead, is a dynamic world. We are in a world where everything does not stay constant. Just because we impose environmental regulation does not mean we have to hold everything else the same. In a dynamic world, of course, things can look very, very different. In a dynamic world, firms can respond to environmental regulation or even anticipate it with innovation. This innovation can take one of two broad forms. One form consists of new technologies and approaches that minimize the costs of compliance. Here, we get smarter and smarter on how to deal with toxic materials, or process emissions. But there is another form of innovation that is even more interesting Keynote Address — Professor Michael E. Porter ------- Page 40 Clean Air Marketplace 1993 and more exciting. These are innovations that address environmental regulation which simultaneously leads to improved products and processes. Think of it as a bonus, In innovating a deal with an environmental regulation, a firm may also benefit the core product or process itself. This produces what we call an innovation offset, which can partially offset the net cost of compliance. In some situations, the innovation offset may be greater than the cost of compliance. We have documented quite a number of cases where the compliance with the environmental regulations had a net profitable impact on the company. Not only was there zero cost, but there actually was a negative cost in dealing with environmental regulation. If environmental problems can be addressed through innovation, we also get another bonus. Innovative solutions will not only help the affected industries be more competitive, but also help U.S. suppliers of environmental products and services industry be more competitive. To the extent that firms are innovating to deal with environmental problems, local suppliers will gain a competitive advantage in selling those environmental products and services in foreign markets where the demand for innovative technologies is exploding. Answering the Critics I originally put forward the argument that strict regulation was not inconsistent with competitiveness in a short Scientific American essay. This essay has received a good deal of scrutiny, far beyond what I could have predicted. It has been warmly received by many, especially in the business community. But I have also had my share of critics, especially among economists. One criticism of my argument is easily dealt with. Some have read my Scientific American essay to say that I believe that I believe that strict environmental regulation inevitably leads to innovation and competitiveness. This is not what my argument is, nor what the essay actually says. My argument is that innovation to minimize and even offset the cost of compliance is possible in many circumstances, provided that regulations were properly crafted. We must focus, then, on relaxing the trade-off between the environment and competitiveness rather than accepting its as given. Any innovation offset is a plus for both the environment and industry. Yet there are more legitimate criticisms that must be dealt with. One is that the opportunity for innovation offsets is exceedingly rare, even though theoretically possible. Here, our argument is that the most important reason we would expect innovation offsets in many circumstances is the nature of pollution itself. Pollution is the emission or discharge of a harmful substance into the environment. If you think about it, pollution if fundamentally a manifestation of economic waste. It involves incompletely using a resource, throwing a resource away, or burning something. The opportunity to lower cost by eliminating pollution, then, seems anything but rare. Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 41 Think of the analogy of quality. Companies used to think about quality in terms of reducing the number of defects. To do so, the prevailing practice was to have many inspections. Then the idea was to have a really good service organization in order to correct the product quality problems that turned up in the field. As we have rethought the quality issue, however, this approach has proven to be the wrong one. The best way to think about quality is to figure out how to build in quality at the source, which is usually in the design, the purchased components, the process technology, the shipping and handling techniques, and so forth. Inspections and the need for a large service organization can be dramatically reduced. This leads to the off-quoted phrase, "quality is free." Given the nature of pollution, I think the analogy with quality is a good one. There is every reason to believe that we could have substantial innovation offsets in many circumstances. Another observation is that estimates of regulatory compliance costs are systematically biased upward. Estimates prior to regulation are usually higher than the actual costs, because early estimates assume no innovation. In coatings, for example, early estimates involved holding everything else constant and added a hood to capture the fumes from the paint line. Yet, it has proved possible to remove the volatile compounds from the paint, and eliminate the need for the hood altogether. Moreover, the new solvent could be water rather than an expensive chemical. The compliance cost estimates used by most studies are those self reported by industry, and no one every goes back and compares them with actual practice. Net compliance costs are biased upward in every single study that shows that environmental regulations raise costs and harm competitiveness. All such studies measure is cost. The models literally assume away any innovation benefits. How, then, could econometric studies reach any other conclusion than they do? Moreover, traditional approaches to regulation have not fostered innovation and thus imposed unnecessarily high costs of compliance on industry. My joint research with Dr. Claas van der Linde of St. Gallen University, work by the Management Institute for Environment and Business, and other research has started to assemble a body of case shady evidence that provides quite striking examples of innovation to respond to environmental regulation. These innovations sometimes created offsets that exceed the cost of compliance. Let me return to the Dutch flower industry. The industry has a serious environmental problem. Cultivating flowers intensely in small areas creates pesticide and fertilizer contamination of the soil and groundwater. The Dutch have understood that they only way to really address this problem is to innovate by moving to a closed-loop system. In advanced Dutch greenhouses, flowers grow in water and are not in contact with the soil. The water circulates and contains the fertilizers and pesticides. Water is reused, and the need for fertilizers and pesticides is reduced, because of the absence of soil and a lower risk of infestation. By designing the cultivation platforms correctly, it is also possible to reduce handling cost. In eliminating the Keynote Address — Professor Michael E. Porter ------- Page 42 Clean Air Marketplace 1993 environmental problem, then, the Dutch have simultaneously lowered cost and even improved product quality. Stringent regulation can actually enhance competitiveness because it pressures greater innovation offsets. Relatively lax regulation can be dealt with easily without innovation, and often with "end-of-pipe" solutions. More stringent regulation, however, requires more innovation. While the cost of compliance may rise, so also does the offset to these costs because of the innovation. Thus, the net cost of compliance often seems to fall with stringency and may turn negative! This is before adding in the innovation benefits for supplier industries. There are many such examples, and the numbers will proliferate as companies (and regulators) become more sophisticated and shed old mindsets. And I am taking into account any benefits from so-called "green demand" (consumers wanting more environmentally friendly products). Instead, the static mindset has created a self-fulfilling prophecy of ever more costly environmental regulation. It has also spawned an entire industry of litigators and consultants fighting over regulation, driving up costs, and draining resources from real solutions. The Need for Regulation One of the most common criticisms of my argument is that if there is money to be made innovating to deal with environmental regulation (i.e., if you can actually offset the cost of compliance), why is regulation necessary? If such profitable opportunities existed, companies would already be pursuing them. The first answer to this criticism is that some companies do, especially in European companies such as Germany and Scandinavia where both companies and consumers are very sensitive to environmental issues. While this may be more true in the United States in future decades, we are now in a phase of our industrial history where companies are inexperienced in dealing creatively with environmental issues. The environment has not been a principal area of technological emphasis. Regulation is needed for five major reasons: Regulation signals and provides information to companies about potential payoffs. A typical company has numerous avenues for technological improvement and limited attention and resources. Companies are inexperienced in measuring environmental impacts, understanding the full costs of toxicity and discharges, and conceiving of new approaches that reduce discharges or eliminate hazardous substances. Regulation rivets attention to this area of potential innovation, just as total quality programs have in the 1980s and early 1990s. Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 43 • Regulation reduces uncertainty about the demand for solutions to environmental impacts. Regulation reduces uncertainty that investments to address the environment will be valuable. • Pressure from regulations acts as a motivator. My work on competitiveness highlights an important role of pressure in the innovation process, to overcome inertia and foster creative thinking. Strict regulation, if it structured to allow innovative solutions, fosters progress. • Regulation addresses the case of incomplete offset. It is not always possible to completely offset the cost of compliance through innovation. There will still be a net cost of compliance, but nearly as large a cost as dealing with environmental problems without innovating (e.g., by adding a hood to capture the fumes versus changing the paint). • Leveling the transitional playing field. During the transition period to innovation-based solutions, regulation ensures that one company cannot opportunistically gain position by avoiding environmental investments. It provides a buffer until new technologies become acceptable. Barriers to Innovation My central message is that there is great potential to limit or relax the tradeoff between environmental regulation and competitiveness via innovation. To the extent that we can relax the tradeoff or even eliminate it, the nation will enhance the competitiveness of its companies and suppliers at the same time as it makes progress on environmental quality. Yet considerable barriers are present in our current system. Perhaps the most important single barrier is mindset. As long as the constituencies see environmental regulation as a fundamentally adversarial, win-or-lose process, innovative solutions will often not even be considered. Other barriers to innovation can be divided into two categories: The Content of Regulatory Standards One of our problems in the United States is that we have gone about regulation in a way that actually makes it difficult, if not impossible, to introduce innovative solutions versus "put-the-hood-over-the-paint-line" solutions. What we should be doing is regulating outcomes, not technologies. Instead, the phrase "best available technology" is deeply rooted in American thinking, which almost guarantees that innovation will not happen. It raises the perceived risk and thereby creates major disincentives for any company that attempts to deal with an environmental problem in an innovative manner. Our regulations must encourage product and process changes rather than treating discharges. Keynote Address — Professor Michael E. Porter ------- Page 44 Clean Air Marketplace 1993 We must make sure that our environmental regulations are in synch (but slightly ahead) with the rest of the world. We must avoid adopting philosophy A when every other country in the world is pursuing philosophy B, or the competitiveness of U.S. companies and U.S. suppliers of environmental products and services will be undermined. We need significant phase-in periods for regulations. We need to give companies as much flexibility as possible to address environmental problems in fundamental ways. WE need to understand how unrelated regulations regard innovation. To eliminate CFCs and HCFCs from refrigerators, for example, one solution involves a mix of small amounts of propane and butane. But safety regulations in the United States seem to have impeded a shift to the new technology, while European companies are already marketing new products. We need to do more of what the Clean Air Act has finally started to do, which is to build market incentives for innovation into regulations. Finally, we need to rethink some of the liability issues. Liability exposure in the United States works against new innovative approaches, and leads companies to take safe, "best available technology," "what everybody else does" approaches. We must provide adequate safeguards against companies recklessly harming citizens, but recognize the health and safety benefits of innovation. The Regulatory Process I suspect that even more important than the content of regulatory standards as a barrier to innovation is the process in place in the United States for setting, implementing, and enforcing the standards. It is hard to imagine a regulatory process that is more anti- innovation than the one we have in this country. What kind of a regulatory process do we need? We want to process where industry accepts standards as a given and starts doing something to meet them, rather than spending years dodging and feinting trying to water down standards and learning what they will actually be. In our current system, once standards are finally settled, it is often too late to address them fundamentally. We need more certainty and predictability, so that it pays to innovate rather than adopt a short-term expedient. We need to evolve toward a regulatory regime in which the EPA makes commitments that standards will be in place for, say, five years, so that industry can lock in and innovate around them instead of hedge against the next twist or turn in direction. We need substantial industry participation in setting standards right from the beginning — not industry participation in the arm-wrestling mode. The industry must develop the trust to provide genuine information reactions, and regulators must develop the trust to take it seriously. We need a much more efficient process that minimizes the resources expended on the process versus cleaning up the environment. A crucial priority is new forums which Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 45 minimize litigations. In Massachusetts, there is actually a money (filing fee) back guarantee if a company does not get an answer on the permitting process within 60 days. While this may seem trivial, the Department of Environmental Protection has not missed it once. These sorts of approaches must proliferate. We need the different parts of government to organize themselves so that companies can understand again what the requirements really are. We need strong technical capabilities among regulators so that regulation and enforcement can understand and accept novel solutions. Finally, we need to build innovation incentives into not only standards but the regulatory process. In Massachusetts, for example, the Commissioner is able to waive permits in some circumstances or promise an immediate permit if it will take a zero-discharge approach, versus a "careful review" if the company wants to continue discharges. This creates strong incentives for innovation rather than end-of-pipe solutions. Imperatives for Companies If we adopt this new perspective, what are the implications for the constituencies now engaged in the environmental area? Companies, first and foremost, must start to recognize environmental regulation and environmental issues as a strategic opportunity — not as an annoying cost, not as a threat. The early movers, the companies that can seize the opportunity first, that embrace innovation-based solutions, will reap major competitive benefits. We are already seeing the competitive advantage of environmental innovation in a widening array or cases. Companies must start by deeply understanding and measuring what it is that they are doing that impacts the environment. One of the reasons that companies are not very innovative about the environment is ignorance. Companies have not analyzed the true cost of toxicity, waste, and discharges. Relatively few companies look not only at the out- of-pocket costs of these things but also the opportunity cost. How much money is going up the smoke stack? What portion of inputs are being wasted? What are the second-order impacts of waste and discharges on other activities? Once environmental impacts are understood, companies must make innovation- based solutions the expectation. In order to find such solutions, environmental strategies must be embedded in overall competitive strategies. They must be a general management issue if the sorts of process and product redesign needed for innovation is to occur. The more environmental issues are delegated to individuals without profit responsibility, the more a company will tend to get incremental solutions. Finally, companies are clearly going to have to start investing in new kinds of innovation and 'new technologies that have not been seen as relevant to their businesses. These sorts of capabilities are necessary to really address environmental issues. Keynote Address — Professor Michael E. Porter ------- Page 46 Clean Air Marketplace 1993 Imperatives for EPA Given this perspective, what is an appropriate mission statement for the EPA? I want to emphasize that what follows is not officially sanctioned, but I offer it as illustrative. A central goal of the EPA should be to promote innovation to enhance environmental quality, including innovation in compliance technologies and innovation in ways to offset compliance costs via more efficient processes or better products. EPA's central mission would be to foster innovation because it lessens the tradeoff between environmental benefits and private costs and will lead to the fastest rate of true progress in environmental quality. The EPA's regulatory standards would be to set to maximize innovation potential. Every single standard that was issued would be scrutinized deeply from this perspective, to encourage innovation-based as opposed to status quo solutions. Some important principles for standard setting have been outlined earlier. Similarly, the regulatory process would be fundamentally reexamined to minimize cost and to foster innovation. Legislative changes may well be required. There is also a need to change the way the EPA deals with the states. Right now, the EPA measures state performance in terms of how many inspections are conducted, not how much improvement in environmental quality they achieve or cost/benefit rations of improvements in various areas. The EPA must move beyond the medium (air, water, etc.) as the principal way of thinking about the environment. It would reorganize around affected industries to better understand industry processes and technology and its total set of problems. This will foster innovative rather than piecemeal solutions. We also need to eliminate the practice of hiring multiple inspectors of the same plant who do not talk to one another, and consume time and resources unnecessarily. To play its modified role, the EPA would not only worry about affected industries but also about the nation's environmental products and services suppliers. The health of this sector is crucial to the pace of innovation. There would be an explicit strategy for upgrading this sector, not only because it will be crucial in addressing America's environmental problems but because it is a major potential area of competitiveness in our economy. The EPA would employ a lot of demonstration projects to stimulate and seed new technologies. I would caution against heavy reliance on government laboratories for these projects because this will slow diffusion. Instead, the EPA should be encouraging private sector entities such as universities and industry associations to pursue such efforts. A major point of leverage for the EPA is to harness the role of government as a buyer. The EPA would coordinate procurement of environmental products and services Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 47 throughout government. The aim would be that government act as a sophisticated and demanding buyer that demands innovative solutions to environmental problems. There is going to be a lot of money spent by the Federal government on environmental issues in the next decade. This spending should be pro-innovation, where the government provides a market for innovative solutions rather than old solutions. Finally, EPA would play a major role in creating information on the economics of compliance, innovation, best practice, trade in environmental equipment and services, and other topics which will speed innovation and sharpen our understanding of these issues. The Role of Environmentalists This way of thinking also casts new light on the appropriate role of environmentalists. While the "progress at any cost" stage was probably necessary, it is time to move beyond it. It would submit that the best way to further the goal of environmental quality today is to foster an innovation mentality. Environmentalist groups should be speaking out for regulatory standards that are pro-innovation. They should devote substantial resources to educate the public to create a demand for environmental solutions, which will motivate companies to supply them, rather than only addressing the supply side. They should also be thinking differently about their role in the regulatory process. Rather than prolonging uncertainty, environmental groups must work to reduce the uncertainty about acceptable and appropriate standards. Rather than consuming resources in filings and litigation, the focus should be on maximizing the proportion of resources devoted to actual solutions. Environmental organizations need to develop deeper interaction with industry. Our environmental organizations could become sources of information and best practice about how to innovate your way around environmental problems. Some of the resources of environmental organizations could also be used to fund research on minimizing the cost of addressing environmental problems, especially as it applies to fragmented industries composed of many small companies. Closing Remarks In summary, we need a whole new way of thinking about the environment- competitiveness nexus — a way that is closer to the reality of modern competition. We need to focus on relaxing the tradeoff rather than heightening it. We need an approach that minimizes, and ideally eliminates, the energy, time, and resources spent not on improving the environment but on the struggle over regulation. It is not at all surprising that the environment-competitiveness debate has emerged the way it has. But now is the time for a paradigm shift to carry us for the next several decades. The real winners among environmentalists, regulatory agencies, companies, and suppliers will be those that can adopt innovation-based solutions rather than accepting current technologies or established approaches to compliance. Keynote Address — Professor Michael E. Porter ------- Pa9© 48 Clean Air Marketplace 1993 Keynote Address — Professor Michael E. Porter ------- Clean Air Marketplace 1993 Page 49 Session 3 — Panel A Electric Power Technologies Septembers, 1993 2:00 p.m. - 4:00 p.m. Moderator: Panelists: Paul Stolpman Eugene Crossland William Elliott Steven Feeney John Huffman Presentations Eugene Crossland, Pure Air, introduced his remarks by explaining the role of Pure Air. Pure Air is a partnership between two Fortune 200 companies — Mitsubishi Heavy Industries America (MHIA), an SO2 scrubber technology company, and Air Products and Chemicals, a company which provides long-term clean air services. Pure Air is involved with a Department of Energy (DOE)-sponsored Clean Coal Demonstration project at the Bailly Station. This powerplant is owned and operated by Northern Indiana Public Services Company (NIPSCO). Pure Air has constructed an SO2 scrubber at the Bailly Station and through a project company owns and operates the scrubber under a 20 year contract with NIPSCO. The Clean Air Act Amendments create a large market for SO2 removal. As a result of this legislation, there was a shift from "command and control" to "least-cost compliance" where each utility must select the compliance option that provides the least cost option for the utility. The Bailly Station project couples advanced technology and the unique Own-and-Operate commercial arrangement to provide a least-cost compliance package. DOE has been awarding money for jointly-funded demonstration projects under the Clean Coal Program. The Bailly Station was awarded funding under the Clean Coal Round II program. DOE provides up to 50 percent funding for design, construction, and operation of projects to demonstrate new clean air technologies. The goal of the Bailly project is to include all viable, advanced technology developments and commercial features to provide a low-cost air pollution control system. The Bailly Station project between Pure Air and Northern Indiana Public Service Company (NIPSCO) was given $63 million by DOE and came on-line in June 1992. Under this project, a large single-module scrubber Session 3A — Electric Power Technologies ------- Page 50 Clean Air Marketplace 1993 system was built to service two boilers at the facility, a concept which is unique in the field of clean air technology. The following table illustrates some features of the NIPSCO/Pure Air project: High SO2 Removal Single 600 MW Module Multiple Boilers Maximum Fuel Flexibility High Efficiency Oxidation System Commercial-Grade Gypsum Dry Injection of Powdered Limestone SO2 Allowances Over 95 percent 99.9 percent availability 99.9 percent availability 2 percent to 4.5 percent sulfur testing Complete FGD system requires less than 1.5 of total station capacity 100 percent sold to the a wallboard facility in percent the area Reduced capital cost Pure Air and NIPSCO shared credits The Bailly Station project is a co-current wet limestone flue gas desulfurization (FGD) system. In this system, the SO2 is converted to calcium sulfite, then is oxidized to form calcium sulfate (gypsum). A centrifuge is used to dewater the Gypsum. Gypsum, a commercial by-product as opposed to waste, is made into wallboard. The chemistry is simple; but what is unique is the order of magnitude of the system and its efficiency. Efficiency is a key to this system; this is accomplished by a large single module which is unique in the industry. What is also unique about the Bailly Station is the partnership which was formed between Pure Air and NIPSCO. Pure Air owns and operates this scrubber and is under a 20-year contract with NIPSCO. Once the three-year demonstration project is over, Pure Air will continue to operate at the facility for 17 additional years. Therefore, Pure Air provides a scrubber service to NIPSCO. William Elliott, Vice President and General Manager, Electric Supply, Northern Indiana Public Service Company (NIPSCO), gave explanatory remarks about NIPSCO. NIPSCO Industries, Inc. is an energy-based holding company. Its largest subsidiary, Northern Indiana Public Service Company, is a regulated natural Session 3A — Electric Power Technologies ------- Clean Air Marketplace 1993 Page 51 gas and electric public utility company serving a 12,000 square-mile area with a population of 2.2 million people. The Bailly Station project, a partnership between NIPSCO and Pure Air, is a demonstration project for the DOE Innovative Clean Coal Technology Program. The program and the partnership provided Bailly Station with superior technology, experience in chemical processes and, due to DOE's program, a 20-year contract. The partial funding from DOE provided a benefit to NIPSCO's customers by reducing the cost of environmental controls needed to comply with Clean Air Guidelines, and allowed NIPSCO to continue to burn high-sulfur coals found in their State. This, over time, benefits the Indiana Coal Industry and provides NIPSCO customers with low-cost fuel flexibility. As the project advanced, the Indiana Utility Regulatory Commission, United States Gypsum, and numerous suppliers and trade unions joined the partnership. Start-up at Bailly Station occurred on June 2, 1992, and commercial operations commenced on June 15, 1992. Between start-up and June 1995, six one-month demonstration tests will be performed to assess scrubber operations with a variety of coals. All will be bituminous coals with sulfur contents ranging from 2.0 percent to 4.5 percent. The partnership presented a new concept for NIPSCO. In the past, we have entered into many partnerships, especially in generating stations; however, these partnerships have been "maintenance" related. Leasing space to an outside company to build, own, operate, and maintain a plant attached to NIPSCO equipment presented an uncertain and an unsettling concept. However, further analysis of the concept indicated that the ultimate benefit of this partnership would rest with NIPSCO and our customers, resulting from Pure Air's years of design, engineering, and chemical operating expertise. The result would be a plant with minimized operating costs and guaranteed maximum efficiency over the contract period. The operating characteristics of Pure Air have been outstanding. During the past twelve months, the Pure Air facility: Scrubbed 3,123,314 MWH; • Had a facility availability of 99.93 percent (in hours) and 99.97 percent (in MWH); • Removed 79,248 tons of SO2; and • Shipped 216,344 tons of by-product gypsum to U.S. Gypsum. Session 3A — Electric Power Technologies ------- Page 52 Clean Air Marketplace 1993 Our teamwork allows us the opportunity to think about what NIPSCO does best — generate electricity. Therefore, there has been an improved station operating performance perspective since the Pure Air facility came on line. The statistics for the year to date demonstrate significant improvement in forced outage rate and availability: • Forced Outage Rate: > 0.74 percent Actual •> 7.62 percent Goal (or 6.68 percent under plan) • Availability: > 90.12 percent Actual •• 82.96 percent Goal (or 7.16 percent over plan) Heat Rate: > 10,174 BTU/kWh Actual - 10,059 BTU/kWh Goal (or 1.1 percent over plan) In closing, NIPSCO has made a long term commitment to the Northwest Indiana Region's clean air standards with the emphasis on keeping costs competitive. There will continue to be a commitment to our partnerships with Pure Air, U.S. Gypsum, the State of Indiana, the Department of Energy, and many others. The last twelve months of operations prove that this blending of people and machine technology are worth using elsewhere to meet clean air standards. John Huffman, Project Development Manager, Kenetech/U.S. Wind Power Inc. On the surface, the resource planning challenge seems straightforward. Most utilities enjoy a favorable position with low energy costs, new base load capacity needs after 2000, and combustion turbines in the near term for peaking power. However, recent events have created uncertainties. The Clean Air Act Amendments of 1990 (CAAA) created uncertainty surrounding SO2 allowance prices, ultimate NOX compliance requirements (Title I), and possible air toxic emissions caps (Title IE). In addition, there are potential for energy taxes, CO2 reductions, and an uncertainty about future prices and availabilities of fuels. All of these uncertainties must be reconciled with increasing pressures to keep costs low. In the past, utilities did not consider wind power because early turbines had unproven technical reliability and poor economics. However, ENETECH/U.S. Wind Power Inc.'s (the world's largest wind power company with over 750 employees) recent Session 3A — Electric Power Technologies ------- Clean Air Marketplace 1993 Page 53 introduction of the 33M-VS Wind Turbine dramatically changes wind power's potential. Wind power can now help utilities deal with resource planning uncertainties and wind may be the least cost CAAA compliance option while hedging against fuel price risks and additional environmental regulations. Wind power evolved in the 1980's into a mature generating technology with a proven 1,600 MW installed in California, with current availability rates exceeding 95 percent. Wind has also proven to be a predictable source of power with seasonal and time-of-day patterns. But despite rapid gains, the economics of wind power were not competitive with conventional power plants until U.S. Wind Power developed the 33M-VS Utility-Grade Advanced Wind Turbine with key utility partners: Pacific Gas & Electric, Niagara Mohawk Power Corporation, and Electric Power Research Institute. Development was completed one and one-half years ago and the technology breakthrough of the product is its variable speed operation. The 33M-VS wind turbine delivers power at 5 cents/kWh power, making it competitive with conventional plants. In addition, wind power provides a wide range of environmental benefits compared to conventional power plants because it has zero emissions. The Energy Policy Act of 1992 included a production tax credit for wind, thus making wind power more advantageous than conventional power plants. The Energy Policy Act provided wind power with a 1.5 cents/kWh tax credit which escalates with inflation for projects placed in service between 1994 and 1999. Thus, on a real levelized basis, and with lower-cost utility financing, the cost of wind is approximately 3.6 cents/kWh. U.S. utilities have committed to over 430 MW so far with 165 MW windplant purchases, 20 MW power plant purchases and 250 MW in joint development agreements. Utilities using the 33M-VS Wind Turbine include: New England Power, Iowa-Illinois Gas & Electric, PacifiCorp and Bonneville Power, Portland General, SMUD, and Puget Sound. Some near-term, publicly-known opportunities for the wind industry include 100 MW of wind power to Northern States Power, 50 MW (AVG) of renewables to Portland General, and 700 MW of renewables to California utilities. Wind Power can add near-term economic value as a least-cost CAA compliance option by displacing marginal (SO2 emitting) energy. Wind's source of value comes from: capacity value, energy savings, SO2 savings, and production tax credits. The value created offsets wind's capital cost, creating a negative cost of compliance (a savings). Wind can create savings for every ton of SO2 removed making it the least-cost compliance option, regardless of where the market price for SO2 allowances settles. The sources of value described in detail are: • Capacity Value: Wind's capacity value is the highest when there is a high correlation between the wind resource and utility peak load. Session 3A — Electric Power Technologies ------- Page 54 Clean Air Marketplace 1993 Energy Savings: Wind has zero fuel costs and stable O&M costs, making it valuable as a fuel displacer, even when coal is on the margin. Also, wind acts as a hedge against uncertain future fuel prices. • SO2 Savings: By displacing marginal energy, wind frees up SO2 allowances which can then be used or sold for profit. • Production Tax Credits: 1.5 cents/kWh escalating. Wind creates value as a CO2 mitigation option making wind preferable to tree planting as a compliance option while providing an excellent hedge against carbon taxes. In conclusion, wind power is a proven technology and is feasible in today's economy. It is an excellent hedge against future energy taxes, additional regulations on emissions of CO2, NOX/ and toxic air pollutants, and future prices and availability of other fuels. It also offers other advantages such as short development and construction lead- times. Steven Feeney, Manager of Upgrade Projects and Services, Environmental Equipment Division, Babcock & Wilcox, Inc. Babcock and Wilcox is part of McDermott International, a company with $3.1 billion per year in revenues, traded on the New York Stock Exchange. The following are engineered products of the Environmental Equipment Division of Babcock & Wilcox. • Wet Flue Gas Desulfurization (Wet FGD) is a staple of the environmental equipment division. As a result of Phase I of Title IV of the Clean Air Act Amendments of 1990, Babcock & Wilcox led the market with five contracts for Wet FGD's. Of these five, two have been delayed and three are currently under construction. There were a total of 18,425 MW contracted for in the U.S. as a result of Phase I. Of this, 4,350 MW have been delayed and 14,075 have been confirmed. The three leaders supplying equipment are Babcock & Wilcox, ABB, and General Electric. Some of the companies which have delayed construction in Phase I are Commonwealth Edison, CEI, Illinois Power, Niagara Mohawk, and Tampa Electric. • Selective Catalytic Reduction (SCR) is a technology utilizing a catalyst located downstream of the economizer on a utility boiler and upstream of Session 3A — Electric Power Technologies ------- Clean Air Marketplace 1993 Page 55 the air heater. In the process ammonia is injected in front of the catalyst and NOX is reduced to nitrogen and water. Throughout the world, 100,000 MW have been installed, 23 percent of these by Babcock & Wilcox or its licensor, Babcock-Hitachi. • Electrostatic precipitators are a participate removal device. Babcock & Wilcox has 30,000 MW of electrostatic precipitations installed worldwide with our German Licensee, Rothemuhle. • Dry Flue Gas Desulfurization (Dry FGD), of which approximately 6,000 MW of utility systems are in operation in the U.S., generally with low-sulfur Western coals. Typically, Dry FGD is considered appropriate for low-sulfur Western coals. However, this perception is changing. Dry FGD has not been a popular compliance option as a result of Phase I; no projects have been sold. • Clean Coal Technologies involve advanced technologies for the reduction in emissions of SO2, NOX, and particulates. • Condenser Heat Exchange (CHx) is a heat recovery system. CHx is a technology which hopefully will reduce air toxics in the future. The technology involves teflon coated tubing which can operate below the acid dew-point without affecting the tubes. It has found widespread use in heat recovery, but it will prove to be an air toxics control device. There is also an international focus to Babcock & Wilcox. Currently Babcock & Wilcox has joint ventures in Mexico, Turkey, China, India, and Indonesia. Market trends for the future include: • Fuel switching — 60,000-65,000 MW of fuel switching resulted from Phase I. Many times, fuel switching requires boiler and accessories modifications. • NOX — called the awakening giant — represents a very large market in the future. Non-attainment requirements may make NOX a bigger capital investment than SO2 in the future; • Phase II of CAA Amendments of 1990, starts in the year 2000 — Delayed by a few years, the decision of customers and as a result, there is little activity; • Allowance market — This could be big in the future. There is a way for existing FGD systems to inexpensively upgrade their units and remove more SO2. If a company could upgrade its units for greater SO2 removal Session 3A — Electric Power Technologies ------- Page 56 Clean Air Marketplace 1993 and receive credit in Phase I through a "substitution plan," in many cases it would be an extremely low-cost option. Recently, however, EPA sent a proposal to OMB to change the substitution rules and EPA is not taking any more permits or plans for substitution. This could be a fatal blow for a low cost option. EPA should revisit the policy of substitution for those units which actually reduce their SO2 emissions below where they otherwise would have been without the planned substitution. Questions and Answers Wliat is the difference between the utility building a scrubber and Pure Air building the scrubber? Since utility companies are a regulated community, they can not push the edge of technology. The scrubber system that the utility would choose may be different than the one Pure Air chose to build since Pure Air is a non-regulated company. For example, it is unheard of for a utility to tie together two boilers to one scrubber. Also, the operating philosophy is different because Pure Air sees a scrubber as a chemical plant, and not a power plant. Even if they built the same product, the operating mind-set would probably be different and this would make a difference in how the scrubber is run. If wind power technology is so great, why isn't everyone doing it? L *> • I The variable speed technology that makes wind power competitive with "^"^•" conventional power plants has just arrived and a lot of education is Involved. The economics are extremely compelling, and you will see many more utilities (in addition to the ones mentioned) sign up for wind power. How much power does wind power produce and what is the minimum wind needed? Mr. Huffman answered that the windmill needs 15-16 miles per hour average annual wind speed to make the economics win. The 33M-VS is a 400 kW machine and provides power at an installation cost of $750-$800/kW. Session 3A — Electric Power Technologies ------- Clean Air Marketplace 1993 Page 57 Session 3 — Panel B Stationary Source VOCs/Air Toxics Control Septembers, 1993 2:00 p.m. - 4:00 p.m. Moderator: Panelists: Bruce C. Jordan, Jr. C. Shepard Burton Dr. Orman A. Simpson David A. Doles Paul D. White Introduction Bruce C. Jordan, Jr., Director of the Emission Standards Division, Office of Air Quality Planning and Standards, U.S. EPA, is responsible for implementing major portions of the Clean Air Act Amendments, including the Air Toxics Program. The discussion focused on stationary source controls and VOCs, and specifically concentrated on how market forces might affect the Air Toxics Program and the way regulations are structured. EPA has traditionally used a "command-and-control" approach to regulate. This approach is a hard barrier to overcome, not only for the regulators, but also for the industries responsible for adhering to the regulation. Regulations become constrained because of the way they are structured and this hampers the development or use of market forces in regulatory programs. This hindrance occurs in two ways: • The way that regulations are actually written forces the use of preexisting technology, and inhibits innovative technology. Oftentimes, the regulation focuses on proven technology, either in setting the performance standards or in identifying the type of control technology that would satisfy the requirement. This actually may prohibit the development of innovative approaches that achieve reductions in a more economical and efficient way. • The emphasis that regulators have put on creating enforceable programs has also hindered the development of market forces and flexibility. The interests of simplicity and enforceability have led regulators to focus on controlling pollution from individual emissions points. It would be much more flexible, however to allow each facility to decide for itself which individual points to control and which means to use. Session 3B — Stationary Source VOCs/Air Toxics Control ------- Page 58 Clean Air Marketplace 1993 Presentations C. Shepard Burton, Senior Vice President at ICF Kaiser Engineers Environment Group, is responsible for the air consulting and air compliance business unit. Mr. Burton focused his talk on fugitive emissions, particularly in the refinery and chemical manufacturing industries. According to Mr. Burton, the rules governing fugitive emissions are complex; there is a sizable opportunity for companies like ICF Kaiser, and there is a sizeable expense involved for companies that have to comply. • Complexity. There are numerous Federal, state and local rules governing VOCs and volatile hazardous air pollutants (VHAPs) that facilities must deal with. For VOCs, the requirements mostly stem from Title I of the Clean Air Act. Some states, however, have their own rules and/or local rules with which to comply as well. Volatile hazardous air pollutants are dealt with under the NESHAPs, RCRA, and HON (Hazardous Organic NESHAPs) rules. A facility located in the Bay Area, for instance, may have to comply with NSPC, NESHAPS, RCRA, HON, CAA RACT rules, and rules specific to the Bay Area Air Quality Management District. Each of the rules differ according to leak definition, monitoring frequency, repair requirements and reporting/recordkeeping requirements. • Costs. $70-$140 million is spent each year by the chemical manufacturing and refining industry to comply with the VOC regulations and fugitive emission rules. After the MACT implementation, this number will increase to approximately $400-$800 million. The increase in cost figures is due to the increasing number of facilities that will be regulated, the additional components that must be monitored, the increased monitoring frequency, and lower leak definition. All major chemical plants and petrochemical facilities will be affected, not just those located in non-attainment areas. • Business Opportunities. The dynamics of the situation present some interesting business decisions, as well as compliance questions. When all of the rules for equipment leaks take effect, there will be a rapid rise in monitoring, system installation, and the number of system components to monitor. The estimated cost to comply, $400-$800 million, is substantially higher than what EPA estimated because it takes into account both chemical manufacturing and petroleum refining, and more realistically reflects the increase in monitoring. Currently, the bulk of this work is performed within the plant by plant personnel. The rest is handled by about 5-10 competitors, including ICF Kaiser. Session 3B — Stationary Source VOCs/Air Toxics Control ------- Clean Air Marketplace 1993 Page 59 There are six elements needed for compliance, and these are included in ICF Kaiser's approach to addressing the challenges facing industry brought on by the fugitive emissions rules. • Sources. Accurately identify all of the leaking components, starting with pipe and instrument drawings for the plant. • Data. Automation is necessary to manage the huge volume of data involved. Most states require quarterly monitoring, and some require monthly monitoring. • Training. Being able to reliably identify and repair leaking components quickly and safely requires specialized training for personnel. • Credibility. One of the problems with leak detection and repair programs is that they have not been credible in the past — it is difficult to find out what someone did, when they did it, and what they have found. • Self-audits. To ensure compliance, it is important to conduct internal review of monitoring activities. New software can help do this effectively. • Continuous improvement. Change is continuous in the chemical and petroleum refining business; as fugitive emissions monitoring systems must interface smoothly with that change. ICF Kaiser has developed a plan to manage all of these elements for facilities. ICF Kaiser has concentrated on making the system as rugged and cost effective as possible, so that it will last. The system is called the Fugitive Emissions Management System (FUGEMS) and it consists of: • Training for field operators, in the form of a users guide, with a big focus on safety, productivity and quality. • Improved hardware for measuring and checking for leaks. ICF Kaiser uses a punch-hole card system. The system has a tag reader, a data logger and a signal conditioner that interfaces with the sniffer. The system works in the following way: *• The field operator has a list of all the components that must be monitored that day and their locations. >• At the specified location, the tag is inserted into the tag reader and the system asks if the reading is on the list of measurements Session 3B — Stationary Source VOCs/Air Toxics Control ------- Page 60 Clean Air Marketplace 1993 required that day. The operator proceeds if it is and may move on if not. > A leak check is conducted, using the time clock in the data logger that makes sure the operator follows the regulatory method. If the equipment fails a leak check, the system prompts the operator to repair the problem. If the operator chooses not to repair it at that time, the system sends a message to maintenance the following day. Operators can conduct hundreds of these checks in a day to meet the requirements. Daily productivity is governed by the leak detection method and the time to find the components. • Improved software that standardizes the operating procedure, and schedules and prioritizes the work. It also develops a synthetic regulation that integrates all of the applicable rules for that facility in order to better identify what the facility needs to do in order to comply. • A guarantee that the system will help a facility reach compliance. ICF Kaiser pledges to pay any fines incurred if a violation occurs. According to Mr. Burton, the system has been a success. It has been installed at six facilities and has had no violations. The system has resulted in a 90 percent reduction in emissions, and a 50 percent reduction in the inplant labor required for the tasks. The time of supervisory and clerical personnel required for compliance tasks has been reduced by 50 percent. There is an issue concerning the slowness in the uptake of these new systems. ICF Kaiser expected to install more than six systems. Clearly, economic uncertainty in these times is driving industry to be cautious. According to the Wall Street journal, refinery margins and chemical margins are really down; firms are not making money from operations, but rather through restructuring and downsizing. Regulatory complexity and gridlock between Federal, state, and local agencies is in part responsible for the slow growth in demand for the fugitive emissions control system. Rule development and promulgation is slow, and the variation in EPA's monetary commitment to enforcement also contributes to enforcement delays. There are some good cost incentives within the regulations, however, specifically in the HON rule; if you have a good program, costs will dramatically decrease. A key factor driving cost incentives to work and fugitive emissions to drop is enforcement — reasonable, reliable, and sufficiently frequent. Session 3B — Stationary Source VOCs/Air Toxics Control ------- Clean Air Marketplace 1993 Page 61 Dr. Orman A. Simpson, Director of Remote Sensing Technology, MDA Scientific Inc., produces optical remote sensing equipment. His presentation examined optical remote sensing technology, how it contributes to manufacturing in the U.S., and the advantages and disadvantages of applying this technology to stationary source monitoring. When the HON and the NESHAPS rules are implemented, everyone needs to understand the costs and the total impact. Every average or medium-sized plant has thousands of valves, pump seals, and flanges that they must monitor on a monthly basis under the national standards for equipment leaks. The average cost is $1.50 per measurement, so facilities are spending hundreds of thousands of dollars every month to be in compliance. Thus, chemical plant managers and environmental engineers are always looking for innovations. One such innovation is optical sensing technology. An optical sensor generally includes some sort of an optical source, an instrument that projects a beam of light out — ultra violet or infrared. This beam hits an optical target that returns it to the transmitter. This provides an analytical technique for measuring and identifying compounds in gas clouds emitted by sources. One example of this technology is Open Path FTIR (Fourier Transform Infrared), built by MDA Scientific, Inc. It can take continuous measurements for multiple compounds at a site where measurements are required. This technology was introduced in 1988, under the Superfund Region 2 field screening program. It has matured since then, with funding support from several EPA programs. Emission rates for upwind remediation activity can be obtained by the system. The system is also effective in fenceline monitoring. For example, Dupont is now using this technology to monitor 24 different compounds every 2 minutes across 1060 meters of their fenceline. SAFER, a subsidiary of Dupont, is inputing the data into emergency response models to get emissions rates. Optical sensors are systems technologies — they are not core component technologies. They are made up of many advanced component technologies. As such, when you obtain an advanced optical system, you impact many component manufacturers in this county. When you introduce innovation of this kind in industry, rather than being a burden on industry, you are actually loosening the ties of the industry, and favorably impacting other manufacturers. To illustrate this point three technologies that are making headway in this market are described below. • Ultra Violet DOAS (Differential Optical Absorption Spectrometer) — Manufactured by Optsis of Sweden, this system combines an infrared open path FTIR system and monitors most of the air toxics with an ultraviolet system that detects SO2, NO2, ozone, and benzene better than the infrared. It uses an ultraviolet lamp source, specifically mercury arc lamps. Arotech and Datal produces precision motorized scanners that are computer controlled. Other manufacturers produce detectors, photomultiplier tubes, Session 3B — Stationary Source VOCs/Air Toxics Control ------- Page 62 Clean Air Marketplace 1993 transmitter and/or receiver optical systems (i.e. mirrors and windowed materials), and products that have to be coated for the ultraviolet. • LIDAR (Light Detection and Ranging) — This laser-based system uses various types of pulse lasers (carbon dioxide lasers, optically pumped lasers, etc.), each from a different manufacturer. Other technologies used in this system include: motorized precision scanners, optical transmitting receiver systems that have optic and window materials dependant on the spectral region in which the system operates, and advanced signal processing electronics. These contain various LIDAR technologies that can look at gases for gas concentration and actually create television images from gas specific clouds or particulate. The diode laser based in-situ stack monitor, developed by SAAB Industrial Systems of Sweden, will be introduced into the US market this year to monitor SO2 and NO2- • FTIR (Fourier Transform Infrared) — This system uses the Michealson Interferedometor that can be found in an analytical chemistry unit, or a process analysis type of instrument; this system simply opens a box and transmits a beam into space. This technology has produced a $110 million market, and requires parts from other manufacturers, such as motorized precision scanners, cool market liquid detectors, transmitter and receiver optics, beam return optics, and infrared sources. Performance specifications (listed in the appendices of 40 CFR Parts 50, 51, 53, 60, and 61) can be adapted to remote monitors, codified reference methods, test methods, and measurement principles. However, the calibration test procedures require major revisions. Although the initial capital costs are higher for remote instruments than for point samplers, the operational costs are less because of mobility. The current estimate is that for some remote monitoring applications the operational costs are decreased by a factor of ten. One disadvantage to using monitors is that there has not been an adaptation of existing performance specifications of continuous monitors to remote monitoring application, or an initiation to formulate additional test procedures required in the application of remote monitors. Remote monitoring can play a major role in EPA's enforcement and R&D activities. There are innovative technologies that produce better results and are more cost effective if regulations can be structured to incorporate innovation. Session 3B — Stationary Source VOCs/Air Toxics Control ------- Clean Air Marketplace 1993 Page 63 David A. Doles, Sales Engineer of Stationary Source Catalysts with Engelhard Corporation, which supplies pollution control equipment, focused primarily on catalytic and thermal oxidation systems. His presentation highlighted the issues and complications affecting industry due to the Clean Air Act Title I and Title III. He discussed aftertreatment technologies available today, as well as past successes and future challenges with these technologies. Mr. Doles began his presentation by sketching out some differences between Title I and Title ID of the Clean Air Act Amendments. Title I, according to Mr. Doles, focuses on state regulation. It allows states, with Federal approval to draw up and enforce regulations. Title III, on the other hand, is essentially Federal regulation. In terms of pollutants addressed, Title I covers all VOCs and does not distinguish between hazardous and non-hazardous emissions. Title III covers only hazardous VOCs. Since there is overlap, some facilities may be regulated by both. Control requirements in Title I depend on whether the area of the facility is in attainment. Such area distinctions do not apply in Title III; all sources have the same control requirements. Timing is also a big difference between these two titles. Facilities may have to meet standards under both acts which come into play over different time periods. This complicates firms' decisions about what technologies to use. Various control options that are available today are: • Process modifications — This includes raw material changes, processing conditions, etc. The end user is often able to both reduce emissions, and realize other economic benefits such as producing a better product or reducing its cost of production. These opportunities, however, are not as common as we would like; such changes are expensive and oftentimes not technologically feasible. • Recovery/Recycling — If VOC streams are concentrated enough, and if they cannot be avoided through process modifications, it is often economically attractive to recapture the VOCs through a number of different technologies. The VOCs can then be reused in the process or sold on a secondary market. • Aftertreatment technologies — If it is not feasible to prevent or recover the pollution, there are a number of aftertreatment technologies that are applicable and currently being used. * Catalytic oxidation — A catalyst, typically a precious metal catalyst, is used to oxidize VOCs. This can be carried out at much reduced temperatures, and the resonance time can be much shorter. There is heat recovery with this system as well. Session 3B — Stationary Source VOCs/Air Toxics Control ------- Page 64 Clean Air Marketplace 1993 > Thermal oxidation — This process takes the VOC stream and heats it to an elevated temperature, 1500°F-2000°F. The two main technologies involved are regenerative and recuperative. For both of these technologies, the goal is to recover the heat that you put into the system in order to oxidize the VOCs. ° Recuperative systems take the exhaust stream from the combustion process and use it to preheat the incoming stream, with heat recoveries commonly at about 60 percent. 0 Regenerative systems consists of multiple regenerative chambers and an oxidation chamber. The contaminated air enters one chamber of the RTO and the air passes upward through the heat sink material, which serves as a preheat for the gas because this chamber is hot from being the exit chamber in the previous cycle. The gas then enters the oxidation chamber, which is operating at elevated temperature, to complete the oxidation of the VOC compounds. • Incineration — Depending on the nature of the VOC stream, it is possible to use incineration as a fuel for existing combustion sources and thereby produce some economic benefits. However, this system is not specifically engineered for high VOC destruction, so for areas with very strict emission standards, incineration may not be appropriate. • Adsorption — This is a recovery system in which VOCs are adsorbed into a carbon bed or perhaps zeolite. There are two drawbacks: the bed eventually has to be discarded, disposed of or destroyed. • High Tech Technologies — These include cryogens, UV, ozonation, and biofiltration. By and large, these are new technologies that have not been widely commercially applied. Mr. Doles focused specifically on two of the above technologies, catalytic oxidation and regenerative thermal oxidation to illustrate past successes in innovation. • Catalytic oxidation — There have been a number of advances in the use of catalysts for oxidation. This is one of the primary advantages of a catalytic system — it can be operated at low temperatures and achieve high efficiency. This advantage has been enhanced over the years with new catalyst and system designs. The major drawback to catalytic systems is that because they use precious metal catalysts, they can be susceptible to Session 3B — Stationary Source VOCs/'Air Toxics Control ------- Clean Air Marketplace 1993 Page 65 poisons. Many catalyst compositions can be poisoned by things like sulfur, heavy metals, chlorinated compounds, etc. To address this, poison resistant catalysts have been developed. Mechanical design and equipment can often be the overall factor that determines the destruction efficiency of the system. With special attention to ensuring the equipment is air tight, destruction efficiencies of 99% can be guaranteed. This technology also reduces capital and operating costs. As the market has grown and more players have entered, there have been innovations to reduce the up front and ongoing costs to operate these systems. This has made the systems readily available and more practical in many applications. • Regenerative thermal oxidation — Technologies in other industries use the concept of a reciprocating flow stream with the ceramic bed, but only recently has it been applied to VOC oxidation. Thermal efficiency through this method has reached 95 percent. Regenerative thermal oxidation systems are particularly attractive for larger flow rate streams, because they recover a significant portion of the heat from the gas. One of the problems had been that as the stream cycles back and forth, there was a residual unoxidized component emitted. New developments in valve design and purge systems, however, eliminate this problem. The future for technological innovation may see the following: • The efficiency and cost of existing technologies will continue to improve. • New technologies will continue to come on the market. Here are a few examples: > Catalytic filtration — A ceramic honeycomb filtration device applied to a catalytic media creates both a catalytic oxidation reaction and particle filtration in the same unit. Two activities can be carried out in one system. > Regenerative catalytic oxidation — Adding a catalyst to the regenerative thermal oxidation system can reduce operating temperature. Operating and total system costs will decrease. • The future for technological innovation is in a dilemma. End users require technologies that are proven so that the after treatment unit does not adversely affect their process and the regulators must accept the technology as meeting their requirements. In writing regulations, regulators must base the rules on results that are achievable with commercially proven technologies. The missing element in this scenario is a mechanism for proving and accepting new technology, which may have the benefit of Session 3B — Stationary Source VOCs/Air Toxics Control ------- Page 66 Clean Air Marketplace 1993 better destruction efficiencies and more cost effective operations. If there is a perception that it will take too long for equipment to be accepted, or it looks like it might not be accepted, equipment suppliers' already limited R&D funds will dry up very quickly. New regulations have created a large dynamic market for aftertreatment technology, resulting in jobs and export opportunities. To continue this market innovation and growth, the regulators need to promote the development and acceptance of new technology. Paul D. White, Business Director of the Environmental Projects Division at Johnson Matthey Corporation, supplies stationary source environmental controls. His presentation described state of the art catalytic oxidation and some developments in meeting the requirements of the Clean Air Act. The main motivation to control VOCs are the requirements in Title I. Facilities not meeting attainment VOC and NOX standards create smog and contribute to the ozone non-attainment areas. The upcoming rules and regulations are impacted by Title III, which regulates carcinogens and mutagens. Many are standard VOCs, but some present some interesting challenges, particularly the halogenated materials. In addition, nuisance conditions of odor and smoke will be addressed. There are a variety of VOC control technologies: • Carbon absorption • Solvent recovery • Incineration *• Recuperative •• Regenerative > Catalytic Catalytic oxidation is currently the preferred technology — it is merely an enhanced thermal oxidation process. The catalyst allows the reaction to take place at a lower temperature, the main advantage of catalytic over thermal oxidation. Much less fuel is needed to heat the incinerator and a catalyst allows the reaction to take place in a in a much shorter period of time. The resonance time is important because it allows the device Session 3B — Stationary Source VOCs/Air Toxics Control ------- Clean Air Marketplace 1993 Page 67 to be smaller. Unsaturated materials are more difficult to destroy than saturated. Benzene, acetone, and methanol are relatively easy VOCs to destroy at relatively low temperatures. Methane and short-chained saturated compounds tend to be more difficult to oxidize. Most of the VOCs and air toxics fall into the range of 450°F-850°F. Typical catalytic applications include: • Can coating • Painting of any kind • Converting (printing on anything other than paper) Title ID presents some interesting challenges. In the past, catalysts were thought to be inefficient in streams that contained halogens. Much research has gone into developing catalysts that can effectively destroy halogenated hydrocarbons. This is an example of the kind of innovation that needs to be done to meet Title ID. There is no advantage to destroying one compound and creating one that is even more hazardous; if there is no moisture in the stream, phosgene is created as the compound is destroyed. The destruction of halogenated VOCs then becomes more than simply designing a catalyst — it focuses on system design to make sure that the water levels are proper. Along with the necessity of injecting water is the heat requirement. Not only must the heat be sufficient to destroy the compound, it must also be sufficient to not create another compound. One solution to this problem is to use PGM catalysts that are less volatile than base metal catalysts, and operate at higher temperatures. Basically, because they operate at higher temperatures, unwanted byproducts do not form. However, laboratory trials still should be backed up by field trials. PGM catalysts are effective for the complete destruction of halogenated VOCs. To deal with regulations, one cannot simply develop a catalyst. A complete system should be developed to account for all the different parameters involved. Questions and Answers How can regulators convince industry that there is technology that may even be more economically feasible than the techniques we use now? Mr. White responded that the producers, users, and government officials must be understanding so that we know the limits of all the different VOC technology and where it can be applied.- There are a host of different VOC technologies available. People Session 3B — Stationary Source VOCs/'Air Toxics Control ------- Page 68 Clean Air Marketplace 1993 must take the time to evaluate the different technologies. Government officials must understand the limits of what the different technologies can and cannot do. Most importantly, vendors have to make sure that people do not misapply the technologies. A member of the audience added that one of the things catalyst manufacturers should consider is the liability question. Warranties and guarantees are quite limited. As part of the innovative process, manufacturers should stand behind the product and offer longer warranties. To what extent is pollution prevention control technology being developed? Mr. Dole responded that Englehard only has abatement and aftertreatment technology as of now. The pollution prevention technologies available today are very industry- and pollution-specific. Some new pollution prevention technologies could include a coating type application, and a progression from solvent to water-based systems. Perhaps there are no capitol costs for this modification, just a change in the product. There is improved equipment available that can prevent leakage. Winch industries arc being proactive in terms of market size and growth? O • I Mr. White replied that, regarding market size and growth of this technology, ^™^^" VOC control is about a $200 million market. The major industry that is now undergoing VOC control is the chemical process industry, particularly the synthetic chemical manufacturers. Many of these industries have had nuisance problems long before now. For example, the printing and converting industry is a known user of solvents, and they really do not have any substitutes — they are stuck with post-treatment. Mr. Jordan added that we are actually developing MACT standards for 174 major industries under Title III. Practically all will be affected by VOC regulation. They cover everything from wood furniture manufacturing to coating operations. Session 3B — Stationary Source VOCs/Air Toxics Control ------- Clean Air Marketplace 1993 Page 69 Each panel member was asked to make a one sentence suggestion to regulators. Mr. Burton.commented that business and government must trust each other. There is a lot of room for improvement. Mr. Simpson added that flexibility should be built into the regulations. Mr. Doles suggested that regulators incorporate flexibility into their regulations and enforcement. Many innovations have a lot of promise, but there is risk involved. EPA can go a long way to help alleviate the risk that the end user perceives. Mr. White recommended that Federal agencies give the states guidance. They need to decide where the most VOCs are coming from and what is the most appropriate technology. Session 3B — Stationary Source VOCs/Air Toxics Control ------- Page 70 Clean Air Marketplace 1993 Session 3B — Stationary Source VOCs/Air Toxics Control ------- Clean Air Marketplace 1993 Page 71 Session 3 — Panel C Vehicular Emissions Control Technologies Septembers, 1993 2:00 p.m. - 4:00 p.m. Moderator: Bruce Bertelson Panelists: John S. Howitt John Mooney Reginald Modlin Dr. George M. Sverdrup Introduction Bruce Bertelsen, Executive Director of the Manufacturers of Emission Controls Association, was the moderator for this session. He began his remarks by stating that the motor vehicle emission control program began approximately 25 years ago with the Clean Air Act Amendments of 1970. The program is an example of an environmental success story for this country and the world. During the 1960s the air quality in a number of cities in the U.S. was as bad as Mexico City's air quality is today. The motor vehicle emission control program has helped turn this around and has spurred the development of a multi- billion dollar industry. Although the program has experienced success in the past, there are still air quality challenges to be addressed today. Specifically, there are two goals: (1) to look back at the program's successes and failures and learn from them, and (2) to look forward to the future of the program. The discussion will focus on new emission control technology, the impacts of that technology, changes in the program, and the impacts of fuel selection. Presentations John S. Howitt, Manager of New Technical Ventures at Allied Signal Corporation, has 23 years experience in auto emissions control, and his current responsibilities include developing new business opportunities in the catalyst area. His remarks focused on advancements in catalyst technology. In the next few years, the market for catalytic converters will see some growth. In North America the need for catalytic converters will increase modestly, while Japan's market will remain constant. However, there will be tremendous growth in Western Europe, and potential for growth in Eastern Europe, South America, and Asia. Session 3C — Vehicular Emissions Control Technologies ------- Page 72 Clean Air Marketplace 1993 The driving force behind technological advancements has been California's forthcoming regulation on LEV standards, to be employed in various phases in the 90's. Preliminary figures from these regulations show that the hydrocarbon limit will fall from today's .41 to a midlevel of .125 and finally to an even lower level. The planned ULEV standard will be .04. The focus of catalyst technology is the control of hydrocarbons. The following list summarizes some of the most remarkable advances in catalyst technology today: • electrically heated catalysts; • palladium catalysts; • lean NOX catalysts; • hydrocarbon traps; • substrates; • compressed natural gas catalysts; • utility engines, mainly for lawn and garden controls; • diesel catalysts; and • motorcycle catalysts. Electrically Heated Catalysts A catalyst usually does not become active until it has reached several hundred degrees, and it is therefore fully effective only on a hot car. Eighty percent of an automobile's total emissions occurs within the first 2 minutes of the start. Electrically heated catalysts decrease the heating time, and thereby reduce the amount of hydrocarbons that escape during the cold start period. They are heated by electric energy conducted through metal substrates. A manifold mounted converter, using a more conventional type of catalyst, can also help to reduce the cold start problem. It absorbs the sensible heat in the exhaust quickly and because the catalytic action is exothermic (heat-generating), it provides a hotter exhaust faster to the main underbody converter. Session 3C — Vehicular Emissions Control Technologies ------- Clean Air Marketplace 1993 Page 73 Palladium Catalysts Catalysts have traditionally been made of platinum, platinum rhodium, or platinum palladium rhodium. Last year a catalyst made solely of palladium was developed that decreased the time it takes for the converter to reach efficiency. These catalysts have been effective in meeting the LEV and ULEV standards in tests. Compressed Natural Gas Catalyst A compressed natural gas catalyst was tested by EPA on a Dodge Dakota pickup truck and several other car models and it was found to have an acceptable conversion efficiency. The catalyst allowed the vehicles to comply with the ULEV standards and was considered successful. Hydrocarbon Traps Substrate manufacturers have recently found a way to impregnate the ceramic substrate with activated carbon to absorb 77 percent of the non-methane hydrocarbons emitted in the first 60 seconds. Utility Engines In the state of California, beginning January 1,1995, utility engines (e.g., lawn and garden equipment) are going to be subject to emission control standards. It has been found that 4 percent of the total hydrocarbons emitted in California comes from utility engines. The standards will continue to tighten significantly through 1999. Engine manufacturers have developed several different strategies to conform with upcoming emission regulations. Some of those strategies include: • tuning engines and carburetors to make engines run more smoothly (1995); • converting to overhead valve engines, which run much cleaner; • catalytic aftertreatment, particularly if the first two options fail; • converting to overhead valve + catalyst engines (1999); and • converting to 4-stroke + catalyst engines (utility engines). This industry faced the following problems in catalyst design for utility engines: • Effectiveness and efficiency (i.e., being able to design a catalyst to meet the standards) Session 3C — Vehicular Emissions Control Technologies ------- Page 74 Clean Air Marketplace 1993 • Durability • Temperature of exhaust and shell of structure where the catalyst is mounted (in many cases, the muffler) • Safety (e.g., mechanical malfunction, fire) • Mechanical durability Cost Motorcycle Catalysts Catalysts on motorcycles and motorbikes are very effective in reducing the emissions of hydrocarbons, CO, and NOX. In virtually every case, the use of these catalysts is the result of regulatory action. For example, catalysts are being installed on motorbikes and motorcycles in Taiwan at the rate of 1 million units a year, and the potential market in that area could expand in the next 5 or 6 years to nearly 6 million units a year. (In some areas of Southeast Asia, the motorcycle is the major form of transportation.) Taiwan already has three-phase standards in place and catalysts are already in production. In Japan they begin in 1996. There are standards in South Korea but few motor vehicles to which they are applicable. In India, Singapore, and Malaysia, standards are currently being considered. John Mooney, Manager of Technology and New Applications at Engelhard Corporation, focused his discussion mainly on diesel catalytic aftertreatment devices. Diesel exhaust is perceived by the public as dirty because of (1) particulates visible to the human eye; (2) a characteristic odor; and (3) gaseous emissions that contribute to smog. Diesel exhaust consists of solid organics, carbon, aerosol organics derived from the fuel or lube oil, HC, CO, SO2 gases, and free organic liquids. Preregulation emissions controls have usually focused on particulate matter, and not as much on hydrocarbons or carbon monoxide. In 1998 there will be a fairly strict standard for NOX. The three catalytic devices that are being applied for the future are (1) diesel oxidation catalysts (DOC); (2) catalytic soot filters (CSF); and (3) lean NOX catalysts. Session 3C — Vehicular Emissions Control Technologies ------- Clean Air Marketplace 1993 Page 75 Diesel Oxidation Catalysts The first DOC was developed in 1968 and there has been quite an improvement in their formulation in the last couple of years. The DOC is similar to those catalysts used on spark ignited engines. However, the liquids collect on the surface of the catalyst, are oxidized to gaseous components, and then are consumed by the catalyst. The following characteristics all pertain to DOCs: • DOCs collect and oxidize aerosol HC. This is sometimes termed the soluble organic fraction (SOF). The sources are from fuel and lube oil consumed or not burned by the engine; • In DOCs gaseous emissions are oxidized just as they are in an oxidation catalyst; • DOCs reduce odor and irritants; • DOCs have low deterioration — some DOCs last for ten years with little deterioration; • DOCs are a lower cost technology compared to other types of aftertreatment devices; • DOCs are the most effective technology in terms of reducing particulate matter; and • DOCs need low sulfur fuel. Ninety-eight percent of fuel sulfur combusts in the combustion chamber into SO2, and about 2 percent combusts into SO3. The engine companies dropped the specifications for sulfur from 0.3 to 0.05 percent. A catalyst is very effective in oxidizing SO2 to SO3. SO3, once formed, hydrolizes with water to form sulfuric acid, which is collected in the filter used to collect particulates. The catalyst companies have been successful in striving to produce a catalyst that would be selective, that is, oxidize the soluble organic hydrocarbons but not oxidize SO2 to SO3 and form particulate. Catalytic Soot Filter A CSF is made from an extruded monolith that collects particulates. This type of trap has a collection efficiency of 60-90 percent with only a 2-4 percent fuel penalty. The regeneration system is either onboard using a fuel burner or electric heater or the whole unit can be taken off and regenerated with a heater. The surface that collects soot is coated with a catalyst. There are several additional features of a CSF: Session 3C — Vehicular Emissions Control Technologies ------- Page 76 Clean Air Marketplace 1993 CSFs can be used for 4-stroke engines without a regeneration system; CSFs oxidize the HC and CO and remove odors and irritants; • CSFs decrease the regeneration emissions; CSFs increase the collection period, i.e., the time it takes to fill the trap; • CSFs provide complete regeneration to the baseline condition; CSFs decrease the temperature at which the collected soot is combusted by 50-200°C; and CSFs provide low deterioration (up to 75,000 miles). A significant stride toward cleaning up the diesel engine would be the use of low sulfur fuel. Lean NOX Catalysts Lean NOX catalysts reduce NOX in oxidizing atmospheres with zeolites (molecular cages that pick up and reduce HC and NOX emissions). Southwest Research has a program funded by CARB to study lean NOX catalysts and further their development. Many catalyst companies have lean NOX development programs and the progress is continuous. Further developments are expected in 1994. Reginald Modlin, Manager of Vehicle Emissions Regulatory Programs at Chrysler Corporation, gave his talk from the perspective of the automobile manufacturer. He felt that the theme of the conference (New Business Opportunities Created by the Clean Air Act Amendments) can be a bit misleading, because the Clean Air Act is about clean air. The link between clean air and a healthy economy is not direct. The maintenance of a clean environment may complement a healthy economy, but one does not necessarily follow the other. Cleanup of the environment will be costly. New technology and new jobs will result, but the costs should not and cannot be hidden. The discussion focused on attitudes and goals for the future and the importance of government and industry cooperation. Session 3C — Vehicular Emissions Control Technologies ------- Clean Air Marketplace 1993 Page 77 The state of California provides the largest clean air challenge of any state. The Air Resources Board is still struggling to show compliance with National Air Quality Standards. Non-attainment areas like California are required to conduct advanced inspection programs. The State's check system has come under review recently, and information gathered shows that the system is riddled with the potential for error and the inappropriate passing of otherwise failing vehicles. Non-attainment areas like California are required by the CAA to implement enhanced IM programs. (EPA is currently finishing guidelines for these programs.) The problem in California is the perception that all the jobs previously associated with testing will be lost because of the new IM programs. There is less of a focus on air quality and more of a focus on jobs. In addition, there has been little discussion of the jobs created by the need to fix the increased volume of failing cars. When people point to perceived potential for loss of jobs without acknowledging the potential business opportunities, the discussion no longer focuses on clean air. If we do not keep our focus on improving air quality, we run the risk of adopting policies that may be more politically acceptable, but result in little sustainable environmental benefit. Solutions to the complex environmental problems that we all face require complex solutions, and automobile manufacturers, regulators, and government officials should resolve the problems by using cost effective measures and properly educating the public as to what they are paying for. From the technology side, an integrated strategy could be built. For instance, regulatory policy could both tighten vehicle emission control and consider ways to reduce customer inconvenience. The tools used in this example are an IM test station, vehicle on- board diagnostic systems, traffic monitoring control systems, roadside vehicle emissions monitoring, and scrappage. Finding and fixing the most polluting cars and trucks is the single most cost effective control strategy for emissions control of motor vehicles. Increasing the frequency of inspection can be achieved simultaneously to reducing the inconvenience of inspections to the consumer, with an on-board diagnostic system. With the addition of a transponder, the data stored in the system's computer could be broadcast to a roadside monitor. Knowing the real-time emissions performance of the vehicle, a central processor could notify the owner of the need to have his vehicle checked and possibly repaired if it is out of compliance. The central processor could also routinely search the files for vehicles that have somehow missed the roadside monitor and generate notice to the owner that a periodic inspection is needed. Testing would not be required at the IM station for those who have encountered a station and have reported passing conditions, thus reducing customer inconvenience. Direct linkage with vehicle registration and licensing systems would assure that the owners would acknowledge notifications for service. Direct integration of a gross polluter scrappage program into this einissions monitoring system based on actual measured emissions of the vehicles pulled from the road could help in establishing emissions trading Session 3C — Vehicular Emissions Control Technologies ------- Page 78 Clean Air Marketplace 1993 banks to help small businesses adjust emissions abatement requirements to their ability to purchase hardware. This time phasing of emission abatement equipment could extend to major industrial facilities as well. The vehicle's transponder could also aid in reducing traffic congestion, the data reflecting exactly where the vehicle is located. Another option for the consumer would be an onboard location display that would provide traffic information accumulation by the traffic control system. Development of these systems would take a coordinated effort from several disciplines to minimize the complexities of each. People need to put aside their own personal biases and work together to provide a coordinated solution. Lastly, the effect of fuels on vehicle emissions should be discussed. An increase in the cost of gasoline is not palatable to government officials. Whether or not regulating fuel formulation is a rational policy option depends on the extent to which fuels impact on tailpipe emissions. According to soon to be released data obtained from tests aimed at determining the emissions difference imposed by fuels alone, the imposed difference can range from 14-48 percent. Properly addressed, fuel formulation is a cost effective motor vehicle emission control strategy. Dr. George M. Sverdrup, Program Manager at Battelle Memorial Institute, is involved in two programs: (1) a comprehensive assessment of toxic emissions from coal fired power plants, including two with clean coal demonstration projects; and (2) the CleanPleet program, a demonstration of five alternative fuels and a control gasoline in 111 Federal Express delivery vans in Southern California. Dr. Sverdrup limited his remarks to the CleanFleet program. The goal of CleanFleet is to demonstrate and document the operations (vehicle performance, maintenance, reliability, durability, safety), emissions, and economic status of five alternative fuels. All the liquid and gaseous fueled vans used were model year 1992 vans built by Ford, Chrysler, and Chevrolet. The following chart gives some details on the fuel type being tested, the location of each fleet, the number of vans being used, and the number of control vans in operation. Control vans operate on regular, unleaded gasoline to provide a base for comparison. Session 3C — Vehicular Emissions Control Technologies ------- Clean Air Marketplace 1993 Page 79 TYPE OF FUEL Propane Reformulated gasoline Electricity (lead acid batteries) Methanol Compressed natural gas LOCATION Rialto South Central Los Angeles Culver City Santa Ana Irvine NUMBER OF VANS 20 21 2 20 21 NUMBER OF CONTROLS 6 9 — 3 9 The vans were phased into operation beginning in April 1992 through September 1992 and will complete the 24-month test in the fall of 1994. Federal Express has used all five fuels successfully in its daily operations. Some highlights of the five sites, illustrating problems encountered and solutions developed are as follows: Rialto (propane) A number of issues were addressed to provide a successful demonstration of propane gas. Initially, the Federal Express drivers were concerned about the accuracy of the fuel gauges and how the fuel gauges read during driving. Problems were encountered with the diaphragms in the regulators, which were replaced with a new material. There have also been problems in the last several months with the electronics added to the vans from one manufacturer to convert from gasoline to propane. The propane fuel tanks are sensitive to grade — if there is a grade, the fuel tank may not completely fill and the van may subsequently run out of gas. Changes also had to be made to the fuel nozzle to allow it to fit into the vehicle fuel tank and adjustments were also made to guard against hand fatigue while fueling vehicles. Since Federal Express usually drives its vans into a warehouse to pack them, duct work and air handling equipment were added to the facility to increase ventilation. Flammable gas detectors were also installed near the floor. South Central Los Angeles (Phase 2 reformulated gasoline) Underground tanks provide storage for the California Phase 2 reformulated gasoline. There is a special fuel dispensing management system in use (TIR1S) to test an automated system for fleet operators reporting fuel use to the government, on a vehicle-by- vehicle basis. Santa Ana (methanol) An above-ground vaulted tank was installed to provide the fuel. Although the fuel storage tank and M-85 dispensing system were specified to be compatible with M-85 and Session 3C — Vehicular Emissions Control Technologies ------- Page 80 Clean Air Marketplace 1993 were warranted as such, some components were not compatible with methanol. These components had to be changed to provide long-term trouble-free operation. Suppliers are only now manufacturing hardware that is compatible with high methanol content motor fuel. Some problems were experienced with the fuel pickup line in the fuel tank. This was remedied by the vehicle manufacturer. There were significant permitting procedures to be met in the installation of this tank. The fuel being used is M-85 — 85 percent methanol and 15 percent Phase 2 reformulated gasoline. Culver City (electric vehicle) Two electric G-Vans are being demonstrated. Initially, they had lead-acid batteries. Under Federal Express driving conditions, there were found to have a range of about 25 miles. One G-Van is now being outfitted with nickel-cadmium batteries. A Ford Ecostar will be added to the project in 1994. Irvine (compressed natural gas) 21 vans are operating on compressed natural gas (CNG) which is supplied onsite by a natural gas compressor, cascade tank storage system, and a dispenser. As for the propane site, enhanced air handling equipment was installed in the building into which the vehicles are bought. A system of 24 flammable gas detectors near the ceiling control operation of the new ventilation system. Range of the vehicles from the three manufacturers varies from about 120 to 150 miles. An extra fuel tank was added to each of the seven Dodge CNG vans to increase the range to 120 miles. During the past few months, problems have been encountered with the electronics used to control fuel in Chevrolet vans modified to run on CNG. The problems have largely been resolved as they were for those propane vans that use the same electronic system. Questions and Answers What is the effect of diesel filters on diesel engines? John Mooney answered that there is a 2-A percent negative fuel economy because of the additional back pressure. However, passive regeneration systems avoid the problem. L ** \ • I ^^^™ What are some different problems concerning retrofit engines versus new engines? John Howitt replied that the most important difference relating to retrofit engines is temperature. Session 3C — Vehicular Emissions Control Technologies ------- Clean Air Marketplace 1993 Page 81 Session 3 — Panel D Alternative Vehicle Technologies September 8, 1993 2:00 p.m. - 4:00 p.m. Moderator: Panelists: Phil Barnett Martin J. Bernard, III Gorik Hossepian Dr. Roberta Nichols Paul Gifford Introduction Phil Barnett, U.S. House of Representatives, Subcommittee on Health and the Environment, introduced the session by stating that high emission inventories are a prime problem addressed by the Clean Air Act Amendments (CAAA). Under the CAAA, many urban areas must reduce their emission inventories by 50-60 percent and in some areas, such as the southern coast of California, by as much as 70-80 percent. Mobile sources are the primary cause of emissions in major cities. The development of cleaner fuel technologies is therefore crucial to the successful implementation of the CAAA's emission reduction provisions. At the same time, continued economic growth must be fostered. Presentations Martin J. Bernard III, Executive Director of the National Station Car Association (NSCA) discussed his association's efforts to develop a nation-wide station car program to fill electric vehicle market niches in urban and suburban markets. There are three early market niches for electric vehicles: service vehicles, shuttle buses, and, most importantly, station cars. These are early niches because the vehicles operating in each require relatively simple technology, have simple driving patterns and return daily to a central location for servicing. Station cars are battery- powered electric vehicles driven by transit passengers to and from a station. Station cars will probably be small, but not 'mini', and fully safety-certified if the mass transit criteria favored by the NSCA are adopted. Some vehicles which would operate only on local streets might not be safety certified, but the NSCA is not interested in supporting those Session 3D — Alternative Vehicle Technologies ------- Page 82 Clean Air Marketplace 1993 types of vehicles. Station cars would be designed to have a 45-mile range and capable of being used on freeways, but only in a limited capacity because the station cars are meant to be primarily urban vehicles. Two advantages to using electric cars rather than conventional cars on short, commuter trips are: • More than half of the emissions released during a 20-mile trip are released within the first five miles and are caused primarily by the "cold start" of the engine. Because most trips to a commuter station are less than five miles long, using station cars would greatly reduce emissions. • Traffic congestion involving conventional cars has a high emission impact. By encouraging public transportation ridership, some of this congestion could be avoided. The startup funding for NSCA came primarily from the Electric Power Research Institute (EPRI). The Transit Development Corporation, a non-profit corporation set up in the mid-1970s by the transit industry to perform research and development, is also providing support to station car demonstrations. Stage 1: Local Demonstrations (1993-1998) The following presents a two-stage process for the introduction of station cars. The first period, running from 1993-1998, will involve local demonstrations of the vehicles. Many of these local demonstrations will be supported by local utilities, transit authorities, and other state and local agencies. The American Public Transit Association has set up an electric station car task force to motivate the transit industry to encourage these efforts. Each demonstration would involve a fleet of 25-30 cars and would be centered around one or more commuter train or light rail or rapid transit stations. Initially, the vehicle would be assigned to one person, possibly an employee of the utility or transit agency, who would be given priority parking at the station. The vehicle would be recharged at the station or at the assigned individual's home at night. The station car would therefore be used primarily as a forward commuting vehicle. Nine major cities, including Atlanta, Boston, Los Angeles, San Francisco, and Washington, D.C., have committed to this program. These transit operators have made a commitment to station car development. The vehicles provide clean air access to mass transit and could eliminate the need for second or third household cars since it could be used for other local trips. As the demonstrations go, they will presumably attract new riders to the public transportation system by making transit a door-to-door service. Demonstration funding for the first stage will come from state and local air quality agencies, state departments of transportation, local electric utilities, and ARPA (which will put $500 million into the development of electric vehicles, though not exclusively station Session 3D — Alternative Vehicle Technologies ------- Clean Air Marketplace 1993 Page 83 cars, in the next few years). NSCA also hopes to interest the Federal Transit Authority in station car development. There are several demonstration programs already underway. In San Franscisco in 1994, for example, 45 station cars will be located at five stations, and have been paid for with local and ARPA funds. In Orange County, the station cars will be used by "reverse commuters" to go to jobs in local industry, hi Miami, officials have found that the program would encourage commuters to use the city's mass transit system, because it allows the riders to conveniently run business and personal errands in the city during the day. Stage 2: Full-Scale Programs The second stage of the station car introduction will begin in 1998 and will involve a number of concurrent programs, including maintenance and charge-ups for cars at the station, on-board diagnostic systems, and monthly billing capabilities. The uses of the vehicles would also be expanded. Dr. Bernard envisions the car as a multiple-use vehicle, that could be used for all kinds of trips in suburban and downtown areas. The cars, in the second stage of the program, would therefore no longer be used exclusively for forward commutes, but also for reverse commutes, shopping trips, and local business trips. During the second stage, the vehicles could be owned by a variety of groups, including transit authorities and local employers, but the station cars will probably be owned by third party leasing firms, or perhaps by parking garage operators. In California, for example, the American Automobile Association has expressed interest in operating station cars. At first, most of the station cars will be conversion cars but, starting in 1995, station cars could be built as electric cars from the "ground up" and will be ultra-lightweight, graphite, fiber-based vehicles. While the NSCA would prefer to have one manufacturer make all the cars, to cut the per-vehicle cost, the participants in the program want their cars to be produced locally. Cottage industries are therefore the key to program expansion. However, efforts will be made to link the smaller manufacturers into a coherent program. The NSCA will perform reliability testing, and EPRI will develop testing protocols so the manufacturers will be operating from the same set of data. Session 3D — Alternative Vehicle Technologies ------- Page 84 Clean Air Marketplace 1993 Gorik Hossepian, Manager, Fuel Cell Program, Allied Signal Aerospace Co., discussed his company's efforts to produce a viable fuel-cell for vehicular power systems. Fuel cells are a particularly attractive option, according to Mr. Hossepian, because they are a technical discontinuity; that is, they represent a revolutionary innovation, not an evolutionary one. The development of a viable fuel cell could reduce the U.S. trade deficit dramatically — by over $21 billion annually — through a reduction in oil imports and increase in technology exports. Fuel cells could be a major global opportunity, not just for Allied-Signal, but for the U.S. Fuel cells are much more efficient power sources than conventional electric generators because the cells transform chemical energy directly into electrical energy without heat and mechanical energy steps. In addition, emissions are almost non-existent when compared with combustion engines, because there is almost no physical contact between the nitrogen and the oxygen at high temperatures, as is the case with the combustion process. Eventually, fuel cells (assuming they are twice as efficient as the cells being produced today) will be able to save three million barrels of oil per day. There are two fuel cell programs sponsored by Allied Signal: the Monolithic Solid Oxide Fuel Cells (MSOFC) program and the Proton Exchange Membrane (PEM) program. The MSOFC is the highest power density fuel cell being developed today, making it attractive for high power needs such as vehicles and industrial sites. The MSOFC is a multi-fuel device — it has operated on anything from packed charcoal to natural gas. Unlike other fuel cells, the energy is produced through the transport of oxygen ions and not hydrogen ions. The MSOFC also has the potential to be economical, perhaps costing under $1,000 per kW installed. The PEM cell is preferred for non-fossil fuel applications, and will be used for transportation applications. Allied Signal has great interest in fuel cell technology. Fuel cells fit in well with Allied Signal's hardware product lines. In addition, the company's expertise in key material technologies and in the aerospace and transportation industries provides Allied Signal with a competitive advantage, which is the key to making fuel cells economically viable. Fuel cells will be the next replacing technology in the auxiliary power unit market, of which Allied Signal currently controls about 90 percent. There are three potential markets for fuel cells: • Power utilities, which have already started using the technology; • Transportation, which should be the next major fuel cell user, because of regulatory mandates to create emission-free cars; and • Aerospace, which is a sector lagging in fuel cell applications. This can be attributed to the fact that fuel cells have a bad reputation, and aircraft companies prefer to deal in proven technologies. Session 3D — Alternative Vehicle Technologies ------- Clean Air Marketplace 1993 Page 85 The presentation concluded with a projection of the future of fuel cells. By 2010, fuel cells will represent a $35 billion market worldwide, with much of the growth occurring after 2000. By 2003, 500,000 zero-emission vehicles will be produced, largely because of the California vehicle law, generating a transportation market for fuel cells. Environmental regulations relating to vehicle emissions have created a market pool, not a market itself. The search for potential commercial uses for the PEM fuel cell has been motivated by current legislative mandates, but a viable product has not yet been developed. Before any growth can occur, the technology and performance of the cells must improve significantly. Allied Signal has attempted to do this through advancements in materials and systems. Dr. Roberta Nichols, Electric Vehicles External Strategy Manager, Ford Motor Co., presented an overview of Ford's efforts to produce electric-powered cars. Dr. Nichols began with a brief discussion of the history of electric vehicles, noting that such vehicles do not represent a new technology. In the early part of the century, in fact, there were more electric cars than gasoline-powered cars. Once hand-crank starters were replaced by electric starters, however, the internal combustion-powered cars became more prevalent. Since that time, the lack of a battery that could power a car with satisfactory range and sufficient lifetime has been the primary obstacle to marketing electric cars. There are several advantages to electric vehicles: • Electric vehicles have zero emissions. The improvement in air quality provided by these cars is especially pronounced in those countries, such as France, where most electricity is provided by nuclear or hydro-electric power plants; • The ability to recharge electric vehicles at home precludes the need to stop at filling stations; • Preliminary indications are that electric vehicles will be more reliable and require less maintenance than internal combustion vehicles because the engine will be simpler to maintain. Oil and spark plugs, for example, do not need to be changed in an electric car; and • Electric vehicles are quiet and can therefore be used in situations, such as a park setting, where conventional vehicles would be too loud. Dr. Nichols Session 3D — Alternative Vehicle Technologies ------- Page 86 Clean Air Marketplace 1993 did note that the quiet operation of the motor could pose a safety problem because pedestrians cannot hear the car coming. Conversely, there are also some disadvantages to the use of electric vehicles: • The reduced driving range of electric-powered cars means that electric vehicles will never provide an equal replacement for the traditional family car; • The high cost and short lifetime of electric vehicle batteries make electric vehicles more expensive to operate than conventional gasoline vehicles. Considering electricity alone, electric vehicles are very inexpensive. But when the cost of replacing batteries is factored in, the cost per mile of operating an electric vehicle is higher than the cost per mile of operating a gasoline engine. The cost of running an electric car in the U.S. would be equivalent to the cost of running a 30 mpg car on $3.75 per gallon gasoline. This gap is especially pronounced in the U.S., where gasoline prices are lower than in European countries: In the U.S., electric cars cost 14 cents a mile to run, compared with four cents a mile for conventional vehicles, while in France, the cost is about 15 cents a mile for both. • Though electric vehicles themselves do not produce emissions, the power plants which supply the electricity to the vehicles do, at least in the U.S. These secondary emissions must be considered, but there does appear to be a net benefit. Ford is examining a number of consumer issues. The initial cost of electric vehicles will be very high, though the price will eventually decrease as the technology is refined and volumes increase. This high initial cost, coupled with the high battery cost and limited range of the vehicles will make electric cars a hard item for Ford to sell. The consumer, in effect, is being asked to pay more for less. The primary obstacle that must be overcome in electric vehicle development is the development of better battery technology. There is no clear indication as to what the battery of the future will be. Ford is currently using sodium sulfur batteries in its electric vehicle program. Though these batteries have four times the energy of a conventional lead/acid battery, a battery source with twice the energy as the sodium sulfur battery may be needed. To this end, the U.S. Advanced Battery Consortium (USABC) was formed in January 1991. USABC is a business partnership among Ford, General Motors, and Chrysler with participation by EPR1 and battery development companies throughout the world. The U.S. Department of Energy has matched (dollar for dollar) industry funds given to USABC. By the end of 1995, over $260 million will be spent by USABC on advanced battery technologies. Session 3D — Alternative Vehicle Technologies ------- Clean Air Marketplace 1993 Page 87 Ford currently is operating an electric vehicle demonstration program. Eighty-two ECOSTAR vans, a modified version of Ford's European Escort van, are being delivered to customers on a 30-month lease, after which time they will be returned to Ford for evaluation. The purpose of the demonstration is to confirm the technology, develop vehicle expertise, and gain information on customer satisfaction. The ECOSTAR has exceeded Ford's targets in several performance areas. The ECOSTAR has a range of more than 100 miles per day, surpassing the initial 100 mile target; is able to accelerate from 0-50 in 12 seconds, bettering the target time by 2 seconds; and is able to carry a 900 pound payload, compared to the 700 pound target. The recharge time of seven hours, however, is longer than the five to six hour target. The van has a single speed integrated transmission and a top speed of 70 mph. The ECOSTAR acceleration is also roughly similar to that of the gasoline powered Escort; the performance of the electric van is slightly better in the 0-50 mph range, but slightly worse in the 50-70 miles-per-hour range. Air conditioning and heating systems are available, though both cut down severely on the range of the vehicle in extreme weather conditions; using the air conditioning in a temperature of 105 degrees cuts the range by a third, while using the heater at zero degrees reduces the range by 40 percent. The development of a market for electric-powered cars will hinge on the development of greater advantages for the cars to outweigh the several disadvantages. In the end, consumer satisfaction must be the primary goal because all the legislation in the world will not support an electric vehicle program unless the customer is satisfied Paul Gifford, Ph.D., Director of Product Development, Energy Conversion Devices, Ovonic Battery Company, Inc., described his company's efforts to develop a high powered battery based on a nickel metal hydride power source. Dr. Gifford began by listing seven areas that must be maximized in the design of batteries used to power electric vehicles: • specific energy content and electrical energy density, which relate to how far a vehicle can travel; • power, which determines how fast a car will be able to accelerate; • low temperature performance, so a car may perform well in inclimate weather; Session 3D — Alternative Vehicle Technologies ------- Page 88 Clean Air Marketplace 1993 • cycle life, which determines how long a battery will last before it must be replaced; • abuse resistance, which is important because vehicle drive trains are pushing at high ranges — up to 320 volt systems; • rapid recharge capability; and • environmental compatibility. Batteries should not contain heavy metals, such as cadmium and lead, which could ultimately result in downstream pollution. The recognized need to develop improved batteries led to the creation of USABC. In May 1992, USABC granted Energy Conversion Devices, Inc. the first contract to develop a nickel metal hydride battery, to be produced by its Ovonic Battery Company subsidiary. Ovonic's development is proceeding well, and the company has remained ahead of schedule in its deliverables. Some of the technical specifications of the nickel metal hydride battery are: • high energy density (80 watt hours per kg, 240 watt hours per Ib versus 34-36 watt hours per kg for conventional lead/acid batteries); • high power (greater than 200 watts per kg, even at high depths of discharge); • long life (1000 cycles at 100 percent depth of discharge); • wide operating temperature (-20°C to +60°C); • quick charge capability (60 percent in 15 minutes); • totally sealed/maintenance free unlike some other batteries which, for example, may require watering systems; • tolerance to overcharge and over-discharge; and • environmental acceptability. The nickel metal hydride batteries do not contain any heavy metals and have been independently certified as passing EPA's pollution standards. Session 3D — Alternative Vehicle Technologies ------- Clean Air Marketplace 1993 Page 89 The following table compares the performance of a vehicle running on a conventional battery versus the Ovonic battery: Range Top speed Acceleration Lifetime Recharge time ADVANCED LEAD/ACID BATTERY 120 miles 100 mph 0-60 mph, 8 seconds 20,000 miles 2 hours OVONIC BATTERY greater than 250 miles 100 mph 0-60 mph, less than 8 seconds 100,000+ miles 60 percent in 15 minutes 100 percent in 1 hour The nickel metal hydride battery does not need to be replaced — the battery would last the lifetime of the car. Ovonic is located in Troy, Michigan and employs 80 people in three facilities. It is a fully integrated battery company, manufacturing its own electrodes, cells, and hydride materials (metal alloys which store hydrogen as a solid and represent the heart of the battery technology). Ovonic has produced batteries in a wide range of shapes and sizes — from a 30 amp per hour cell to a 250 amp per hour cell. These cells have been configured into battery modules and full electric vehicle battery packs. Questions and Answers L We have heard different views on the progress of battery technology. Dr. f^ I Nichols seems more pessimistic than Dr. Gifford. How do you account for the • I difference in your assessments? Dr. Gifford stated that while work was left to be done in battery development, significant progress has been made. Dr. Gifford stated that the results presented are actual experimental results demonstrated with existing cell and battery hardware. He also pointed out that the nickel metal hydride battery was currently being successfully tested in a mini van in Troy, Michigan. Dr. Nichols characterized the differences between her and Dr. Gifford as "where we are today versus where we want to go." She stated that Dr. Gifford was discussing potential battery development, and that the batteries currently being tested do not quite match up to the projected technical specifications. She also said that it was too soon to comment whether Dr. Gifford was being overly optimistic. Session 3D — Alternative Vehicle Technologies ------- Page 90 Clean Air Marketplace 1993 Does Ford make station vehicles? *> • I Dr. Nichols responded that it is too soon to tell whether Ford will enter into the T"^^J station car market. While Ford has not traditionally been in that business, the status of electric vehicle technology makes the nature of the market uncertain. Can the sodium sulfate battery be disposed of safely? Dr. Nichols said that the USABC contract with the battery developers requires them to develop a means to recycle any battery that is produced. What is the cost of the PEM for transit operators? * • I Mr. Hossepian responded that the current cost is greater than $2,000 per kW, and ^•^J may be as high as $8,000 per kW. To make the technology economically viable, however, the cost must be in the $20-$30 per kW range. What are the logistics of station cars? Dr. Bernard responded that ownership will rest in a third party — not the person who uses the car, and not the transit agency. The car would be rented to a customer who would keep it until it was needed for the next transit trip, perhaps using it during the day at work. While the station cars might not ever be financially viable, they will be economically viable, because the environmental benefits will outweigh the costs of the program. The station car might replace the third car in a three car household, thus providing benefits. The station cars currently use lead/acid batteries, and NSCA expects to use such batteries until at least 2000, because they are the only affordable battery systems available. Have you considered using solar power for electric vehicles? Dr. Bernard responded that not enough energy can be collected to power cars using only solar power. Mr. Hossepian agreed, and stated that sufficient power density simply does not exist with a solar energy source. Mr. Gifford pointed out that solar power cannot stand on its own as an energy source, but with the right technology, solar power could be used for vehicle range extension. Dr. Nichols explained that The ECOSTAR van uses a solar powered fan to blow out hot air while the van is idle, to prevent drain on the air conditioning when the van is started. Session 3D — Alternative Vehicle Technologies ------- Clean Air Marketplace 1993 Page 91 a The comparison in gas prices between the U.S. and other countries that Dr. Nichols presented is misleading because the gas taxes between those countries vary so much. If more electric cars are used, will not tax revenue be lost? Dr. Nichols agreed with the questioner's point, but speculated that if many electric cars were in use and there was a resulting reduction in fuel tax collected, then some sort of tax would probably be imposed on batteries or alternative fuels to make up the difference. a Are venture capital markets active in the development of alternative vehicle technologies? Mr. Gifford indicated that venture capitalists are probably waiting to see what the market for batteries will be. We do not expect significant involvement on their part until the technologies are developed further. Dr. Nichols responded that because of this trend, government agencies would probably remain the prime source of funding for alternative vehicle technologies. Because the legislative mandates of the U.S. government are driving electric vehicles into the marketplace at a faster rate than they would otherwise be introduced, the government recognizes that they have a responsibility to help manufacturers develop such vehicles. Mr. Hossepian added that venture capital companies are very active in the development of fuel cells. What has been the effect of the President's clean air initiative on the industry? Dr. Nichols responded that the initiative is not close to being in final form and no one in industry knows what the final initiative will contain, // we put "ambassador vehicle" cars on the road that have not been safety f} I certified, as Mr. Bernard implied we might, are not we just hurting ourselves? a Dr. Bernard stated that the NSCA does not support the production of non-safety certified vehicles, but such vehicles may be produced in any case. Mr. Bernard added that his association depends on cottage industries because Original Equipment Manufacturers (OEM) are not willing to work in a small market niche, such as in station vehicles. How does the intensity of U.S. efforts to produce electric vehicles compare to C}~ I efforts in the rest of the world? a Dr. Nichols responded that U.S. technology is as good as technology anywhere and the U.S. could be at the forefront of the electric vehicle market if it could bring that technology into the marketplace at an affordable price. Session 3D — Alternative Vehicle Technologies ------- Page 92 Clean Air Marketplace 1993 Mr. Gifford explained that there is a high visibility of effort in developing battery technology in the U.S., largely due to the efforts of USABC. At the same time, while the U.S. may be a leader today in the development of advanced battery technology, competition abroad will be a problem in the future. The level of activity in Europe and Japan is very intense. In Europe, the size of the electric vehicle market is potentially larger than it is in the U.S., and the Japanese and Korean auto companies are pursuing the development of technology with great vigor, though they do so with a lower public profile than the U.S. Mr. Hossepian stated that the U.S. is out spent by two and one-half to one by the European community, and by five to one by the Japanese in fuel cell technologies. Most of the money in Europe and Japan goes toward demonstration programs for relatively poor technology, while some U.S. money is being spent on solving technical problems, which makes the technology viable. In sum, the U.S. is ahead of Europe and Japan from a technical standpoint, but it is being out spent at an alarming rate. Is Ford using fuel cells? Dr. Nichols responded that the development of fuel cells is still in the research stage, and is handled through a different department. Session 3D — Alternative Vehicle Technologies ------- Clean Air Marketplace 1993 Page 93 Session 4 — Panel A Electric Power Services (including DSM) September 8, 1993 4:15 p.m. -6:15 p.m. Moderator: Panelists: Renee Rico Jeffrey VanSanf William Hederman Carlton Bartels John Henry Introduction Renee Rico, Chief, Market Innovations Branch, Acid Rain Division, U.S. EPA, discussed how the electric power industry is at a crossroads, faced with mandates to consider the environment while providing least cost service. The opportunities in the Clean Air Act (CAA) go well beyond the traditional command-and-control technologies. Opportunities for compliance with a variety of 1990 Clean Air Act Amendments (CAAA) requirements, include fuel choice, energy efficiency and demand side management (DSM). While the acid rain program contains probably the best known requirement facing utilities, they also have to comply with Title I ambient air quality standards requirements, including those for ozone. The Energy Policy Act builds on the issues the CAAA began to address, such as how utilities consider their planning and delivery of services, Interstate issues, least cost planning for meeting energy needs, as well as accounting for lost revenue due to DSM and conservation. Greenhouse gases is another issue that will be discussed. Presentations Jeffrey VanSant, Vice President and Director of Fuel Supply, New England Power Company, New England Electric System (NEES), discussed his company's efforts to reduce emissions based on least cost strategies and increased energy conservation. NEES has one of the nation's largest DSM programs. A critical part of NEES' commitment to reduce the environmental impacts of electric service by 50 percent by the year 2000 is its DSM program, one of the largest in the nation. NEES's retail electric companies serve about half of Massachusetts, most of Rhode Island, and part of New Hampshire. It also owns New England Power Company, a wholesale power company. Session 4A — Electric Power Services ------- Page 94 Clean Air Marketplace 1993 History of DSM at NEES NEBS' commitment to conservation and load management was first articulated in 1979 its long range plan, the first in a series of company planning initiatives. The commitment was stepped up in 1985 with a second plan in which NEES committed itself to a balanced, least cost planning process. In 1989, in cooperation with the utility commissions in Rhode Island, Massachusetts, and New Hampshire, and also with the Conservation Law Foundation, the NEES retail companies pioneered the development of regulatory mechanisms that provide utilities with the opportunity to earn a return on their conservation and load management investments. The objectives of the mechanisms were: • To guarantee value to the customer • To share the savings fairly • To ensure the company is paid only for performance In the third NEES plan, announced in 1991, NEES reaffirmed its commitment to conservation as part of an overall strategy with the following objectives: • To reduce the impact of emissions by 45 percent in the next decade • To cause no real increase in electricity rates in the next decade • To combine supply and demand side strategies to meet these goals DSM is expected to contribute about 10 percent of the total emissions reductions. Savings, Spending, and Shareholder Value Since 1979 NEES has spent $341 million on DSM. DSM spending currently amounts to five percent of revenue, making NEES's DSM program one of the largest in the country as a percentage of revenue. The incentive measures have been a success. In 1990, before tax incentives earned by the company were $4.3 million; in 1991, they were $7.3 million, and in 1992, $10.5 million. NEES expects to save 600,000 megawatt-hours over the period 1990 to the end of 1993 as a result of the DSM programs installed. The key here is not just the real savings achieved, but the development with the Conservation Law Foundation of highly advanced evaluation techniques for measuring energy saved and continuous monitoring. Since 1987, 3,000 tons of NOX emissions, 7,000 tons of SO2 emissions, and two million tons of CO2 emissions have been reduced as a result of DSM programs. The reductions are not huge, but they are real and quantifiable. DSM is an ideal pump primer for emissions trading, and emissions trading can provide an additional incentive to undertake DSM. Session 4A — Electric Power Services ------- Clean Air Marketplace 1993 Page 95 Other Emissions Reduction Initiatives NEES is involved in several innovative projects, the objectives of which are to: • Push the edge on technology, both in pollution control and the efficient creation and use of energy • Gain knowledge about technology to help tackle environmental strategies in the future • Participate in the regulatory process • Establish the value of offsets • Ensure low cost access to offsets Selective non-catalytic reduction Selective non-catalytic reduction is a chemical process for reducing NOX emissions. Urea is injected into a boiler where it combines with NOX to yield elemental nitrogen and water. The project at Salem Harbor, a cooperative arrangement with the Massachusetts Department of Environmental Protection, is a good example of pushing the technological edge. This is the first successful commercial application of selective non-catalytic reduction in a coal-fired boiler, and it has cut NOX reductions by almost 50 percent. Renewable Power In 1991 NEES issued a "green" request for proposal — a solicitation for proposals for renewable resources. As a result, NEES recently announced that it will purchase 36 megawatts of electricity from seven renewable plants, including New England's first wind power project. The cost of power for most of these projects is less than the cost of power produced by modern fossil fuel plants. The technologies and processes employed by these plants include state-of-the-art wind turbines, combustion of methane produced at landfills, and municipal solid waste combustion. This competitive solicitation was the first of its kind in the United States. Coalbed Methane NEES has also participated in a pilot program to demonstrate the feasibility and cost of capturing coalbed methane at two sites in West Virginia and Pennsylvania. The goals were to collect scientific data demonstrating the potential cost of coalbed methane offsets, to help establish the value and verifiability of coalbed methane offsets, and to secure access to sources of offsets. In the process NEES has developed a valuable data base. The results of the program are an $11 per ton CO2 equivalent cost, factoring in Session 4A — Electric Power Services ------- Page 96 Clean Air Marketplace 1993 expected methane flow rates, the price at which it would be sold into a pipeline, and associated development costs. NEES expects to continue its pilot projects. International Greenhouse Gas Reduction NEES has also participated in a reduced impact logging project in Malaysia. This pilot project tests new methods of harvesting that reduce the impact on the forest. It involves better planning and minimizing destruction of trees not targeted for harvesting. An environmental audit committee, consisting of an expert from the University of Florida and the Rainforest Alliance, has been established to measure the results. The first harvesting is underway using the reduced impact logging techniques. Initial results appear to confirm that CO2 will be offset at a cost of $l-$2 per ton. NOX Trading NEES is pursuing NOX trading on two fronts. First, it is working closely with NESCAUM (North East States for Coordinated Air Use Management) to develop protocols for quantifying NOX reductions, in order to create and document a NOX reduction credit. The next step will be to address the banking and trading of credits. Second, NEES is actively pursuing trading partners in Massachusetts and Rhode Island to help prime the trading system. The CAAA, with their expansion of market-based emission credit trading to more localities and more affected sources, were a turning point in emissions regulation, providing market-based options to meet emissions reduction goals. Market-based approaches have many advantages over traditional command and control approaches, and should be adopted for other emissions. Market-based approaches result in least cost compliance, and encourage expenditures beyond what would be done under a command and control environment. Market-based systems encourage industry through competition and incentives to stimulate technology development. They can create economic development opportunities by: • Fostering technology development • Providing incentives to use energy more efficiently • Reducing the costs for everyone • Making offsets available to new industry NEES plans to offer offsets as an inducement to industries that choose to locate in its service territory. A good example of the economic development opportunities are the thousands of jobs created by NEES' DSM program. In conclusion, with a market based Session 4A — Electric Power Services ------- Clean Air Marketplace 1993 Page 97 system, adverse environmental impacts can be reduced in a cost effective manner, development opportunities can be created, and shareholder value will increase. William Hederman, Managing Director, RJ. Rudden Associates, Inc., discussed integrating natural gas and electric utility resource planning. He chose to discuss this topic because of the uninformed opposition of utilities to fuel substitution he has encountered in litigation at the state commission level. In many cases integrating natural gas and utility DSM programs will result in major efficiency gains that benefit all. DSM is important to gas and electric utilities for very different reasons. It is important to keep in mind the differences between gas and electric utilities. • Vertical integration: Gas utilities are much less vertically integrated than electric utilities. • Planning horizons: Electric utilities are comfortable planning 20 or 30 years ahead or considering the life of a power plant. A gas company often plans only 20 or 30 months into the future. It does not take more than a year or a year and a half to put new gas capacity in place, with the exception of long haul pipelines. Local gas systems therefore have a different mentality than electric utilities. • Outages: A big part of load management on the gas side is planning for interruptions of major industrial customers. Electric utilities have more information about their load and market than gas suppliers do. When the gas and electric combination utilities start dealing with DSM on the gas side, they typically bring some of their electric market and gas market people together to talk. The electric side has information on penetration rates and age of appliances. The gas side does not and may not collect this type of information. Because of the mistaken belief that the U.S. was running out of gas supplies, regulators have often prohibited gas utilities from making expenditures for market research or marketing. Where marketing and market research are allowed, the exclusion of costs from revenue requirements consitutes a major negative factor. • Implications of DSM: On the electric side DSM tends to mean less electricity. On the gas side it tends to mean more gas. That appears to have created serious resentment on the part of the electric utility. Session 4A — Electric Power Services ------- Page 98 Clean Air Marketplace 1993 Despite the differences there are opportunities to improve air quality with natural gas. • Cooling: One major opportunity is gas cooling. One of the advantages of using gas as part of electric DSM is its persistence (i.e., ability to stay in place). Gas equipment, unlike a high efficiency bulb, will continue to produce electricity savings far into the future. There is little potential for electricity use at the site to increase over time once gas cooling equipment is in place. • Water heating: Another possibility is hot water supply, but it is more controversial. Going to a high efficiency electric water heater may lock out an option that is even more efficient, such as gas. Officials at EPA have talked informally about supporting gas over electrical hot water at the state level, but have not done so yet. What utilities need are not directives from EPA, but objective, expert information about externalities and how to take them into account when considering gas and electric power. An individual utility does not have the expertise, the data, or the economic resources to develop definitive externality values. The more perceptive state regulators are looking to come up with some way to increase efficiency in their regions. They are therefore interested in more efficient use of the gas and electric utilities' infrastructure. Between one-fourth and one-third of states have or are considering gas-electricity fuel substitution requirements. Looking at gas and electricity demand over a given year shows that even in very different climates, excess seasonal capacity in gas and electricity are complementary. The highest demand for gas is during the winter when gas is used to heat homes. The highest demand for electricity is in the summer when it is used to power air conditioners. Gas suppliers and utilities are forced to build capacity for these peak periods that then goes unused much of the rest of the year. Gas cooling systems can increase use in a low-use season. Using the seasonal spare capacity in both systems will delay the need to build more power plants. There is considerable potential for synergy. That economic gain need not end up solely in the hands of the gas company or the electric company. The breakthrough of DSM is that incentives can be offered in such a way that all parties benefit. The challenge is to get over the almost emotional rejection of the idea, just because gas and electricity are competitors. Competition should be maintained. To quote a friend from the Hill — the idea of putting two monopolies in a room and asking them to cooperate does not give people "warm fuzzies." Fuel substitution needs to take place in such a way that competition is preserved, but the economic advantages of offering cheaper service as a result of greater efficiency should not be overlooked. Because fuel substitution is a more efficient use of resources, it should give those regions that implement it a Session 4A — Electric Power Services ------- Clean Air Marketplace 1993 Page 99 competitive advantage in power costs at the national level. This is beginning to occur in a few regions where there are gas and electric combination utilities, such as Consolidated Edison in New York and Baltimore Gas and Electric. The best way to overcome competitor and regulator distrust is a strategy first used with DSM. A technical working group including the electric utilities, gas suppliers, and regulators should be set up to start finding common ground and building trust. They can begin with many technical issues such as how to establish avoided costs, externality values, discount rates, and incremental costs. The group needs to decide which building simulation models are acceptable and how to run base and post-DSM cases. Then the debate can focus on meaningful issues. Many DSM consultants and technicians are missing a strategic opportunity here. They seem to think that the top executives want to think narrowly on gas-electricity fuel substitution. There is a revolution in efficiency going on. Time has shown that those who choose to stick their head in the sand tend to face premature retirement. Carlton Battels, Director, Environmental Brokerage Services, Cantor Fitzgerald, discussed the SO2 allowance trading system created by Title IV of the 1990 CAAA and Regional Clean Air Incentives Market (RECLAIM) in the South Coast Air Quality Management District (SCAQMD) in Los Angeles, California. The SO2 allowance trading system is one of the most innovative parts of the 1990 CAAA. The Act sets a maximum level of emissions, and the market decides the least cost method of reaching this level. This will result in great efficiencies and lower costs in reducing SO2 and acid rain. The market acts to drive innovation in the emission reduction system. Allowing trading in allowances has reduced the price of eliminating SO2 from $1,200 to $200 per ton. Cantor Fitzgerald is trying to formalize the market by establishing a centralized marketplace which brings buyers, sellers and traders together. By establishing that recognize that all allowances are the same, greater efficiency in trading can be achieved. Currently, emissions allowances are sold through detailed and complex one-to-one contracts. This should not be necessary. By creating trading rules, a more efficient, liquid, and low cost commodity market can be created. Cantor Fitzgerald is in the process of establishing a screen based trading system, similar to the one used for U.S. government bonds, to create a centralized marketplace from decentralized information. It will provide a place to turn when one needs or has allowances, a place where the price is set by the entire market. Session 4A — Electric Power Services ------- Page 100 Clean Air Marketplace 1993 Cantor Fitzgerald needs to tailor the market to fit the needs of the industry. In particular, Cantor Fitzgerald has created a transaction, the forward-looking contract, that is based on the way utilities buy and sell power and fuel. The forward-looking contract is a purchase of several years supply at a time with a set delivery schedule and payment. This with the needs of today's industry. Cantor Fitzgerald will be running a screen-based trading system in the California Regional Clean Air Incentives Market (RECLAIM) starting in January and, is trying to set up such a program in the acid rain allowances market. The advantages of a centralized marketplace are: • Price discovery, resulting from many transactions occurring at one time in one place. A risk adverse group, such as the electric utility, is especially reluctant to make price commitments when there is price uncertainty. Cantor's system posts sales and price, but keeps names secret. • Better deals, resulting from the availability of many buyers and sellers. A centralized market makes it easy to combine the offers of several buyers or sellers to match the exact quantity that you wish to buy or sell. In a decentralized market, the cost of finding the best deal is much more expensive. • Standardized agreements, resulting in quicker, simpler and cheaper transactions. Everything is done with standardized agreements, signed beforehand. Specialized contracts are rarely necessary. The broker arranges and supervises the exchange of money and emission credits. The contract is set up in such a way that today's ratepayers do not pay for allowances for tomorrow's ratepayers. There are also tax advantages to spreading the sale over several years. In sum, the contract fits into cost regulation today, and it is consistent with the way rates are set. The allowance market by law is open to everyone, and there is a role for financial intermediaries because of the rigid way utilities look at pricing. Intermediaries can smooth out cost flows. Cantor Fitzgerald will be running a market-clearing, computer-assisted auction in California, with the aim of bringing order into an ill defined market with minimum risk to the participants. RECLAIM, a trading system for SO2 and NOX in SCAQMD, will come into existence in December. Emitters, including utilities, will then be able to trade emissions allowances within the district. At a given moment every person faces the same prices. Everyone either gets a price they are happy with or they do not make a trade. The computer calculates the price over time, making it possible to weigh the costs of installing new emissions control equipment with the value of the product, emissions credits. Session 4A — Electric Power Services ------- Clean Air Marketplace 1993 Page 101 John B. Henry II, President, Clean Air Capital Markets (CACM), discussed the SO2 allowance market from another perspective. CACM, an environmental investment bank, has structured the majority of private placement (one-to-one) SO2 transactions, totalling more than 200,000 allowances. It currently has eight full-time professional employees and continues to grow. Many of the deals are not made public because of concerns about negative publicity and competitive pressures, contributing to the lack of information mentioned by Mr. Bartels. Deals that CACM have been involved with are: • A deal between Wisconsin Power and Light and the Tennessee Valley Authority (TVA). The public reaction to the first allowance transaction showed how important politics and public perception are in this market. • ALCOA, the world's largest aluminum manufacturer, has undergone some significant fuel switching at a plant in Indiana. The emissions allowances were sold to Ohio Edison. • NEES is compensating generation for reduced utilization deal with Ohio Edison now awaiting EPA approval. • Illinois Power avoided the major expense of installing scrubbers by purchasing a bundle of allowance streams from several sources that CACM had put together. Increasingly, deals are not announced, making it difficult to obtain price information. The information that is available is often unreliable. In addition, utilities have only limited staff working on allowances, and allowances have not been a major priority. Full time specialists are needed to close deals. CACM acts as a confidential advisor/ advocate and does not take capital positions in its trades. CACM is paid only if an allowance deal is concluded. Its job is to structure deals for its clients. The allowance trading market is driven by prudence rather than greed, and the public relations aspects are highly important. Rate-making is a large part of any deal as well, because utilities are so highly regulated. Who pays and who benefits, the rate payers or the shareholders, must be determined in each case. There are also political limitations on the deals that can be done, particularly ones between distant areas. Utilities are the major players in the allowance market in which CACM operates. The utility industry represents the largest accumulation of capital in the economy, as well as the most regulated industry in the economy. Utilities are required to exercise compliance planning, which is what shapes the market. Compliance plans traditionally have consisted of one or a combination of two options: Session 4A — Electric Power Services ------- Page 102 Clean Air Marketplace 1993 (1) The scrubber, which is a huge capital investment, paid for over 25 to 30 years, and (2) Fuel switching to low sulfur coal or gas, which involves a long term contract of 10 to 15 years. Both of these compliance options can be viewed as the utility purchasing emissions allowances from its own system. These purchases are called "on-system" purchases while allowances bought from other utilities or sources in the emissions allowances market are "off-system" purchases. Utilities make commitments to clean up years in advance, and the methods they traditionally choose involve long-term streams of reductions, rather than annual reductions. This shapes the allowance market. Every utility is set up to reduce emissions through "on-system" measures. Every deal so far has been a major policy decision, requiring the participation of the CEO and the chairman of the board. No utility is yet willing to look at "off-system" compliance in a fundamentally different way than "on-system" compliance, meaning that utilities are not interested in short term or small allowance trades. A utility that is buying "off-system" allowances is looking for a secure supply at reasonable prices. CACM believes the solution is to lock in long term streams through private placement. How do you overcome customer resistance to "off-system" transactions? CACM's experience is that requests for proposals, bulletin boards and auctions do not meet market needs. A centralized market will not solve the needs of utilities. CACM has found that the main obstacle to off-system compliance is that utilities are struggling with least-cost versus least-risk. The regulatory structure of who pays, who benefits, and who takes on risk makes the market very complicated. Public utility commissions need to learn more about the allowance market, but cannot be expected to give utilities a blank check and rubber stamp every allowance deal. Those advocating allowance transactions need to recognize that they are competing with suppliers of on-system emissions reductions, such as low sulfur coal suppliers and scrubber manufacturers. The price of allowances must be competitive with the scrubbers and fuel switching, which are sold in customized contracts in a decentralized marketplace. The CAAA SO2 emissions reduction plan has two phases. Phase I, which ends in 1999, requires a 3.5 million ton annual reduction in SO2 emissions, a fairly easy standard. Most of this has been met with fuel switching, in many cases at negative or close to zero cost. Scrubbers supply much of the remaining reductions. Thus, in Phase I, the price of allowances has been very low. Phase II, starting in 2000, requires an annual reduction of more than 8 million tons. At least half of this will be met through fuel switching, with the rest coming from scrubbers and allowance purchases. According to Mr. Henry, shareholders will not willingly pay for scrubbers, and utility management are preparing to go before their regulatory boards to get permission to have rate payers pick up the cost. Session 4A — Electric Power Services ------- Clean Air Marketplace 1993 Page 103 There will be a two-tiered market for allowances — a forward market, which CACM is involved with today, will be joined in the future by a short term allowance market. The window for forward high-value Phase II allowance deals is 1994-1996. As seen in the EPA auction, the short term price of an allowance is considerably lower and after 2010 will fall as the uncertainty associated with the transition to lower emissions is eliminated. Questions and Answers Is the centralized marketplace described by Mr. Bartels a complement or a substitute for the one-to-one private placement transactions that Mr, Henry has been working on? Mr. Bartels explained that there is significant overlap, with both systems offering streams of allowances, but standardized trading cannot take over everything. Private placement trades offer a lot more hand holding. As the market develops, there will be a transition. Originally, power exchange involved as much effort as emissions trading today, but now power exchange is commonplace and top management is not involved. Cantor also sees a two tier market. There is definitely a rivalry between the centralized marketplace and private placement firms. Mr. Henry commented that utilities lack confidence in how their regulatory commissions will treat their allowance decisions. In theory, allowances could be traded as a standardized commodity, but that is not what is going on. Given the window of opportunity for Phase II, which will close in just a few years due to long-term planning, large deals need to be made if they are to be made at all. CACM is not focused on EPA developing an annual, short-term market. From the seller's point of view, EPA's annual forced sale of 2.8 percent of a utility's paper one-year at a time with 100 percent cash up front is a disaster. Utilities do not want this product because it doesn't meet their need for scarcity of supply. However, the auction is in the law, and will continue to be held. Ms. Rico added that the irony is that Congress did not think the auction through because there is no floor price set. There will always be a market for an allowance at close to zero cost. What are examples of rate payers taking the risk and of shareholders taking the risk? Mr. Henry answered that in the Wisconsin Power and Light deal, the rate payers paid for the clean up and got the proceeds from the sale. The shareholders of Ohio Edison paid for the ALCOA allowances^ At Pacific Corp., the rate payer paid for the clean up, and the proceeds will go back to the rate payer. Session 4A — Electric Power Services ------- Page 104 Clean Air Marketplace 1993 Mr. Henry added that there is no evidence that CEOs are going to put shareholder money at risk to create additional allowances for the sale. Mr. Bartels commented that utilities have not awakened to the fact they are all in the market, whether they have made a trade or not. They are also all at risk, rate payers and shareholders alike, whether they have made a trade or not. There is no way to get a least cost compliance plan without at least considering trading. Utilities are going to be asked about their allowance management plan. Before a utility can say that the technology solution is the most cost effective one, it must examine allowance trading options. If they do not do it now, they may be held accountable for that oversight later. Mr. Henry added that there is sometimes a difference between regulatory theory and regulatory reality, which can lead to higher cost, rate based option being preferred to a lower cost option that puts the shareholders at risk. f} I * \ L""""i A Maryland emitter was interested in buying NOX allowances and selling CO2 reductions, and wanted advice on doing so. Mr. VanSant remarked that NEES has NOX allowances to sell. However, the political obstacles to trading allowances over such a distance would be difficult to overcome. NESCAUM is currently running a model trade program, which NEES is participating in. At the moment they are just going through the protocols of creating and certifying NOX emission reductions. However, Maryland is part of the Mid-Atlantic Region Air Management Association (MARAMA), rather than NESCAUM. In terms of selling CO2, NEES is a competitor. Is it true that there is no official system for CO2 now? Mr. VanSant stated that at the moment, greenhouse gases such as CO2 are not part of a trading system. Several European utilities have expressed interest in buying greenhouse gas emission allowances. First, market structures for creating and certifying credits need to be developed. How can we get regulators to look at economic alternatives such as trading allowances fully? Mr. Hederman suggested that educating the regulators is the answer. Working with the appropriate committees can lead to progress. A lot of effort is going into putting together guidebooks with model regulations. Lawrence Berkeley Labs has put one together on gas. Mr. VanSant pointed out that since 1985, NEES has been pursuing gas- electric deals by which NEES would use gas in the summer, the off-peak for gas use. NEES has made a commitment to gas, and its gas needs are growing, but it could never get a gas company to play ball. As a result NEES has built its own excess capacity. Order 636, which makes gas companies accountable for the capacity they pay for, will make fuel switching deals possible. When the gas companies are paying for pipeline that they are Session 4A — Electric Power Services ------- Clean Air Marketplace 1993 Page 105 not using, and the state commissions hold them accountable, they will be forced to lay it off to the highest valued market. Examples of this include New England Electric Utility, Ocean State, and a gas company in Tennessee. The questioner noted that allowances that are traded from one utility to another are quickly taken off the market, and only those that are traded to third parties act as financial instruments. Mr. Bartels responded that the market is dominated by users, who view allowances as operational assets rather than as trading vehicles. However, third parties can reduce the risk and cost incurred by the end user in the market. Although the market is being designed for the utility market, the participation of the investment community will be needed to defray risk and increase liquidity. The questioner clarified that the effect of this type of trading would be two classes of allowances: one set that was traded and one set that was kept by utilities. Mr. Bartels contended that utilities do not have a different "class" of allowance, rather they are consuming the allowances that they keep. An allowance is a commodity and also a future. a What is the effect of advocacy groups further reducing the emissions allowances available by buying and retiring them? Mr. Bartels stated that there have been a few cases and several groups that are interested. However, the market has $1.8 billion in capital. Even at today's low prices, it would take all the money of all the environmental groups in the country to make a noticeable dent in emissions. What are the chances of a CO2 market being included in a CAA amendment? Mr. Bartels answered that the Montreal Protocol includes a greenhouse gas market as an option. A bill to create such a market will be introduced in the near future. Ms. Rico pointed out that there is discussion of'how the U.S. will meet its obligation to stabilize greenhouse gas emissions at 1990 levels. The administration would prefer to use voluntary reduction programs. A market implies that reductions are mandatory. In light of uncertainty in many countries about reduction goals and the way they will be reached, there is a reluctance to discuss trading in the absence of knowing what the goal is. There are concerns about how to measure reductions and monitor international trades. A greenhouse gas market is not impossible, but there are some practical steps to getting a program up and running in terms of the infrastructure required. Session 4A — Electric Power Services ------- Page 106 Clean Air Marketplace 1993 Session 4A — Electric Power Services ------- Clean Air Marketplace 1993 Page 107 Session 4 — Panel B Stationary Source NOX Control Approaches (Including Fuel Switching) September 8, 1993 4:15 p.m. - 6:15 p.m. Moderator: Panelists: Joseph A. Belanger Vincent M. Albanese Joel Bluestein Mitchell B. Cohen Dr. Michael J. Wax Introduction Joseph A. Belanger, Director of Planning and Standards, Bureau of Air Management, Connecticut Department of Environmental Protection, noted that NOX control approaches are an important subject because air quality conditions are so bad that NOX control beyond RACT (reasonably attainable control technologies) will be needed. Flexibility will be the key to a rational NOX control policy. Presentations Vincent M. Albanese is Vice President for External Affairs at NALCO Fuel Tech, which has intellectual property rights to NOX control patents. NALCO Fuel Tech's marketing structure is an international one, with offices in England and Germany; they have recently expanded to Taiwan and Korea. NALCO's strategy is to manage the technology of its licensees by establishing marketing partnerships or strategic alliance setups. Mr. Albanese focused on the specific control technique of selective non-catalytic reduction (SNCR). SNCR involves spraying urea into a specific temperature zone of the flue gas in a boiler or other equipment. The NOX components of flue gas are converted to nitrogen and water in the resulting reaction. NOX reduction in a power generation boiler is a low capital pollution control device; operation and management of the system comprise most of the expense. This technology can produce a 40-70 percent reduction of NOX, although the particular reduction is dependent on site-specific factors. The type of process, for instance, renders the pollution reduction more or less effective; a range of 20-95 percent has been observed over processes ranging from gas burners to solid waste incinerators. Session 4B — Stationary Source NO Control Approaches ------- Page 108 Clean Air Marketplace 1993 Capital costs for SNCR range from $5-$20 per kilowatt. The Annualized Busbar Cost is 0.5-2.5 mils per kilowatt-hour (one mil is 1/1000 of a dollar) or $0.05-$0.25 per MMBtu. This cost range includes many kinds of processes, including new processes as well as retrofits. At a demonstration of SNCR at Wisconsin Electric Power Company (WEPCO), site specific factors resulted in effective use of reagents. At a cyclone unit, the cost of containment was $1,000 per ton. For WEPCO and the cyclone unit, the capital cost was $7-$10 per kW. Mr. Albanese is excited about these benefits, and their implications for how major sources of NOX may comply with the regulations. Longer term use of SNCR was demonstrated at LILCO (Long Island Lighting Company). The unit ran for 8 months, resulting in total use cost of $950 per ton. This unit was run under dispatch conditions, as opposed to a constant load. At a commercial installation at NEPCO (New England Power Company), three units currently have SNCR as the stand-alone technology for NOX reduction. Experience in delivering SNCR technology in cost-effective ways is growing at a frantic pace. The rapid rate of technology growth often outpaces the ability of consultants and regulators to publish information guides. Therefore, it is difficult for someone not directly involved with NOX pollution control to keep up with the costs and technologies. When a NOX source is faced with compliance measures, it must determine what combination of available technology is best to use. For RACT, for instance, SNCR can stand-alone. However, combustion management used with SNCR may be a more cost- effective option. The NOX reduction attainable by these technologies tends to be additive when technologies are used in combination. Several possible measures may be used to attain NOX reductions as required by regulations, including gas reburn (GR), selective catalytic reduction (SCR), low NOX burners (LNBs), and SNCR. With SNCR the cost is "expense intensive" but not necessarily expensive in terms of dollars per ton of NOX reduced. Nearly 90% of the cost is concentrated in operation. This combination is attractive in the ozone season, which lasts from 6-7 months (roughly April through October) out of each year. The system can be operated to reduce NOX, and it can be turned off in seasons when ozone is less of a consideration. This flexibility is an example of what we must strive for in making rational NOX control policy. Session 4B — Stationary Source NO Control Approaches ------- Clean Air Marketplace 1993 Page 109 Joel Bluestein, Director, Gas-Based NOX Control Center, has been involved in researching fuel-type strategies. He began his presentation by polling the audience to determine their affiliations. There were three to five regulators, four to six equipment manufacturers, and about 15 consultants or lawyers, as well as many other professionals. Mr. Bluestein addressed NOX control requirements under Title I, rather than acid rain provisions. Low NOX burners may not be sufficient to meet Title I requirements that may go beyond the reductions required by Title IV regulations. There are several approaches to using gas in existing coal and oil burners. Co- firing is the simultaneous firing of a small portion of natural gas with coal. It has the benefit of reducing emissions, and addresses both operating and environmental problems. Seasonal gas-based NOX control is a cost-effective approach. Conversion to gas matches the period of best gas availability and low gas prices to the peak ozone season — when NOX reduction is most needed. Emissions of SO2, CO2, particulates, and air toxics are also reduced. On the low end, there is zero capital, but the incremental cost of natural gas is a consideration. The high end cost is $10-$20 per kilowatt for gas conversion. Gas reburn uses natural gas to chemically reduce NOX emissions by injecting the gas into the boiler above the primary combustion zone. The gas doesn't actually burn, as there is not sufficient oxygen. Instead, natural gas chemically reduces the oxides of nitrogen and gas, and the remaining combustion gases are burned out by excess air. Reburn of 15-20 percent natural gas has reduced NOX by 50-70 percent in recent long term testing of coal- or oil-fired burners. This reduces the primary fuel input; for example, coal input can be reduced by 18 percent by injecting natural gas above the combustion zone. Consequently, emissions caused by coal burning are also reduced. When overtired air is applied in conjunction with low NOX burners, an additional reduction is achieved. Gas reburn can reduce NOX in cases where simple conversion may not be effective. Additionally, it is less economically sensitive to gas prices since it uses less gas. There are several gas reburn projects currently supported by the Gas Research Institute, DOE, and EPA. These projects encompass the major boiler configurations (cyclone, wall, and tangential), as well as gas technology combinations. The costs of projects at Ohio Edison, Illinois Power, PS Colorado, Midwest Utilities, and Kansas Power and Light have ranged from $30-$35 per kilowatt. NOX control has ranged from 50-75 percent. At Illinois Power's Hennepin facility, long-term gas reburn data showed an overall 67.3 percent reduction — lower than that required by EPA and NESCAUM regulations. This reduction was produced with tangential firing. Full scale data was presented on NOX produced by coal designed utility boilers that had switched fuel or were using gas firing to reduce NOX. The numbers were very low, ranging from 0.05 pounds of NOX per million Btu to 0.46 pounds per million Btu. Reburn is specifically applicable to coal, oil, and gas-fired units that cannot meet RACT limits with combustion modifications alone. It is suitable for meeting more Session 4B — Stationary Source NO Control Approaches ------- Page 110 Clean Air Marketplace 1993 restrictive requirements for existing sources. Reburn is an option for the lowest achievable emission rate (LAER), a very strict level that applies to new sources in ozone non- attainrnent zones. Finally, Mr. Bluestein presented a graph discussing the cost and effect of NOX control technologies. While not trying to identify the best technology, he believes that there will be a large range of technologies used for NOX control. The graph showed the cost of control in dollars per ton versus the percentage of NOX reduced. All technologies fell under the $2,500 per ton mark. In the 30-50 percent NOX reduction range, low NOX burners are inexpensive. SNCR's are in the 50-70 percent range, and require more control. The highest range of NOX reduction can be created by SCR, seasonal gas conversion, advanced gas reburn, SNCR plus gas reburn, and low NOX burners plus gas reburn. The moderator noted that as a regulator, he likes to see technologies with high NOX reduction which are in the under $1,000 per ton range. Mitchell B. Cohen, a Senior Consulting Engineer with Asea Brown Boveri- Combustion Engineering Systems (ABB), gave a slide presentation overview of integrated NOX reduction techniques. ABB's innovative techniques are achieving NOX emissions that are below Japanese, German, and U.S. NOX emission regulations for new coal fired utility units. Japan's national regulations require NOX emissions of around 250 ppmvd at 3 percent oxygen, while German levels are about 120 ppmvd and U.S. levels in some local areas just under 100 ppmvd. NOX reduction in boilers can be achieved with combustion improvements, flue gas treatment at high gas temperatures with ammonia or urea (SNCR), and tail-end flue gas treatment (SCR) at lower gas temperatures with ammonia and catalyst. In designing a unit for NOX control, the engineer must analyze the fuel and the operating process (e.g., base load or cycling load). High reliability and optimization of post-combustion techniques is the objective of each design. Every unit design is site specific. SNCR and SCR can reduce combustion NOX for pulverized coal. ABB has analyzed in-furnace and post-combustion NOX reduction methods. Tangential firing produces lower NOX levels than wall firing, and the emission levels of both have decreased steadily over the past 30 years. The lowest in-furnace NOX system integrates the furnace design with the tangential firing sys'tem and pulverizer equipment to guarantee less than or equal to 0.1 pounds of NOX per million Btu, or the equivalent of a volume of NOX of about 73 ppm. The most cost effective way to reduce NOX is by maximizing in-furnace control. Session 4B — Stationary Source NO Control Approaches ------- Clean Air Marketplace 1993 Page 111 Mr. Cohen discussed optimized selective catalytic reduction systems. As Federal, state and local regulations require increasingly lower NOX emissions, low NOX firing systems can minimize reductions necessary from SCR systems. An optimized SCR system has many benefits, including lower initial capital costs, minimized catalyst replacement and disposal costs, lower system pressure drop, lower auxiliary power, and lower ammonia consumption. ABB uses the Tangential Firing System 2000 (TFS2000) in combination with its Environment 2000 (E2000) unit. E2000 is an integrated NOX control system with an optimized steam generator design for highest efficiency. The unit has two levels of overtired air and a vertical downflow SCR chamber, controlling NOX emissions levels to under 100 ppm. In-furnace NOX control involves local and global air staging. In the TFS2000 furnace, which is used in the E2000 unit, oxygen is managed throughout the combustion process to minirnize emissions of CO, and VOCs. This new tangential firing system effectively uses vertical and horizontal staging to lower NOX emissions. It produces complete mixing, has high combustion efficiency, and protects furnace walls from corrosion. The main difference between SNCR and SCR is in operating temperature. SNCRs run at higher temperatures, 1600°F-2000°F, while SCRs operate between 575°F-750°F. SCR systems are reliable for several reasons: their operation is simple and they have no moving components, minimal maintenance, and a long catalyst life. SCRs utilize either a ceramic-based or plate type catalyst on which the reaction with ammonia takes place. SCR costs have been declining. • In 1985, the capital cost for a new coal fired utility unit was $100 per kilowatt. • By 1993, this cost has been reduced to about $30 per kilowatt. • Capital costs for firing systems have held relatively steady at less than $20 per kilowatt, and by 1993 have fallen as low as $10 per kilowatt. NOX control technology will become more viable as experience is gained in retrofitting and operating these systerfis. Some cost ranges for LNCFSs (low NOX concentric firing systems) are $10-$15 per kilowatt for an in-furnace combustion system, and $30 per kilowatt for a combined system (TFS2000 + SCR). ABB helps promote the effectiveness of NOX control techniques by providing local and state regulatory and environmental groups with information on air pollution control. Session 4B — Stationary Source NO Control Approaches ------- Page 112 Clean Air Marketplace 1993 Dr. Michael J. Wax, Deputy Director, Institute of Clean Air Companies (ICAC), made several "macro remarks," in light of all the technical information that had been presented by the other speakers. ICAC members sell all types of control technologies. ICAC takes the position of favoring performance- based rules over command and control rules. Regulators should set rules that specify emission limits, but are technology neutral. Competition should be allowed to minimize the costs of compliance with maximum control over technologies. Each NOX producing source is different; it would be impossible to specify one type of control. In other words the marketplace should decide what NOX control technology to use. ICAC research has come across a problem that is not limited to NOX control. The problem is that important information is missing from the marketplace. At least two NOX control technologies, SCR and SNCR, are misunderstood. Their capabilities are still viewed as more experimental than they actually are. The extensive use of these technologies overseas and in the U.S. has not been acknowledged; SNCR and SCR are still seen as risky. The costs of SCR and SNCR are also misunderstood. It is assumed that costs are higher than they actually are, but air pollution control equipment costs actually drop over time. The numbers typically associated with SCR, such as $150 per kilowatt, are too high. ICAC estimates lower SCR costs: Coal-fired units: $30-$70 per kilowatt • Oil- and gas-fired units: $15-$30 per kilowatt • SNCR costs for utility boilers similiarly are lower than commonly believed, and are $8-20 per kilowatt. These latter numbers are the ones that should be used in setting regulations and setting facility compliance. In the initial evaluation, costs for new NOX control technologies are higher than they will be after implementation. Several factors have decreased costs for NOX control technologies: increased experience, technical advances, and more competition. Another beneficial aspect of competition is that it makes people smarter. If several suppliers are bidding on a NOX control job, prices will be forced down. Competitors will see each others' innovat]ive designs and work harder to produce equipment that satisfies the buyers' needs and requirements. In closing, ICAC would like to see as much accurate information as possible in the marketplace. More information helps both the public and utility groups. Session 4B — Stationary Source NOX Control Approaches ------- Clean Air Marketplace 1993 Page 113 Vince Albanese noted that a lot of comments were made regarding capital costs. This is an incomplete picture, because the issue of cost is a complex one. He presented a graph showing the costs, in dollars per ton NOX reduced for various technologies, that was produced by a NESCAUM contractor working on an EPA report. The graph shows that the costs for six technologies overlap at RACT-type costs, including low NOX burners plus overtired air, SNCR uncontrolled, SNCR controlled, reburn on cyclic and wet bottom boilers, overfired air, and low NOX burners. Dollars/ ton NOX reduction costs tend to overlap when one considers the broad data available. The ACT document has shown the sensitivity of site-specific variables as they affect costs. Ninety percent of the costs are wrapped up in capital; this has been realized because retrofit units must be set up. The costs ranges are wide, and sensitivities are being probed. There are very rough guides available to make economic conclusions. Therefore, flexibility and market incentives must be encouraged. Questions and Answers Can you clarify what is meant by "level playing field" standard based on output? Mr. Belanger suggest that in the long term, we should be talking about a standard based on emissions per utility output. In other words, the standard should be based on the change in NOX emissions per kilowatt-hour. This would treat NOX as a paid- for resource; companies would, in effect, be buying each unit. The Connecticut EPA is researching the possibility of developing this concept. What are the 'regulatory barriers to implementing NOX control technologies? *> • I Mr. Albanese explained that there are regulatory barriers to implementing the "•"•J NOX reductions, but these barriers are diminishing. At the time literature research was initiated by EPA and others to investigate RACT and other measures, technologies other than burners and combustion modifications had not yet been commercially used. Recently, field demonstrations and commercial use of other technologies have been rapidly accepted, so the issue of RACT technology is not so clear cut anymore. Mr. Albanese added that there is a perception that technologies beyond combustion modification have high cost. Because RACT is a retrofit requirement, many site specific factors govern cost, and cost therefore ranges widely. Regulators are now allowing that other technologies can be utilized to comply with RACT. Session 4B — Stationary Source NO Control Approaches ------- Page 114 Clean Air Marketplace 1993 Mr. Belanger commented that the question of seasonal regulation needs to be examined. Mr. Bluestein added that ozone is a seasonal problem. Looking at production of ozone and requiring control and reductions seasonally is a major change in philosophy for regulators. Mr. Bluestein indicated that fuel switching has not been looked at as a control technology. A level playing field refers to whether emission levels are based on fuel. The field is level when limits are set in a fuel neutral way. What works best, and is most cost effective, is site specific. In the context of ozone rules starting at'a baseline, total emissions must be reduced. There is the question of fuel switching being satisfactory if it is the cheaper solution. Fuel based1 rules provide a dis-incentive to NOX control. Using cleaner fuel should be encouraged by the regulating community. In the serious and severe ozone non- attainment zones, substantial NOX emissions reductions will be required. Companies will need flexibility to reduce NOX emissions, including fuel approaches. In the spirit of flexibility, cost effective solutions should be promoted. To what extent would a fuel-neutral policy push companies away from more expensive technologies? Dr. Wax responded that a fuel-neutral policy would not necessarily push companies away from'what are seen as more expensive technologies. The company's selection of a technology would depend on the regulation, price of the control technologies, and might be a mixture of controls and clean fuels. Mr. Cohen explained that it makes sense to put in SCR in some cases, because some units do not have adequate furnace space to accommodate low NOX burner technology. A generalization cannot be made on this issue. Mr. Bluestein added that a fuel-neutral policy might encourage gas burning, but only marginally. L f} I * I ^^•"" With respect to anticipation of change, is each process optimized to anticipate a change in NOX regulatory levels? Mr. Cohen acknowledged that uncertainty in regulations has been a problem. SCR technology can accommodate additional reductions. Low NOX burners can be fine- tuned to a certain point. Mr. AJbanese explained that with regard to regulatory uncertainty, the source must be aware of the margin of reductions required. When the reagent-based technology is not pushed to the maximum reduction level, or when a combination of technologies is used, there is the potential to generate air emission credits. Session 46 — Stationary Source NO Control Approaches ------- Clean Air Marketplace 1993 Page 115 a If gas burning provides additional pollution control and has seasonal benefits, why should a regulator be willing to undertake the seasonal approach? Mr. Bluestein responded that NOX reduction primarily for ozone non-attainment is very expensive. In'order to make air healthy, it is worth the extra money in the summer time when air quality is poor. In winter, when the emissions are not hurting us, why should companies spend the money? Additionally, if other pollutants can be reduced, that should be taken into account. At $500-$2,000 per ton, is NOX control perceived as expensive? A panelist responded that if the costs for NOX controls seem high, they are reasonable in respect to cost-effectiveness. A National Academy of Sciences study found that NOX controls work 3-10 times as well as VOC controls, which range from $10,000-$20,000 per ton. Costs for NOX control are lower, and control is much more cost effective, by a 30:1 ratio. Car emissions reductions have increased from 96-98 percent. Previously, power plants were reducing 0 percent of their emissions; now they can reduce 75 percent of these emissions. To what extent will snfall businesses be adversely affected if EPA does not accept fuel switching as an alternative NOX control? Mr. Belanger explained that fuel switching must be viewed with respect to its limitations. As opposed to switching from coal to gas, the reductions attained by switching from oil to gas might not meet necessary standards. Mr. Bluestein added that NOX RACT guidance requires the total savings during a period to be equivalent to the year round savings. For smaller boilers, it may be possible to get EPA to sign off on credits. EPA will accept documentation of savings. L f% I * I "™^"" Will small boilers would be expected to match the savings and reductions achieved by large boilers? Dr. Wax indicated that unit control costs will become higher for small boilers, and the rules will acknowledge this limitation. However, costs are not so prohibitive as to disallow fuel switching. L The technologies discussed today address many programs. Are there any ^} I technologies that address the solid waste issue (e.g., the ash produced by coal * I fif^d boilers)? Mr. Belanger responded that these NOX reduction technologies should not change the marketability of soda ash. Session 4B — Stationary Source NOX Control Approaches ------- Page 116 Clean Air Marketplace 1993 Mr. Cohen pointed out that there are disadvantages to some NOX controls, namely that ammonia emissions are higher and there is potentially higher levels of carbon in the fly ash. These considerations go hand-in-hand in examining a specific site. For example, greater fineness may be required. Each situation must be evaluated. Dr. Wax commented that increased solid waste problems have not been a problem in Germany. None of the fly ash created by NOX controlled units is landfilled there, and ammonia slip has been kept low, at levels of 2 ppm and less. Session 4B — Stationary Source NO Control Approaches ------- Clean Air Marketplace 1993 Page 117 Session 4 — Panel C Vehicular Emissions Control Services September 8, 1993 4:15 p.m. - 6:15 p.m. Moderator: Panelists: Ken Thomas William Dell Gary Muggins Jay Gordon Dan Grubbe Introduction Ken Thomas, Horiba Instruments, is a leading manufacturer of equipment for the Federal Test Procedure, and one of the designers of the IM240 test. Despite perceptions to the contrary, the IM240 is a simple, quick, viable test of whether a car meets Federal Test Procedure regulations. It is different from other inspection and maintenance tests in that vehicles are driven on a dynamometer, which simulates real driving patterns. The test measures hydrocarbons, CO, and NOX as a vehicle is operated at many different speeds. This is important because vehicle acceleration and deceleration can be significant sources of pollution in malfunctioning vehicles. The IM240 captures the total exhaust stream, which also distinguishes it from other tests. The purge test, which is part of the IM240 test, is conducted while the vehicle is on the dynamometer. This test investigates whether the charcoal canister, which is designed to prevent evaporative emissions from the gas tank, is functioning properly and recirculating the fuel vapors. The pressure test, also a part of the IM240 test, ensures that a fuel system is working correctly and recirculating vapors in the system. Presentations William Dell, Director of Marketing for Systems Control Corporation, focused his presentation on two basic issues: the responsibilities of inspection and maintenance (I/M) firms, and how I/M firms cooperate with the government to create better vehicle inspection programs. State agencies typically contract an I/M firm to be the single point of responsibility for the design, development, and operation of a vehicle inspection program Session 4C — Vehicular Emissions Control Services ------- Page 118 Clean Air Marketplace 1993 to meet the requirements of the CAAA. I/M contracts are usually very complex, often including items such as: • Financing for the inspection program • Siting and acquisition of land and buildings for use in the program • Sacility design • Testing equipment and procedures • Staffing of facilities • Public relations and advertising • Technician training • Initial operation of the program • Quality assurance Mr. Dell presented slides of facilities currently performing under I/M contracts. For example, there is a multiple lane, high impact program in Texas, which has developed a fully automated assembly line testing procedure. How an I/M firm goes about Implementing these contracts throughout a state is an important issue. The primary importance of cooperation between state governments and the industry in getting these programs operational cannot be too lightly stressed. In the legislative phase, I/M contractors generally help governments design programs through a number of different methods, the most visible of which is direct lobbying. Firms also work with various agencies, helping to develop definitions and program designs. This education process is accomplished through testimony at hearings, working with legislative staffs, as well as advising individual legislators. In the regulatory phase, I/M contractors lend their technical expertise to help state agencies gather information and design specific portions of the tests. Firms also work with the press, helping the public understand the program. If handled properly, cooperation between the state and contractors helps tremendously in designing an effective program, and does not give the firms involved unfair advantage. However, there is a fine line between positive cooperation and conflict of interest. Session 4C — Vehicular Emissions Control Services ------- Clean Air Marketplace 1993 Page 119 Cooperation between governments and the I/M industry is also crucial in the Request For Proposal (RFP) development phase. The states with the best RFPs are those that worked with contractors to incorporate their technical expertise and other advice. Firms, for instance, can lend information and field research capabilities in order to solve potential problems before a RFP is even released. Consensus building is critical to developing a sound inspection program. The state of Virginia, for example, has developed ad-hoc committees of individuals and groups affected by I/M requirements to deal with the development of rules and RFPs. The Coalition for Safer, Cleaner Vehicles has also been reaching out to different parties in order to build consensus. Gary Hugging is the Executive Vice President of the Coalition for Safer, Cleaner Vehicles (CSCV), a national non-profit consumer environmental and industry organization committed to assisting states in adopting effective vehicle emissions and safety inspection programs. The coalition also provides public education on the benefits of vehicle inspection programs. Mr. Huggins began by focusing on the Maintenance or the "M" side of I&M programs. New enhanced vehicle inspections, required by the 1990 Clean Air Act Amendments, will be much more effective than past requirements and are expected to fail between 15-25 million vehicles in the first testing cycle (two years). It is vital that we now focus on effective automobile technician training programs to assure that vehicles that fail enhanced inspections can be effectively repaired. Not one ounce of pollution is removed by inspection alone. The key to the success of I&M programs will be effective vehicle repairs. This need led CSCV to create the Education/Training Advisory Board (ETAB) for the purpose of developing guidelines for effective technician training programs and to assist states in addressing important issues related to improved vehicle maintenance. Additionally, CSCV created the National Education Resource Center (NERC) to draw on the expertise of companies involved with technician training and automotive repair to help states and industry develop solutions to problems involved with the implementation of effective I&M programs. To address the need to focus more organizations and states on the "M" side of I&M, EPA along with CSCV and other interested organizations also began the Vehicle Maintenance Initiative. To begin building a regional infrastructure of qualified trainers, CSCV, in cooperation with EPA and the Coordinating Committee for Automotive Repair (CCAR), Session 4C — Vehicular Emissions Control Services ------- Page 120 Clean Air Marketplace 1993 is initiating a National Train-The-Trainer Program. The goal of the program is to prepare sufficient numbers of people in I&M areas to train automotive technicians for the implementation of enhanced I&M and to begin grassroots efforts to build support for the program. CSCV also serves on several state I&M advisory committees and is encouraging states that have not formed them to do so. The Coalition believes these local efforts will be vital in the implementation of effective programs and in building public support. Dan Grubbe is Manager of Arizona's Vehicle Inspection Program, one of the most extensive vehicle inspection programs in the U.S. He provided a brief overview of his program and its testing procedures. Loaded tests are performed on 1981 and post-1981 vehicles as well as all diesel vehicles, and idle tests are performed on older vehicles. The program includes tests on operational air injection, the catalytic converter, the fuel inlet restrictor, and the presence of a gas cap. Handling 1.7 million vehicles annually, the Arizona program is considered mid- sized, and has a single I/M contractor. The program has a 14 percent failure rate. The Arizona plan has reaped considerable rewards: attainment has been reached in the Tucson area and the frequency of nonattainment in Phoenix has declined. To maintain these types of results, especially with a state Vehicle Miles Traveled (VMT) growth of over 3 percent, the state is considering enhancing the program. The high degree of public approval and confidence in inspection programs must be maintained. Therefore, when selecting an I/M contractor, it is crucial to consider the need to maximize the convenience to the customer and to minimize the costs. For example, sites must have adequate facilities and efforts must be made to reduce waiting times at emissions testing sites. More importantly, programs must improve their ability to accurately diagnose and repair vehicles the first time. The inability to do this could prove to be a major factor in the erosion of public confidence in inspection programs. The ability to diagnose and correct malfunctions can be improved through better education and training of mechanics, and by providing them with diagnostic trouble-shooting guides. Diagnostic aids and better vocational/technical schools can provide information on common problems and how to remedy them. Before turning to the questions and answers section of the panel, Gary Huggins stressed that vehicle emissions control efforts will continue to be one of the most important Session 4C — Vehicular Emissions Control Services ------- Clean Air Marketplace 1993 Page 121 components in the effort to improve air quality. Vehicle emissions control efforts are much more cost effective than other options, and, according to a survey, 70 percent of the public supports inspection efforts as opposed to other methods. The panelists assembled at the conference represent both ends of the vehicle inspection effort: those developing the tests and inspection programs, and those actually implementing the tests and inspection programs and ensuring that the mechanics are able to repair the cars effectively. Questions and Answers How long does the IM240 inspection test take to complete? Mr. Thomas responded that the test is called IM240 because it takes 240 seconds to complete. It uses simulated road conditions, including inclines and declines. EPA is considering a "fast pass" system in which a car could be designated as "super clean" within the first 45 seconds or so of the test. What percentage of the 14 percent that fail in the Arizona program get waivers? Mr. Grubbe responded that the current waiver rate is 1.09 percent of the total population. There are three waiver limits: vehicles of model year 1974 or earlier have a $50 limit, vehicles of model years 1975-1980 have a $200 limit, and vehicles of model year 1981 or later have a $300 limit. What is the difference between the pressure test and the purge test? Mr. Dell responded that the pressure test associated with the IM240 makes sure that the system is not leaking, and the purge test makes sure that the stored vapors get burned in the engine. How do IIM contractors finance these programs? Mr. Dell explained that a lease-back arrangement for land and buildings is a common financing tool; the equipment assets are usually funded by the companies. There are also less obvious financing methods, such as the involvement of bonding agencies. Session 4C — Vehicular Emissions Control Services ------- Page 122 Clean Air Marketplace 1993 What opportunities does the IIM industry see in leveraging new areas of work into IIM contracts? Mr. Dell responded that as an industry, I/M contractors are trying to incorporate as much as they can into the contracts, as this would maximize the convenience to customers. However, it is difficult to expand the scope of the contracts in a number of areas. For instance, safety inspections are a stronghold of the automotive repair industry and many lawmakers and regulators are reluctant to become involved. There are also opportunities to include other aspects of the process, including vehicle registrations and recalls. Session 4C — Vehicular Emissions Control Services ------- Clean Air Marketplace 1993 Page 123 Session 4 — Panel D Alternative Fuels Septembers, 1993 4:15 p.m. - 6:15 p.m. Moderator: Panelists: Charles L. Gray, Jr. William Holmberg Jerrold L. Levine Raymond Lewis Carl Moyer Dr. Jeffery Seisler Introduction Charles L. Gray, Jr., Director of Regulatory Programs and Technology for the Office of Mobile Sources, U.S. EPA, introduced the topic of alternative fuels by suggesting that the automotive fuels industry is experiencing the greatest rate of change since its original creation and growth. This change has been caused by a shift in the focus of the Clean Air Act, from exclusively trying to change vehicle technology to reduce emissions, to a combined strategy of dealing with both the vehicle and the fuel. The change has also been driven by the weak U.S. economy and U.S. dependence on foreign oil. There are high expectations for dealing with economic problems in the U.S. and unless the imported oil problem is addressed, there is little hope of the economy improving. Clean fuels are alternatives to imported petroleum, not to each other. There are a variety of alternative fuels programs already in place or being established, including 41 established oxygenated fuels programs in carbon monoxide (CO) nonattainment areas; the introduction of reformulated gasoline in many of the U.S.'s ozone nonattainment areas in 1995; expanded fleet programs focusing on alternative fuels; and the Presidential Task Force to set goals for converting the Federal fleet. The Federal fleet is expected to be a model for state and local government fleet programs. It will combine the provisions of the Energy Policy Act with the fleet provisions of the Clean Air Act to clean the air and stimulate the market for alternative fuels. The alternative fuels industry has a bold, exciting future beyond what has already been achieved. Session 4D — Alternative Fuels ------- Page 124 Clean Air Marketplace 1993 Presentations William Holmberg, Regulatory and Policy Advisor for the National SoyDiesel Development Board (NSDB), discussed the potential of Biodiesel fuel to be a part of the transition to a sustainable society, and particularly the role of farmers in the NSDB in bringing about that change. There are pros and cons to Biodiesel. The advantage of Biodiesel include the fact that it is: • Renewable, with a very positive energy balance; effective in stabilizing greenhouse gas emissions; • Chemically similar to diesel but biodegradable and nontoxic; • Essentially free of sulfur and aromatics; • Helpful) in reducing CO, hydrocarbons, particulate matter, visible smoke and, with some fine-tuning, nitrogen oxides (NOX) emissions; • A team player with petro-diesel and requires no significant engine modifications or infrastructure changes. The chief disadvantage of biodiesel is its cost. Other disadvantages include biodiesel's tendency in some situations to damage elastomers and concrete, although much of this damage can be avoided by using proper materials. The main distinction between a renewable fuel and a fossil fuel is that naturally occurring fossil fuels can be produced at minimal cost to the producer, while Biodiesel requires that farmers be paid for the feedstocks they grow. However, when environmental benefits and societal benefits, including nation-building, are taken into account, the cost of Biodiesel balances out and provides the opportunity to move towards a sustainable society. To achieve this balance, Biodiesel must receive the same financial incentives as other alternative fuels. Biodiesel also differs from fossil fuels in that the board of directors of the NSDB is comprised of farmers, not corporate executives. The work and goals of the board reflect the members' background and strong commitment to sustainable agriculture. The priorities of the NSDB, as described by NSDB President Gary Ellington, reflect that dedication. These priorities: • Look ahead to an increase in farm profitability by generating new markets for surplus agricultural products; Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 125 • Look to the left to ensure that all aspects of the Biodiesel industry meet the needs of the environmental and public interest communities; and • Look to the right to make sure that they are a part of the nation-building process of energy security and job creation. The discussion moved on to compare the modern evolution of fuel ethanol and Biodiesel and exploring the potential of biofuels, Biodiesel in particular. The purpose of initiating the renewable fuels industry was to find new markets for agricultural products, which are in great surplus. The following chart delineates several key points in the comparison. EVENT Start up Requirements to reduce emissions Octane rating/cetane index Oxygen content Energy security Basic industry and job creation Greenhouse gas stabilization Increased emissions Exploration of alternative uses of the fuel Cooperative relationship with government and environmentalists Integrated approach from soil biology to tailpipe FUEL ETHANOL INDUSTRY 1975 CO and unburned hydrocarbons High Octane 113(R+M)/2 35 percent weight Fair to high with cellulosics as feedstocks Already significant with great potential Fair, with energy balance of 1:1.3 Evaporative emissions and NOX Focus on 1 0 percent ethanol blends Limited efforts to develop cooperative relationships Limited interest BIODIESEL INDUSTRY 1992 CO, unburned hydrocarbons, particulate matter High Cetane 49 and higher for saturated oils/fats as feedstocks Neat form, about 1 1 percent weight Low with conventional feedstocks, but fair to high with microalgae as feedstocks Just starting, with great potential Outstanding, with energy balance of 1:4 NOX can be controlled with timing retardation, additives, engine modification Extensive efforts to determine best blends, best engine/fuel relationships, best relationships with other fuels Extensive efforts to build cooperative relationships Extensive interest in cooperative exploration Session 4D — Alternative Fuels ------- Page 126 Clean Air Marketplace 1993 The accomplishments of the NSDB reflect the growth of the Biodiesel industry: • Over $5 million in investment by farmers in the past 13 months. • Registration of Biodiesel variations with EPA, and attempts to determine "substantially similar" diesel blends not exceeding 2.7 weight percent oxygen. • Working in cooperation with engine manufacturers to gain support for Biodiesel blends. Joint effort with ASTM and NCWM to establish standards. • Supervision of contracts with the Southwest Research Institute, the National Institute for Petroleum and Energy Research, and ORTECH of Canada to conduct engine emissions research and testing, as required by EPA. • Wide range of demonstrations involving blends of Biodiesel with different fuels (petro-diesel, natural gas, compressed natural gas (CNG)/liquid natural gas (LNG), methanol and ethanol) and applications in marine, underground, and railroad industries, fleet operations, and individual vehicle and equipment tests. • Working in cooperation with the National Renewable Energy Laboratory to assemble and catalogue all demonstration and test data. • Working in cooperation with the Departments of Agriculture, Energy (DOE), Transportation, and Defense in developing additional data needed to meet EPA requirements, DOE requirements for alternative fuel classification, and engine manufacturer and end-user requirements. One of the goals of the NSDB is inclusiveness — working together cooperatively with all interested parties. Therefore, in addition to promoting the interests of Biodiesel, the Biodiesel industry would like to team up with the CNG/LNG, ethanol and methanol industries, so that the fuels meet the DOE classification of an alternative fuel when used together. By the end of October 1993, Biodiesel will be used in more heavy-duty engines than all other alternative fuels combined. Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 127 Jerrold L. Levine, Director for Corporate Studies at Amoco Oil Corporation, discussed the alternative transportation fuels industry, CNG in particular, and Amoco's role in the CNG industry. While legislation will mandate the supply of an increasing level of alternative fuels, no particular fuel is identified in either the Clean Air Act or the Energy Policy Act. While market dynamics are expected to determine the alternative fuel of choice, under the Energy Policy Act, CNG is likely to prevail as the clean fuel of choice. By entering the CNG industry, Amoco has the opportunity to position itself as a leader in the clean transportation fuels industry. Alternative fuels represent a new retail market opportunity. The combination of all fleet requirements covered by the Clean Air Act, the Energy Policy Act, and the President's order for a 50 percent Federal fleet expansion, are expected to drive the alternative fuels market. By 2010, alternative fuels could replace somewhere between 550,000 and 1.1 million barrels per day of equivalent demand for gasoline, or 8-15 percent of the demand for gasoline. The lower estimate assumes that alternative fuels will satisfy the basic requirements of existing Federal and state legislation. The high estimate assumes significant participation by other states and the conversion of existing vehicles. In comparison to methanol, ethanol, and propane, natural gas generally has lower CO, volatile organic compounds (VOCs), and NOX emission levels than do reformulated gasolines. The operating characteristics of natural gas (e.g., cold weather starts, convenience of refueling, and "driveability") generally are superior to those of other alternative fuels, except for convenience of refueling. In terms of maintenance, natural gas and propane vehicles require fewer oil changes and engine tune-ups and have longer engine life. Converted light-duty vehicles tend to suffer from poor acceleration and limited range, problems generally not encountered in larger vehicles such as pickups and vans. Dedicated CNG vehicles will be redesigned with engine control systems, compression ratios, and port fuel injection in order to overcome these problems. LNG has the same operating characteristics as CNG, but vehicles can carry much more fuel and have an extended driving range. The disadvantage of LNG is that it has a very low temperature and requires special handling. As a result, it is not being seriously considered for cars and light trucks, but is being reviewed for use in larger medium- and heavy-duty trucks, tractors, and railroads. There are several reasons why CNG is likely to be the clean fuel of choice: • CNG has a distribution system in place. Development of a dedicated infrastructure for methanol, the next most likely alternative fuel, is not likely, especially under the accelerated timetables for use of alternative fuels prescribed by the Energy Policy Act. Session 4D — Alternative Fuels ------- Page 128 Clean Air Marketplace 1993 • CNG is clean burning. Emissions are 85 percent lower than gasoline, and generally lower than other alternative fuels. • CNG is safe. It is neither toxic nor corrosive. • Natural gas is domestically abundant. A 50-year conventional supply is available, with hundreds of years of unconventional supply available. • CNG is inexpensive. It is typically priced 2CMO percent below gasoline. All other alternatives are more expensive than gasoline. • CNG reduces engine maintenance expense. • CNG performs. It has an octane reading of over 130 and yields essentially the same fuel efficiency (mpg) as gasoline. • CNG can be sold via public or private fueling. The challenge facing industry is to respond to the need for fueling facilities while having enough CNG vehicles to justify the investment. There are several reasons why the market for public CNG fueling stations is expected to grow: • High initial investment necessary for gasoline fueling facilities (typically $200,000 to $300,000 for existing sites) and a strong desire to get away from underground storage tanks may lead many fleet managers to remove their on-site fueling stations and utilize public fueling. • Many fleet managers indicate that they want to initiate a pilot program for their vehicles to get comfortable with CNG before committing to a full-scale program. A public fueling site could be used for this purpose. • Public fueling development will encourage manufacturers to produce more dedicated CNG vehicles. • The size and availability of a public fueling program will help establish CNG as the alternative fuel of choice. The keys to success of CNG public fueling systems can be likened to the three legs of a stool, all of which must be in place and work effectively for the system to succeed: A proactive local distribution company (LDC). Generally this would be the local utility. A proactive LDC has an aggressive fleet marketing program consisting of fleet customer prospect lists, solicitation of fleet customers, and incentives or rebates against the cost of vehicle conversion. Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 129 • A retail fuels marketer. Successful retail fuels marketers are willing to form alliances and commit resources. They bring to the table existing service station sites and a knowledge of transportation fuels marketing. • Local conversion and technology centers. This allows fleet owners to convert vehicles locally and have confidence that there is local technical support to maintain the vehicle. This is necessary until auto manufacturers begin manufacturing sufficient numbers of dedicated CNG vehicles. Fueling stations should be convenient for customers: • User-friendliness. A CNG dispenser should be similar to a liquid fuels dispenser, both in appearance and in operation. • Fast-fill dispensing. Dispensing of CNG into the vehicle's storage cylinder should take about the same amount of time as liquid fuels dispensing at the station. • Priced and dispensed in familiar terms. CNG should be priced in cents per equivalent gallon and dispensed in equivalent gallons, allowing the purchaser to easily compare fuel cost savings to gasoline. • Easy payment. The station cashier should be able to take various forms of payment — cash, major credit cards, and government fleet cards — with no need to pre-arrange vehicle fuel purchases. Amoco began marketing CNG two years ago, with three CNG fueling stations in operation by the end of 1991: public stations in Denver and Boulder, CO, and a demonstration station in Washington, D.C. The Colorado stations were the first public CNG fueling stations in the U.S. opened by a major oil company. In the past two years, Amoco has equipped a total of 17 stations with CNG, more than any other major retailer. Although volume for these stations continues to be low and the stations tend not to be economically profitable, Amoco expects to add about 15 more stations this year in markets where local distribution companies and governments are receptive. Amoco would enter the CNG fuels market for three reasons: • Amoco has been a leader for many years in producing quality fuels for the transportation industry. CNG public fueling initiatives are viewed as providing an additional product to the existing transportation fuels product slate. • Marketing CNG strengthens Amoco's strong corporate commitment to environmental leadership. Amoco believes that it has the opportunity to Session 4D — Alternative Fuels ------- Page 130 Clean Air Marketplace 1993 position itself as a leader in the growing market of alternatives to petroleum-based fuels. • As a customer-focused company, Amoco is dedicated to meeting its fleet customers' needs as they comply with mandates of the Clean Air Act and the Energy Policy Act. Raymond Lewis, President of the American Methanol Institute, believes that people must realize that alternative fuels are real, current, and economic. In examining what alternative fuels and clean air can do for jobs and the economy, he explored how alternative fuels can form a healthy competition that generates clean fuel technology and economic development. Methanol, by current definitions of clean fuels including reformulated gasoline, represents the largest alternative fuel. Methyl tertiary butyl ether (MTBE), a methanol derivative, is the fastest growing chemical in the world and uses around 40 percent of the methanol in the U.S. It is used as an oxygenate in oxygenated and reformulated gasoline. Mayor Pena started an oxygenated fuels program in Denver that spread to other cities. The program was so successful that it was incorporated into the Clean Air Act. Currently in place in 41 cities, the oxygenated fuels program is considered one of EPA's most successful programs, with high implementation and acceptance rates, as well as tangible CO reductions. Reformulated gasoline programs were introduced later and have the potential to double the current demand for MTBE. Reformulated gasoline was developed in California where specific environmental concerns led to a search for cleaner burning fuels. The refinery industry recognized the potential of methanol to be a tremendous competitor in the marketplace and set its fuel standards to be as clean as methanol fuel. ARCO initially developed a reformulated gasoline with a goal to be as clean as M85 (85 percent methanol fuel). As a result, Unocal and Chevron lost market share and responded by cleaning their products. Under the Clean Air Act, the oil industry was forced to acknowledge the potential for reformulated gasoline because three companies had voluntarily developed it through competition in the marketplace. The presence of methanol in the fuels industry as a product and the competitive driving force of M85, forced the development and marketing of a cleaner gasoline product. Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 131 There are three benefits to using neat fuels (e.g., M85 and M100) in flexible fuel vehicles. • Neat Methanol fuels are the most similar to liquid fuels currently in use. Although vehicles are being built with different materials, competition has reduced price, allowing the consumer to adopt an alternative fuel while avoiding excessive cost. • Because flexible fuel vehicles can run on either methanol, gasoline (or some combination thereof)/ consumers are not constrained by the availability of alternative fuels. • M85 is a transition fuel that can be used during the development of an infrastructure for dedicated vehicles that will be even cleaner and more fuel efficient. It is important to consider methanol supply and availability in the U.S. and the capital cost of methanol conversions. Viewing the overall capital requirement for the development of an alternative fuel infrastructure, the cost of methanol is lower than that of CNG. Methanol can be derived from natural gas — it is the largest use of natural gas as an alternative fuel which is growing in domestic supply. Methanol also can be derived from oil, coal, biomass, sewage sludge, new steel coke oven processes that turn emissions into methanol, and conversions of closed ammonia plants. There is also a rapidly growing distribution infrastructure for methanol that requires approximately one tenth the capital cost of a CNG station. Methanol can be transported in liquid pipelines like gasoline and dispersed through liquid fuel pumps with only minor modifications. Large oil pipeline companies have made a commitment to transporting methanol through their commercial pipelines once there is sufficient volume. Methanol has the capacity to displace crude oil, and industry has acknowledged and should welcome the competition it provides. The use of methanol as an ether, the development of Biodiesel fuel which is partially made from methanol, and the role of methanol in reformulated gasoline are examples of competition within the alternative fuels industry. The ultimate goal is to create sufficient competition within the alternative fuels industry so that consumers can choose which alternative fuel they want to use. The best way to achieve this goal is to level subsidies of alternative fuels to allow the market to determine competition. Session 4D — Alternative Fuels ------- Page 132 Clean Air Marketplace 1993 Carl Moyer, Chief Scientist for Acurex Environmental Corporation, presented an overview of the business aspects of alternative fuels. He has considerable experience demonstrating alternative fuels, supporting fleet programs in California, and helping state and local agencies develop incentive programs for successful energy programs. The future of the alternative fuel industry, its pace, and elements of alternative fuel program success can be outlined in six themes. (1) Driving Forces for Alternative Fuels Driving forces for alternative fuels are weak and not well aligned. This is a time of great fuel change, but most of the changes are going to happen in gasoline and diesel. Emission standards alone will not drive alternative fuels. • There is a strong response of gasoline to meet the alternative fuels threat. In California, gasoline is capable of meeting emissions standards for light- and medium-duty vehicles through low emission vehicles (LEVs), while the standards for zero emission vehicles will require entirely different technologies. There is no room for alternative fuels in the light- and medium-duty sectors solely to meet emission standards. But there is a possible exception: if the gasoline LEVs are late for some reason, a demand for flexible-fueled transitional LEVs may be triggered. • Heavy-duty diesel standards can be met by clean diesel until the 2000s. Emission standards cannot be used to force out clean diesel and switch to alternative fuels. Local decisions to overtly favor clean fuels over diesel for buses and some other fleets (Seattle, Sacramento, Texas) are an exception to this. ' • Emission reduction credits can be critical to making alternative fuels competitive, particularly natural gas and methanol in the heavy duty (HDV) sector. When markets are thin, it is hard to equate a real dollar value with NOX credits, and transaction costs are high. The relatively minimal Energy Policy Act requirements (100,000-300,000 vehicles per year) are divided between methanol, natural gas, and propane, and between original equipment manufacturers (OEM) and vehicle conversions. This division results in a fairly small niche for each technology. Also, available financial incentives reward fuels in competing ways. For instance: • The Energy Policy Act and rate basing reward capital-intensive technologies, such as natural gas and propane, but they do not support methanol. Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 133 • The energy tax punishes all alternatives and local taxes tend to be confusing. • Site specific evaluations of fleet options are needed by all fleet operators; however, it is difficult for fleet operators to understand all of their options and respond appropriately. (2) Niche Strategies Niches can work for low, medium, and heavy duty vehicles. Fleet economics favor niche strategies, where marketing costs decrease with large volume sales and high mileage vehicles favor natural gas and propane. While there is a shortage of certified natural gas, engines and rate basing benefits are temporary. Methanol can adapt to niches by careful matching of fuel supply to vehicles. Fuel suppliers must take risks and work to link fleet- fueling retailers to fleet users. Fleet fuel retailers are eager to meet this demand because fleet vehicles are required to convert and the Energy Policy Act opportunity is very near- term. The methanol industry needs dedicated suppliers who are willing to work to make methanol succeed. The question facing the industry is how long OEMs will stay with methanol cars, if they do not need them for emission requirements or CAFE credits. (3) Cost-Consciousness Government and business fleets are extremely cost-conscious in a time of recession and require a delivered value in their alternative fuel vehicles. Trials and experiments with alternative fuels are ending and retail fleet purchases are impending. Suppliers of vehicles and fuel must provide service, reliability, and competitive costs to retailers who want value and quality. Suppliers must be willing to provide the labor intensive on-site presence necessary to help and support their customers as they make the transition to alternative fueled vehicles. (4) Market Value Emission standards alone will not drive alternative fuels; therefore, success for methanol is more likely where NOX reductions offered by alternative fuels have real market value (i.e., in air quality-impacted areas). Emission credits can be worth up to $30,000 per heavy duty vehicle in their net present value or 20tf per gallon of methanol. Unfortunately, it is difficult to take advantage of emission credits for several reasons. Markets are thin, it is difficult to locate buyers, verification of credits requires costly testing and auditing, and skimming and factoring for breather-benefits adds cost. (5) Inherent Advantages Although natural gas and LPG are better positioned, methanol can compete in the alternative fuel fleet market. The lower cost of fuel offers inherent advantages for natural Session 4D — Alternative Fuels ------- Page 134 Clean Air Marketplace 1993 gas, but vehicle technology still needs improvement. Fleets are not affected by economies of scale, which is also a benefit for natural gas. However, methanol can take advantage of fleet operations by working niches. (6) Cost-Prohibitive Alternatives Ethanol production and electric vehicles (EVs) probably will not be viable options. Their costs are too high. In particular, EVs need a better platform with less weight and fewer losses. He suggests that EVs may become viable for fleets where air credits can be obtained during urban design. The 1990s have provided real, albeit limited, opportunities for alternative fueled vehicles. Success will require suppliers of fuels and equipment to work closely with buyers. This has nof been the case so far. Natural gas suppliers tend to be more service oriented and may fit into this role more easily. Broader alternative fuel vehicle markets will require different policies than those implemented in 1974-1992. Although individually the different policy acts have useful features, when added up, they provide no decisive guidance except for emissions. A question to consider is why there is not greater emphasis on the balance of payments and domestic jobs in the promotion of alternative fuels. Dr. Jeffeiy Seisler, Executive Director of the Natural Gas Vehicle Coalition (NGVC), discussed natural gas technology (vehicles, hardware, and the fueling process) that is available on the market today and efforts by the natural gas industry and fuel retailers to bring the fuel to the marketplace. There are challenges facing the NGVC, especially in that convincing the natural gas industry that there is a viable transportation market. The NGVC has been particularly striving to: • Achieve a balanced approach to developing a regulatory/legislative market for natural gas vehicles and strengthen the gas industry's support of that market. Facilitate and commercialize natural gas vehicle development. Natural gas is worldwide and requires international tie-ins. It is necessary to provide the opportunity for U.S. companies to export their technology abroad. There are many advances in natural gas vehicle technology. To date, most technology has been mechanically-based retrofit, taking a standard gasoline vehicle and Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 135 adding on natural gas cylinders, a regulator, and fuel mixer. Retrofitted vehicles work with either gasoline or natural gas, though the fuels are not mixed. These retrofits have had minimal effect on the outside appearance of the vehicles. Examples of new technologies include: • IMPCO is at the forefront of developing computer technology for closed loop systems that work with tailpipe sensors. • Diesel engines are using fuel injectors to inject natural gas and spark plugs to ignite the fuel; the heat of compression engines cannot generate sufficient heat to meet the ignition temperature of CNG. Hercules has a "new look" diesel engine that uses spark plugs. • The defense industry is becoming involved in developing cylinder technology out of lightweight composites. • Browning Ferris and Southwest Research Institute produced a dedicated natural gas Mack garbage truck that was driven from Texas to Boston. • Brooklyn Union is experimenting with closed loop garbage trucks that run on natural gas that is collected from landfills and compressed. • Bluebird and Hercules are producing natural gas school buses. • The Big Three auto manufacturers are all in various stages of developing natural gas vehicles. Ford has introduced the dedicated CNG Crown Victoria; General Motors Corporation is taking an after market conversion approach through a contract with IMPCO to convert new trucks; and Chrysler has the "cleanest burning internal combustion engine on the road," which has been certified as surpassing California LEV standards. • Natural gas is being used in on- and off-road vehicles, water vehicles, and trains. For instance, one can find natural gas in Zambonis, Disneyland water rides, police cars, Giant food delivery vans, Entenmann's delivery trucks, airport shuttle buses, Burlington Northern LNG trains, off-road forklifts, and mass transit buses. There are different ways in which natural gas vehicles can be fueled, but it is difficult to predict which method will be predominant. Instead, utilities will use different market development styles to develop their natural gas fueling markets. Fueling methods include: • Fueling at the utility, which is oriented towards fleet operators. Session 4D — Alternative Fuels ------- Page 136 Clean Air Marketplace 1993 • Selling through the fence, where a utility puts the CNG dispenser outside of the utility yard so that the customer does not have to enter the utility property. • Dedicating a natural gas station for fleet operators. • Installing pumps at independent retailers (e.g., a utility-owned pump at a privately-owned gas station). • Gas companies establishing their own, non-regulated, non-rate-based businesses (e.g., Natural Fuels in Denver, CO). • Taking over-the-road cylinders to places not served by natural gas pipelines. • Slow-fill and home refueling. Dr. Seisler concluded by highlighting some of the changes necessary to make alternative fuels, and CNG in particular, acceptable in the marketplace. Organizations representing alternative fuels must look to establish a balanced approach to legislation/regulation that will build in standards and legitimize alternative fuels in the marketplace. Public relations and communications must be used to get the message out that alternative fuels are available and consumers must choose which fuel they want to use. In addition to having sufficient time and economic resources, alternative fuel suppliers need to be visionaries to succeed. Questions and Answers There is an issue concerning inherently low emission vehicle (ILEV) standards, which recognize that there are two sources of hydrocarbon!organic emissions from motor vehicles, exhaust and evaporative. Why would ILEV standards not provide a strong market incentive for alternative fuels? Mr. Moyer explained that the ILEV concept fundamentally requires dedicated vehicles. Lessons from the 1980s show that it is extremely challenging to match vehicles with user application if the vehicle does not have some option for another fuel. Flexible fuel or dual fuel vehicles take away many of the advantages sought through ILEV. Work in California has tried to recognize high in use emissions and include whole life cycle emissions, from the refinery to the tailpipe. ILEV standards favor alternative fuels, but regulators cannot impose standards requiring dedicated vehicles without experiencing extreme backlash from the vehicle users. Retrofit technologies in the heavy duty area could also help address this problem. Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 137 Mr. Gray added that dedicated alternative fuel vehicles will be very attractive, despite their drawbacks, relative to the draconian measures that will need to be implemented to meet increasingly strict air standards. Mr. Moyer asserted that legislation that supports alternative fuels with some tailoring to community acceptance, and more aggressiveness from the agencies for lower NOX standards for new engines, should be encouraged. Mr. Levine pointed out that a standard for heavy duty vehicles was established, but only the Detroit Diesel Corporation (DDC) was prepared to meet it. Rather than letting DDC benefit in the marketplace, the standards were changed and DDC was told not to take the initiative standards seriously. Will the car companies take proposed standards seriously if they have been ignored in the past? Mr. Gray answered that such a statement presumes that the CAA will not be implemented. Unless that situation changes, it is difficult to propose alternatives that are less negative than a technology solution. Why does the methanol industry find the ILEV concept objectionable? Mr. Lewis pointed out that the methanol industry does not object to the concept, but rather the implementation. ILEV assumes that only one thing, the volatile emissions equipment, fails and ignores all of the other components on the system of a car. It prevents a market for transition fuels such as M85 because they fail emission standards. Industry has fuel that would lead to Ml00, but regulators have set a standard that only M100, which is not market-ready, can meet. Presently, M85 should be banned from the major programs, like state fleets, and implementation deadlines are so short that it is impossible for car companies to address the problem. ILEV is not a fuel neutral standard. Mr. Gray added that ILEV is a performance standard based on air quality. L ^% I • I Is there a nationwide effort that makes Congresspeople aware of the potential to cause a significant reduction in the balance of trade or to process unused grain or garbage? Dr. Seisler explained that the NGVC is looking at the government to use and balance all of the opportunities it has to support alternative fuels: mandates, incentives, credits, basic communications, and development of standards to force the adoption of alternative fuels. Mr. Lewis commented that it is a problem for an alternative fuel to get established in an existing infrastructure where the current costs are very low. It does not make sense for methanol to have to compete in an arena where all fuels are not created equal. Session 4D — Alternative Fuels ------- Page 138 Clean Air Marketplace 1993 Why is the alternative fuel industry not focusing on the issue of replacing foreign oil instead of focusing on how one fuel is disadvantaged in terms of other alternative fuels? Mr. Lewis answered that when one industry goes out to promote this idea, it is viewed as feathering its own nest. Promotion of alternative fuels has to be perceived as good for the whole country and not for one private industry. f% I • I ^™^^" When you talk about reducing dependence on foreign oil, you assume that all of the alternatives are domestically produced, but many foreign oil producers are gearing up to produce methanol for the 1995 oxygenates seasons. Also, even if methanol is domestically produced, is it not still a finite resource? Mr. Lewis explained that the source of methanol is natural gas, so if there is a source for one alternative fuel then there is a source for both. Also, methanol can be produced from renewable resources. Mr. Gray responded that a domestic policy initiative needs to say that some amount of our fuel will be derived from domestic resources and some from renewable resources, while promoting technological development and preserving jobs. Mr. Levine went on to say that in order to produce methanol, there needs to be a lot of natural gas in one place. There is a lot of natural gas in the U.S., but it is spread out. There is much more concentrated natural gas in the Middle East and former Soviet Union, but the economy will not import expensive methanol if petroleum fuel is inexpensive. Have there been any attempts to quantify methane releases from methane uses? Dr. Seisler responded yes, however the focus needs to be on developing greenhouse gas standards, which include methane and carbon dioxide. Session 4D — Alternative Fuels ------- Clean Air Marketplace 1993 Page 139 Keynote Address by Senator Max Baucus "An Environmental Renaissance' September 9, 1993 Two days ago the Fall session of Congress began, and the Environment and Public Works Committee has a lot to do. Next Tuesday we will hold our first major hearing on the implementation of the Clean Air Act Amendments of 1990. At the hearing I hope to hear a lot more about the subject being discussed at this conference: new environmental technologies. I believe that on environmental issues, this year will be among the most productive in more than two decades. That is because there is a basic change in government philosophy and in public attitudes toward environmental protection. We are leaving an era of reaction, backlash, and fear, and entering one of hope and progress. We seem to be resolving a bitter and destructive argument that has hindered environmental progress for decades: the contention by some that environmental protection will destroy jobs and end economic growth; and the argument by others that a vigorous economy and technological advances will destroy the environment. From Conservationism To Common Ground Before we discuss the future, it may be helpful to talk a little bit about the past, and about the historic processes that brought us all here today. As a mass movement, modern environmentalism dates from the first Earth Day celebration in 1970. In those days, now familiar environmental issues were very new to government and industry. People were sick and tired of burning rivers, dirty air, and toxic dumps. They asked Congress to respond, and Congress did respond. The Clean Water Act, the Clean Air Act, and the Safe Drinking Water Act all date from that era. In those and following years, however, too many environmentalists viewed industry not as a partner to work with, but as an enemy to conquer. Too many members of the business community took the same view of environmentalists. Bitter divisions between the Executive Branch and Congress, and between industry and environmental groups, made advances impossible. Legal and political battles, not scientific analysis and cooperation, dominated the environmental landscape. The result, of course, was that for Keynote Address — Senator Max Baucus ------- Page 140 Clean Air Marketplace 1993 a full decade, from the early 1980s to the early 1990s, environmental progress halted, and at times was reversed. This year we can clear the air, so to speak. That means, as I like to say, that we are on the verge of a Renaissance — a rebirth of environmental progress. At the core of this Renaissance, as at the core of the Renaissance in Europe hundreds of years ago, is better understanding. It is the understanding that we must preserve our natural resources to sustain ourselves both economically and physically. Industrial and environmental groups have found common ground in the goal of sustainable development — a growing economy, secure jobs, a healthy and clean environment. The challenge is no longer whether, but how to reach the goal. Taking Stock Last winter, when I became Chairman of the Committee, I looked over the agenda for the 103rd Congress and I saw a lot to do: the Clean Water Act, implementation of the Clean Air Act Amendments of 1990, the Endangered Species Act, and the Environmental Justice Act. But I decided that rather than try to rush through it all, the Committee should step back and look at the big canvas. So we held a long series of what I called "Taking Stock" hearings. I brought in scientific experts, environmental groups, legal scholars, economists, and ordinary citizens to discuss where our country and our world stand on environmental issues. I listened to testimony on many different environmental topics and considered many different approaches to our environmental goals. I emerged from those hearings more confident than ever that we have the makings of a consensus on the right way to approach environmental protection, a way to keep our country environmentally clean and economically healthy, a way to achieve sustainable development. I am optimistic about the future because, as Russell Train reminded me, my generation is more environmentally conscious than his. And our children, he noted, are even more driven to achieve environmental preservation than we are. Corporations Are Changing Their Ways 1 am also optimistic because American businesses are catching on. Companies now listen to advice from inside and from outside. They are changing their ways and adopting environmentally safer practices — not just for public relations, but because it make good business sense. Keynote Address — Senator Max Baucus ------- Clean Air Marketplace 1993 Page 141 • Dow Chemical used ideas submitted by its own employees to reduce waste in five of its plants, saving the company $10.5 million through recycling and increased efficiency. • Xerox changed its packaging, eliminating 10,000 tons of waste and saving up to $15 million per year. • AT&T saves at least $25 million a year in supply costs by eliminating ozone-depleting substances. Government Must do the Same Government can learn some lessons from companies like these. We who write laws must be just as thoughtful and innovative as they are. We must take some new directions. In the spirit of re-inventing government, we must look for ways to re-invent environmental laws. The traditional "command and control" approach to environmental law is no longer as effective as it once was in solving our environmental problems. This does not mean lowering environmental standards. Nor does it mean sacrificing our economy for the sake of preservation. The "Taking Stock" hearings brought home to me the importance of three things: (1) developing new, cutting edge environmental technology; (2) creating market-based incentives in our environmental laws and programs; and (3) finding multi-media solutions tailored to particular facilities. Developing New Technology Green technology can make environmental controls more efficient and more effective — and it is critical to our economy. A recent study found that the air pollution control industry can create 40,000 U.S. jobs per year by the year 2000. This job growth is fueled by a 44 percent increase in worldwide demand for environmental goods and services. Green technology, however, will not develop automatically. We must avoid a naive faith that demand for these products will arise on its own. Instead, we must create it by using tough regulatory standards. The California Air Resources Board, for example, requires that by 1998, 2 percent of the cars produced for sale in California must have zero emissions. That makes some people mad. But it gets results. Major auto companies and small firms are now developing electric cars for the California market. And over 100,000 miles, an electric car is 200 times cleaner than the least-polluting conventional vehicle. I want to see that kind of advance nationwide, in all industries. The Environment Committee has given us a start by reporting an "enviro-tech" bill I introduced earlier this year. I believe this legislation will get us started, by setting an overall strategy for Federal Keynote Address — Senator Max Baucus ------- Page 142 Clean Air Marketplace 1993 environmental technology research and development, and fostering private development of technology. Other countries are well ahead of us in understanding the importance of green technology, both for environmental and economic reasons. For example, I recently visited Japan and spoke with Mr. Okamatsu, the Vice Minister for International Affairs at Japan's Ministry of International Trade and Industry. I expected a tough discussion of U.S.-Japan trade conflicts, the bilateral deficit, the Clinton Administration's trade negotiating framework, and so on. But in fact what interested Mr. Okamatsu most was not trade. It was my enviro-tech bill. He knew more about that bill than virtually anyone I have met in the U.S., and he told me that it is precisely the sort of thing the U.S. needs to do not only to protect the environment, but to improve our international economic position as well. Using The Market The second step is to use market forces to promote environmental protection. At times, this will happen automatically. At times, we can create markets, as California has done for the electric car. And at other times, we will have to eliminate market incentives that push companies to pollute. • First, we have to insist that a product's price reflect its full social cost. We cannot let companies use "pollution subsidies" to cut costs and underprice environmentally responsible competitors. • Second^ we have to look for ways to create markets to reduce emissions. We have already begun to do so with the 1990 Clean Air Act Amendments, which created the allowance trading program for sulfur dioxide. I am looking forward to hearing more in the days ahead about California's RECLAIM program. On the whole, this new market for acid rain allowances is working well. There were some problems in the way initial allowances were achieved, but those are growing pains. They should not overshadow the overall success of the first auction last March. We must learn from these mistakes to ensure the future success of other markets. Finding Multi-Media Solutions The third new step is to use what some call "multi-media solutions." This means considering the total emissions of all pollutants into all media rather than focusing only on single sources of emissions into one medium. This way, we can find the cheapest way for a facility to reduce its pollution overall. Keynote Address — Senator Max Baucus ------- Clean Air Marketplace 1993 Page 143 This approach makes economic and environmental sense. Strict divisions by medium are unnatural. They ignore the inter-relationship between the elements that comprise the environment. When we write laws, we must understand their effects on one another. As Bill Ruckelshaus told the Environment and Public Works Committee this summer: "... the Administrator of EPA must follow rules of nine major statutes, none of which were designed to work with one another. There is no integrating principle built at all into this statutory armory. Each is written to stand alone, as if the world were made entirely of air or water or some other target of concern. No word in all this law directs EPA to simply find the combination of policies across all programs that will garner the maximum benefit to the environment for every dollar of cost expended." I read with great interest a recent account in the Wall Street Journal of a joint study by EPA and Amoco regarding its Yorktown refinery in Virginia. EPA regulations required the refinery to install a pollution-prevention system at a cost of $41 million. The study, however, showed that the refinery could achieve greater overall pollution reductions for $11 million, without u$ing the required prevention system. How did they discover this? I know the more interesting question may be "Who told the boss?" But we can learn more from the answer to the first question. Most of the pollution being regulated at the facility was toxic benzene vapor. EPA's Air Pollution Office, therefore, had an important part to play if an innovative solution was to be found. Amoco and EPA jointly studied the plant's overall emissions of gases, fluids, and solid waste. They found that emissions of vapors from dirty water were 20 times less than predicted. On the other hand, releases at the loading docks where fuel is pumped into barges were extremely high. But benzene vapors coming from inside the refinery were regulated under the Clean Air Act and benzene vapors escaping at the loading docks were not. Amoco had to build a $41 million dollar water-treatment facility to clean up the dirty water. After a bill like that, they decided not to make any changes in the loading docks. The benzene vapors there, a much worse problem than the vapors at the water emission point, went untouched. Obviously, this is not a story of successful pollution control. It is an example of a rigid law that forces companies and environmental control officials to concentrate on a minor problem and ignore the top priority. We have to change the law. And we have to find the other laws that have similarly perverse results, and change them. With this example in mind, the Senate Environment Committee will study the use of multi-media approaches in the near future. Most cases will not be as simple as this. Just as in the Acid Rain Allowances Trading Program, there will be a learning curve as we find the best ways to reduce total pollution. We may find it best reorganize EPA to deal with particular sectors of the Keynote Address — Senator Max Baucus ------- Page 144 Clean Air Marketplace 1993 industrial base, or into geographical teams that help particular plants lower overall emissions. But it is clear that we have to make changes if we do not want to repeat the Yorktown experience all over the country. Common Ground The Yorktown refinery project is not a happy story. And it did not have a happy ending, whether you are an ordinary North Carolina citizen who wants pollution reduced, or the guy who ended up short $30 million, or the worker at the loading dock who is still breathing in benzene vapors. But it is a story with a moral. It shows that if the laws are well designed, industry and government can cooperate. Despite the distrust that originally existed between Amoco' and the EPA, the two sides collaborated and came up with the right answers. Only the law stood in their way. A related problem is that environmental teams, as well as laws, are too specialized. Like the wise men in the Indian folk tale, they often look only at the truck, or the side, or the foot, or the tusk — and they miss the whole elephant. Multi-media examination of a facility goes against today's emphasis on hyper-specialized training. But in the end, as happened in the Yorktown project, we may find a multi-media approach more efficient and much more effective. Add to multi-media approaches better technology and market based incentives to prevent pollution, while continuing to keep the regulatory requirements high, and I think we are out of the Dark Ages and on our way to a Renaissance in environmental law. Conclusion As always, 1 am inspired by my western roots. One of my favorite authors is a Montana native named Norman MacLean, who wrote the now-famous novel A River Runs Through It. Toward the end of his life, MacLean wrote an account of the Mann Gulch Fire of 1949 on the Upper Missouri. The book, Young Men and Fire, tells the story of the 13 young firefighters — called "Smokejumpers" because they used planes and parachutes to reach the fires as fast as possible — who jumped into the gulch and died when the fire caught them on a steep hillside. The book recounts a tragic episode in Montana history. But it also tells an inspiring story of your people who worked together for the common good, of the lessons we can learn from terrible experiences, and of how important it is always to try and find new and better ways to solve our problems. Toward the end of the book, MacLean writes about how the "Smokejumpers" reacted to the fire: "The Mann Gulch tragedy immediately became a flaming symbol to the Smokejumpers and to firefighters generally, especially those in the Northwest... It was some of these who said to me not long after the fire, Keynote Address — Senator Max Baucus ------- Clean Air Marketplace 1993 Page 145 'God damn it, no man of mine is ever going to die that way.' Small cracks were soon filled in, especially with technical improvements... the training of the crews was also improved in many particulars... [and] in the early 40 years since the Mann Gulch tragedy, no Smokejumper has died on a fire line." That is a lesson for people in all walks of life, but is particularly important for those of us in the environmental field. We have had a lot of disasters, a lot of failures, and some tragic individual incidents. But we can learn from them all just as we learned from the Yorktown refinery. We can use new technologies, new economic tools, and new overall approaches to our problems. And by doing so we will prevent future failures. Which brings me back to the subject of this meeting. Innovative new technologies for cleaning our polluted air are on display here at this Conference. Take a look at them. In technical brilliance and in the new approaches their inventors bring to environmental protection, they are an inspiration. They tell me very clearly that we can make an environmental Renaissance a reality. Keynote Address — Senator Max Baucus ------- Page 146 Clean Air Marketplace 1993 Keynote Address — Senator Max Baucus ------- Clean Air Marketplace 1993 Page 147 Session 5 — Panel A Federal, State, and Local Regulatory Programs September 9, 1993 9:15 am. - J1:15 a.m. Moderator: Panelists: S. William Becker Michael Bradley Bruce S. Carhart David Jordan Robert Brenner Introduction S. William Becker, Executive Director, State and Territorial Air Pollution Program Administrators, described the panel as a collection of officials at different levels of government in charge of implementing market-based regulatory strategies. This panel, according to Mr. Becker, provides the opportunity to explore examples of how market- based initiatives can work and to discuss what we can do to improve them. Presentations Michael Bradley, Executive Director for Northeast States for Coordinated Air Use Management (NESCAUM), began his remarks by stating that NESCAUM is moving forward with a number of issues. The mission of NESCAUM is to pursue clean air goals, but do it at the lowest cost and in a way that will promote economic expansion and new jobs. This was a key overriding criterion in the way NESCAUM pursued its strategies, particularly as the Northeast was still in the midst of a regional recession when the Clean Air Act Amendments (CAAA) were passed. This past summer, with the widespread number of ozone non-attainment days, illustrates our regional ozone problem. The realization that NOX is a part of our ozone problem is one of the major changes from the earlier approaches in the 1980s. Thus, NESCAUM foresees NOX emission reductions to be approximately 60-70 percent during this decade. NESCAUM is actively pursuing a regulatory framework which promotes control programs that encourage technological advances, hopefully at a low cost and utilizes economic incentives which will result in an effective approach. Session 5A — Federal, State, and Local Regulatory Programs ------- Page 148 Clean iAir Marketplace 1993 NOX Reduction for Utilities and Industrial Boilers A significant amount of NOX emissions come from industrial boilers and electric power generation facilities. After holding meetings and information gathering sessions, NESCAUM developed emissions performance standards that included innovative concepts (e.g., allowing a utility to over-control one or more boilers, while under- or not controlling another boiler in the same state, in order to focus on those facilities that will be in operation for the longer term). The states are moving forward with their own NOX reduction strategies that are consistent with this policy. Although NESCAUM's policy was initially received with much opposition by the utility industry, the industry is now concentrating on devising the most cost effective strategies to comply with the standards. The NESCAUM states are also attempting to allow utilities to choose the best control strategy to attain the performance standard. The utilities may choose any strategy (e.g., fuels changes, seasonal strategies, combustion modifications) that is most cost effective. In particular, selective non-catalytic reduction is the one technology with measurable, cost effective results that has been used recently by utilities in the Northeast. More advanced technological solutions (e.g, selective catalytic controls) are also being considered. There is a healthy level of competition between control technologies that reduce emissions from all types of fuels, as well as competition with cleaner fuels like natural gas. The stage is being set for a second round of NOX reductions two different policy approaches are being considered: • A performance standard, and • An allowance cap approach, which sets a baseline level of emissions for each major source (e.g., boiler), effectively allowing the major source to decide what control options to pursue, including purchasing credits. The regulations will be based on energy output, not on the amount of energy content of fuel going into the facility. Focusing on energy output provides incentives for overall efficiency, demand-side management techniques, and conservation, and places a higher value on renewable resources. NESCAUM is currently undertaking a feasibility analysis on this alternative. Motor Vehicle Control Strategies NESCAUM is also focusing on California's low emission vehicle (LEV) program. The estimated emissions control cost per vehicle that California has set has dropped by a large magnitude in less than 2 years. This is crucial to those who see motor vehicles as a key component in an overall reduction program. The California standards mandate production of zero-emission vehicles by model year 1998. This has led to an unprecedented shift in research and development activities Session 5A — Federal, State, and Local Regulatory Programs ------- Clean Air Marketplace 1993 Page 149 to sectors within the automobile manufacturing industry, battery manufacturing area, and electronic component area, to attempt to produce an electric and hybrid electric vehicle, which is affordable and performs well. There also has been a tremendous effort on state, local, and Federal government levels to form partnerships with the private sector to facilitate the development of these technologies and implement demonstration programs, as well as to look at broader infrastructure issues. Economic Incentives for the Emissions Trading Program Emission trading and economic incentives have to play a role, because without these incentives, states may not be able to achieve their goals. NESCAUM met with 12-15 private sector representatives and promoted a summer demonstration program. The goal was to promote innovative, traditional, non-traditional, and seasonal control strategies. Actual control strategies implemented included trip reduction, demand-side management, application of selective non-catalytic reduction, seasonal fuel switching, use of alternative fuels for both light and heavy duty vehicles, vehicle scrappage, and aggressive fugitive emission controls. Massachusetts is about to adopt regulations that are the most innovative emission trading regulations on the books today. These regulations will get attention from other states in the Northeast. NESCAUM is interested in putting regulatory initiatives into place by promoting a high degree of market competition; the utility NOx/industrial NOX competition has illustrated the benefit of doing this. The market is certainly responding, and there is more to come. NESCAUM is looking to continue to encourage mechanisms that will advance technologies, as well as innovative strategies and market competition. Bruce S. Carhart, Executive Director, Ozone Transport Commission (OTC), explained that the OTC was created in the Clean Air Act Amendments of 1990 to coordinate the control of ground-level ozone in the Northeast and mid- Atlantic states. Air quality activities have generally been on a state-by-state basis. There is now statutory recognition that regional problems require regional solutions, and should not be addressed solely on a state-by-state basis. Toward that end, the OTC coordinates air quality management strategies in the ozone transport area. The goal is to provide attainment and maintenance of ambient ozone standards by statutory attainment dates. The commission must be creative and imaginative in the way it brings about attainment and maintenance. Clearly, economic incentives are going to play a part. One area to focus on is emission offsets, specifically trading programs. Session 5A — Federal, State, and Local Regulatory Programs ------- Page 150 Clean Air Marketplace 1993 Mr. Carhart introduced a slide show that discussed the following topics: • Background information on the OTC. In the Northeast, there are substantial urban areas that contribute to the ozone problem. A non-attainment map shows established areas of non-attainment throughout the region. Modelling studies have been performed to further identify the nature and severity of the problem. Background information on the air quality challenge. • Offset requirements of the CAAA. • The extent to which emission offset programs have been/are being developed in the Northeast and mid-Atlantic states. The OTC is developing trading programs because: 1) it is sound policy to encourage progress toward economic growth, while also moving toward ozone reduction requirements; 2) there is the potential for reducing costs of compliance; and 3) there is the potential for reducing emissions that would not otherwise occur. The May 18,1993, Memorandum of Understanding (MOU) that OTC signed relating to NOX emission offset programs. The preamble discusses trying to achieve greater air quality benefits as well as economic benefits than would otherwise occur in the absence of such a program. • Future activities for the OTC, including interstate offset trading systems. The OTC has initiated correspondence with EPA and wants to evaluate past offset experience to demonstrate the potential to create emission reduction credits. David Jordan, Former Administrator, Indianapolis Air Pollution Control Division, Semor Project Manager, ERM Midwest, explained that he has the perspective or a local air pollution agency official, as well as someone who has industrial clients. Mr. Jordan outlined major issues that state and local agencies have to deal with, and also described some private sector concerns. Session 5A — Federal, State, and Local Regulatory Programs ------- Clean Air Marketplace 1993 Page 1ST Some concerns of regulators include: • Meeting obligations of the CAAA, including non-attainment obligations, deadlines, and plans to submit. Regulators want flexibility from EPA, and particularly want to be able to determine if their source is in compliance with regulations. • Being a partner with industry, which includes being kept abreast of future changes in industry. • Economic growth, primarily the expansion of the industrial base. • Fiscal stability, which would allow a program to grow in the future. Some examples of industry's concerns are: • Consistency across counties, states, and regional boundaries in the enforcement of laws. Industry wants to see laws uniformly enforced. A facility is put at a competitive disadvantage if it is forced to comply when competitors are not. • Certainty about what the ground rules are. Industry wants to know what the regulations are, what the standards are, when they have to be met, and how to demonstrate compliance. • Flexibility in how industry manages operations. Day-to-day operations change, and industry wants this reflected in regulations. • Industry wants regulators to have quality staff in order to better understand how indu-stry does business. Joint opportunities for how these concerns can possibly be addressed include changing the way business has been conducted in order to make market-based solutions more attractive. There are environmental interests, business' interests, and regulatory interests that have to come together to address these issues. Some possible options for addressing various concerns include: • Better communication and consensus-building among all interests in the rulemaking process. Everyone has an obligation to get involved in the process to 'avoid the typical regulatory-negotiation approach. There is a need to involve EPA in this process, and there is a need for more outreach and training on obligations. Small business assistance programs are a very important aspect in making a rulemaking successful. Involving the public Session 5A — Federal, State, and Local Regulatory Programs ------- Page 152 Clean Air Marketplace 1993 will help in heading off negative reactions from environmental groups to certain regulatory stances. • More flexible regulations can be written using different types of technologies. We have a strong track record of attaining regulatory goals (e.g., Acid Rain). What we have to understand is the relationship of these programs to our ability to meet our environmental obligations. • Maximizing flexibility. We want the environmental benefit that we desire at the least cost. The CAAA provide opportunities for this; more flexibility is given to state and local agencies to develop rules and regulations to meet the standards (e.g., ozone control obligations). There is also an opportunity to involve the public and decision makers in development. • EPA's role in an audit program. EPA must make sure there is consistency across the country in the effort to meet environmental goals. EPA also has a role in providing technology to regulators, in order to provide information to be used in the rulemaking process. EPA also needs to set up a good technology exchange program. • Efforts to rejuvenate local and state governments. There has recently been considerable attention surrounding Mr. Gore's "Reinventing Government" approach. This approach has been going on for some time at the local level, and we want it to continue to be encouraged. • Efforts to do business in sensible ways, such as the efficient spending of resources. There will be efforts to change the way we do business, including multi-media approaches, efforts to coordinate different governmental interests, TQM approaches, and team building to assess cross- media impacts and our business practices. In closing, there are a great deal of opportunities for the future to try to make market-based approaches succeed. Robert Brenner, Acting Deputy Assistant Administrator, Office of Air and Radiation, U.S. EPA, began by tying together the presentations so far. We have heard the need for regulatory approaches that really challenge industry and reward companies that are clever in their approach. If we do our job right in developing the regulations, we will further build a constituency that Session 5A — Federal, State, and Local Regulatory Programs ------- Clean Air Marketplace 1993 Page 153 supports the CAAA (e.g., industries that can gain a competitive advantage by being smart in how they comply with the CAAA). The economic incentive programs that work best are those that are designed by regulators, industry, environmental groups, and all relevant parties together. These types of programs will not just provide equivalent environmental results to traditional regulatory approaches. Almost always, part of the savings that you achieve by using this approach are used for better protection of the environment. Regulators are also becoming more supportive of incentive programs because these programs are the best way to promote new technologies and prevent pollution. For instance, systems that encourage firms to move beyond compliance requirements have been very successful. Under such programs people understand that there is a real market for cheaper technologies that can meet stricter standards. Incentive programs such as marketable permits provide powerful stimulus for pollution prevention because sources with zero emissions can sell permits they no longer need. As new technologies are developed, other areas will find it easier to meet air quality goals. Other advantages of incentive programs include better monitoring and better recordkeeping. The ability to accurately quantify the results of the programs is important. It is important to continue the concept of regulatory negotiation, round tables, and other consensus-building approaches for feedback on regulations (especially before the public comment period). It is also very important that we provide timeliness and predictability in our regulations. The problems we have had in the past have made it difficult for state and local agencies to have the lead time they need to develop new approaches for more effective compliance. As we work with other parts of the administration (e.g., DOC, DOE, DOT, OMB), we intend to constructively develop innovative approaches and get these rulemakings out on time. It is very important that we find ways to cooperate and provide flexibility to regulators across the country to enable them to meet their area's transportation needs, energy concerns, increase export opportunities, and produce state air quality plans. Questions and Answers To what extent are other types of trading programs, such as for Volatile Organic Compounds (VOCs), being examined? Mr. Carhart explained that priorities had to be established for initial efforts. We decided on NOX because it was a new requirement. Also NOX trading has an advantage over VOC trading which involves both reactivity and toxicity. However, we have consciously put together the May 18, 1993 MOU so that it could be added onto in the future. If it appears that there is a need to expand into VOCs, there is always that possibility. In the short run, NOX became the priority. Session 5A — Federal, State, and Local Regulatory Programs ------- Page 154 Clean Air Marketplace 1993 How can the OTC meet its emission reduction requirements without an LEV program? Mr. Carhart responded that the OTC has been looking at a broad range of options for meeting the emission reduction requirements. We find that just relying on specifically indicated strategies in the CAAA is not going to do the job in the Northeast. The OTC believes that we need a balanced approach between VOC and NOX, and between stationary and mobile sources. To date, the OTC has not found a way to attainment without LEV. L f) I * I ^^^™ What is the relationship between regional air pollution authorities and state air agencies (i.e., What is the mission of NESCAUM and the OTC?)? Mr. Bradley answered that due to the regional nature of the markets, it makes a lot of sense to pursue consistent regulatory programs. To achieve this, NESCAUM supports the exchange of information. Out of that consensus-building process, a consistent approach is borne. There are many benefits to pursuing a consistent — not a uniform — approach in terms of environmental equity. The regional process saves a lot of resources by having a regional rather than a state-by-state process. Mr. Carhart added that the course is replicated for the OTC, in that there is a shared commitment on ozone control in the region. L f} I J_\ ™^™" What are the advantages and ramifications of taking the approach of pounds per kilowatt hour? Mr. Bradley responded that the current regulations to control NOX and SO2 emissions in the Northeast are based on the energy input in a boiler, which is in pounds per million BTU units. This creates the incentive to become as efficient as possible, in a way that produces fewer emissions. They have done this in California. Would you go about it the same way? Mr. Bradley responded that NESCAUM is looking at a California program, the South Coast utility averaging program, restricted just to utilities. We are looking at expanding the population of sources to include all of the major NOX emission sources. L To what extent are you planning on incorporating public participation in the f} I development of the energy output approach? JJ ^"™" Mr. Bradley responded that the process is really only a feasibility analysis right now. It is made up of a committee of all of the state and EPA offices, as well as an advisory committee made up of private sector and environmental advocates. There will be a public process, and there will be a broader comment process as we develop the program. However, there are a lot of sticky issues to be resolved, and things are not final Session 5A — Federal, State, and Local Regulatory Programs ------- Clean Air Marketplace 1993 Page 155 yet. For example, we have to come up with a feasible way to measure and deal with baseline emissions. U How do we use market-based incentives to effect individual behavior, or to f% I influence companies' actions to provide incentives for changing their employees' • I behavior, particularly in light of the mobile source problem ofNOx emissions? T""^"" Do you have comments on the extent to which state or local regulatory processes, market incentives, or state emissions fees can be used as incentives to change individual behavior? Mr. Brenner responded that, as was pointed out earlier in the conference, the price of a product should reflect its full environmental implication. States are trying to do this on their own, and trying to deal with relatively diverse sources. It may be more efficient to handle on a Federal level. Mr. Brenner added that the employee commute (also known as the employee trip reduction program), if implemented correctly, will strpngly encourage employees to commute in more environmentally friendly ways. For example, groups of companies are getting together to work jointly to set up incentives. It is difficult, and for years we have been trying to inject into the transportation sector the right kind of market signals. The current transportation sector is like the utility sector 15 years ago: utility pricing was not very rational given environmental economic impacts. Over time, utility pricing has become more rational. The challenge now is to see whether we can do something similar in the transportation sector so that we can send pricing signals so people make the right kind of investments. L EPA Regions are increasing the number of requests from states for fairly f% I innovative public/private partnership proposals. We are seeing that EPA is • I reducing its funding for market-based incentives, and that the Inspector General •"^•" (IG) is about to "land on" anyone who touches a public/private partnership. Mr. Gore's recent report cited two overzealous IGs illustrating a restriction of creativity instead of an encouragement to educate people and get them on the right track. Mr. Brenner pointed out that it is difficult to implement or find funding for these programs. However, there is a lot of momentum behind developing these kinds of programs, even without additional funding from EPA. We are finding that state and local governments are funding their own programs. We are continuing to do the best we can, but hope that, as people see the merits of the programs, they will grow. As far as the comment on IGs, there is a whole body of statutes and regulations that make the new types of approaches difficult to implement. One of the messages of the "Reinventing Government" report is that it is time to look at procurement regulations and determine whether they have become too detailed and burdensome to pursue some of the innovative types of approaches. In defense of IGs, they are simply making sure that we Session 5A — Federal, State, and Local Regulatory Programs ------- Page 156 Clean Air Marketplace 1993 adhere to the requirements that are in place. "Over-zealousness" occurs in any regulatory agency. Unfortunately, we cannot simply ask the IGs to ignore the regulations. Instead, we should start reforming the regulations. Mr. Carhart responded that we face a difficult task in states — trying to make ends meet in order to augment decreases in grants and state and local appropriations. If a state and local regulator are asked to choose between spending a certain amount on cleaning up the air toxics problem versus a market-based incentive scheme with an unsure payoff, the air regulator does not have much choice. EPA has been saying to us that they are going to earmark money for market-based approaches, but this reduces the funding on other, perhaps more important, issues that have greater impact on public health. One of the ways to overcome this problem is for industry to sell to the government. There should be an understanding that one cannot expect a government regulator to accept something that only makes industry's job easier, without helping the environment, and without pursuing additional recordkeeping and monitoring to ensure the desired results. A more successful approach is to convey a system in which one sees more reductions, better recordkeeping, and better monitoring. What is the status of the need for California reformulated fuel within the LEV program? What kind of emission credits would EPA give for an LEV program with Federally reformulated gasoline? Mr. Carhart stated that the position of the OTC has been very clear. The intent has always been to use Federally reformulated fuel in the LEV program. As far as court cases are concerned, the position of the states will be upheld. OTC has looked at the LEV program with Federally reformulated fuel and found that we should be getting most of the emission reductions even without California reformulated fuel. All of the indications show that Federally reformulated fuel is the technically feasible thing to do. Mr. Brenner explained that it would be difficult to determine what the credits would be. In determining the credits, we look at not only the vehicle and the fuels, but maintenance requirements as well. What sort of maintenance requirement would have to go along with the program in order to get the desired program results? r What type of consideration is being made to allow for site specific considerations in implementing technology transfers? In some cases, they may actually increase CO and air toxics. Mr. Brenner responded that site specific considerations will enter the discussion. If we offer flexibility in programs, such as technologies that increase VOCs while reducing NOX, the problem can be compensated for in other ways. If the technologies are no longer economic, it might not be appropriate for that area. The point is to give people several options as to where they get reductions. The flexible approaches are also important Session 5A — Federal, State, and Local Regulatory Programs ------- Clean Air Marketplace 1993 Page 157 because it may be possible to achieve more reduction and remain economically viable for the industry. Do you think there is enough time to implement that type of flexibility into the NOX reduction provisions we have been discussing? Is the process too far along? Mr. Brenner responded that we have an economic incentives rulemaking that deals with trading. We are trying to set up ways so that we can achieve better — not just equivalent — environmental results. L f} I • I The approaches discussed so far seem pretty slow in coming about (e.g., performance standards). Why is it taking so long, and what types of things could be done to speed things up to make this a more common practice? Mr. Bradley indicated that we are asking for a new mind set, a new approach. There are technical, institutional, and political obstacles that are difficult to overcome. The momentum is beginning to build through successful application of flexible, innovative approaches. Mr. Becker added that the goal is to have equal or greater emissions reduction, the assurance that those reductions will occur, and increased monitoring and recordkeeping. There has to be mutual trust. Mr. Brenner pointed out that we have to overcome some baggage (e.g., the Bubble Program implemented in the 1980s) from the past where the emphasis was more on regulatory relief than regulatory reform. These programs were seen by many as lowering environmental goals rather than achieving the same or better environmental goals at lower cost. Thus, there is suspicion. Also monitoring is difficult to facilitate in these types of programs. Mr. Carhart added that developing interstate NOX offset trading programs is new. It is a problem of trying to coordinate trading and nonattainment planning efforts simultaneously, and we are finding that it simply takes time. On the positive side, the time spent now is likely to be well spent, as it is designed to produce both an attainment and maintenance plan and an economic incentive program, in tandem. This should be viewed as a benefit to everyone, instead of trying to create an attainment and maintenance program first, and then trying to retrofit economic incentives after the Title I program has already been created. Session 5A — Federal, State, and Local Regulatory Programs ------- Page 158 Clean Air Marketplace 1993 Could you comment on the possibility that emission reduction credits, once certified, may be assigned a lower (or zero) value in the future if a state changes its reduction standards? Some have argued that this is necessary, but others argue that it will retard investment in early reductions. Is such a system really market-based if the creator of the credits is asked to take on that much risk? Mr. Carhart responded that, based on the modelling that has been done, NOX control is a very effective way of reducing regional ozone. We are quite likely to see a second stage of NOy control in order to provide for attainment within the region. For that reason, the OTC has taken an aggressive posture toward evaluating additional NOX emission control strategies aimed at that second phase. In fact, just this week, both the OTC Stationary Source Committee and Mobile Source Committee met (separately), to discuss additional NOX emission control strategies that are available. For any system of this sort to work, there must be predictability, and establishing the new SIP limits expeditiously will help. Session 5A — Federal, State, and Local Regulatory Programs ------- Clean Air Marketplace 1993 Page 159 Session 5 — Panel B Technology Development and Diffusion September 9, 1993 9:30 a.m. - 11:30 a.m. Moderator: Panelists: Steve Harper Nick Nikkila Tim Mohin Robb Lenhart Dr. Joseph Ben-Dak Introduction Steve Harper, Senior Policy Analyst, Office of Air and Radiation, U.S. EPA, introduced the panelists for this session. A diverse set of perspectives has been presented at this conference. In simpler days environmentalists could point to technology as a monolith that created environmental degradation. The discourse today is much more sophisticated. There is an increased realization that only technological transformation will allow us both to continue to grow economically and to solve our environmental problems. Gus Speth, former Head of the World Resources Institute and current Director of the United Nations Development Programme, has written very eloquently on this topic, identifying the need for a "wholesale technological transformation." The need for a technological transformation manifests itself domestically in many ways. Technology transfer provides the only means for economically solving some of the current environmental problems of which Senator Baucus spoke and those that the Senate will confront in various re-authorization bills in Congress. In the air quality arena, the ground level ozone pollution in cities like Los Angeles, Houston, and New York is a problem which many people believe cannot be solved using current technology without shutting down the economy — an effect which no one wants. As we tackle progressively tougher environmental problems, the cost of cleaning will climb substantially. We need to find cleaner and cheaper solutions. As our economy grows, innovative technology will permit us to improve both our environmental and our economic well-being. Internationally, some feel innovative technology is the only hope for sustainable development. Indeed, discussions of sustainable development increasingly turn to topics such as de- materialization and technologies that effectively reduce the connection between the economy and nature. It is important to note that although the primary focus of the panel today — and of the conference — is on environmental technology, or what some call "dark green" Session SB — Technology Development and Diffusion ------- Page 160 Clean Air Marketplace 1993 technology, much of what is needed throughout industry is what is termed "light green" technology. Light green technology is technology that will have significant impacts, although not having environmental improvement as its primary focus. Examples of light green technologies include energy efficiency breakthroughs such as the use of light-weight, fuel-efficiency boosting and composite materials in automobile manufacturing. The Clinton Administration has significantly increased the Federal government's focus on technology development and diffusion. For example, EPA has convened the Innovative Technology Council to make decisions on how environmental technology monies will be spent and, more importantly, to get the various parts of the Federal government to act together. The Environmental Technology Initiative will provide $36 million in its first year and is projected to grow to a cumulative $1.9 billion over an 8-9 year period. More recently, President Clinton has convened the President's Council on Sustainable Development. It is safe to assume that many public and private sector leaders will want to focus on technology innovation and diffusion as the cornerstone to sustainability. It is in innovative technology that our economic and environmental objectives can meet cooperatively. An important question the panel may want to address is how much effort and funding to apply toward innovative technology development, versus toward the actual diffusion of current technologies which are innovative but which, for a variety of reasons, have not found a market niche. The fundamental question for the panel is, "What is the proper role of government in both technology development and diffusion?" The environmental goods and services market is unique in that it is created and shaped by regulations that EPA and other agencies are charged with implementing. EPA and DOE have traditionally played a role in supporting both basic and high-risk research activities. Typically, this has been in partnership with the private sector and increasingly through mechanisms such as Cooperative Research and Development Agreements (CRADAs). Some say EPA plays an important role in discouraging the market acceptance of innovative technologies since the "best available technology" syndrome is woven into many statutes. This syndrome leads to risk aversion on the part of permit writers and companies that could potentially face severe penalties if they try something innovative that does not work. Besides cleaning up its regulatory act, the government can have many other important roles, such as providing and sharing state of the art information, thereby facilitating uniform technology protocols against which new technologies can be judged. The government is important as a sophisticated consumer. Although the Federal government has received criticism in the past, President Clinton is making great strides with procurement policy changes to encourage and increase the extent of the government's purchasing role (e.g., the Federal government encouraging the use of recycled paper). The incentives and flexibility that are built into the Clean Air Act are key to the marriage of stringency and flexibility in fostering technology innovation. At EPA we have developed a database, called the Clean Air Marketplace (CLAM) Database, to track new Session 5B — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 161 technology and business activities directly related to the Clean Air Act. Currently, we have over 600 projects in the database. Not all of them are new technologies, but there is a tremendous, amount of technological ferment in the market. The pace and predictability of future EPA regulations will have a large impact on the marketplace. Presentations Nick Nikkila, Director, Economic Development and Business Retention, South Coast Air Quality Management District (SCAQMD), described the efforts of the regional air pollution control agency in assisting in the development and commercialization of new, less polluting technologies. The SCAQMD — comprised of Los Angeles, Orange, and Riverside counties and the non-desert portion of San Bernadino County — was given the legislative authority to regulate air pollution in the Los Angeles area. In all, the SCAQMD covers 13,350 square miles and a population of over 13 million people. It also covers in excess of 9 million resident vehicles which, coupled with tourist traffic, drive approximately 270 million miles each day. The combination of topography, meteorology, and population has produced a level of air pollution that is beyond any conditions experienced elsewhere in the United States. The problem is growing and the population of the area is projected to increase by more that 30 percent by the year 2010. If we are to have healthy air quality in the Southern California Basin, it will only come about as a result of new, lower-emitting technologies such as fuel cells for mobile and stationary applications, commercially acceptable zero- emission vehicles, non-VOC coatings and inks that are usable in all printing and coating applications, and ultra-low NOX burners. As a result, the SCAQMD, more than any other air pollution control agency in the country, depends upon the development and commercialization of new technologies. While stringent regulatory requirements can provide incentives for technology development, it is our belief that this alone is not sufficient to meet the needs of our area. The SCAQMD must play a larger role in the solution. Since SCAQMD created of the Office of Technology Advancement in 1988, the office has invested in excess of $34 million toward the research and development of low- emitting technologies. Because this money is used to leverage additional research and development funding, the result has been in excess of $100 million dedicated to the development of low-emitting technologies. In a risk-averse corporate culture, our participation has had value far beyond the dollar amount contributed. We often are able to give technical innovators in corporate America the credibility they need within their own companies to advance research and demonstration projects, even when our share is only 10 percent of a project or less. The SCAQMD has provided co-funding for over 100 research and development projects. Session SB — Technology Development and Diffusion ------- Page 162 Clean Air Marketplace 1993 Initially, the vision was something like that in the movie, Field of Dreams — "Build it and they will come." In reality, demonstrating the efficacy and feasibility of a technology does not guarantee investment in its commercialization and use. Since gaining that perspective, we have initiated two separate actions: • The Best Available Control Technology (BACT) designation program; and • The development of a new Technology Commercialization Loan Program. The Best Available Control Technology (BACT) Designation Program In the state of California, all new sources of pollution are required to be equipped with BACT level controls or processes. As a result, a BACT designation can make a new technology a much more viable commercial product. Within our agency, we are now building a discrete group, which will be dedicated to BACT designations and will have a close tie to our technology advancement program. In that way, we can maximize the opportunities for private investment in the commercialization of new technologies. As a technology becomes available for commercial investment, we perform a BACT analysis. A subsequent BACT designation should then serve to attract investors to that technblogy. One of the things we have heard from investment bankers today is that, "What is BACT today may not be BACT tomorrow." This creates uncertainty in regard to the time-frame for marketability of the technology in which they might be considering investment. In response, the SCAQMD is now considering establishing a fixed, or guaranteed life of three years for BACT designations. The designation would be valid for three years whether a new technology with improved effectiveness comes out next week or next year. Once a technology is termed BACT, it would hold that designation for three years. This means that there will be an overlap of technologies that are BACT. This strategy would assure investors a reasonable market period for the new technology being considered. All signs suggest that this will improve the opportunities for timely, private investment in the commercialization of newly emerging technologies. Commercialization Capital Private investment is not always attractive to the technology entrepreneur. Often, an entrepreneur goes to the bank with only an intellectual property — often regarded as poor collateral for a loan. On the other hand, if that same entrepreneur seeks funding from a venture capitalist, the entrepreneur would be forced to pay a very high price, most often in the form of equity in their company. After working for years to develop a technology, it is difficult for individuals to give up a large part of their company to people who have invested comparatively very little themselves. In response, the SCAQMD has begun an effort which we hope will result in the creation of a revolving loan fund dedicated to the commercialization of new technology. Initially, the source of funding would be a part of the current vehicle registration fee. For that reason, projects that could Session SB — Technology Development and Diffusion ------- Clean Air Marketplace11993 Page 163 be funded would be limited to those that are related to mobile sources. If this proves successful, we will look for opportunities to expand this program to cover stationary source-related technologies as well. Currently, a contractor has been hired to develop recommendations for the structure and administration of such a loan program. Any suggestions from those familiar with existing loan programs are welcome. The SCAQMD recognizes that efforts to develop and commercialize a new technology can be useless if the customer is not able to buy the product. That is why the low interest loan program is available for customers who want to purchase the new technology. The SCAQMD is taking other bold steps toward an improved regulatory climate for innovations, including the new market-based approach which the SCAQMD terms RECLAIM (Regional Clean Air Incentives Market). Hearings are scheduled to begin on September 9, 1993, and are expected to last until October 15, 1993, when RECLAIM will, hopefully, be approved. If adopted, RECLAIM could change the regulatory mode both nationally and internationally. Inspection of non-RECLAIM sources has revealed that in just one instance, the SCAQMD has saved more than 19,000 businesses in Southern California over $1.7 billion, while opening the way for more rapid economic recovery and air quality improvement. Through the SCAQMD's knowledge of new emerging technologies and their partnerships with businesses in their district, SCAQMD has been able to retain 4,000 jobs which otherwise would have left the basin. Given California's poor economic situation, economic enhancement must go hand-in-hand with environmental improvement. The approach of the SCAQMD is proactive because it combines development, commercialization, and the use of new technologies to create greater opportunities for innovation and improving the economy. Tim Mohin, Senior Fellow, U.S. Senate Environment and Public Works Committee, spoke about the National Environmental Technology Act of 1993. The bill was introduced by Senator Baucus on May 18,1993; co-authors of the bill include Senator Lieberman and Senator Mikulski. Goals of the Legislation The National Environmental Technology Act is the embodiment of the marriage between the environment and the economy. The goal of the legislation is to foster a strong Session 5B — Technology Development and Diffusion ------- Page 164 Clean Air Marketplace 1993 U.S. environmental technology industry, leading to increased job creation, economic development, and a healthy environment. A strong environmental technology industry is a win-win situation for America. In determining the goals of this legislation, the Committee of Environment and Public Works asked, "What can we do within our jurisdiction that will foster this industry?," resulting in four primary objectives of the bill: • Coordinate the efforts of the Federal government related to environmental technology; • Provide the necessary seed money for the capitalization of innovative technologies development in the private sector; • Reduce market barriers that exist for the environmental technology market; and • Disseminate information by Linking users and developers. Coordination The National Environmental Technology Panel was organized to meet the first objective, coordinating government efforts. According to a Congressional research service report, there are over ten different agencies within the Federal government that have a combined total annual spending of over $4 billion for environmental technology. The report illustrated that it was difficult to specifically determine how this money is being spent. The Federal Coordinating Council for Science Engineering and Technology (FCCSET) has developed a panel within its existing structure to coordinate environmental technology efforts throughout the government. The Clinton administration has already designated this panel, which would act as the National Environmental Technology Panel. The panel aims to find out what is already being done by Federal agencies and to create a budget crosscut of all the dollars that are being spent on environmental technology today. From this information, FCCSET will develop a national strategy for addressing our critical environmental technology needs, indicating where we need to start investing our dollars. This strategy will form the basis for a research agenda for the future. Each year the panel will review the budgets of those separate agencies requesting environmental technology funds as one single budget request. Joint reporting will maximize coordination efforts, reduce duplication, and enhance the goal of a national strategy for environmental technology. Funding Environmental technology development is consistently suffering from a lack of venture capital. Venture capitalists tend to be conservative; therefore, the high risk, high pay-off ventures often do not get funded. Session SB — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 165 Bureau of Environmental Technology The National Environmental Technology Act addresses the funding issue through provisions for the Bureau of Environmental Technology and the Environment Innovations Research Program. The Bureau of Environmental Technology, located at EPA, would be a focal point for the development of environmental technology. It would be modelled after successful government programs such as the Advanced Technology Program (ATP) at the Department of Commerce and the Advanced Research Projects Agency (ARPA) at DOE. These tend to be non-bureaucratic agencies which are nimble and can fund the development of innovative technology projects focusing on pre-commercial, product- oriented research and development. The proposed appropriation levels for this project are $36 million for the first year (FY 94), and $120 million in the third year. To encourage public and private partnerships the bill requires that 95 percent of the money appropriated to this bureau be spent outside the Federal government in private and public partnerships. Developing a public and private partnership requires a 50 percent match from businesses (25 percent for smaller businesses). In addition, more projects will be conducted in coordination with other Federal agencies. The bill contains a first-year waiver, allowing 10 percent of these dollars to be spent within the Federal government for start-up costs during the first year. There have been complaints that EPA is a regulatory agency and not a technology development agency. EPA's first priority is regulation; however, the agency spends over $100 million per year on environmental technology. The agency has experience and is well positioned to anticipate the future regulatory agenda and, therefore, the environmental technology needs of the country in the future. The bureau director must work with the heads of other agencies such as ATP and ARPA. Environmental Innovation Research Program The purpose of this program is to advance both clean-up and pollution prevention technologies. The program is specifically geared toward commercially viable technologies. This program uses the Small Business Innovative Research (SBIR) programs model, which is proven in developing successful ventures and technologies. It uses a carefully structured, three-phase approach to set aside dollars for programs. The Environmental Innovation Research Program is funded through money that would have been used to clean up sites within the federal government. The costs of federal cleanup have been estimated in the billions and as high as $1 trillion over the next thirty years. This program will tap 1.25 percent of the funds that would be appropriated for cleanup and these funds would be spent in the private sector, to develop technology for the cleanup of these sites. This is necessary to reduce future costs and to provide solutions for those sites which we currently do not have the knowledge or technology available to clean up. The scope of the Technology Research Program is not limited to cleanup technologies, it also includes pollution prevention technologies. The development of new technology for pollution Session SB — Technology Development and Diffusion ------- Page 166 Clean Air Marketplace 1993 prevention is also in the interest of the cleanup endeavor, since prevention technologies will result in less pollution to clean up in the future. Reduce Market Barriers Technology Verifications Program (EPA) The goal of the Verification Program is to break down the barriers of performance and equipment standards by setting up a program within EPA that would verify new technology developments. It is difficult for developers to get into the market when their technology is not trusted. There exists a need for a credible third party to verify the cost and performance characteristics of new technologies under tested conditions. This is needed to combat the inertia to employ the technologies used to develop the performance standard. In practice, the permit writers look at the background document to find the backbone process upon which improved performance is based and then utilize this technology. EPA's development of verification will provide the regulated community an introduction to new technologies and simultaneously give credibility to the new technology. Therefore, the regulated community will have greater flexibility in choosing technologies to be implemented. The program would rate a new technology versus the technology upon which the performance is based. EPA would look at the technology and verify cost and performance. The result will not be a "Pass/Fail" endorsement, but a description of how well a technology compares to the regulatory line. A verified technology will not guarantee compliance with the standard for users of the new technology; it will provide a verification of how that new technology performs. During the review of technologies, those that are pollution prevention approaches are favored. Innovative Technology Testing Program (EPA) Another barrier to the development and marketing of new technologies is the lack of adequate testing facilities. The issue of liability stands as a huge barrier when a new technology is in need of demonstration or testing. Risk averse companies do not want to take on this liability and, therefore, do not promote testing at their facilities. The Innovative Technology Testing Program builds on the existing EPA Superfund Innovative Technology (SITE) program, which focuses on cleanup. The SITE program allows developers of new technologies to come on-site and demonstrate how their new technology works. The Federal government should expand this program to include Superfund sites and other federal facilities. The testing provision intends that the federal government assumes the risl^ for the development of innovative technologies. Session 5B — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 167 Disseminate Information Coordination between EPA and NIST The National Institute for Standards and Technology (NIST), Department of Commerce, has a network of manufacturing technology development centers. There are currently seven existing centers, expected to increase to 100 in the next budget year. This increase offers an incredible opportunity to spread the news about environmental technology. We feel that this is one of the most effective ways in which to distribute this information about environmental technology. The current focus of NIST facilities is to help small businesses improve their manufacturing processes. This program proposes that these facilities could simultaneously help businesses with their environmental strategy. EPA should be connected with this network. The bill also has provisions to connect EPA with the Agricultural Extension Centers. Clearinghouse All of the information developed under this act will be collected and distributed by a clearinghouse. It is our hope that this will get the information out to small businesses. The program will possibly promote exports to other countries and provide information to technology developers on the sources of technical and financial assistance that they can access to help export their products. National Environmental Technology Advisory Council This council will be part of the existing NACEPT council that EPA already operates. The concept behind the program is to bring private sector and non-government expertise involvement into these technology programs. The program seeks to combat the criticisms that bureaucrats are picking winners and losers while they have no idea about real market forces. This is a fair criticism and that is why it is important to bring into this council people from business and academia who really understand the market forces that are driving decisions. Remaining Challenges This bill is only the first step on a long road of environmental technology in this country. Japan's Ministry of International Trade and Industry (MITI) has taken an interest in this bill. This is encouraging because it indicates that we must be doing something right to draw such esteemed international interest. The largest remaining challenge is to break down some of the barriers between business and government. We need to stop wasting money and energy fighting each other and focus on our shared goals of a cleaner environment and a healthier bottom line. Environmental technology is a means for both government and industry to achieve our goals. We need solid ground rules to direct our efforts. A regulation should be tough, but it should also be reasonable and flexible. The Session SB — Technology Development and Diffusion ------- Page 168 Clean Air Marketplace 1993 importance of focusing on incentive systems so that we can go beyond the regulations cannot be stressed enough. The Amoco situation, where there is no incentive for Amoco to stick its neck out and take action because they run the risk of not doing enough by the standard of some future regulation, is a shame. We need to find ways to build in both incentives and flexibility. All the economic indicators point to a strong environmental technology industry — on which we need to capitalize. We need to become a world leader, and to do that, EPA, industry, environmental groups, and Congress need to work together. The National Environmental Technology Act provides a good start for such cooperation. Robb Lenhart, Director of Business Services, National Environmental Technologies Applications Corporation (NETAC), began by endorsing the leveraging of which Mr. Harper spoke. Many of the issues discussed at the conference are being dealt with in this legislation. Mr. Lenhart expanded on NETAC's role in helping small businesses get new, innovative technology into the market. History of NETAC NETAC was founded as a partnership of industry, government, and the academic community; it recognized that many of the solutions for the environmental industry must come from different segments, not just from industry alone. Created in October of 1988, NETAC is a subsidiary of the University of Pittsburgh Trust. At that time EPA Administrator Lee Thomas came to Pittsburgh and spoke with the University about establishing this type of program. It was recognized that the SITE program was beginning to provide a forum for providing the operating and cost data for new environmental technologies. What was missing at that point was the commercialization assistance that many individual entrepreneurs and small- to medium-sized companies needed to take their technologies successfully to the market. NETAC was established to focus on providing this commercialization assistance. NETAC is a non-profit organization that accelerates commercialization of priority environmental technologies. NETAC operates on an annual budget of approximately $1 million, as part of the start up fund from EPA. Fulfilling this mission means identifying the technologies which are available, and then providing the services needed to move those technologies successfully into the marketplace. An important lesson learned in the past five years of operation is that NETAC must do more than just help the companies who are developing new technologies; it must also assist the end users who are seeking Session SB — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 169 innovative ways to solve their problems. NETAC now offers product and information services on emerging innovative technologies to help users get access to the available technologies. Air Pollution Controls in the Market Earlier in the conference we heard about the overwhelming need for innovation. The need for new technologies drives market opportunities. A market survey was conducted by the Environmental Business Journal, showing that air pollution control represents a market of $5-$6 billion per year over the last four years. (Numbers that you may hear from EPA of $20-$30 billion differ due to construction costs not included in the costing by the Environmental Business Journal.) The overall annual cost for environmental goods and services in the U.S. is approximately $135 billion, with air pollution control representing a large part of the total. Air pollution control costs are even more significant when one looks at the projected growth: in the 1980s, averages of 12-15 percent growth for environmental costs were normal; projections show 5-7 percent averages for the 1990s. Air pollution control costs show the highest projected growth. Need for Innovative Technologies One needs only to look at the remediation side of the current marketplace to see how things stand. Over 40 percent of the technologies currently being identified for site reclamation work are innovative, emerging technologies. This number has increased by about 10 percent over the past three years. The same trend is true for the air pollution control business. Looking at the sites on the National Priority List (NPL), one sees that the reason that approximately one-quarter of the sites appear on the NPL is because of their air impacts. The potential exists for many chemicals or compounds to become airborne. This is a serious problem demanding technologies that can address this issue. What does this mean in terms of new business for companies in the air pollution control field? A study by the BT1 consulting group identified new service offerings for environmental firms in 1993; approximately one-fifth of all new proposals for this year from the environmental field deal with the air segment. Venture capitalists are also good indicators of the business in environmental technology. A survey by the Environmental Business Journal looking at the level of interest of investors showed that — compared to eleven other areas in the environmental segment — interest in air pollution control ranked third. Interest in air pollution control has increased while resource recovery has decreased, the latter resulting from recycling and reclamation programs that have not been as economically successful as expected. What Does This Mean for an Industrial Company Financially? It is important for industrial companies to recognize that environmental technology development and commercialization can be a successful process. NETAC compared four Session 5B — Technology Development and Diffusion ------- Page 170 Clean Air Marketplace 1993 separate companies in the air pollution control field, looking at financial performance figures, annual sales, compounded annual growth rates over a three-year period, operating profit margins, operating profit/sales, the return on equity, the net income based on average shareholder equity, and the price-to-eamings ratio. As a general rule, if a company achieves operating profit margins greater than 8-10 percent, or if the company's return on equity is in excess of 20 percent, the company is doing fairly well. Some companies in the past, however, continued to achieve these levels year after year. Comparing the air pollution control industry to other environmental control segments with regard to employment level, employment figures for air pollution firms have increased while other environmental organizations are in decline. NET AC recently compared different environmental segment niches and illustrated a qualitative ranking for sales growth rate, operating profit margins, and financial stability. In general, air pollution control ranked in the top two or three segments in the environmental field. Other segments that ranked near air pollution control were remediation and water/ wastewater treatment, all representing good returns for companies who are involved. What Does NETAC Do? NETAC's efforts in commercialization Initially, NETAC was set up to encourage commercialization. This endeavor began by breaking down the continuum of technology development into a number of stages. NETAC uses a six-stage model based on participants, commercialization factors, success criteria, and an "activity balance" between technology and business factors. NETAC maintains a micro approach to solving some of these technology commercialization problems. NETAC analyzes the players involved: technology professionals, business professionals, users, suppliers, financial investors, and regulatory personnel. NETAC also looks into how each tends to get more or less involved as development progresses from the initial idea or proof of concept stages through prototype and pilot development, demonstration, and commercialization activities. NETAC has developed success criteria for each stage that must be fulfilled in order to move forward successfully to the next stage. Different commercialization factors utilized in the process are technology, market factors, competition both within the U.S. and abroad, and business and management issues. NETAC's research shows that more companies fail due to a lack of attention to business issues than to technical considerations. Generally, small companies or entrepreneurs do not focus enough on business. Sometimes they have spent millions in development and then find themselves asking, "Who needs this?" or "Where is my market?" Many technical successes are business failures. How can the business issues be properly addressed? The point is that there are some key levels of accomplishment that need to be addressed as one moves through the development process. Both technical and Session SB — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 171 business factors need to be dealt with at every stage of the process. In the beginning, companies too frequently neglect business factors — there is a trade-off. NET AC, as a new group dealing with technology commercialization, has been able to look at some of these issues from the business side. With this perspective NETAC has been able to help companies deal with commercialization. NETAC identifies the barriers to commercialization and develops strategies to get around them. NETAC hosts seminars and conferences to offer strategies for avoiding barriers. "The Valley of Death", a schematic illustrating different types of financing applicable to the technology development process, was introduced from a DOE publication. The valley illustrates the difficulty of accessing the proper funding at the appropriate time during the development process. Clearly, as you move from stage to stage in development, the need for funding changes. NETAC has identified many sources of funding for entrepreneurs by developing lists of venture capitalists who work in the environmental field, and by creating relationships with corporations where, through corporate partnering, we help entrepreneurs get their technologies demonstrated and developed. There are many different avenues that can be pursued in obtaining funding; NETAC tries to offer these financing options in a clear manner to businesses. NETAC does not have actual funding from the EPA to support the development process. In most instances, NETAC has been involved in technology development and demonstration activities supported directly by the client organization. When investors are looking at an organization, they are primarily concerned with: (1) the business operation; (2) the potential for turn-around of profit; and (3) technology. Good profit margins and a proven track record for the organization are important. Technology Information Another large aspect of NETAC's capability is technology information services, as it is important to disseminate technology into the marketplace. NETAC has a database called ETAP which has nearly 2,000 emerging innovative technologies. The Vender Information System for Innovative Treatment Technology (VISIT) database of EPA has about 300, but is more focused, whereas the NETAC database is more comprehensive in selecting new solutions. NETAC provides another technology information service called "Product Profile", which consists of a two-page description of technologies that have been developed from vendor information. Approximately 250 technologies have been developed in the past 2-3 years for this service. The Product Profiles include process descriptions, technology applications, operating parameters of the process, and vendor information. NETAC has no investment or equity interest in any of the technologies — this is purely a service to offer technology information to businesses looking for environmental technologies. NETAC does independent confirmation tests to screen out "fly-by-night" technologies from this Product Profile service. NETAC also offers technology evaluations, independent assessments, and demonstrations that illustrate that a technology can work. NETAC has developed test Session 5B — Technology Development and Diffusion ------- Page 172 Clean Air Marketplace 1993 protocols for products that have been applied to oil spill clean-ups, and also offers business evaluations, market assessments, arid industry analyses. In summary, there is a connection between what we have been trying to accomplish here — the seed that was planted five years ago by EPA — and some of the initiatives described at this conference. We believe that this illustrates how we can work together to solve some of the most pressing U.S. environmental problems. Dr. Joseph Ben-Dak, Chief, Global Technology Group, United Nations Development Programme (UNDP), deals with technology transfer, adaptation, and conversion of military technologies to civilian markets. His remarks focused on the international view of sustainable development. Most of the developing countries do not have an organization like NET AC, nor a technology assessment or dissemination program, nor even a Clean Air Act. Nor is there any chance of such a regulation in the near future. These countries, therefore, have very little of the regulatory function that is taken for granted both nationally and regionally. Markets are applicable, under some conditions. U.S. companies (correctly) believe that third world countries do not have the money to pay for their technology. This will not change drastically, but you really can determine some sub-populations of interest from the general group. Part of the reason we are going to be dealing more with clean air is because the administrator of UNDP, Gus Speth, is speaking in a tone the rest of us like very much. The idea that one can make a living in a less developed country and at the same time be very much in tune with environmentally sound technologies is beginning to be something very much in fashion. There are essentially seven different groups in which clean air technologies are relevant, five of which are described below. The UNDP is dealing with all these groups. Group 1: Commonwealth of Independent States and Eastern Europe The Commonwealth of Independent States and many parts of Eastern Europe have experienced extensive environmental damage to their air and water supplies. These areas require immediate action. The people of each strata of the population in these countries are beginning to become aware of the damage and there is a growing interest in obtaining funds for the environment from the European Community. These are not good years for Session SB — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 173 the European Economic Community, but, there is a great deal being attempted by European corporations. Now is the time to pull in U.S. technology. We must use a great deal of Japanese, U.S., and European companies and pull together the best technology solutions and services from each. There are currently over 170 requests to the UNDP from countries in Eastern Europe. This represents a large sum of money that could be applied in the next five years to environmental technology. Group 2: China China represents a large percentage of humanity. To put their population into perspective, there are factories in China with 80,000 workers that are considered "small". There is a growing awareness in China of the issue of air and water pollution, particularly in cities with both open and closed industrial parks. If one wants to do business in China, the most important thing is not to go about it as a market, but to try to develop the technology with the country, catering to its needs and its situation. Packages are made of complementary technologies by looking at what already exists locally and pulling this together with foreign technologies. Approximately 20 percent of the military industry, which currently produces strictly military products, will be totally converted to environmentally oriented goods in the next ten years. There is an enormous amount of research and development in this area. Unfortunately, these industries are not being given a fair chance by U.S. and other foreign countries to pull together local resources with foreign efforts. Group 3: Small Island States Small island states, which politically represent about one-third of the members of the U.N. community, include Papua New Guinea, Indonesia, and others. These countries consist of gentle, precarious ecosystems, and have a great need for technology. There are 62 states defined as island states which are calling for technology. If one creates a wise, careful coalition of technology, more can be done for these precious ecosystems and humanity because a large portion of the population lives on island states or in seashore areas. Group 4: Newly Industrialized Countries The large, newly industrial countries of Indonesia, Malaysia, and some larger countries of Africa such as Nigeria, are an untapped resource for products and collaboration opportunities in environmentally sound technologies. Africa, Latin America, and other less developed countries represent one of the biggest challenges because they are able to fund little development. One of the biggest challenges that one faces in entering those markets is the so-called "appropriate technologies" and ways to reduce the overall cost. Session 5B — Technology Development and Diffusion ------- Page 174 Clean Air Marketplace 1993 As "citizens of the world," we ought to look at these issues in addition to our local concents. This is a high priority for the next level of development. The U.S. needs to help the UNDP develop standards internationally. The relationship between what happens in this country and what will happen in less developed countries is obvious. The issue of sustainable development indicates that we must focus on developing environmentally sound technologies that are relevant in producing a living, as well as a sustainable standard of resources both internationally and nationally that makes sense in the long run. That is, we must apply a lot of loving care to the questions of how the environment and natural resources are being treated. Many more countries today are talking about these issues. Ten years ago, no lesser developed countries talked about sustainable development. Even today, leaders of these countries still do not consider the environment a priority, but at least they recognize that the environment is a concern. There is an element of support from other international organizations such as the Global Environment Facility, the World Bank, the Commission on Sustainable Development within the secretariat of the U.N., the UNKTAD, and the UNEP. The combined budget for these organizations is $1 billion every five years. This budget must be applied specifically to environmental issues especially dealing with sustainable development. This is particularly relevant for the lesser developed countries of the world. Group 5: Cities and Super-Cities Cities and super-cities — composed of large critical masses of over 700,000 people typically operate under a built-in economy of scale to apply technology. The people in these cities are aware of the importance of the environment, because they have seen it destroyed. The large population makes it necessary to buy services for the people in these cities, and in doing this create a private/public combination that makes sense for the situations in these cities. There are no less than 20 large cities which have asked the UNDP for assistance. They are seeking mid-course correction of their current situation. These cities are open to technologies, open to utilizing debt, and intend to take these actions in the near future. Often the military is the most logical partner because military personnel are already technically oriented. The military leaders understand technology from being involved in weapons and military equipment. Many military leaders understand that their role in the world may change. Some critics say that the UNDP is doing too much with the military, that it is not fashionable at this time. They do not understand that, as in Daniel Webster's story, "You must work with the devil to kill it." There are approximately 42 different military groups looking to redirect their energy and manpower. The more you tie technology and innovations to these communities the more success you will enjoy. Many assume that the private sector is ineffective in less developed countries. In many of these countries they are so interested in the technology they ignore the infrastructure and quality control. Source reduction technologies are far better than control technologies. Pollution prevention is a key concern for the regions. All should remember that we are first citizens Session 5B — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 175 of the world and that we should work together to improve the economic and environmental situation across the world through technology application. Questions and Answers a It seems that throughout the conference people have been speaking about control technologies as either a light green or dark green technology. Can you explain the difference? People use both of these terms broadly to describe technologies which reduce pollution, including source reduction, control technologies, and pollution prevention. As Mr. Harper described earlier, dark green technologies are those created with the intent of improving the environment, light green technologies are those which reduce the threat to the environment as an incidental bonus. In Georgia, entrepreneurs speak about incubation centers that generate sustaining revenue and lock in technical support. To what extent have your organizations thought about this approach? Mr. Mohin stated that although he has thought about this approach, it is not included in the legislation. He looked at a similar program at Iowa State University. Mr. Lenhart indicated that it was a process which could be factored in, but that NET AC does not run any special programs as of yet to deal with this issue. Many programs focusing on business deserve greater attention. How does government coupling with innovative technology effect investments in research and development? Mr. Nikkila pointed out that 87 percent of over $100 million spent in California has been on California companies. Mr. Mohin added that we are making progress in change, but we still have a long way to go. We need a better way to combine the bottom line. Corporations are not in the environment business, they are in the money-making business. From Congress' standpoint we need to make it part of the bottom line by promoting tax incentives, tax credits, and taxes on hazardous waste generators. Mr. Harper indicated that the political environment is changing across the world. Similarly, there is change in corporate culture. Session SB — Technology Development and Diffusion ------- Page 176 Clean Air Marketplace 1993 A statement was made earlier in regard to industry not wanting to be innovative. Who is coming to the SCAQMD? Are they vendors for off-the-shelf technology? Mr. Nikkila explained that under the RECLAIM program, innovators are given a goal, such as a law, around which to focus their innovative efforts. The RECLAIM program also encourages innovators to sell and, thereby share, what they have developed. When speaking about breaking the barriers to technology innovation, you mentioned that technology verification would not guarantee compliance. Does this mean that verifiers would have a separate set of standards? Mr. Mohin responded that there is a need to compare existing technology with regulations. Moving away from specific regulations, verification is more of a credibility check. EPA would provide information to prospective consumers that the technology has some legitimacy. In other words, using an EPA "verified technology" does not mean that EPA is guaranteeing its use will automatically ensure compliance. EPA has the responsibility to help drive technology. Session 5B — Technology Development and Diffusion ------- Clean Air Marketplace 1993 Page 177 Session 5 — Panel C Export Promotion September 9, 1993 9:30 a.m. - 11:30 a.m. Moderator: Panelists: Richard A. Wegman Rodney Sobin Lewis P. Reade F. Bradford Smith Introduction Richard A. Wegman, Partner, Garvey, Schubert, and Barer, noted that the U.S. is almost twenty-five years into the "modern environmental age," exemplified by the fact that much of its environmental technology is now second generation. As a result, American companies are well situated to take advantage of a burgeoning international market for these technologies and services. The market, currently estimated at $30 billion for air pollution control technologies alone, is projected to grow substantially by the year 2000 to as much as $80 billion. In light of these statistics, the panelists were asked to address several topics during the course of their presentations: • What more can government, at all levels (but particularly the Federal government), do to promote exports and American companies that wish to serve this market? • Are the efforts of the different Federal government agencies involved in this area well coordinated? If not, how can coordination be improved between and among the agencies? • [For the public sector panelists] What is President Clinton's Inter-Agency Strategic Plan going to look like and what sort of results can be expected? Session 5C — Export Promotion ------- Page 178 Clean Air Marketplace 1993 Presentations Rodney Sobin, Analyst, U.S. Congress, Office of Technology Assessment (OTA), began his remarks by highlighting a current OTA project, provisionally titled "American Industry and the Environment," which is examining trade, the environment, and competitiveness. Several reports have been or currently are being prepared for this study: • Trade and Environment: Conflicts and Opportunities (released May 1992), is a background paper that examines the relationships between trade practices and laws, and environmental concerns and regulations. • Development Assistance, Export Promotion, and Environmental Technology (released September 1993), discusses the use of environmental aid, and includes the use of environmental aid to promote exports of environmental technologies. • The third report, a final assessment scheduled for release in November 1993, will address competitiveness of the environmental business services sector, and analyze the effects of environmental regulations on the competitiveness of U.S. manufacturing. Mr. Sobin provided a brief overview of the organization of export promotion in the U.S. The Federal export promotion and financing apparatus is complex, with responsibilities divided among numerous agencies. Some of the programs and initiatives of the Federal agencies that have primary responsibility for promoting U.S. exports and related investment abroad are as follows. • The International Trade Administration (ITA) of the Department of Commerce operates the U.S. Foreign and Commercial Service, a network of U.S. regional offices and commercial officers overseas, and a Trade Information Center. ITA also distributes information via trade data banks, electronic bulletin boards, and publications. Its responsibilities include gathering and disseminating market data and trade leads, providing export education, facilitating trade missions, shows, and connections between U.S. companies and potential customers abroad. • The Export-Import Bank (Eximbank) promotes exports by accepting credit risks that are unlikely to be accepted by private lenders. It provides credit insurance, loan guarantees, and some direct loans to finance U.S. exports. The Overseas Private Investment Corporation (OPIC) provides loans, loan guarantees, political risk insurance, and other services to private sector Session 5C — Export Promotion ------- Clean Air Marketplace 1993 Page 179 investors for financing investments in developing and middle-income countries. OPIC hopes to establish an International Environmental Investment Fund. • The Trade and Development Agency (TDA) funds pre-feasibility and feasibility studies conducted by U.S. firms for projects in developing and middle-income countries. TDA also supports technical assistance, training, and trade events. Support for activities like TDA's is important because U.S. involvement at planning stages increases the likelihood of winning design, construction, and project management contracts, as well as providing opportunities for the export of manufactured products. In addition, other agencies support environmental export activities even when it is not their primary mission: • The U.S. Agency for International Development (U.S. AID) supports and administers many programs including the U.S.-Asia Environmental Partnership, the Environmental Credit Program, the Private Investment and Trade Opportunities program, and the Bureau for Private Enterprise, in addition to supporting other activities such as feasibility studies, trade events, and environmental training. • The Department of Energy (DOE), active in promoting cleaner energy technology trade and transfer, administers an Export Initiative Program, leads the interagency Committee on Renewable Energy Commerce and Trade (CORECT), and provides technical assistance capability. The Energy Policy Act of 1992 authorizes U.S. AID and DOE to lead export and technology transfer initiatives for renewable energy, energy efficiency, and clean coal technologies to developing countries and Eastern Europe. • The Environmental Protection Agency (EPA) plays a role as a provider of technical expertise. EPA also helped create the U.S. Environmental Training Institute, whose courses are designed to allow U.S. companies to showcase their environmental products and services to foreign private and public sector officials of developing countries while providing training and technical assistance. EPA also recently developed a Green Pages directory of environmental firms. A number of states have developed significant export promotion programs that in some cases target environmental products and services. They have taken a growing responsibility for export promotion by posting representatives overseas, planning trade Session 5C — Export Promotion ------- Page 180 Clean Air Marketplace 1993 events, promoting export awareness and education, providing advice on financing, and passing on trade leads. States can also help businesses gain access to Federal services. Many private sector organizations such as industry associations also work toward increasing environmental exports by helping coordinate public and private efforts. Other efforts such as objective, independent performance evaluations of U.S. environmental technologies could be used to help speed the diffusion of innovative technology domestically and promote exports of U.S. products. Programs like the Superfund Innovative Technology Evaluation program for remedial treatment technologies could be used as a model for expanding into pollution prevention and control technologies of interest to industry and utilities. Responsibility for the problems of export promotion lie with both the public and the private sectors. Industry needs to recognize that reaping the rewards of exports takes significant effort, time, and expense, in addition to developing an export culture within the company products and services often need to be adapted to the needs of foreign markets and practices. However, an environment with multiple agencies and programs has led to poor coordination, program duplication, and a lack of overall strategy. The low level of awareness in the private sector (and sometimes, the public sector) of what services are available and how to access them is also a problem. Several initiatives are underway to attempt to address these issues, although many face the same problems as the programs and agencies they represent: • An interagency Trade Program Coordinating Committee (TPCC): to develop an overall export strategy; along with an environmental subgroup to develop an environmental export strategy. • An Interagency Working Group on Environmental Technology: to develop strategies to further environmental exports, technology development, and technology diffusion; • The Trade Information Center (Commerce): to direct inquiries to appropriate agencies; • Trade and Investment Services Center (U.S. AID) and Export Promotion Initiative (DOE): to provide coordinated services to U.S. exporters; • CORECT (DOE): to provide coordination for renewable energy exporters; and Session 5C — Export Promotion ------- Clean Air Marketplace 1993 Page 181 • The U.S.-Asia Environmental Partnership: to coordinate environmental exports, technology cooperation, and investment in the Asia-Pacific region. These initiatives should assist in improving agency coordination. Lewis P. Reade, Director General, United States-Asia Environmental Partnership (US-AEP), United States Agency for International Development (USAID), began his presentation by noting that USAID recognized early the relationship between economic development and the environment. The environment is a major issue in developing and newly industrialized countries for a number of reasons. For example, the environment is a major component of sustainable development. The poor, who are the focus of economic development efforts, usually suffer the most from environmental degradation. From an economic development standpoint, a strong economy supports a good environment, and a good environment supports strong economic growth. The two principal goals of the U.S.-Asia Environmental Partnership are to: • Work with U.S. and Asian governments, non-governmental organizations, and the private sector to identify and address environmental problems that prevent sustainable development and sustainable economic growth. • Provide technology transfer opportunities for U.S. producers of environmental technologies and services. USAID does not underwrite specific projects, but rather provides the "software" that needs to be in place so that American companies can take advantage of the Asian market. To that end, US-AEP provides information (in the form of relationships, and technical information and training), networking opportunities, and access to financing related to these technologies. Asia, a vast region supporting over half the world's population and many of its resources, is experiencing rapid population and industrial/economic growth, and consequently some serious environmental crises. Studies show Asia is already having a major impact on global air quality, and the situation is expected to worsen. USAID hopes to help improve conditions in the thirty-four developing and newly industrialized Asian countries which are part of this partnership. Therefore, there is a role for U.S. businesses to play in helping Asia address and remediate the negative environmental trends. Session 5C — Export Promotion ------- Page 182 Clean Air Marketplace 1993 US-AEP's role is one of coordination. It supports the environmental and commercial efforts of other agencies with core funding, currently $100 million over five years. The partnership expects these core funds to leverage significant contributions from the U.S. and foreign governments, private sector companies, non-governmental organizations, and multilateral development institutions. Through US-AEP, substantial business opportunities are created for U.S. technology, goods, and services. US-AEP expended about $4 million, originally for organization and now for project start-up. All of the current projects are less than a year old; some are only a few weeks old. They estimate that their work thus far has generated in excess of $50 million for U.S. companies. US-AEP's theory is that a system is necessary in order to help companies; this system focuses on four major components, and some supporting activities. • Creating links between American companies and potential foreign customers that lead to business opportunities in the long run. • Underwriting companies that go out to demonstrate their technologies. Examples include efforts currently underway in cooperation with the Department of Commerce, and similar activities with the National Association of State Development Agencies to open nine Offices of Technology Cooperation. • Helping companies that have opportunities in Asia to seek trade financing. An arrangement with the Bankers Association for Foreign Trade and the Commerce Department will help towards this end. US-AEP has established an 800 number for those in the industry to call to find out which banks are prepared to meet their export financing needs for environmental goods and services. • Developing a "one-stop" phone network called the Environmental Technology Network for Asia. Such a network would contain trade leads generated by the technical overseas representatives, plus all the environmental laws, regulations and current practices of the Asian countries. US-AEP also hopes to generate interest among larger commercial banks to coordinate with OPIC and the Environmental Development Fund to provide equity financing for American companies. Three banks have already signed on, and arrangements are being made with several others. Biodiversity conservation is another area in which US-AEP has become involved, by producing education in the practice of sustainable harvesting of non-timber forest Session 5C — Export Promotion ------- Clean Air Marketplace 1993 Page 183 products and coral reef products. A consortium composed of the World Wildlife Fund, the Nature Conservancy, and World Resources, Inc., and others, are involved in this effort. America needs to rethink its attitudes and business practices to become more oriented towards international trade. Marketing environmental goods and services is a highly technical and engineer-oriented process; they are not like standard commodities that we are used to trading. Five years ago, only 8 percent of the U.S. GNP came from trade; today it is 12 percent. Currently, only 1 in 11 American business persons have passports, compared with 1 in 2 British, and practicaDy every Dutch business person. US-AEP is involved in sponsoring a variety of projects specifically in the clean air marketplace, such as a conference on reducing pollution in mega-cities on the Pacific Rim, a joint project with EPA and IBM to help the Koreans address the problem of CFCs, urban pollution monitoring in Hong Kong, and dealing with bus emissions and electrifying vehicles in Nepal and Thailand. They believe that the U.S. has significant technology to help in activities like these, technology that came about and is improving as a result of the Clean Air Act Amendments. F. Bradford Smith, President and CEO, Environmental Elements Corporation (EEC), noted that his remarks would respond to some of the data presented by the other panelists to provide a context for discussing how the government can promote environmental exports. He provided some background information on the history and nature of EEC's business. Mr. Smith disagrees with the OECD's estimate of a $30 billion market for American environmental products. For example, in their 1992 annual report, ABB, one of the largest suppliers (as measured by revenues) of air pollution control equipment in the world, disclosed world-wide revenues of only $540 million for these types of products. This is less than 2 percent of the world market as defined by OECD. Some of the statistics deserve further scrutiny. Other issues that affect American entry into world markets include: • The world market for environmental goods and services is highly fragmented. Most industrialized nations have companies in this field with significant, proprietary technology. As a result, this is an internationally well-populated, highly qualified, and competitive marketplace. Session 5C — Export Promotion ------- Page 184 Clean Air Marketplace 1993 • "Need" and "market" are not synonymous. Most of the statistics (like OECD's) are based on need, which in some cases, i.e., Eastern Europe, is very obvious. However, the need for goods and services does not necessarily create a market. First, there must be the ability to get through a process, outlined as: dream —> vision -> policy —» plan -» program —> prospect -> project -» bids —> contracts -> work This requires technical skill, administrative management, skillful policy making, and substantial funds. Currently, there is a great deal of need, but very few markets. • The money must be indigenous to the geography in which the need arises. These factors greatly complicate what is required of American government and industries. Assuming a supporting industry technology and interest to enter the world marketplace exists, along with governmental policy, American companies also have specific needs: • Profits — however, the investment cycle for international "prospecting" is several years, at best. • Established business relationships — Mr. Smith concurred with Mr. Reade that international business is far more dependent on and influenced by personal relationships than it is in the U.S. American companies are in danger of being viewed and treated as opportunists when it comes to bidding on project-specific opportunities. • Export culture — Mr. Smith also agreed with Mr. Sobin's comments that there needs to be private sector responsibility for increasing this culture within their companies. • A relatively stable or thriving domestic marketplace for a company's products and services — Because of the investments required, an industry's ability to export is dependent on strong demand at home. This last point leads to a key issue that had not yet been addressed. The U.S. domestic air pollution control marketplace, to the extent that it is being influenced by Title IV of the Clean Air Act, is a great disappointment, in part because of reasons subject to Federal policy and regulatory process influence. This has to be examined as a component of export promotion policy. Session 5C — Export Promotion ------- Clean Air Marketplace 1993 Page 185 American government and industries must face the reality of the role of government financing and how this helps our international competitors. Currently, American industry is not equipped to compete in the international marketplace with foreign companies whose governments are using financing capability as a domestic economic development tool. Financing can be a key component that may distinguish one country's efforts from another, despite equal technological expertise. This is a policy-level issue that the government must address. In addition, Federal policy needs to be much more specific and recognize that we are dealing with a crowded world marketplace. In order to deal with the market effectively, the U.S. needs a much stronger and more buoyant domestic market. Countries export the technologies, products, and services in which they excel. This can only come about as a result of a strong domestic market that has provided both the demand and the competition to hone these components to a world-class level. Barriers to the domestic market are few but they can and should be addressed as a national priority by both policy and regulatory people at the state and Federal levels. Questions and Answers L f% I • | Can you provide some theories as to why the domestic market for environmental goods and services is so soft, and what might the government do to strengthen it? Mr. Smith explained that industry has not been purchasing many of these goods and services mainly because the government has not enforced the Clean Air Act Amendments of 1990 in a complete or timely manner. This resulting atmosphere of uncertainty among industry, despite the self-enforcing deadlines laid out by Title IV, has led to the attitude that the deadlines do not mean anything. Some industries are not complying, and are prepared to wait and see what happens. In addition, there is the continuing recession that American industries have yet to recover from, despite what economic indicators may show. Lastly, there has been a serious lack of coordination among Federal and state regulators. Their differing concerns, air quality (Federal) and rate setting (state), have not been resolved as they pertain to environmental compliance costs, a major issue for industry. Being able to recover their costs is significant for industry, who want reasonable assurance that this will happen before making extensive capital investment. What do you think can be done — by both the private sector and the government — to stimulate greater awareness and interest in overseas markets among U.S. companies? Mr. Smith stated that the government's efforts to help American companies are extensive, but are too unfocused. There is no qualitative screening of data and information, and Session 5C — Export Promotion ------- Page 186 ^ Clean Air Marketplace 1993 companies get overwhelmed and discouraged. Project development money is another lacking item that would greatly help companies. Such funding would go towards feasibility studies very early on, typically long before proposals or specifications are issued. This type of "soft" money is something most companies cannot afford; however, some foreign governments support their companies in this manner. American companies often work on projects where the feasibility studies have been done by another country, and are subsequently forced to play "catch-up." Therefore, getting into a project early on can be key. Mr. Reade concurred with Mr. Smith on several of his points. However, he strongly disagreed with Mr. Smith's argument that a domestic base is necessary for export culture. Many newly industrializing countries market products in the U.S. that they do not sell in their own countries. Strong companies that can afford to engage in long-term prospects by maintaining a continuing presence in a country and establishing relationships to create a market for their goods are the ones that will succeed. Technology products designed for use in the U.S. cannot always be applied [in the same form] in another country (e.g., using an expensive computer to perform tasks for which another country might rely on inexpensive labor.) Mr. Smith responded to this by distinguishing between a company trying to sell leftover products, versus having a base market on which to build. The environmental business within the U.S. has not measured up to expectations, and companies are feeling the effects. He is not aware of a major technical breakthrough generated by the U.S. in the last ten years. To illustrate this, he noted that 50 percent of the scrubbers installed as a result of the Clean Air Act were of European design. Exports will not make up for a lack of a domestic market, because without this market, the products and technology will not be at a world-class level, and consequently, internationally competitive. Mr. Sobin commented on several different issues raised by the other panelists. First, U.S. foreign assistance is often relatively less capital intensive than for other European countries and Japan. The U.S. typically provides money for rural training and agriculture, which are not as export intensive as projects like power plants or sewer systems, which other countries are likely to assist. Therefore, the issue of development assistance may be one worth examining. In addition, the appropriateness of a technology in a given marketplace is important. American products often have a reputation for being too complex, sophisticated, and expensive, and after-assistance is often poor. Lastly, most businesspeople are unaware of where to go to get information. There is a whole export promotion structure set up, but it in him has not been very well marketed. Session 5C — Export Promotion ------- Clean Air Marketplace 1993 Page 187 a Stronger environmental regulations have been promulgated in Europe. How is this related to the fact that 50 percent of scrubber technologies are developed in Europe? Mr. Smith responded that the initial blossoming American market for particulate control and scrubber technology was a result of the Clean Air Act of 1970 and the amendments in 1977. That market became dormant in 1981, and has not made a comeback since 1990. In the meantime, strong acid rain regulations were being passed in Scandinavia, Germany, and Japan. As a result, the second generation of scrubbing technology moved overseas, primarily to Germany. This is the technology that has moved back to the U.S. in response to the Clean Air Act of 1990. This anecdote strongly illustrates why it is important to have a strong domestic base. f% I • I ^•^^" guy?" Many small environmental technology companies face problems that bigger companies do not; how is the government qualifying the information and leads they make available to companies; is the government and its programs (i.e., the nine overseas export offices discussed by Mr. Reade) capable of helping "the little Mr. Reade answered that small- and medium-sized firms usually do not have the discretionary funds that are necessary for market, sales, and product development. The job of the technical representative, in addition to making contacts with buyers, distributors, intermediaries, etc. and gathering information, is to be responsible for qualifying the people and companies that they believe would be of interest to American firms. These representatives, both Americans and foreign nationals, have been hired for their backgrounds, which typically include engineering and sales. Representatives may also eventually identify lead agents in the host countries who would be responsible for qualifying the contacts/ Mr. Sobin explained that while these representatives will help the situation with small- and medium-size firms, they still cannot replace face-to-face contact. Intermediaries cannot set up arrangements with distributors or joint ventures — both for cultural and legal reasons. They can smooth the way and reduce costs somewhat, but it is still a costly and uncertain risk. However, they can cut down on the time investment that would be involved otherwise. Session 5C — Export Promotion ------- Page 188 Clean Air Marketplace 1993 Would the weaker U.S. dollar provide any advantages for export opportunities, and is this of consequence in the immediate term? Mr. Smith felt that it does not seem to hurt or help; most hardware is being produced locally and the role that U.S. firms are playing at the moment (start-up, process and detail engineering) does not translate into a huge portion of the money that is being generated. In addition, the manufacture of engineered products (as an example) is becoming increasingly international as companies move parts of their operations around to different locations world-wide where they can be done at the lowest cost. Lastly, many of today's contracts are being denominated in dollars, particularly in the Middle East. Session 5C — Export Promotion ------- Clean Air Marketplace 1993 Page 189 Keynote Address by Donald A. Deieso President and CEO, Research-Cottrell Companies Introduction by Robert Brenner, Acting Deputy Assistant Administrator, Office of Air and Radiation, U.S. EPA September 9, 7993 Of course as all of you are aware, it is one thing to have these good ideas and another thing to have people like Steve Harper who can really make them happen. And it is a lot harder to make them happen than it is to have a good idea. So as Carol Browner said yesterday, we are very grateful to you for putting this together and doing such an excellent job. One of the very nice parts of my job at EPA is the opportunity to work with some very creative, innovative, and dynamic people who are involved in this effort to implement the Clean Air Act. You have heard from a number of them over the last couple days and you are about to hear from another, Don Deieso. Don is the President and CEO of the seven Research-Cottrell Companies. They are one of the oldest and largest air pollution control firms in the United States. He is also now Executive Vice President of their parent firm, Air and Water Technologies Corporation. We asked Don to speak not only because of his central role in the Clean Air Marketplace, but because he has a fairly unique prospective: he has personally participated in just about every side of this marketplace. He has been Assistant Commissioner for Environmental Management and Control at the New Jersey Department of Environmental Protection. He has been the Chief Chemical Engineer for ConEd in New York, where he was responsible for corporate environmental science and engineering activities. Prior to that, he actually developed waste treatment systems at ConEd. Notice that he really has some technical skills as opposed to a lot of us "policy wonks" who are involved in this area. He also worked for EPA. He directed hazard remediation in our Region II Office. He has also done a stint in academia where he has done some teaching on environmental science at Rutgers University. Over the past few years, Don has been a member of our Clean Air Act Advisory Committee and that is where we at EPA have learned that not only have his experiences made him unusually knowledgeable and insightful on air pollution issues, but he also has not hesitated to speak very directly to us about the right way to implement the Act. To my way of thinking, what could be a better combination for a conference speaker — he knows what he is talking about, given his experiences he really can relate to all of you, and I can confidently say he will tell it to you straight. Keynote Address — Donald A. Deieso ------- Page 190 Clean Air Marketplace 1993 Address by Donald A. Deieso Rob, thank you very much. Steve, let me first commend EPA once again for an outstanding conference. This started out as a very small group but, as I understand now, it is a record attendance of over 300 and that is to your credit, finding a niche and filling it and letting this activity grow. As a former EPA-er, I am extremely proud of the accomplishment. As a high school student back in New Jersey during the late 1960s, I remember a number of public hearings on the proposed sulfur-in-fuel air regulations that were very controversial at that time, and I remember distinctly the loud opposition raised by industry. Adopt these, they argued, and we will be out of business. The regulations of course were adopted, business continued, and life went on. During the implementation of the 1977 Clean Air Act Amendments, I served in a advisory role to EPA on the development of specific new source performance standards. The public hearings were no less contentious, and the theme of the 1960s echoed again in the position of the regulated community who said "economy versus environment." They created an illusion that the American people cannot have both. During my tenure in New Jersey under Governor Tom Kean in the mid- and late-1980s, there was not a week that went by that we were not visited by one of the Fortune 50 companies resident in our state, and always the arguments were the same: If you impose this regulation, if you levy this enforcement action against us, if you force this site cleanup, we will have no choice but to leave the state. In fact, so consistent was the pattern that it became known to the Governor as the "caster appeal" (casters being those devices on the bottom of a chair that make it roll easily), so-named because one would believe that the major manufacturing facilities in the state were on casters, and we would find them up and down the New Jersey Turnpike going to Pennsylvania or going to Delaware or moving to wherever the regulations were the least burdensome. For those of us who participated in the process leading to the 1990 Clean Air Act Amendments, the subcommittee chambers resounded with overstated, poorly documented, and ill-supported statements by both sides of the debate. Potential cost impacts of the Amendments on the regulated community were consistently cast in billions of dollars a year — reminiscent of Carl Sagan's comments about the extent of the universe — and yes, the "economy versus environment" debate was raised again and again and again. I would like to report to you that, nearly three years after the passage of the 1990 Clean Air Act Amendments, the overall domestic air pollution control market is smaller now than what it was in 1989. So we gather for this conference this week, a conference entitled "Clean Air Marketplace 1993," and we will discuss wonderfully complex and elegant topics such as finance, public-private partnerships, and globalization of technology — and this is very, very good. And yet, I hear the ghosts of thirty years ago in the "economy versus environment" debate even today, and it causes me to wonder just how far we have really progressed culturally toward the goal of improving our environment. Keynote Address — Donald A. Deieso ------- Clean Air Marketplace 1993 Page 191 Our firm, along with others, participated in a study prepared by EPA last year on the benefits to the economy of the Clean Air Act Amendments. At the core of the findings was the principle that the air pollution control act and business would create jobs — special types of jobs, high-tech jobs. This report was prepared presumably to blunt many of the arguments made by the regulated community that it would cause tremendous hardship on the economy: plant closures, displacement of workers, layoffs, and unemployment. I suppose we can agree that this logic would add up the jobs gained, subtract the jobs lost, and declare this a victory for society. We could do that, but I search desperately in that equation for the parameters of public health and welfare the basis of all of our actions. More intriguing to me was the notion that environmental control programs had to "pay their way" and had to be measured in a traditional return-on- investment approach, the way you would introduce a new product to a consumer marketplace. And yes, that might be the beginning stages of free enterprise as applied to environmental programs. But we must clearly understand that we have a debt to society programs, we have quite a bit of affirmative action of 40 and 50 years of industrialization to make up, and I am not quite sure that analysis is proper in time. It has been clear to me that economic prosperity is a prerequisite for robust environmental industry and business. In fact, the past two years have demonstrated convincingly that environmental firms are not recession-proof, nor are we recession- resistant. The capital structures of this country's major environmental firms have been severely damaged by the poor economic climate of the past two years. Stocks are at 50-60 percent of the value they enjoyed less than two years ago. These are the same firms that this nation expects to invest in advanced technology demonstration projects and research and development. Well, be assured the money simply is not there. But as with Charles Dickens — it was the best of times, it was the worst of times — as depressed as the domestic market has been, as interesting and exciting have the offshore opportunities for these U.S.-based environmental firms been for us in the past two years. Last February, in testimony before the Senate Environment and Public Works Committee, I presented the five components which create a robust environmental marketplace: • Strong laws and regulations; • A general will on the part of the regulated community to comply with the spirit as well as the letter of the law; • A strong enforcement program; • A healthy national economy; and • Cost-effective control techniques. Keynote Address — Donald A. Deieso ------- Page 192 Clean Air Marketplace 1993 All five, incidentally, apply as effectively domestically as they do internationally. Let us examine each of these separately. Strong laws and regulations We have environmental laws and regulations in the United States. We have environmental laws and regulations throughout Europe and in many of the developing countries of the Pacific Rim. In fact, one could argue these laws, when studied, are very strong. The European Economic Community requirements promise to be as stringent and in some cases more stringent than U.S. emission standards. Certain standards in Japan have out-paced us here. The requirements for waste-to-energy plants, for instance, in Japan are considerably tighter than those in this country. International treaties have been developed for greenhouse gases, biodiversity; all of those hint that we are globalizing, we are making more consistent, the environmental requirements country-to-country. More impressive to us, there is not a client that we deal with based in the U.S. that retains our products or services for work in developing countries that does not immediately say: I would like this facility, I would like that piece of equipment, to comply with U.S.-based standards. Notwithstanding that perhaps Thailand or Malaysia may not have the same stringent requirements today, they understand that the investment is a sound investment for the future. A general will to comply with the spirit as well as the letter of the law There is a general will on the part of the regulated community to operate in compliance with environmental standards. It has been in some cases less than consistent, and I continue to be struck by the wide diversity of commitment. Fortune magazine on July 26 (a few weeks ago) had a wonderful article in which they assessed the nation's top companies and rated them on the 10 worst, 10 best, and 10 most improved. Without names it was fascinating to see that among the 10 worst were multi-national, multi-billion dollar companies that for the last 10 years, by Fortune's review and discussions with those corporate officers, would indicate status quo. A strong enforcement program Most of us think of enforcement in the traditional sense of an EPA or state DEP cop on every corner. And somewhere that notion is becoming obsolete. Enforcement today is now actually taking two facets — the first is of course traditional environmental reporting obligations in which the regulated community must come forward with their moments of non-compliance. But there is another very subtle and very powerful force building in enforcement on the financial side. The Securities and Exchange Commission in its regulation of publicly traded companies is now asking for disclosures of environmental liabilities. No longer in an annual report can a company hide the fact that there is a $150 million site cleanup that it faces. The accounting community, the auditors, the Price Waterhouses of the country (i.e., the "Big Eight"), are also under pressure to Keynote Address — Donald A. Deieso ------- Clean Air Marketplace 1993 Page 193 disclose, to ask the company to disclose, to find material in discussion with corporate management those items that would suggest that there is an environmental exposure that the company faces. This of course was highlighted a year and a half ago when one of the Big Eight was sued by shareholders. They were sued because they had knowledge that the company was facing a $150 million exposure. The net worth of the company was $100 million. The environmental exposure was clearly material, something the shareholders needed to know, deserved to know, and by law had a right to know. And those elements of enforcement in fact last year grew. Very quietly and subtly the SEC and EPA connected databases so that now when EPA has an enforcement action against Company A that will become immediately pa,rt of the SEC record on Company A and so the SEC will police those disclosures to see that shareholders are well informed of any exposures that the company may have. That enforcement promises to be as powerful, if not more so, than the Environmental Enforcement Officer at your door. A healthy national economy We would benefit from a healthy, international economy. Here perhaps is the true Achilles heel to growing the environmental business. The U.S. is not the only nation struggling with a sluggish economy; many of our fellow European allies and competitors are locked in their own conflicts with deficits, unemployment, trade imbalances of many sorts. In some cases and in some countries — for example Eastern Europe, parts of the Pacific, and Latin and South America — it is literally true to say that they cannot afford to protect the environment and to heal and rehabilitate the environment. It simply cannot be done. We have operations in Eastern Europe, and the devastation that we see is something that I can only imagine in the pages of our Donora, Pennsylvania, incident of 1948. Some areas of complete deforestation, health records of local hospitals with respiratory ailments that would dwarf anything that London in the 1960s would have offered. And yet, these are the countries that today simply cannot afford a scrubber, cannot afford an electrostatic precipitator, or water and wastewater treatment. Cost-effective control techniques In the same discussion in February, I said I found it increasingly difficult to define what a U.S. environmental firm is. Most of us sit here today with a notion that there is a U.S. environmental business. My own company, for instance, and almost every one of our major competitors in this country, owns or is partially owned by an offshore company. We compete in this country and abroad with environmental business firms that design and manufacture the same basic categories of equipment; in fact, indistinguishable in the U.S. is, a U.S.-based company. So, in short, much of the globalization that we speak of has already occurred. There is not a firm without a major and/or significant ownership by a firm from offshore. Similarly, there is not a technology in the U.S. that is not in some way a hybrid of ideas that have been spawned in either Germany or Japan and that are in play in our field today. So in short, there really is not a U.S. company and there is not a U.S. market; it is truly is a global market. Nearly 20-30 percent of our revenue is based in Keynote Address — Donald A. Deieso ------- Page 194 Clean Air Marketplace 1993 international business. Of that, more than half is sold and negotiated in the U.S. for multi- nationals here to be installed and/or designed in other countries. So more and more we are seeing one massive incestuous group of competitors and technologies all in play, all improving and all benefiting, one idea for the other. Does this mean that our environmental business is condemned to chase country-by- country and without any sense of U.S. identity? We think the answer is no. We continue to lead the world here in much of the technology developed. There was a notion during the last Presidential campaign that Japan and Germany had better ideas, that they were well advanced of anything that we have in this country, and we would benefit. Let me be very clear. The environmental program, the environmental technologies were born in the United States. We were treating wastewater before any other nation. We were chlorinating wastewater in 1909. We had the first electrostatic precipitator. We had the first scrubbers. These ideas were spawned and developed here in the U.S., and that leadership and technology continues. Solutions to industry-wide problems We find ourselves, however, faced with a few major shortcomings. Let me offer some very practical solutions to the problems that our industry faces. • First, the U.S. government must subsidize the expansion of environmental businesses in undeveloped and developing nations by providing loan guarantees and access to capital at below-market rates for very specific projects. >• We and a German partner were recently defeated in a large scrubber project in Thailand by a Japanese firm. We were defeated not because we did not have the best technology — in fact, we had the number-one rated technology). When, in the final moments when that government came forward in Thailand and said, "but we have no money for this project... you must finance it", we packaged our best financing through commercial banks, but the Japanese came in with financing backed by their government with complete loan guarantees and, of course, it was something that we could not match. •• Similarly, in Mexico a year and a half ago, the Japanese government advanced the Mexican government $250 million for air pollution and environmental control. There was a hitch: the work had to be done by Japanese firms. Keynote Address — Donald A. Deieso ------- Clean Air Marketplace 1993 Page 195 These are marketplaces that U.S.-based companies have developed, have spent quite a bit of time and energy, and have wonderful technology to play. But U.S. companies do not have a level playing field by any measure. Second, investment tax credits need to be offered in this country for all of its environmental technology purchases — a well-trodden issue. Third, tax credit for R&D on environmental expenditures and environmental initiatives. We have wonderful technologies today that your public companies must expense. For those of you who are unfamiliar with P&L and public finance reporting, it means that every dollar of R&D must be discounted against a profit. Well, those of you that are in the financial community study the profit and loss statements and operating statements of the public companies in the environment today, and you will find many of them in major distress. That is not the condition under which one invests in R&D, and it is simply not going to be made easy. Lastly, there are accounting rules that could easily favor environmental research and development as an item that could be capitalized and enjoyed over the next 20 and 25 years. Those two would be of tremendous help in freeing these companies to do what they must do. Conclusion In closing, let me suggest a few thoughts. First and clearly, this technology of the U.S.-based companies is more than competitive — in many instances it is superior. Second, the quality of the engineers and scientists in the companies, universities, and EPA rank among the top in the world. There is no doubt in that regard. Third, we are at a considerable disadvantage in the world marketplace because of competitors' government backing and subsidies and — perhaps no different than the Airbus in a non-related industry — it is coming home to roost here, and the prospects for the future are even dimmer if we cannot muster government support. If there are any questions that you have, I would be delighted to entertain them. Keynote Address — Donald A. Deieso ------- Page 196 Clean Air Marketplace 1993 Keynote Address — Donald A. Deieso ------- Clean Air Marketplace 1993 Page 197 Session 6 Connections Among Clean AirAct/ISTEA/Energy Policy Act September 9, 1993 2:00 p.m. - 4:00 p.m. Moderator: Susan F. Tierney Panelists: G.B. Arrington Joseph Goffman Michael Stanton Mary Margaret Whipple Ben G. Henneke Introduction Susan F. Tierney, Assistant Secretary, Office of Policy Planning and Program Evaluation, U.S. Department of Energy (DOE), noted that there has been an upward trend in ozone precursor and greenhouse gas emissions, oil imports, and vehicle miles travelled (VMT) in the last few decades. Each of these upward trends is part of a common problem. To paraphrase Secretary O'Leary, "It is the car, Stupid." The Clean Air Act Amendments (CAAA), the Intermodal Surface Transportation Efficiency Act (ISTEA), and the Energy Policy Act of 1992, provide an integrated response to the problems created by motor vehicle emissions. These statutes begin to focus on issues that are critical to reducing motor vehicle emissions — improving fuel options, reforming motor vehicle operation, and reducing VMT. The three acts also provide an opportunity to fight vehicular emissions in a comprehensive way while considering national security, the environment, jobs, and economic development. Together, the statutes encourage innovation and business opportunities, as well as promise to combat negative air quality trends. Presentations G.B. Arrington, Director of Strategic and Long-Range Planning, Tri-County Metropolitan Transportation District (Tri-Met) of Portland, Oregon, discussed how integrated land use and transit planning in Portland over the last twenty years have resulted in a more vibrant economy, as well as cleaner air and less traffic. Portland's efforts can serve as a model for many other communities facing similar problems, according to Mr. Arrington. The success of Portland's innovative public policy can be seen in its thriving downtown, smooth functioning transit mall, and soon to be expanded urban light rail system. MAX, the light rail system, is in fact part of an integrated plan to shape urban growth, move people around the area, defer highway investment, and enhance the quality of life. Development dollars invested in projects adjacent to the light rail line have exceeded the cost of the line by four-fold. Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Page 198 Clean Air Marketplace 1993 In the 1970s Portland's central city was dying. Expanding the public transit system was chosen over highway development as a key part of a comprehensive strategy to promote downtown growth. Before MAX started operations, Tri-Met buses accounted for half of the rush hour trips into the city and one-third of all trips downtown. Since MAX began its operations, Tri-Met's market share of travellers has doubled. Today, one in three people in Portland ride public transit at least once a month. Sixty percent of riders are choice riders (i.e., individuals who have a car available). The success of this system has hinged on the cooperation between government land use planners and the transit authority. This cooperation comes out of the belief that new rail systems should not be seen solely as transit investments, but must also take into account the community's vision of its own growth. The transit authority, for instance, asks local governments along the rail corridor to help make development more dependent on transit by limiting parking, widening sidewalks, improving pedestrian access, and allowing mixed use development. For its part, Tri-Met provides investment funds and assists local jurisdictions in planning to stimulate economic development around transit stations. Public transit has been key to the downtown investment strategy in Portland for years. Transit corridors have been spines for growth, the most intense development, and the lowest parking ratios. The plan is to build downtown around public transit, and to use it to shuttle people around Center City once they are there. Since 1972, strict limits have been set on parking in an effort to create automatic demand for mass transit. New office buildings, for instance, have strict maximum but no minimum limits on parking space. Rather than wither away as critics predicted, the downtown has thrived. Portland has grown from having 56,000 jobs in 1975 to 86,000 today, an increase of over 50 percent, while the number of cars entering downtown has not changed. Portland would have to add six new parking garages, each as tall as its highest building, if the city were to reduce its dependence on public transit. In addition to saving resources, Portland's reliance on public transit has halted the growth in traffic congestion and has helped markedly improve air quality. Portland has gone from being out of compliance with national ambient air quality standards two out of every three days in 1973 to having 100 percent compliance in 1992. Portland has not had an air quality violation since 1987. Portland has been pursuing a balanced transportation plan. Rather than widening highways to accommodate growth, the area chose to invest in public transit. Portland has not built a radial freeway or widened any arterial highways in 20 years, and the city is in the process of expanding MAX. In 1991 the State Land Use and Conservation Commission passed a new transportation rule which is designed to reduce dependence on single occupant vehicles. It calls for a ten percent reduction in the number of parking spaces and a ten percent reduction in VMT in the next twenty years. The rule requires local governments to adopt land use and subdivision strategies within the next two years that allow transit-oriented development as a matter of right. The Portland metropolitan area Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Clean Air Marketplace 1993 Page 199 is required to consider changes in land use plans in lieu of making transportation investments. The state transportation plan reduced the need for state highway building from $37 billion to $24 billion by assuming investments in public transit. The common thread in Portland's land use and transportation plans is the desire to contain growth: Portland wishes to "grow up", as opposed to "growing out", to substantially increase density in transit corridors, and to help ensure that new development is served by public transit. Portland shows the dramatic impact that integrated land-use, transit planning can have. Some examples are: • The Transit Mall. This four block, $180 million mall is a prime place to shop in Portland. Light rail provides a larger retail market, which has attracted stores. • Lloyd's Center. A mall with 1.3 million square feet across the river from the transit mall has been renovated to take advantage of light rail customers. • The Oregon Convention Center. An $85 million, 400,000 square-foot convention center was designed with mass transit in mind. It has only 400 parking spaces. • The Arena. A $205 million, 20,000 seat arena has been built adjacent to a MAX station. It has only 3,000 parking spaces. In sum, 7 million square feet of development, valued at over $1 billion, have been completed immediately adjacent to MAX stations since MAX was built. Another $440 million in new development has been announced. The lesson to learn from Portland is the value of regional, integrated land-use, transit planning with the force of law. Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Page 200 Clean Air Marketplace 1993 Joseph Goffman, Senior Attorney, Environmental Defense Fund, discussed the use of market-based approaches to achieve policy goals, which he contended can greatly complement the traditional comrnand-and-control approach. The CAAA, ISTEA, and the Energy Policy Act provide examples of laws that integrate a variety of policy tools, including market incentives, for achieving their goals. The CAAA institutionalized the conclusion that the market can be used as a tool for stimulating innovation. The Act empowers state and local authorities to force new stationary source technologies, new fuels, and new approaches to mobile sources. Title IV of the CAAA, the acid rain program, created the market for SO2 emissions. Mandatory reductions on individual plants are made flexible with a market that allows plants who reduce emissions by more than their standard to sell credits to those who do not meet their reduction standards. Under a market system all utilities, vendors, and consultants constantly have an incentive to find new, better and cheaper ways of getting the job done. Another example of the use of market-based incentives in environmental policy is the Energy Policy Act of 1992. The Energy Policy Act addresses a wide range of issues, including utility regulation and the diversification of motor fuels. One provision of the Energy Policy Act creates a voluntary registry of firms that reduce greenhouse gas emissions. Although greenhouse gas emissions are not yet regulated, the Energy Policy Act creates several incentives to reduce emissions: • Those who expect that greenhouse gas reductions will eventually be mandatory stand to benefit by having their baseline emissions and reductions recorded now in the hopes of getting credit later on. • The registry, by publicizing a firm's emissions reductions, could be used to a firm's advantage in public relations. Many of the actions taken to reduce pollutants in response to the CAAA will also reduce greenhouse gasses. The registry gives firms the option of telling the public about the positive greenhouse gas reduction side effects that result from complying with the CAAA. Those innovators who can reduce both CAAA pollutants and greenhouse gasses will be rewarded by the marketplace. Together, the CAAA, the Energy Policy Act, and ISTEA provide a much more diverse policy framework to encourage innovation than traditional command-and-control techniques. They provide a powerful inducement to firms to think about both greenhouse gas and traditional pollutant management. The idea of using markets for pollutant reduction commodities is critical to the success of clean air efforts. The CAAA offer a critical opportunity to expand the pollution reduction market. States putting together their State Implementation Plans (SIPs) for Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Clean Air Marketplace 1993 Page 201 ground level ozone have the option of creating a market for ozone precursor emissions reduction. As governments and polluters are developing pollution reduction plans, the focus should not be limited to technology mandates, but rather should include market frameworks among the tools for reaching compliance. Michael Stanton, Director, Federal Liaison Department, American Automobile Manufacturers Association (AAMA), spoke of the challenges the auto industry faces in trying to meet the demands of the CAAA, the Energy Policy Act, and ISTEA. One of the major causes of difficulty is the differences among the three acts. The CAAA have been debated and discussed in Congress for eleven years, while ISTEA and the Energy Policy Act appeared on the scene much more recently. The Energy Policy Act and the CAAA also have different objectives; the Energy Policy Act's goal is to reduce consumption of oil, while the CAAA attack pollution. The two acts differ on many smaller, yet very significant points as well, such as the definition of a fleet or classification of certain fuels. The AAMA, in order to encourage alternate fuel vehicle (AFV) demand, wanted an AFV exemption from transportation control measures (TCMs), such as high occupancy vehicle (HOV) lanes, put into the Federal law. However, if this exemption were included at the Federal level, states would not be allowed to count the air pollution credits in their SIPs. In considering the CAAA and the Energy Policy Act, the AAMA wants what is best for its customers — the closer the programs in the two acts are, the better. Unfortunately, sometimes compliance with one act is not compatible with compliance with the other. For instance, the auto industry had originally hoped to meet the CAAA fleet mandates through the use of reformulated gasoline, even though the likelihood of success of such an approach is unknown. The Energy Policy Act, however, requires that many fleets purchase AFVs; reformulated gasoline is not considered to be an alternative fuel. The auto industry currently faces several sets of requirements in addition to the fleet programs in the Energy Policy Act and CAAA. ISTEA includes safety requirements. The CAAA contains hundreds of requirements, many technology forcing, and many of which the auto makers do not yet know how they will meet. In addition, the CAAA and Montreal Protocols require that the auto makers eliminate the use of CFCs, which affects their production processes. The AAMA estimates that meeting Federal safety requirements Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Page 202 Clean Air Marketplace 1993 adds $1,000 to the price of a car, with emissions controls costing an additional $1,600. Controlling CFC emissions adds $125 to $150. Given all these requirements, the big challenge to auto manufacturers is to try to promote APVs, and make them compatible with CAAA requirements. The auto manufacturers are working with DOE, the General Services Administration (GSA) and the Federal Fleet Conversion Task Force to try to jump start the use of AFVs. The difficulties are not just in production. The greatest obstacle to overcome is the lack of demand, which threatens the sustainability of an AFV program. Congress intended government to lead the way through Federal purchase requirements. How Will Auto Manufacturers Supply the Vehicles and How Will GSA Purchase Them? Auto manufacturers have been supportive of fuel-neutrality in the Energy Policy Act throughout its development because they do not know which fuel will be the winner, if in fact any single fuel is. They would prefer to let the market decide. Each fuel presents certain advantages and disadvantages. For example, compressed natural gas (CNG) is a very clean burning but space consuming fuel. As the Big 3 look actively into all fuels, they are finding that the biggest challenge is solving market needs, fuel needs, and vehicle needs simultaneously. Auto manufacturers are currently developing and selling flexible fuel vehicles (FFVs) that run on M85 or E85 (methanol and ethanol blends) and dedicated vehicles that run on CNG or electricity. Auto manufacturers expect to sell FFVs that can run on ethanol, methanol or gasoline during the transition period to alternative fuels. Such vehicles can be made to run without extensive and expensive reconfiguration, but these fuels are not clean enough to meet the strict final emission standards mandated by the CAAA. Electricity is a fuel option that is clean enough to satisfy the regulations, but is very expensive. Two percent of all vehicles sold in California in 1998, and ten percent by 2003, must be electric powered. The manufacturers are approaching the AFV requirements differently. • Ford has put a lot of effort into FFVs, focusing on the Taurus, a mid-sized vehicle. In addition, it is working on using liquid propane gas as a fuel on its light duty trucks. Ford is the only one of the domestic auto makers working on a CNG powered passenger car, using the Crown Victoria. By putting four CNG cylinders in the trunk and behind the back seat, Ford has achieved a driving range of several hundred miles. In the area of electric powered vehicles, it is developing what Mr. Stanton calls a mini-mini-van. Ford has done everything possible to make the van feel like a gasoline powered vehicle, including using a key rather than a button to start the vehicle and having the vehicle inch forward when the brake is released from a standstill. These improvements have centered around Ford's main concern in developing consumer acceptance of AFVs. Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Clean Air Marketplace 1993 Page 203 • General Motors Corporation had a Lumina FFV, but it is backing off production as sales have been poor. For CNG, General Motors is using the Sierra pickup truck because it has room for the fuel canisters that will allow a driving range that matches gasoline. General Motors is also working on bi-fuel vehicles, and an electric powered passenger car. • Chrysler has been working on a compact FFV for 1993-94, the Dodge Spirit. Like General Motors, it has chosen a larger vehicle for CNG. Chrysler has the electric T-Van on the market, which sells for between $100,000 and $125,000. What Are Auto Manufacturers Looking for from Government and Fleet Customers? Auto manufacturers are looking for purchase commitments. It is expensive in terms of capital and time to start up a production line, and it is not economical to do so without purchase commitments. The auto industry is also looking to narrow the scope of vehicles that they will market as AFVs. There are about 600 gasoline powered models currently in the market, and only a limited number will be able to make the transition to alternative fuels. Automobile manufacturers also want to focus on certain areas of the U.S. for the development of infrastructure. Commitments to deliver fuel must be made in order for vehicles to be matched with fuels. An example of a program attempting to do this is DOE's Clean Cities program. Surveys say that people are not willing to pay more for less. Auto manufacturers have a responsibility to provide AFVs that will have the driving range, operating characteristics, and cost of a gasoline powered vehicle if these vehicles will be successful. What Has Government Been Doing? In 1992 the Federal government purchased 6 models of AFVs. Of the 3,100 vehicles purchased, 2,600 were M85 compact sedans. GSA has also purchased predominately compact gasoline powered sedans —17,000 of the 18,200 vehicles purchased were compact sedans. Compact cars, however, do not lend themselves to CNG because they do not have the capacity to store sufficient fuel to match the range of a gasoline powered vehicle. Therefore the question is whether companies should focus on compact vehicles or try to broaden the market. Chrysler has focused on the compact vehicle because of the Federal government business. Ford has opted for mid-sized vehicles because that is what non- government fleets purchase. Companies are also taking into account the fact that certain fuels are better suited to some areas of the U.S. than others, in their model development calculations. Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Page 204 Clean Air Marketplace 1993 What Needs to Be Done? • Funding incremental cost: The incremental cost of FFVs and AFVs over gasoline powered vehicles ranges from close to zero in the case of FFVs, to $4,000-$6,000 for CNGs, to $100,000 for current electric vehicle prototypes. Government support in lowering incremental costs will increase the size of the AFV market. • Availability of alternative fuels: Right now there are about 600 CNG fueling stations nationwide, and not all of them are open to the public. We need to make sure that they all operate the same way, the connections are the same, the pressure is the same, and the quality is the same. • Driving range: Auto manufacturers need to solve the storage problems of CNG and methanol, which gallon for gallon only get you half as far as gasoline. • Consumer education: This is a huge challenge that many groups will need to work together to meet. • Fuel and fuel facility standardization: Government, fuel providers, and auto makers need to work together to set standards. For example, the units in which different fuels are sold need to be standardized. All of these problems must be overcome if the volume of vehicles and fuel sold is to be adequate. Finally, there are many market and technology unknowns, such as fuel prices, to be addressed. Mary Margaret Whipple, Vice Chairman, Arlington County Board, and Member, Washington Metropolitan Area Transit Authority Board, presented one example of how local and regional authorities are responding to ISTEA, CAAA, and the Energy Policy Act. The problems of air pollution and traffic are caused and experienced at a local level, and must be responded to at that level. Local governments and citizens generally feel they know their own communities best and want to be involved in formulating responses to pollution problems. National policy must be particularly flexible to deal with the different needs of rural and urban communities. For example, the most important transportation priority for a rural county in Virginia may be paving roads or erecting a Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Clean Air Marketplace 1993 Page 205 guard rail, while improving mass transit may be more important to the urban counties. ISTEA recognizes the importance of local response, and allows for strong local involvement in implementation. ISTEA also recognizes the interconnections with the CAAA, and provides congestion management and air quality funds for non-attainment areas. ISTEA congestion funds can be used for HOV lanes, traditional highways, public transit, bike paths, or other modes of transportation. The Metropolitan Planning Offices (MPOs) have a leading role in deciding how to allocate funds. The Washington MPO includes Maryland, Virginia, and Washington, DC. In the first year that ISTEA funding was available, Maryland made its funding decisions at the state level while in Virginia a committee of local officials came up with a plan. DC could not spend ISTEA funds because it was at its obligation authority limit. The Virginia committee muddled through, trying to balance the need to give something to every area with the need to use the funds where they would do the most good. In the first year, this was done with little scientific data about likely air quality effects of different programs. This year more scientific data and agreements led to a smoother outcome, which involved purchasing new buses for the metro system. This experience has shown that the flexibility of ISTEA at the local level is a significant benefit but takes additional effort. Washington is a serious ozone non-attainment area, and is required to reach attainment by 1999. The Metropolitan Washington Air Quality Committee (MWAQC) is responsible for developing the air quality attainment plan (SIP) to reduce emissions by 15 percent. It consists of elected officials from the Washington area and regulatory officials from Maryland, Virginia, and Washington. MWAQC has been meeting for more than a year, quantifying sources of pollution and making long, unconstrained lists of possible reductions, often without reference to cost per ton or feasibility. Choosing which sources to reduce, how, and by how much was complicated by regular revisions of emissions targets. In the last few months the committee focused on a shorter, more reasonable list of possible reductions, and has now published a plan. The plan that was finally agreed upon relies heavily on required programs, such as enhanced I/M and Stage E Vapor Recovery systems, and reformulated gasoline. Once the preferred technical solutions were exhausted, the remainder of emissions had to be eliminated through paint and coatings and pesticide formulation regulations, TCMs, bans on open burning, and episodic measures such as a prohibition on lawn mowing on poor air quality days. Measures that require people to change their behavior must pass the common sense test. Previous positive experiences with snow emergency routes and lawn watering limits during water shortages demonstrate that episodic measures tan work. Further emissions cuts will require more serious and expensive measures, such as additional TCMs. Ultimately this region will pay more attention to land use and transit issues. Members of the Council of Governments have spent much of the last few years developing Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Page 206 Clean Air Marketplace 1993 a plan for regional excellence, which emphasizes coordinated land use and transit planning. At the moment local officials are much more informed about air quality and health issues than the general population. It has been difficult to generate public interest, and education will therefore be a key to the long term success of any program. Ben G. Henneke, President, Clean Air Action Corporation, discussed common assumptions about vehicle use that have been built into 1STEA, CAAA, and the Energy Policy Act, and why he believes some of them are incorrect. He then discussed some innovative local solutions to improving air quality. Most assumptions built into the three acts originated in the 1988 Alternative Fuels Act, and some of them are faulty. The first incorrect assumption is that VMT will continue to grow at its historic rate. VMT has grown in recent years because the car has improved. When a product improves or falls in price, people demand more of it. The cost per mile of operating a car has declined over the years, and cars have unproved significantly. Poor land use planning has exacerbated VMT growth, but the main reason that VMT has increased is the steady improvement of automobile quality and price. Cars in their present form, however, cannot get much better. A commuter, for instance, will not spend another two hours a day in his/her car because of its comfort. Therefore, the growth in VMT should slow. Further, alternatives to vehicle use are growing, helped by ISTEA. Highway funds are now going to different modes of transit. The second incorrect assumption concerns the viability of alternative fuels. Fuel neutrality is not a realistic option because of the chicken and egg problem of lack of supply and demand infrastructure. But even if one fuel were chosen, the numbers simply do hot work. None of the alternative fuels available is as cheap and plentiful as gasoline. Gasoline is still the cheapest option, even when taking into account the additional cost of cleaning up the air that it creates. Even if CNG were a zero emission fuel, it would still not be economical. Petrochemicals and home heating are more effective uses of natural gas. This is bad news for the underlying assumptions of the acts. The only chance for alternative fuel to decrease our oil import dependence is if research drives down the price of alternative fuel. Mr. Henneke discussed the example of a MPO that succeeded in improving air quality in spite of a lack of resources. Its strategy had annual, seasonal, and episodic elements. This city had been classified as in attainment because a recession brought down emissions. When the economy began to pick up the city found that it was not eligible for funds set aside by the CAAA and ISTEA for cities with air quality and traffic problems. The MPO concluded that encouraging cleaner gasoline was the solution for which it was Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Clean Air Marketplace 1993 Page 207 easiest to build political support. The MPO asked the five gasoline suppliers in the area to sell less polluting gasoline during the time of year that air quality was poorest. Four suppliers refused the first year, but Sun Companies provided leadership and this past year all five agreed. Inspection and maintenance (I/M) is politically unpopular, and the state in which this city is located was reluctant to impose tougher I/M standards. The city managed to get ISTEA congestion funds that, combined with corporate funding of 20 percent, was used to buy mobile inspection stations. These stations will be parked at the offices of the corporate sponsors, allowing employees to have their vehicles inspected while they are at work. Episodic measures on high ozone days included free public transit and requesting that people drive their cleanest car and do not fill up the tank. Free mass transit has resulted in a 50 to 70 percent increase in ridership. Another method of reducing mobile source emissions now being developed is the elimination of toll bootH lines. The lines created by toll booths are in effect large stationary sources made up of mobile sources. In addition to idling, many drivers slam on the accelerator after paying, releasing large amounts of extra pollution. Questions and Answers What sort of AFV programs is General Motors focusing on? ? • I Mr. Stanton responded that General Motors is focusing on CNG. General Motors ^^™ is the industry leader in conversions, although the legal questions about warranty requirements with conversions are an obstacle. U 1*% I * I Why did not the AAMA comment on DOE regulations based on the Energy Policy Act of 1992, sections 407 and 503, which refer to AFV data acquisition programs? Mr. Stanton responded that the regulations were brought to the attention of the AAMA several months ago. L f} I • I What are examples of government policy working to increase innovation or create a need that innovators can fill, and how do these relate to the creation of a market for pollution allowances? Mr. Stanton responded that auto safety regulations are an example. Auto makers were required to include passive restraints on all vehicles unless two-thirds of the states required that passengers wear seat belts. Forty-two states now require that passengers Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Page 208 Clean Air Marketplace 1993 wear seat belts, but most of the laws do not meet the specific requirements set by the Federal government. In the meantime, most cars are now manufactured with anti-lock brakes and air bags because of increased consumer safety awareness, a result of Federal regulations. Mr. Henneke added that in terms of creating demand for pollution credits, it should be recognized that people respond to price signals, but they also choose to ignore them. For example, many people choose not to buy generic cereal: But the price of generic cereal versus name brand or pollution credits versus on-system pollution reduction at least keeps prices honest. If people know the cost of a ton of reduction then they can choose the cheaper one. Mr. Goffman responded that many baffles hide and distort true costs. Another example is the employee trip reduction rule, which is unpopular and of unknown cost, but is required. Pollution credits are an easy solution, but sometimes the market does not work, and buyers and sellers cannot discover price signals. Mr. Arrington pointed out that technical solutions attack the symptoms, not the problems. People want options not to drive and to have livable, vibrant cities. The market has not recognized this need. California has given up on land use and transit planning. It is doing everything with technical solutions. Cleaner cars are not a good solution. Ms. Whipple responded that people do not drive their cars more because they are more comfortable. They drive more because housing policy is creating a situation where people live far from where they work. 7 What did the oil companies do to clean up the fuel in the city Mr. Henneke described? Mr. Henneke responded that they reduced Reid vapor pressure. Why does Portland have a pollution problem and what can other cities learn from Portland? Mr. Arrington explained that Portland's weather and geography are much like Los Angeles' — pollution is trapped in the basin. Cleaner fuel, inspections and maintenance, a parking plan, and no new roads are the programs that have worked for Portland. Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Clean Air Marketplace 1993 Page 209 Can tour buses that travel between cities or across regions receive mobile source credits? Can a tour bus operator receive credits for buying cleaner engines, or only for running on alternative fuels? Robert Brenner, in the audience, explained that EPA provides guidance, which localities can adopt. Credits are only available within those localities. Within those localities, credits could then be sold. Are the suburbs around Portland the same as those around other cities with large housing developments and strip zoning? L ^% I * I T™^™ Mr. Arrington responded that the urban growth area is legally limited. Transit service is offered to those areas with high density, mixed use only. Portland has strong regional plans and state support. The state air agency sets parking ratios regionally, including the suburbs, as part of the SIP, to guarantee a level playing field throughout the region. The mega-store national chains that are marked by large parking lots are complaining, and negotiations are underway. Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Page 210 Clean Air Marketplace 1993 Session 6 — Connections Among Clean Air Act/ISTEA/Energy Policy Act ------- Clean Air Marketplace 1993 Page 211 Session 7 The Global Marketplace — Export Opportunities September 9, 1993 2:00 p.m. - 4:00 p.m. Moderator: Donald C. Conners, Esq. Panelists: Russell Sturm Alvin Aim John Schofield Alan Scarsella Roger Strelow Introduction Donald C. Conners, Esq., President of the Environmental Business Council of the U.S., Inc., introduced the focus of this session: to raise the collective consciousness about the opportunities for export of environmental goods and services that grow out of Clean Air Act regulations and policies. Mr. Conners noted that the session would focus on specific export opportunities and, in particular, how companies with competitive clean air technological products and services could promote the sale of these goods and services overseas. There are major initiatives at the Federal level, both at the White House and in Congress, as well as among the states, to promote jobs and the environment. The White House perception is that the U.S. environmental industry has a competitive advantage in the global marketplace — there is an opportunity to create jobs in the U.S. by helping industry connect to overseas markets and assisting in the development of worldwide markets for environmental goods and services. Some of the Federal initiatives were set forth in President Clinton's April 22,1993, Earth Day speech: • The Federal government must engage in the purchase of environmental goods and services — these are referred to as "green" goods and services. • The government must develop a coordinated Federal strategy on how Federal' agencies might work in cooperation with the environmental industry to connect industry to markets. The White House has set up a committee, led by Commerce Secretary Ron Brown, to deal with issue of promoting the environmental market and particularly export opportunities. The committee, in a series of meetings nationwide, recently invited industry Session 7 — The Global Marketplace - Export Opportunities ------- Page 212 Clean Air Marketplace 1993 to come forth and suggest ways the Federal government could ensure a healthy domestic industry, which is an important precursor to a healthy export industry. The committee will dissolve when it issues its report. The long-term sustained effort toward the promotion of environmental goods and services then will rest in the Trade Promotion Coordinating Council, formally created by the Export Enhancement Act of 1992. Congress is currently engaged in a similar initiative to promote the export of environmental goods and services in the global marketplace. There are currently four major pieces of legislation pending: The National Trade Development Act of 1993 • The National Environmental Technology Act of 1993 • The Environmental Technologies Export Financing Act of 1993 • The Green Tech Jobs Initiative of 1993 The Office of Technology Assessment recently issued a report that pertains to development assistance and linkage between the programs outlined in the legislation and the promotion of environmental technologies. Hopefully, everyone will leave this conference with an understanding of the need to assist industry in creating an effective partnership so that companies will be better able to find and exploit market opportunities worldwide. Presentations Russell Sturm, Program Director of Private Sector Activities and the International Institute for Energy Conservation (IIEC), spoke about the energy efficiency component of the industry and discussed the global market opportunities his work has identified. A publication put out by IIEC, entitled Seizing the Moment, characterizes the industries, identifies export opportunities, and describes U.S. government activities already in place to assist the energy efficiency industry. Exporting is a definite opportunity in which U.S. manufacturers have a competitive advantage. An example of this is the significant potential for exporting refrigerator technology to India as,it continues to develop. India currently has 15 percent annual growth in the demand for refrigerators, and the potential for continued growth is considerable. In ten years, for instance, the Indian market will equal the U.S. market, and in 22 years it will be four times that of the United States. In addition to this growth, the Indian demand for high efficiency U.S. refrigerator technology will also expand since most of the refrigerators currently in the Indian market are relatively inefficient; improved Session 7 — The Global Marketplace - Export Opportunities ------- Clean Air Marketplace 1993 Page 213 energy efficiency will be necessary for India to prevent current problems created by power shortages that constrain industrial growth. U.S. refrigerator firms therefore have a significant opportunity in India, which is especially important since the U.S. refrigerator market already has 99.9 percent penetration. Second, The World Bank projects that during this decade, $1 trillion in capital will be required to meet the electricity infrastructure demands of the developing world. At the same time, there are $230 billion available from traditional sources of capital to meet that demand. Therefore, there is going to be a 75 percent shortfall in capital required to meet the demand or else more cost effective means must be used to provide expanded energy services. Another dynamic affecting this market is environmental constraints — especially CO2 reductions. With global treaties limiting CO2 emissions, the only way economic growth can occur is through the use of new technologies that will allow us to reduce the generation of electricity at the same time as we expand energy services. The energy efficiency industry is difficult to characterize because it is fractured into different pieces without a unified identity. It does, however, include the following: • Energy.services companies • Building environmental control industries HVAC • Building products • Industrial and process controls • Motor adjustable speed drives • Automobile sub-sectors • Agricultural sub-sectors • Lighting manufacturers • Window manufacturers • Household appliances Each sub-sector of this industry is represented through a trade association. Even within these sub-sectors there are "sub sub-sectors". For example, wood window Session 7 — The Global Marketplace - Export Opportunities ------- Page 214 Clean Air Marketplace 1993 manufacturers, aluminum window manufacturers, and vinyl manufacturers are represented. Though the energy efficiency industry has many specialized trade associations, there does not yet exist a unifying umbrella organization that speaks on behalf of all efficiency companies. What is the size of this energy efficiency industry? It is difficult to tell just how big it is because oftentimes, the industry is not recognized as an industry unto itself. There is an approximately $18 billion dollar per year U.S. market for energy efficient products and services. There is currently an $84 billion dollar global market. If, however, energy efficiency products represent an alternative energy resource, there is a trillion dollar per year global marketplace because they are substitutes for traditional resources. What domestic forces have caused this tremendous growth in the energy efficiency market? U.S. utilities have recognized that energy efficiency products and services represent an alternative means of delivering energy services, in part because regulatory reforms have allowed them to profit by investing in the delivery of energy services in the least cost manner. With a long-term investment perspective, a utility makes decisions on purchasing power plants with paybacks of 15-20 years. The utility can provide added energy services at a rate of two and a half cents per kilowatt hour by investing in the more efficient refrigerator, for example. An example of U.S. government involvement is the Golden Carrot Program where EPA brought utilities together to come up with $30 million — as a reward to manufacturers of refrigerators — to bring a more efficient refrigerator technology into the US economy beyond DOE standards. The energy policies of the U.S., such as regulatory reform for the utility industry, and the encouragement of efficient energy are spreading globally. This is because environmental and economic constraints dictate the use of energy efficiency in expanding the delivery of energy services necessary to fuel economic growth. In Thailand, for instance, there is 10 percent growth in electricity demand growth each year. There is simply not enough time or capital to build power plants at that rate. To avoid economic growth constraints, Thailand needs to find ways of expanding its energy services that can be rapidly implemented. It has adopted Demand Side Management (DSM) as a response, and has made a $189 million commitment to DSM in the next 5 years. Thailand has also created an $80 million per year annual fund to finance energy efficiency investments. The fund focuses on lighting, refrigeration, building design, and industrial motors. These are all technological innovations dominated by U.S. industries. Another example of an export opportunity that involves technology in which the U.S. has advantages is in Mexico. Mexico is currently developing the largest demand side management demonstration in the residential sector. This January, the Mexican national Session 7 — The Global Marketplace - Export Opportunities ------- Clean Air Marketplace 1993 Page 215 utility is procuring one and one half million compact florescent lightbulbs. This is the largest procurement in the history of the lighting industry. This initiative is based on the superior energy performance of compact florescent light bulbs. The Mexican national utility's investment will be $20 million, in the first stage of the project. The government of Norway is investing an additional $4 million because they are interested in the potential carbon offset benefits of this program down the line. The relevance to the private sector is clear. It is the largest procurement 'in the history of the industry for a technology in which the U.S. excels. Some of the main barriers between these export opportunities and the energy efficiency industry are: • Lack of recognition of opportunity • Lack of government perception of opportunity • Lack of government organization and finance mechanisms to assist the industry The Committee on Energy Efficiency Commerce & Trade (COEECT), mandated by Congress last winter in the Energy Policy Act of 1992, coordinates the various activities of the Federal government to promote energy efficiency. In effect, DOE is looking for guidance from the industry. The International Institute for Energy Conservation (UEC), Alliance to Save Energy, and the American Council for an Energy Efficient Economy have had preliminary meetings with industry representatives to establish a "Business and Energy Efficiency Advocates' Consortium." to provide a unified, guiding voice. In 1971, the U.S. had a new technology in hand known as VCRs. We invented and initially produced the technology. Twenty years later, the U.S. exported $65 million worth of high-end VCR equipment. At the same time, it was importing $1.5 billion worth of this technology from Japan. We are on the edge of opportunity with the efficiency industry; the global market is on the verge of explosion. Environmental impacts and capital restraints on infrastructure investment limit growth in the energy sector. We have a very strong domestic energy efficiency industry. The opportunity is out there. Session 7 — The Global Marketplace - Export Opportunities ------- Page 216 Clean Air Marketplace 1993 Alvin Aim, Senior Vice President for SAIC Corporation, focused on three aspects of the Clean Air Marketplace in relation to exports: (1) the Clean Air industry itself; (2) participating in the industry; and (3) how the government could assist the industry in the area of exports. In the mid-1970s, two very important technological developments occurred that were influential at the start of the domestic air pollution control market: (1) EPA's regulatory posture resulting ultimately in industry adopting the stack-scrubber as a technology to deal with sulfur oxides, and (2) the 1970 Clean Air Act requirements resulting in adoption of the catalytic converter as the main VOC control technology. The prospects for the air pollution industry are great (even with increased U.S. emphasis on hazardous waste and other issues that are less pressing to large parts of the world) in part due to the devastating air pollution problems in Central/Eastern Europe, Mexico City, as well as U.S. cities. The market is great — especially in developing countries, and the U.S. has a strong technological position. However, entering the environmental export business is difficult and time consuming. Things are often done very differently elsewhere; personal relationships are often much more important. Oftentimes that means placing someone in another country, which is an expensive undertaking. Therefore, the early years are a very expensive education. What can government do to help the environmental industry? • The government needs to spend more money to find out what our competitors are doing. This could be helpful in the formulation of government policy. • The government also needs to create more mechanisms to help establish personal relationships between U.S. business and foreign business (e.g., via trade missions). Commercial attaches at the embassies could be helpful as well. • The government should establish exchange programs to bring more foreign visitors to the U.S. to investigate U.S. products. • The government should target more expenditures up front. It should provide help to countries around the world to develop their indigenous environmental capabilities. • Feasibility studies are particularly effective. These would provide an opportunity for U.S. firms to develop specifications on which to bid. If the Session 7 — The Global Marketplace - Export Opportunities ------- Clean Air Marketplace 1993 Page 217 feasibility studies are done by competitors, we will have very little opportunity to bid on the subsequent work. Intelligence is key. We need much better intelligence in foreign markets. The government needs to develop some policy for promoting U.S. firms at embassies. As far as financing is concerned, the government can provide money and information to help firms get started but, ultimately, the success is really up to individual companies. The industry needs to work together, be aggressive, and share information on what works and what does not work. John Schofield, President and CEO of Thermatrix, Inc., presented his observations as a technology developer for a new company. His company has developed a flameless thermal oxidation technology which he claimed will have a major impact in the marketplace as a replacement for incineration. This technology was introduced for the first time in September 1992. Thermatrix had immediate success in getting orders for equipment using this technology in the U.S. market. Initially Thermatrix had only $250,000 for this development. Thermatrix appeared at one conference per month for marketing purposes, and began receiving domestic orders. They immediately started manufacturing equipment. In early December, they began to receive foreign inquiries, but were unable to service them due to lack of funds. It is very expensive to open an export market, especially when funds are limited. In checking with all of the organizations that assist in exporting, nobody could provide any assistance with the up front market development. A business can only get a loan if their company is profitable. Unfortunately, Thermatrix was not profitable because it was still growing and profits were funnelled back into the company. Basically, there was no way to get any money from any export agencies to assist in these exports. The inability to get funding to develop a company means that piece by piece you begin to sell the company overseas. What the U.S. is doing, instead of exporting goods and services manufactured here, is exporting technologies and companies. Thus, Thermatrix received several foreign inquiries about its newly developed technology, and several countries wanted to purchase units to be shipped overseas and installed. Because Thermatrix did not have the funding nor the infrastructure to do this, the first step was to sell some of the company equity to a venture capital firm representing Session 7 — The Global Marketplace - Export Opportunities ------- Page 218 Clean Air Marketplace 1993 the government of Singapore. Then, Thermatrix entered into a licensing agreement whereby they would receive the funding from forward royalties in exchange for allowing manufacture of units with Thermatrix's technology for installation in Sweden and Germany. The same thing occurred with Samsung of South Korea. Once again, however, Thermatrix did not have the funding to service inquiries. Thus, Samsung set up an agency to import the units; they sent an agent to the U.S. at their expense be trained on Thermatrix technology equipment; Samsung is also paying 50 percent of costs at an upcoming exhibit in South Korea. Still, however, Thermatrix could not get any financial assistance from U.S. organizations to assist in exporting. The Belgium government approached Thermatrix and offered $2 million to establish a manufacturing and engineering facility in Belgium to help service the European market. Again, however, Thermatrix cannot get any assistance from the U.S. exporting agencies to undertake such an activity. Furthermore, EPA does not certify technology. Some sort of high level certification would assist firms in the exportation market. With the current push on environmental technology, unless the system changes, the U.S. will continue to export technology and companies, but not exports. Alan Scarsella, Director of International Business Development for Wahlco Environmental Systems, Inc., spoke of work at Wahlco in developing funding sources through U.S. and foreign government agencies, and private institutions to broaden the company's export opportunities. Wahlco has worked to try to find capital, put together deals, and finance the opportunities that they see developing in Eastern Europe, Asia, and elsewhere. In Poland, Wahlco worked through a joint venture partner who acted as its manufacturer's representative. Wahlco had worked with this company for 20 years prior to this particular venture and was able to make good connections. Also, there is a Clean Air Foundation in Poland that was helpful in getting Walcho into one of the plants in Warsaw. As a result, Wahlco was able to put one of its units in the plant as a demonstration unit at a very low cost both for Walcho and the customer. The cost was paid for in coal, a barter arrangement. Mr. Scarsella reiterated how advantageous it was to have a partner in Europe that was very familiar with the Polish economy as well as with the barter system. The demonstration unit was very successful. Wahlco signed an agreement with the plant manager to install several more units — this time for deiitchmarks and U.S. dollars. Session 7—The Global Marketplace - Export Opportunities ------- Clean Air Marketplace 1993 Page 219 In India, Wahlco's experience was not as positive. Wahlco became involved with a plant owned by one of the state electricity boards. As in Poland, Wahlco made the plant connection through a joint venture. In 1991, Wahlco received an initial offer to bid, made an offer, and quoted a price. Two years later, Wahlco was still waiting for feedback. Finally, they were asked to resubmit the bid because the coal had been changed and the particulate amount had increased by a magnitude of five. Wahlco had to double the capacity of the unit they had designed. Wahlco did this but kept the price the same. By that time, however, people that had been making decisions had been replaced, and the new staff were not very familiar with the technology and felt there had been some wrongdoing on Wahlco's part in reference to the quoted price (which, in actuality, was the same as the original quote from two years earlier). Wahlco was offered unacceptable conditions: they might be allowed to install a demonstration unit, but only if it was entirely at Wahlco's expense; if the first year's demonstration is successful, the electricity board may consider whether it wants to purchase the equipment. There is a U.S. AID program called TEST, handled by a joint advisory panel of U.S. and Indian representatives. They have offered to help Wahlco in any way they can to clear up this kind of issue. Sanders International is the primary contractor for TEST and have been very helpful; they perform the same type of role that the consultants to government agencies should play. Although Wahlco representatives spent two weeks educating plant representatives on their technology and Wahlco has their own people posted in India, there is no guarantee of ultimate project success. One cannot necessarily do business in one country the way one does it somewhere else. Wahlco is currently working with its Indian joint venture to resolve the situation and salvage the job. If a reasonable demonstration agreement is reached, Wahlco hopes to have the assistance of one of the national laboratories as a third party to certify demonstration results. Like other U.S. manufacturers, some of our best prospective customers lack the ability to pay for the product. Many U.S. investors would respond to the right incentive to provide their capital, especially if the investment would help improve conditions in their native country. The Earth Day slogan was "Think globally, act locally." Any improvement in the environment has its incremental effect on the whole. The U.S. should encourage people to invest in cleaning up the environment, whether it is in this country or elsewhere. We can do that with the right incentives. We gained experience with alternative energy incentives. Hopefully we can use those lessons to design incentives that encourage individuals to invest in purchasing U.S. environmental products regardless where they are used. It would help us both economically and environmentally. I believe it would also help us politically. Session 7 — The Global Marketplace - Export Opportunities ------- Page 220 Clean Air Marketplace 1993 Roger Strelow, Vice President of Environmental Affairs for Bechtel Corporation, endorsed the notion of finding a suitable mechanism for high- level certification of environmental technologies. This could be particularly helpful when promoting technologies abroad. One of the Congressional bills being considered has a provision that would create a high-level entity separate from EPA to give U.S. firms a mechanism for promoting technology abroad. Bechtel is the largest environmental engineering and construction company in the United States. It is an $8 billion company that is heavily involved abroad. The key industry sectors Bechtel serves are fossil power, petroleum and chemicals, and mining and metals. Betchel designs and builds industrial facilities, highways, airports, and power plants. Bechtel often does its air quality work as an integral part of a broader project, for example, in designing and building an entire power plant. Some 30^40 percent of Bechtel's total business is overseas. The Environmental Technology Export Council strengthens some of the linkages between larger and smaller firms in common export ventures. Bechtel's business philosophy has been generally to avoid proprietary technologies. Bechtel usually helps customers look over the entire range of available domestic and foreign technologies. It rarely develops a technology that is its own. One area that has been a notable exception is with flue gas desulfurization (FGD). For the Coal Strip Power Plant in Montana, Bechtel designed a system for a particular application. It developed a Dolomite Lime FGD process. Bechtel also has a sea water scrubbing technology that is now being licensed overseas along with the Coal Strip derived process. Another technology is the confined zone dispersion — to remove sulfur without having to have a scrubbing unit. Cheaper than a scrubbing unit, this may be particularly attractive to regions like Eastern Europe. However, it only removes about 50 percent compared to the 90 percent success rate of scrubbing units. Bechtel has performed a number of overseas studies and feasibility assessments — from the UK to Saudi Arabia, and from New Zealand to Japan — in the area of FGD. Bechtel sees a substantial global FGD market developing over the next 15 years of some $45 billion, about half retrofit/ half new facilities. The U.S. portion of this market should be about $9 billion. However, there is a substantial portion not open to U.S. firms. The open market for US FGD abroad, where US firms can be competitive, is approximately $25 billion. Western Europe and the Asia Pacific area are the focal points for the development of this market. One alternative, especially for smaller companies is to find appropriate linkages with firms like Bechtel. This enables the smaller company to gain some leverage. One example, in the hazardous waste treatment field rather than the air pollution field, helps to illustrate the potential. A thermal distillation technology that actually qualifies for RCRA recycling can be used to treat a wide variety of hydrocarbon wastes and was Session 7 — The Global Marketplace - Export Opportunities ------- Clean Air Marketplace 1993 Page 221 developed by an independent entrepreneur. Bechtel discovered it early in its development. Recently, the technology company has contracted with an affiliate of Bechtel, Zytel-Bechtel (a joint Japanese-U.S. firm that specializes in the engineering and production of process technology units), to be the exclusive designer and fabricator of its equipment. Bechtel gives an operational guarantee for the equipment Bechtel designs and builds. This operational guarantee by Zytel-Bechtel is an enormous asset to a small technology company that is not heavily capitalized. There are plenty of opportunities for the private sector, even without additional government intervention, to do a better and smarter job of competing with foreign enterprises in the export market for air pollution control and other environmental types of work. However, we cannot stake the future of our companies on government becoming organized and getting out on the front line to work with us. Session 7 — The Global Marketplace - Export Opportunities ------- Page 222 Clean Air Marketplace 1993 Session 7 — The Global Marketplace - Export Opportunities ------- Clean Air Marketplace 1993 Page 223 Session 8 Looking to the Future — New Directions for Environmental Technology September 9, 1993 2:00 p.m. - 4:00 p.m. Moderator: Panelists: Richard Ayres, Esq. Braden R. Allenby Howard Geller Dr. Richard Klimisch Bruce Smart Introduction Richard Ayres, Esq., Partner at O'Melveny & Myers, opened the discussion by reflecting on the future of environmental technology over the next 30 years. The environmental technology marketplace is rapidly changing because, according to the House Committee on Merchant Marines and Fisheries, most of the 58,000 small environmental companies in the U.S. do not export their technology. Ten to fifteen years from now, global environmental trade may expand. Over the next three decades, this marketplace will go "offshore and upstream." During this time frame the developing world will acquire the technology that the developed world has today, and environmental pollution abatement will undoubtedly follow. Furthermore, environmental technology will provide innovations in pollution prevention and life-cycle controls. Examples of these possible innovations include energy efficiency technology, alternative energy generation technology, and life-cycle analysis. Presentations Braden R. Allenby, Research Director, Technology and Environment, AT&T, focused on defining environmental technology. Americans lack a certain perspective on technical issues; they tend to trivialize tasks and turn them into products. This is not environmental technology. A better definition of environmental technology can be formulated using the environmental impact equation: Environmental Impact = Population x Wealth /Unit Population x Environmental Impact / Unit Wealth Session 8 — Looking to the Future - New Directions for Environmental Technology ------- Page 224 Clean Air Marketplace 1993 Several terms in this equation need to be refined. The environmental impact term, for instance, is unacceptable today because of such problems as species depletion, global climate change, and the loss of soil and water resources. The population is increasing and can be considered exogenous. The wealth / unit population term is also increasing because the developing world will not give up its right to develop, and the developed world will not give up its right to increase wealth. As a result, environmental impact / unit wealth must compensate not only for the first two terms, but for environmental impact as well. Moreover, environmental impact / unit wealth is a technological term because quality of life and economic development are created through the applications of technologies. It is not, however, limited just to technological products (e.g., scrubbers). This definition of environmental technology is, therefore, much broader in scope than the term "environmental technology" usually implies and involves, for example, a technology's diffusion into society. Today there is no such thing as environmental technology because we have not yet developed a sustainable technological base. A useful example is the manufacture of cars. Industry must focus on other things besides manufacturing processes and tailpipes to assess environmental pollution. For instance, industry should look at how cars are used in society. The Japanese, for example, use cars for many different reasons than Americans do, and this will affect pollution. Because of this cultural difference, green technology in America is viewed differently than elsewhere. The above differences will affect competition between U.S. and foreign markets because other countries are trying to develop towards a more sustainable position. The environmental industry is, by nature, transitory. Today, environmentalists push for companies to develop technologies that eliminate pollution stemming from the starting point of industrial processes. This was not the case several years ago. A Virginia electronics manufacturing plant, for example, went from emitting CFCs and chlorinated solvents to near zero pollution level reportable under the Superfund Amendments and Reauthorization Act in 2-3 years, by re-engineering components and processes from the ground up. The implication of this approach is not to focus on controlling emissions, but to re-engineer industry away from any practice that produces emissions at the start of the industrial process. The most important green technology issues are as follows: • Policy should not be directed towards subsidizing or improving existing technology, but should establish boundary conditions that will encourage industry to take environmentally appropriate actions. • Policy should focus on systems. By taking a life-cycle approach to productivity, technology, and service within the same context in which they are used in our culture and economy, we can minimize negative impacts Session 8 — Looking, to the Future - New Directions for Environmental Technology ------- Clean Air Marketplace 1993 Page 225 and, therefore, begin to develop new insights into environmental technology. Howard Geller, Executive Director of the American Council for an Energy Efficient Economy, is dedicated to advancing energy conservation technologies. Mr. Geller discussed a study that illustrated the potential economic savings and pollution reduction in the utility industry and reviewed some emerging technologies in energy conservation. According to Mr. Geller, if industry uses less energy in making a product or providing a service, then less pollution will result. Improving the efficiency of energy use is cost effective because the energy savings generated are worth more than the cost of the energy efficient technology. The following study illustrates this point. Acid Rain and Electricity Conservation, a study concluded in 1987, focused on the role of more efficient electricity use in cutting emissions of SOX in the Upper Midwest. The study presented potential energy savings that could result over a 20-year period if utilities promoted these new technologies. A base-case load growth of 1.7 percent per year between 1985 and 2005 was predicted, assuming normal electricity use with no new efficient technology. More efficient energy use could result in a growth rate of only 0.9 percent per year for the same time period. The same study can be used to simulate fuel use and emissions scenarios. These scenarios tested the effectiveness of conservation and further emissions control technology. In addition, the study assumed there would be legislation reducing SO2 emissions by 5 million tons in 1995 and by 10 million tons in 2000. The results were as follows: • Before the new legislation, emissions slowly rose; after the legislation, the more efficient technology reduced emissions by 7-11 percent. • For the period 1985-2000, electricity costs to the consumer totalled $355 billion. Employing conventional emissions control technology added $3.6-$8j4 billion in electricity costs to the consumer. However, if more efficient electricity and pollution measures are employed, there is a net economic savings of $3.7 to 10 billion. The savings more than offsets the cost of the pollution control technology and therefore, makes this scenario profitable. Session 8 — Looking fo the Future - New Directions for Environmental Technology ------- Page 226 Clean Air Marketplace 1993 The following examples illustrate the emerging technologies focusing on energy conservation. • Energy efficiency in refrigerators has dramatically improved over the past 20 years. Until about 1970, electricity use in these appliances rose because of added features. By the early 1970s, electricity use in refrigerators began declining while average unit size increased roughly 10 percent. Public pressure and higher oil prices during this time period drove the development of more efficient refrigerators. • More recently, EPA sponsored a contest to see which refrigerator manufacturer could build the most efficient, pollution-free machine. As a result, products now use only 350-500 KWHr of electricity compared to the 1500-2000 KWHr common 15 to 20 years ago. • Other appliances that have increased energy efficiency are clothes washers and clothes dryers. Heat pump and microwave clothes dryers should be available to consumers in the next five years. • Lighting, particularly compact fluorescent lamps, now use less energy and are gaining popularity in the marketplace. Improved incandescent lamps are also readily available to consumers. There are many benefits stemming from more efficient energy use. By using less energy, industries can pass on their savings to consumers. Lower energy costs to industry also will help create new jobs, limit our dependence on foreign oil, and, ultimately, produce environmental benefits such as reduced pollution. Dr. Richard Klimisch, Vice President of the Engineering Affairs Division at the American Automobile Manufacturers Association, introduced the United States Council for Automotive Research (USCAR). This organization comprises consortia that are involved in the research and development of new vehicles. USCAR considers both the environment and the needs of society when designing new technologies. There are five consortia forming the environmental side of USCAR: The Auto/Oil Air Quality Improvement Research Program, a partnership between the auto and oil industries to improve air quality. Session 8 — Looking to the Future - New Directions for Environmental Technology ------- Clean Air Marketplace 1993 Page 227 • The Low Emission Technology Program, which is involved in measuring pollution using remote sensing technology. • The Low Emission Paint Partnership, focusing on the goal of reducing and eventually eliminating solvents in paint. • The U.S. Advanced Battery Consortium, which helps develop better batteries so that electric vehicles have a better range with less cost. • The Vehicle Recycling Partnership, which works on the reuse, recycle, and disposal of vehicles. Currently it is developing methods to recycle plastics found in vehicles. Lastly, the discussion focused on America's dependence on cheap gasoline. Fuel consumption is controlled by fuel prices. Therefore, to decrease fuel consumption, fuel prices must rise. This will inevitably spur the production of more efficient vehicles. However, efficient vehicles will only be produced in mass quantity when markets open and the public demands new technology. Bruce Smart, Senior Fellow at World Resources Institute and author of Beyond Compliance: A New Industry View of the Environment, discussed his views on how America can solve its environmental problems correctly and efficiently. We cannot really tackle these problems, according to Mr. Smart, until both the environmental and business communities agree on goals and policies for change. Technology is the key to solving our problems. However, this technology must be developed through industry — government and environmental groups cannot play the central role. Environmental problems involve too much emotion. This emotion causes groups to take sides, allowing issues to become stagnant in Washington. Therefore, technology must replace emotion with fact; we must set priorities and better define our problems. Only when the problems are better denned can we decide how to tackle them efficiently. The environmental and business communities must agree to move towards solving our environmental problems by developing a consensus on the following issues: • Correct indicators of the environment; • A hierarchy of relative risk; and Session 8 — Looking to the Future - New Directions for Environmental Technology ------- Page 228 Clean Air Marketplace 1993 • Proper dissemination of information to the public. When the problems are better defined, we can apply specific technologies to properly solve them. The development of these specific technologies will undoubtedly help America become more competitive in world markets. Questions and Answers: How we can provide incentives to promote new technologies? Mr. Smart answered by stating that business can respond accordingly if we can institute a fee system for pollutants or give credit for a lack of pollution. These incentives will help our tax and fiscal system reflect the social costs of environmental degradation. Mr. Allenby added that it may be difficult for governments to adopt incentives such as fees and rebates. Community right-to-know programs to spread the word regarding environmental degradation may also be useful. Mr. Geller responded that utility incentives (i.e., rebates) and the gas guzzler tax already provide incentives. Perhaps the gas guzzler tax could be expanded to tax owners or issue rebates according to the amount of emissions vehicles produce. Why didn't anyone mention renewable technology? Dr. Klimisch responded that a talk on soydiesel was given the day before. More needs to be done with renewable energy to limit CO2. Mr. Geller added that wind technology and solar-thermal technology are gaining popularity and will expand in use. More bio-fuels are also on the horizon. Many companies have developed environmental technologies but have not marketed them. How can we force companies to release their products? L f} I J_\ ^^^"* Mr. Smart explained that more rapid depreciation schedules, investment tax credits, and incentives for new technology by raising the costs of using old technology are some answers. How was USCAR formed when many other similar environmental problem- solving consortia failed to form? Dr. Klimisch responded that the time was right. Other consortia failed because of economic distress in the member companies. Session 8 — Looking to the Future - New Directions for Environmental Technology ------- Clean Air Marketplace 1993 Page 229 How will the development of electric cars affect energy efficiency? Mr. Geller responded that one must look carefully at the total resource requirements of a technology. Economies in the marketplace will help determine which energy sources will be better used. Can we really attain long-term sustainable development? Mr. Allenby answered that one must assume sustainable development is possible, but it is questionable whether there are data to support this stance. How will pollution prevention spur development in companies? Mr. Allenby explained that pollution prevention will not yield as much as is hoped because compared to emissions reporting, pollution prevention reporting is complex and more difficult for non-technical people to understand. Pollution prevention is a good idea for managers of facilities to know, but it will not be an effective driver for practical developments. In addition, the environmental benefit that will result is just a good next step in the right direction. Session 8 — Looking to the Future - New Directions for Environmental Technology ------- Page 230 Clean Air Marketplace 1993 Session 8 — Looking to the Future - New Directions for Environmental Technology ------- Clean Air Marketplace 1993 Page 231 Session 9 Public/Private Partnerships in Cleaning the Air September 9, 1993 4: J5 p.m. - 6:15 p.m. Moderator: Panelists: Steven Howards Daniel Greenbaum Isaac Manning Steven Coffin Ben G. Henneke Introduction Steven Howards, President of Environmental Strategies, prefaced his remarks by posing the following questions: Why would air quality regulators want to work with the private sector? Why would the private sector want to work with air quality regulators? Models and examples of public/private sector partnerships, particularly partnerships that use the private sector to facilitate the implementation of public programs, show that such partnerships can form, work, and be successful in creating stronger pollution control programs and in fostering greater competition in the clean air market. The private sector, especially those industries that might gain broader markets from the implementation of stronger control programs, can play a key role in helping air quality regulators develop and implement their programs. The private sector wants to participate in program implementation in order to be a part of the program development process, understand how decisions are made, and shape programs to create additional market opportunities for environmentally, economically, and socially responsible products. The public sector needs information and support from the private sector in getting programs implemented. To the extent possible, the public sector needs private sector help in developing programs that nurture competition in the marketplace and create an incentive for the development and marketing of cleaner products. Although the motivations of the involved parties might be quite distinct, the potential for powerful public/private partnerships exists if both the public and private sectors take time at the outset of program development to see how their interests coincide and to subsequently develop programs that harness their joint energies. There are successful programs in which the public and private sectors created unusual collaborative processes using their joint technical resources to create consensus- based programs that encourage the private sector to aggressively pursue market opportunities. Programs based on pub lie/private sector partnerships can be economically sounder, and can better anticipate and address points of controversy, allowing the private Session 9 — Public/Private Partnerships in Cleaning the Air ------- Page 232 Clean Air Marketplace 1993 sector to actively contribute to the implementation of programs, rather than serve only as passive observers. Presentations Daniel Greenbaum, Commissioner of the Massachusetts Department of Environmental Protection, discussed efforts by the State of Massachusetts to forge public/private sector partnerships and develop ideas for the direction of future partnerships. Because the public sector cannot alone protect the environment, the relationship between the public and private sectors becomes crucial to the entire issue of environmental protection. The public sector can pass rules, enforce rules, and give incentives, but the private sector makes decisions, investments, and propagates expertise and ideas. Mr. Greenbaum began by discussing the role that the public sector should play in clean air. In describing this role, one sees seemingly contrasting approaches: a "command and control", "tough-on-the-environment" stance, versus a cooperative relationship with the private sector. The command and control approach has achieved a certain level of success in clean air. However, a command and control approach limits the input of ideas and expertise, which is necessary for comprehensive and sustainable clean air programs. An approach incorporating both stances (command and control, and cooperation) would be more successful — the Clean Air Act Amendments serve as an example. It sets very straightforward clean air goals (e.g., the acid rain program and ozone attainment requirements), but does not specifically mandate how to reach these goals. The Clean Air Act Amendments allow the market to determine how to reach clean air goals in the cheapest and most effective way possible. Implementing the Clean Air Act Amendments is a classic zero-sum game. The reality of the Clean Air Act is not whether pollution reductions are made, but how they are made. If one industry (e.g., auto manufacturing) does not make sufficient reductions, reductions have to be made by another industry (e.g., utilities). People are a necessary part of making choices to achieve pollution reductions. If partnerships that involve people making decisions are not fostered in the development of clean air programs, different economic sectors will not understand their integral role in meeting clean air standards and will be less willing to comply with any programs that impact their industries. Two examples of successful public/private sector partnerships that broadly encourage people to go beyond basic requirements in order to benefit from economic incentives include: • Transportation control measures. Massachusetts addressed the issue of creating business, development, and incentive opportunities — that are not in opposition to clean air goals — by chartering a transportation task force. Session 9 — Public/Private Partnerships in Cleaning the Air ------- Clean Air Marketplace 1993 Page 233 The task force, comprised of the public, private, and public interest sectors, developed a set of proposals to meet the air pollution reduction goals. As a part of the negotiation process, the business community identified the public sector as responsible for maintaining transportation systems and built into the State Implementation Plan (SIP) — a set of enforceable performance standards for public sector maintenance and operation of transit systems. The Boston Chamber of Commerce also proposed an entirely market-based emission incentive program in which a fee would be imposed on those who drive more than a certain number of miles per year in more highly polluting vehicles, while granting credits to those who drive less than the amount and/or in less polluting vehicles. Even though the program would not generate profits for the government, it would allow economic and market incentives to influence the current automobile pricing system. Although there was not agreement on all points, a market-based proposal was developed that outlines collective goals, activities for individuals to participate in, and an overall time line for events. The proposal does not control how the goals are going to be met, but rather, tries to offer people options to reduce the growth in trips. Under the proposal, the market encourages many of the reductions, as well as promoting cooperation. • Emissions trading. In a project involving almost no public money, Northeast States for Coordinated Air Use Management (NESCAUM) developed a voluntary program with twelve companies, two state agencies, and the city of Philadelphia to work with companies to measure air emissions and use emission credits effectively. This program will develop the market for credits, thereby encouraging companies to invest in greater emission reductions than required by the Clean Air Act Amendments. Enforcement cases are an additional forum from which public/private sector partnerships can develop. Enforcement actions provide the government with many opportunities either to be very tough or to look at opportunities for partnerships to advance clean air. For example, enforcement actions were brought against the New England Power Company. The company agreed to come into compliance, and additionally agreed to be one of the first commercial installations in the country to use selective noncatalytic reduction to reduce NOX emissions. This voluntary reduction with new, untested technology brought about very substantial reductions and improved public relations with neighbors around the plant. The company is looking into applying the technology at other plants that do not have enforcement issues to earn marketable emission credits. This sort of unlikely partnership not only produces cleaner air and lower costs, but it also tests out new technologies and gets them moving at a faster pace. There is also the potential for public/private sector partnerships resulting from implementing private sector licensing processes and certification programs for traditional Session 9 — Public/Private Partnerships in Cleaning the Air ------- Page 234 Clean Air Marketplace 1993 government roles. Private sector companies fulfilling traditionally public sector roles provide several economic and service-related benefits. These programs build a greater private sector pool of expertise, provide better service to people, make available more service to people, force better quality control, and encourage a very active and competitive private market providing the services. Several such programs are being implemented in Massachusetts. • Starting in October, much of the Superfund cleanup process will be turned over to licensed site professionals. The licensed professionals will render opinions on cleanups and be subject to audits in the same way that accountants are subject to audits by the IRS. The program will allow a large number of relatively uncontaminated sites to move forward more quickly and allow private expertise to operate. • Massachusetts is certifying private toxic use reduction planners, rather than solely relying on the limited resources of public sector specialists. These private sector individuals will have responsibility for developing toxics use reduction plans with industries. • Massachusetts has developed a rulemaking for stationary source emitters that includes some privatization of the permitting process. The State will not review plans from every company, but will have private sector specialists, who in addition to reviewing completed applications, will help companies submit their permit applications accurately. Two fundamental elements form the basis of successful public/private sector partnerships: • Both sides of the partnership must have some incentive to be involved. Unfortunately, many in both the public and private sectors do not understand what incentives to partnerships are. Understanding the economic and environmental incentives of public/private sector partnerships will encourage involvement from both sides and begin to build the trust necessary to sustain both the partnerships and clean air. • People in different sectors are beginning to understand that there are common environmental problems that everyone — not just environmentalists — is trying to solve. Implementation of the Clean Air Act Amendments may be the stepping stone for building trust between the public and private sectors. People will see that with trusting, more gets done with less bureaucratic wrangling. There is a surprising amount of common ground on which to move forward, a large and diverse group of people who recognize and support their interest in implementation, both of which should result in successful implementation of clean air programs. Session 9 — Public/Private Partnerships in Cleaning the Air ------- Clean Air Marketplace 1993 Page 235 Isaac Manning, an architect and real estate developer who works with the North Texas Clean Air Coalition (NTCAC), discussed the role of clean air in sustaining a strong economy and the role of public/private sector partnerships in achieving environmental and economic goals in the Dallas-Fort Worth metropolitan area. When the business community and Chambers of Commerce began losing opportunities for economic and industrial development because of poor air quality, it became clear that there was little distinction between clean air and economic development. The five myths of nonattainment are: • It is not my fault. Ninety-two percent of VOCs emitted in the Dallas-Fort Worth area are from mobile and area sources. • It is not my county, plant, or town that is causing all of these problems. Currently four counties in the Dallas-Fort Worth area are not in attainment, 11 counties could be in non-attainment by 1996. • There are too many or not enough air monitors. Air monitors are necessary to determine compliance. They are crucial for reaching attainment, as they prove the programs are working. • It is impossible to comply. With that attitude, everything is impossible. Texans, Mr. Manning pointed out, like a challenge; attainment is difficult, but not impossible. • YOM can change the Clean Air Act Amendments. Too much time is wasted fighting the law and not working for solutions. The Dallas-Fort Worth area can be used as a case study for refuting the myths of nonattainment, illustrating the potential of public private partnerships. Only eight percent of the emissions in the area are from stationary sources. As a result, the area lacks surplus emissions from industrial development that could provide emission offsets to reach attainment. The only way for the area to meet the air quality standards required by the Clean Air Act Amendments, which allow continued economic growth, is by reducing air emissions from mobile and area sources. The singular goal of NTCAC — comprised of the Dallas Chamber of Commerce, the Fort Worth Chamber of Commerce, the North Texas Commission, and the North Central Texas Council of Governments — is to bring the Dallas-Fort Worth metropolitan area into attainment. NTCAC, a partnership between the public and private sectors, worked with EPA Region VI and the Texas Air Control Board to develop a program to bring Dallas-Fort Worth into attainment before 1996 and maintain air quality as required by the Clean Air Act Amendments. The private sector supported clean air programs as a long term Session 9 — Public/Private Partnerships in Cleaning the Air ------- Page 236 Clean Air Marketplace 1993 business decision, and in this way generated political support for implementation of clean air rules and programs. The joint efforts of NTCAC and the private sector resulted in the creation of a SIP and a privately run "shadow SIP." The shadow SIP is based on the Tulsa-Oklahoma Ozone Alert Program. On days that are likely to have ozone exceedances, certain activities are either encouraged or discouraged (e.g., using public transportation and not cutting grass, respectively). The public sector was invited to join the program through the transportation authorities. The Tulsa program showed that if free rides were offered on ozone-alert days, overall ridership on public transportation would increase. The Fort Worth transportation authority has experienced a 30-40 percent increase in ridership since the inception of the Ozone Alert Program. The Dallas Area Rapid Transit joined the program in August 1993. Another element of the shadow SIP program involves corporations ranking their employees' performance on ozone-alert days and linking that performance directly to their bonus compensation. Under the program, employees get the impression that if they do not comply with ozone-alert requirements, they will be impacted financially. A final element of the program involves educating school children. Children are taught simple ways to reduce air pollution. In addition, children directly feel the affects of ozone-alert days because their schoolday starts later. Children can directly pressure their peers and parents into compliance. Clean air truly is a public and private partnership. Because the economic and environmental future rests on partnerships, industry, business, government, and public interest groups must work together in creative ways, discarding stereotypes about individual groups. Steven Coffin, Vice President of the Colorado Interstate Gas Company (CIGC) and Vice Chairman of the Colorado Air Quality Control Commission, discussed two examples of business opportunities that have been developed for the natural gas industry through efforts to address the air quality issues facing Colorado. The natural gas industry is in a good position to seize opportunities created by the Clean Air Act and do something about air quality problems in Colorado because the problems are related to carbon monoxide and particulate matter — not ozone. In addition, visibility is an important air quality concern. The majority of these pollutants are caused, directly or indirectly, by mobile sources in Colorado. Session 9 — Public/Private Partnerships in Cleaning the Air ------- Clean Air Marketplace 1993 Page 237 There is a strong impetus fair environmental protection in Colorado. • People come to the State for outdoor activities, the quality of life, and the mountains. • Denver (like Dallas) went through a major economic downturn that was directly linked to air quality. Despite improvements in air quality resulting from "easy" control measures, economic growth has generated more vehicle miles travelled and more cars on the road, challenging air quality improvements. Colorado is in the position of having to implement additional, more difficult control measures to meet air quality standards. Natural gas utilities, distributors, and pipelines are beginning to recognize their potential, to contribute to the pollution, and to become players in developing State and private programs to use natural gas to reduce emissions. Business Opportunity #1: CNG Vehicle Industry In the early 1980s, CIGC and the Public Service Company started promoting the use of natural gas to operate vehicles on a pilot-project basis. Although the project was not intended to become a major venture, over time it became an established business. Several elements contributed to the success of the pilot CNG vehicle programs, including: • Poor air quality is a hindrance to economic development; • Nationwide energy security problems have been recognized; • Natural gas is more economically efficient ($0.60 per gallon equivalent of gasoline) than gasoline; and • The natural gas industry is indigenous to Colorado and an important part of the Colorado economy. Additionally, several pieces of legislation encouraged the development of CNG vehicle programs in the state. • At the Federal level, the Colorado delegation influenced Congress to modify the alternative fuel fleet requirements of the Clean Air Act Amendments of 1990 to include carbon monoxide nonattainment areas. • At the State level, tax credit and other financial incentives promoted the use of alternative fuels. Session 9 — Public/Private Partnerships in Cleaning the Air ------- Page 238 Clean Air Marketplace 1993 The natural gas industry began to see that market demand was greater than could be serviced through a pilot project approach. In 1990, Natural Fuels Corp. was created to put all of the operations for a CNG vehicle infrastructure together: vehicle conversion, refueling station development, fuel sales, and vehicle servicing. This venture has improved public relations and the economic position of both public utilities and private fleet operators: utilities sell more natural gas and fleet operators can convert their vehicles for economic purposes while cleaning the air. Currently, there are approximately 3,000 CNG vehicles on the road in Colorado with 18 service and refueling stations. There are both negative and positive aspects of the CNG vehicle market. On the negative side: • The market is more difficult than anticipated; • The cost of conversion is still high and a barrier to market growth; • Customer convenience is poor; and • Customer acceptance — attitude, behavior, thinking about CNG or converting cars — is low. The industry is working with the government to address these negative aspects. On the positive side, the CNG vehicle market has: • Generated business opportunities — additional gas has been sold; • Generated a significant amount of goodwill — CNG vehicles have become a part of the clean air solution; and • Paved the way for other companies to get into the CNG business (e.g., Total, Amoco). Business Opportunity #2: Conversion of Woodburning Fireplaces The second business opportunity involves the conversion of woodburning fireplaces to natural gas. Fireplaces are a significant contributor to the air pollution problem in Denver. However, as a result of a strong educational program and close work with local and state governments, some woodburning fireplace bans are being put into effect. For example, "The Great Stove and Fireplace Changeout" was an illustration of the public and private sectors joining together to implement a voluntary mechanism for cleaning the air. Participants in the program included public utilities, the woodburning industry (i.e., manufacturers and sellers of fireplaces), and a major financial institution. The program was a two-month cooperative effort that incorporated an aggressive advertising campaign, educational outreach, low interest loans for fireplace conversions, municipal waivers of Session 9 — Public/Private Partnerships in Cleaning the Air ------- Clean Air Marketplace 1993 Page 239 sales tax and building permit fees, discounts, and rebates to encourage voluntary conversions from wood burning to natural gas fireplaces and stoves. The program resulted in a 25 percent increase in sales of clean burning appliances, an improvement in air quality, and the establishment of an ongoing coalition to increase public awareness of the polluting aspects of woodburning fireplaces. A number of Federal and state programs, including the Clean Air Act Amendments and the Energy Policy Act of 1992 fleet requirements, and state and Federal financial incentives, will have a determining impact on the industry. The key to the success of natural gas, and all clean fuel industries, is legislative support to ensure the development of a strong market for the fuels. If companies look creatively at the air quality problem, it becomes clear that there are more potential products and ways to make money than ever thought possible. Ben G. Henneke, President of the Clean Air Action Corporation, used the Tulsa Ozone Alert Program to discuss the importance of building on successful program ideas and of including industry, regulators, and environmentalists in public/private sector partnerships. Through the input of many different perspectives, each time a clean air idea works, it has wide-ranging implications. As it is adopted elsewhere, it is consistently improved. Mr. Henneke discussed how the Tulsa program has grown from a privately funded effort to one involving Federal funding and broad educational programs. Despite the success of the Tulsa program in generating emission reductions and government support through simple control measures, people will only do "inconvenient" things occasionally. Public and private sectors, and environmentalists, must work together to reduce pollution. By involving three perspectives in the discussion, typically opposing factions can be brought together in a cooperative manner. Tulsa's public/private partnership is comprised of approximately 50 percent environmental public interest groups, 25 percent public sector, and 25 percent private industry. Environmental groups and industry will join forces in the development of clean air programs, while regulators are overwhelmed just to implement required laws and regulations. The government's role is to provide information, so that creative, voluntary programs may develop. The joint efforts of environmental groups and industry have created an atmosphere of cooperation and a certain level of compromise. In the spirit of cooperation, environmental groups and regulators establish goals and a time frame, while the industrial sector determines how it will meet those requirements in the goals. Session 9 — Public/Private Partnerships in Cleaning the Air ------- Page 240 Clean Air Marketplace 1993 The potential for public and private sector partnerships, particularly involving environmentalists, is much greater than most realize. The willingness of industry to participate in clean air programs is significantly underestimated when industry is given the freedom to determine how it will reach clean air goals. The potential for public and private sector partnerships can only increase as people build, through shared ideas, examples of clean air programs that have been successfully implemented. Questions and Answers What is being used to clean up gasoline and diesel in Tulsa? Mr. Henneke answered that nothing is being done to clean up diesel. To clean gasoline, the Reid vapor pressure (RVP) was reduced and voluntary reformulated gasoline was put in place. Companies were not required to use Federal or California reformulated fuel, but they were required to clean the fuel in whatever way was most economical. Mr. Howards pointed out that the problem with diesel is sulfur and aromatics. In Denver, refineries developed ways to reduce the sulfur content of diesel cheaply, which resulted in the marketing of diesel based on its clean air qualities. This marketing strategy started building voluntary consumer demand for cleaner products. New York State has been very slow in pushing its clean air regulations. Do states talk to each other? Mr. Greenbaum explained that NESCAUM, which includes the air directors from New York, New Jersey, and the other Northeast states, meets regularly to come up with joint strategies. By 1989 all eight member states had adopted seasonal lower RVP gasoline. The members of NESCAUM are now part of the larger Ozone Transport Commission, established in the Clean Air Act Amendments of 1990, which is working to develop everything from cleaner gasoline and cars to a regional emission credit trading system. New York has played an active part of this group. Have you looked at soydiesel? L *> • I Mr. Henneke responded that there are several ways to clean up diesel emissions ^™™ if there is no Federal standard: (1) inexpensive catalysts can be retrofitted on most diesel engines; (2) engines can be overfeed with natural gas and alcohols, as is being done with methanol and ethanol; or (3) inherently less polluting fuels, such as soydiesel, can be used. Session 9 — Public/Private Partnerships in Cleaning the Air ------- Clean Air Marketplace 1993 Page 241 Session 10 — Panel A Financing Companies and Projects September 9, 1993 4:15 p.m. - 6:15 p.m. Moderator. Panelists: Robert Brenner Jerry Esmay Robert Grady Jake Tarr Frank Pope James H. McCall Introduction Robert Brenner, Acting Deputy Assistant Administrator, Office of Air and Radiation, U.S. EPA, introduced the session by reiterating Donald Deieso's statement in the afternoon's keynote address: Unless the financing works, the project is not likely to happen. This session offers us the opportunity to hear from several people who are involved in financing CAAA-related projects, which, according to Mr. Brenner, is an excellent way to explore the critical role of financing in the Clean Air Marketplace. These representatives can offer valuable help to both government and industry in identifying the hurdles to financing clean air projects and approaches we can take to facilitate financing. Presentations Jerry Esntay, Environmental Project Specialist, International Finance Corporation (IFC), began by explaining that the IFC is the private sector arm of the World Bank, financing only private companies without government project guarantees. The U.S. is the largest single shareholder of the World Bank, owning approximately 25 percent of the shares outstanding compared to most other countries, which generally hold about 6 percent or less. Conversely, the U.S. represents only about five percent of industry that is sponsoring environmental projects through EFC. The EFC is the project financier of businesses that set up in Group 2 countries and help mobilize resources for projects within these countries. Despite some popular perceptions, adequate financing is generally available. What are lacking are viable projects that qualified U.S. firms are willing to support. The following are a few examples of the various types of international projects for which U.S.-based firms can acquire financing through the IFC: Session WA — Financing Companies and Projects ------- Page 242 Clean Air Marketplace 1993 • Manufacturing operations where research and development is accomplished primarily in the U.S.; and manufacturing, management efficiency, and quality control services in Group 2 countries. These projects allow for the development of new technologies within the U.S., as well as provide Group 2 countries with goods, services, and much needed industrial training. • Build own Transfer (BOT) projects. An example of a BOT project is the arrangement that a European environmental firm has made with a facility that cannot afford to invest in pollution control equipment but will be required to meet European Community (EC) emissions standards. The firm sells equipment and services to the facility on a per cubic meter of air cleaner basis; by installing equipment on-site and charging the facility for cleaning their emissions over a period of fifteen years. By the end of the fifteen years, the equipment is paid for and can then be turned over to the facility. This type of venture may become more common as Central European firms try to break into the EC, and could be a great opportunity for environmental businesses to get their foot in the door of the international market. • Model Industries, which set examples for other industries to follow. A heavy polluting auto manufacturer located in South America, for example, and the U.S. will join forces with an environmental consulting firm to provide waste minimization, pollution control, and clean-up of contaminated soils. In doing so, the auto manufacturer will improve its regional and global reputation, and the environmental consultants will establish an international business base with minimum risk and capital. The IFC is the largest single development bank for the private sector in the world. It has financed over 1,000 business ventures all over the world, in more than 90 countries, with total project costs exceeding $60 billion. The IFC offers financial structuring and acts as a catalyst for other financing options. When considering projects to finance, the IFC looks for strong management, a strong market, and solid financial resources. The IFC looks for value added ventures, where the community will also benefit as a result of the project. Mr. Esmay concluded that the private sector will be the driving force behind meeting future environmental regulations, as the public sector will not have the necessary capital requirements. Session JOA — Financing Companies and Projects ------- Clean Air Marketplace 1993 Page 243 Robert Grady, Vice President, Robertson Stephens & Co., began by stating that the current financial market has not been kind to environmental stocks. He provided a performance comparison of environmental services stocks in the first two quarters of 1993 by comparing a Roberts & Stephens Co. index of 132 environmental services firms to the S&P 400 and the NASDAQ indexes. Environmental services stocks were down about eighteen percent in value in the first two quarters of 1993 while the S&P 400 and NASDAQ indexes were up by about three and one half percent, and four percent respectively. Mr. Grady sought to debunk three pieces of conventional wisdom related to investing in environmental stocks: (1) Environmental markets are dead; (2) Business does not like regulation; and (3) Investors are willing to invest in socially responsible companies just to be socially responsible. Misperception 1 — Environmental markets are dead The misperception that environmental markets are dead is due in part to misplaced premium valuations of environmental stocks that resulted from the passage of the Clean Air Act Amendments, and the election of Clinton and Gore. As a result of disappointing growth that followed premiums, investors became disenchanted with environmental stocks. They did not understand that clean air regulations were not scheduled to take effect immediately. This pessimism remains and affects all environmental stocks. The primary reason for the misperception that the environmental market is dead is the recent rapid shift in the definition of an "environmental firm." The environmental industry has been changing its focus from remediation to pollution prevention. Companies in their strategic decisions, as well as public statutes, regulations, and implementations schemes, have been stressing prevention over end-of-pipe controls. The Global Environment Fund's Market Survey for 1993 estimates that industries will spend four times as much on industrial process changes as on actual pollution control equipment to meet the mandates of the CAAA of 1990. Production process changes, factory automation changes, substitution of various types of raw materials, and energy efficiency improvements are examples of ways industries are responding to the changing demands of the clean air marketplace. Along the same line, the Global Environment Fund's Survey states that the under- performance of the remediation side of the environmental industry is not purely a cyclical phenomenon related to the overall economy; in fact, it is related to the overall importance of pollution prevention. Remediation companies that specialize solely in removal and hauling of hazardous substances are only part of the environmental industry and will continue their relative decline. Stocks which will perform well are process technology improvements that help the environment, instrumentation and monitoring companies, and companies performing cleanup for the Department of Defense and the Department of Energy. Session IDA — Financing Companies and Projects ------- Page 244 Clean Air Marketplace 1993 Misperception 2 — Business does not like regulation The second piece of faulty conventional wisdom is the myth that businesses do not like regulation. In fact, many environmental companies, as well as investors, rely on regulatory timeliness and regulatory certainty in order to maintain a consistent and reliable marketplace. Companies rely on regulations to provide them with the rules of the road. The key from a financing perspective is that regulations come out on time and are enforced. A recent example of the importance of promulgating regulations consistently and in a timely manner was demonstrated by EPA's decision to delay the issuance of Subtitle D of the Resource Conservation and Recovery Act (RCRA). This delay hurt those companies that were taking steps in order to comply with the regulations by investing in and implementing new technologies. Misperception 3 — Investors are willing to invest in socially responsible companies just to be socially responsible The third misperception is that investors are willing to pay a premium to invest in socially responsible markets. This might have been that case for a short period in 1990, and may to a certain extent be true, but companies have to make money in order to be attractive to investors. The changing nature of the environmental industry is the result of the need for companies to adapt to the requirements of a true marketplace (e.g., having the attributes that are required to be a successful company — serving a growing market, having strong margins, having a strong management team, and developing a strong business plan). These attributes are essential in order to make environmental companies attractive to investors and ensure future interest in investing in the environment. Mr. Grady indicated that investors will be very selective and will be looking for a well planned business strategy, triple play companies (companies whose products promote environmental improvement, energy efficiency, and economic efficiency simultaneously), regulatory progress in the sector, and margins that can sustain growth and profitability in the business. Conclusion: Changing demands in the marketplace will result in growth in new sectors of the environmental industry. Consistency and timeliness of regulations and the proper enforcement of these regulations will be essential to the continued growth of the industry. Investors will be selective, which will impact the type of financing available to firms. But significant new funds continue to pour into mutual funds and other sources of equity financing, which is good news for environmental firms wishing to access the equity markets. Session 1QA — Financing Companies and Projects ------- Clean Air Marketplace 1993 Page 245 Just as the early enthusiasm in 1990 was misplaced, Mr. Grady concluded, the current pessimism or "doom and gloom" attitude is also misplaced. Jake Tarr, Vice President, Arete Ventures, summarized the key investment criteria that venture capital firms such as Arete Ventures look for in possible clean air related investments. The most important criteria is a clearly defined near-term market need, which in most cases is created by regulation. Other qualities important to a venture capital firm include: a management team that presents a compelling story of success, modest capital requirements, and a strategy to maintain a sustainable market advantage. In most cases, venture capital firms are not looking to invest in projects such as electric vehicle companies or SO2 remediation companies because of the enormously high capital requirements and the fact that these firms will be at a huge disadvantage against larger competitors. Instead, Arete" is looking for companies that specialize in areas such as development of instrumentation, dispersed power generation, and vehicle-related component technologies (i.e., storage tank technologies, gas lines, and batteries). Such companies will contribute greatly to the future of the environmental industry. Arete Ventures has recently backed the following projects: • Environmental Monitoring (Continuous Emissions Monitoring) • Solid Polymer Fuel Cell Power Systems • Landfill Gas Treatment Systems (Advanced Gas Processing) • Gas Adsorption Heat Pump • Polycrystalline Silicon Photovoltaic Cells & Modules • High Temperature Super Conductors For Power Transmission • Fungal Bioremediation Session 10A — Financing Companies and Projects ------- Page 246 Clean Air Marketplace 1993 Frank Pope, General Partner with Technology Funding, Inc., stated that environmental technology firms are facing a capital shortage at the commercialization stage because of unique barriers to the market. These barriers are the result of unknown factors that make it very difficult to project if and when a new technology will be successful and profitable. Venture capital is a very conservative business and most of these firms will not invest in the environmental industry because there is not a proven series of success. Out of 650 professional venture capital firms in the country, less than 20 of these firms will consider environmental technology investments. Venture capital investors are hesitant to commit funds to environmental firms for a variety of reasons: • Most firms are not making money • Many companies have not lined up customers • The industry is young and the management is inexperienced • Many firms experience permitting delays We are at the crossroads in developing an enormous private industry market in the environmental sector. Much of the future success will be the result of strong government backing and efforts by advisory groups such as the California Environmental Technology Partnership, which assists in resolving problems between industry and the government. With the assistance of such advisory groups, the government has made changes in procurement and testing regulations which have in turn minimized barriers to the environmental market and environmental firms more attractive to investors. Other options for environmental firms to turn to for funding are private investors, private companies, joint ventures, general grants, and the government. Various tax breaks (i.e., for the use of recycling equipment) also provide financial assistance. Environmental firms that seek financial assistance should be persistent. We are in the early stages of what could potentially be a huge marketplace. Session 10A — Financing Companies and Projects ------- Clean Air Marketplace 1993 Page 247 James H. McCall, President, Environmental Capital Corporation, reiterated some of the financing difficulties that many small businesses experience when trying use services and technologies in the environmental marketplace. The Air Quality Assistance Fund/1146.1 Demonstration Program was developed with the South Coast Air Quality Management District (SCAQMD) to assist small businesses in complying with environmental regulations. This is a demonstration of help to mitigate the impact of the compliance requirements of SCAQMD Rule 1146.1, which requires owners of boilers, process heaters, and steam generators to reduce their NOX emissions. The Air Quality Assistance Fund is now a $4 million and was created with fines and penalties. The majority of these funds are set aside to provide loan guarantees for small businesses. The program is structured to provide incentives for banks to make loans to small businesses and to create a secondary market for these loans. In addition, the Federal Reserve Bank of San Francisco has advised all banks that participation in this program will enhance their compliance with the Community Investment Act. Listed below are some examples of how the community will benefit from the program. • Small businesses will benefit by receiving assistance through multiple credible channels. The high level of professional technical assistance and compliance support, and lower cost debt capital with fixed rates and long- term repayment terms will also be significant benefits of the SCAQMD program. The program will also facilitate compliance and help owners small businesses avoid diversion from operating the business by assisting in the permitting process, and focuses on lenders that are familiar with businesses and thereby avoiding time-consuming efforts to establish new relationships. • The program will also provide assistance to SCAQMD by helping to mitigate regulatory impact on small businesses, facilitating compliance, improving community relations, enhancing staff utilization, and meeting CAAA mandates. • The program will assist the banks by mitigating credit risk with credit enhancement of small businesses, providing liquidity for loans, reducing interest rate risk, and enhancing compliance with the Federal Community Reinvestment Act. The program will also assist in improving relationships with small business customers, improving community relations, and providing a new financial service product to the market. Session WA — Financing Companies and Profocts ------- Page 248 Clean Air Marketplace 1993 • Utility Companies will benefit from the program through improved relationships, customer retention, and enhanced community relations. • Consultants and vendors will benefit from new marketing tools. The benefits of this program to the community are pragmatic and specific — this program can be a model that will be replicated in other communities in the future. Session 10A — Financing Companies and Projects ------- Clean Air Marketplace 1993 Page 249 Session 10 — Panel B Financing Exports and Investments September 9, 1993 4:15 p.m. - 6:15 p.m. Moderator: Panelists: William A. Delphos John Wisniewski Edward Sanders Harvey Him berg Introduction William A. Delphos, President of Delphos International, a company which specializes in helping U.S. companies obtain government financing for international business. Mr. Delphos is also the Chairman of the U.S. Environmental Training Institute, a public/private partnership that promotes the transfer of environmentally sound technology and management principles by providing training courses to public and private sector officials from developing countries around the world. Presentations John Wisniewski, Vice President of Engineering at the Export-Import Bank of the United States (Eximbank), and responsible for the evaluation of the environmental aspects of bank transactions, began by describing his organization. Eximbank facilitates the export of U.S. goods and services by providing loans or loan guarantees to foreign buyers of U.S. goods and services in order to offset the effects of export subsidy credits from other governments. The Bank has helped finance more than $280 billion of exports from the U.S. to more than 150 countries, mostly developing countries. Financing programs include: • Direct loans to foreign buyers of U.S. goods and services. • Guarantees to U.S. and foreign commercial lenders for repayment protection for their loans to foreign buyers. • Export credit insurance to protect U.S. exporters against foreign buyers' inability to meet payment obligations. Session 10B — Financing Exports and Investments ------- Page 250 Clean Air Marketplace 1993 • Working capital guarantees to encourage commercial lenders to make loans to small- and medium-sized U.S. businesses that have exporting potential. Eximbank does not give preferential treatment to any U.S. product, company, or industry, nor does it allocate specific sums of money to countries or geographic regions. instead, it responds to specific requests for financing from foreign buyers and American exporters. Environmental exports are not new to Eximbank. Recently, however, the Bank has placed additional emphasis on enhancing environmental exports. Some recent examples of loan and loan guarantee programs the Bank has supported include: i • A feasibility study for water and sewage treatment in Istanbul, Turkey; • Over $100 million in U.S. equipment and project management services to improve water resources and infrastructure in rural areas in Venezuela; and • A wide array of other U.S. pollution control equipment exports. Eximbank is participating in a number of inter-governmental working groups involved in the development of a U.S. export strategy for U.S. environmental goods and services (e.g., Interage-ncy Working Group on Technology and Exports, whose findings were released in a November 1993 report). The report includes results from public stakeholder meetings held in Los Angeles, Dallas, and Boston. Edward Sanders, President of Sanders International, explained that his company provides business facilitation services, specializing in environmental technology transfer and venture promotion, working primarily in Central and Eastern Europe. Sanders International has been the recent recipient of U.S. Agency for International Development (USAID) contracts in Eastern Europe and India to help facilitate environmental investments and exports in those regions. The Clean Air Marketplace Conference 1993 highlighted the availability of a variety of sources of assistance for financing environmental exports. Financial assistance for specific projects, however, may nonetheless seem difficult to obtain. The conditions attached to the financing make it difficult to match projects with the financing requirements. Among companies with which Sanders International works, there is generally an assumption that financing will be available without a careful analysis of Session WB — Financing Exports and Investments ------- Clean Air Marketplace 1993 Page 251 whether a particular project fits with financing sources that are likely to be available. Two screening devices can facilitate the identification of sources of financing: • Determine whether the transaction is public or private. Who is the buyer of the product (or the partner in the investment)? If private, do financing sources really have access to appropriate funds? Potential sources of financing differ for public versus private transactions. Consequently, the conditions attached to funding will be also different. • Determine whether the transaction is an export or an investment. If the transaction involves exports, financier concerns will likely be focused on the security for the loan; in "tougher markets" the general lack of security can be a tremendous roadblock to project progress. An example shows the importance of the issue: a recent project in Central Europe was expected to be successfully carried out, but fell through because local bank guarantees were simply not available on reasonable terms. If the transaction is an investment, financiers will want the project principals to have equity in the project. Harvey Himberg, of the Overseas Private Investment Corporation (OPIC), explained that OPIC has provided financing, insurance and supported feasibility studies for environmental projects overseas. Mr. Himberg focused his remarks on investments as an alternative and complement to direct export finance. Direct financing may have advantages for environmental goods and services, in terms of entering and competing. However, from a broader perspective, it may not always be in the best interests of the parties. Another way to export and obtain access to export financing is through a project structured as a direct investment. The relationship between investments and exports has been growing. Indeed, U.S. exports of manufactured goods and services go overwhelmingly to locations that already have substantial direct U.S. investment. In more competitive markets, companies may require more proximity to their markets than a purely export relationship can provide, and local companies will maintain a competitive advantage. Financing and insuring overseas investment is a specialty of OPIC. OPIC is an agency of the U.S. government organized for the sole purpose of providing financing, insurance, and pre-investment services to companies seeking to enter markets through direct investment. An investment can take various forms including direct equity loans for enterprises, leases, licensing agreements, and management contracts. OPIC offers services in nearly 140 countries, including those in Latin America, Asia, Africa, Eastern Europe, and Session 10B — Financing Exports and Investments ------- Page 252 Clean Air Marketplace 1993 the newly independent states (MS) of the former Soviet Union. OPIC (with funding from USAID and US-Asia Environmental Partnership (US-AEP)) provides funding for feasibility studies for prospective investment projects in Eastern Europe, NIS countries, the Asia- Pacific countries, and Africa. OPIC loan guarantees range from $1 million to $200 million per project. Loans are made on a non-recourfee and Limited basis (i.e., the income of the foreign enterprise must be sufficient to repay the loan and the assets must be sufficient to provide security for the loan or loan guarantee), at U.S. commercial rates of interest, with terms ranging from five to twelve years. These rates and terms are not always available from commercial banks in the countries in which OPIC operates. OPIC insurance provides U.S. companies with protection against "political risks" including expropriation of assets by the host government, inconvertibility of local currency, and politically motivated damage to physical assets and facilities. Two examples (one large and one small) of environmental projects that OPIC has assisted include: • Ford Motor Company. This project involves a facility located in Brazil that manufactures emission control equipment for sale to Brazilian auto manufacturers. Without the project, Ford would not have been able to compete with domestic manufacturers. Furthermore, the supply of U.S. components to the project (e.g., test equipment) will amount to about $10 million of exports to Brazil. • Environmental Systems Corporation. The project involves a firm located in the Slovak Republic that provides environmental engineering services to industries located throughout Eastern Europe. While small ($3 million in U.S. exports), it is assisting in the continued development of substantially larger markets. Other OPIC initiatives, both independent, and in coordination with other U.S. government agencies), include: • The OPIC/USAID environmental investment mission to Argentina, Chile, and Brazil (November 1993). • Development of an environmental investment fund, which will provide equity financing to U.S. companies interested in investing in environmental projects but lacking sufficient equity. A project development program that will include feasibility studies and other pre-investment support for environmental investments in the Asia- Pacific region, in coordination with USAID and the US-AEP. Session 10B — Financing Exports and Investments ------- Clean Air Marketplace 1993 Page 253 Questions and Answers To what extent do groups like Eximbank, Sanders International, and OPIC assist small businesses (i.e., 10 employees and under)? Mr. Wisniewski explained that Eximbank has a Congressional mandate to focus on small business, and that at least 10 percent of all Eximbank authorizations are to be for small businesses. The current Administration supports small businesses in exporting environmental services. As a government agency with a Congressional mandate, Eximbank is compelled to find reasonable assurance of repayment in transactions of support. Mr. Delphos expanded on the response by saying that in general, if certain base requirements for a project are met (e.g., minimum length of operation, specific equity status, ability to produce and sell product, and the existence of a foreign order or prospect for a foreign order), then legitimate programs are available to assist in funding. Naturally, if the project is a pure start-up that is still in development, financing will likely be difficult to obtain. Mr. Sanders added that many programs are available to help finance programs other than just straight exports. For example, in Central Europe, the Enterprise Funds concentrate largely on environmental projects. Intermediaries often can more cost effectively service small loans. The projects between $1-$10 million are the biggest gap in the overall financing scheme. Mr. Himberg pointed out that the problems and challenges of helping small businesses in financing exports are magnified in investment projects because investment projects take both more up-front and long-term financing to sustain. Thus, small businesses will require a certain amount of capital base in order to initiate and maintain projects. What would Eximbank and OPIC do in terms of credit markets in response to CO2 reduction projects? Mr. Himberg responded that it is difficult to finance stand-alone projects such as these (i.e., projects that do not generate a stream of income by themselves). If the project were linked to some sort of market that would produce a stream of income, the project could possibly be the type of investment that OPIC could assist. There exists the possibility of user-fee systems. Under an OECD agreement, there are provisions related to "tied aid," in the sense of a mixture of commercial financing with grants. If one can show that a project would not be financially or commercially viable otherwise, then it can be eligible for tied aid. Thus, if a company can categorize a project as being environmental (e.g., fluidized bed clean coal technology), obtaining funding will be easier. Session 10B — Financing Exports and Investments ------- Page 254 Clean Air Marketplace 1993 To what extent have the panelists dealt with financing CO2 prevention projects, and how can one compare this to CO2 control? Also, how can one quantitatively compare the pay-backs/spin-offs from the initial venture? Mr. Wisniewski responded that Eximbank finances all of the above types of projects. All renewable energy is treated by Eximbank as environmentally beneficial. Eximbank supports projects that have these beneficial environmental effects, including those with and without income streams. How can one develop methods to assess the above types of projects? • • Mr. Himberg explained that OPIC is not involved with demonstration projects; instead, OPIC is involved with fully commercial projects. To the extent that other agencies draw conclusions that might be useful, OPIC utilizes the information in looking at technologies for the first time. Mr. Wisniewski added that Eximbank also uses certain commercial data to assess projects. What is meant by a "feasibility study", and what role does OPIC play in them? Mr. Himberg responded that the company involved in the long-term implementation of the project should be intimately involved in performing the feasibility shady. OPIC does not fund third-party feasibility studies. Current feasibility programs include project development in Eastern Europe and NIS countries, Asia and Africa. Eximbank has an "engineering multiplier" program that finances feasibility studies. Mr. Delphos pointed out that there is not a single "feasibility study" program to facilitate U.S. companies going overseas or starting to conduct market research in order to locate distributors. Can you clarify the meaning of a feasibility study? *1 • I Mr. Himberg explained that he is referring to a feasibility shady as a shady of the ^^™"" financial and commercial feasibility of a planned project. The product of a feasibility shady is a business plan for an investment that would be eligible to apply for OPIC funding or insurance. It should not be confused with a purely technical feasibility shady. Are these feasibility studies 100-percent funded? Mr. Himberg responded that OPIC feasibility studies are "cost-shared", with between 50-75 percent of the feasibility shady funded, depending on whether the U.S. investor is a large, small, or medium sized business. It becomes a reimbursable grant if the project goes ahead within two years (i.e., the company pays OPIC back). Mr. Wisniewski commented that Eximbank finances feasibility studies as loans and guarantees Session WB — Financing Exports and Investments ------- Clean Air Marketplace 1993 Page 255 to foreign borrowers, which have to be repaid in any case, regardless of whether the project goes forward. L To what extent are government efforts to stimulate exports and joint ventures f} I in environmental technologies reducing or diminishing similar efforts • I domestically? Mr. Himberg responded that government efforts abroad could structure the incentive schemes so as to have the desired outcome. Mr. Wisniewski added that Exirribank treats services just like capital goods, and last year Eximbank supported over $1 billion in service exports. But in any transaction, one can expect that about 15 percent of the transaction is for services (e.g., management services, engineering services). Mr. Himberg pointed out that the difficulty of financing services directly, with non- recourse financing, is that assets are not always apparent. OPIC participates in some direct financing. Many projects initially involve equipment but later involve services in order to maintain the equipment. Session 10B — Financing Exports and Investments ------- APPENDICES ------- APPENDIX A Conference Program ------- The Clean Air Marketplace 1993 New Business Opportunities Created by the Clean Air Act Amendments September 8-9, 1993 • Sheraton Washington Hotel • Washington, D.C. Co-sponsors: American Automobile Manufacturers Association American Gas Association American Institute for Pollution Prevention American Institute of Chemical Engineers American Petroleum Institute Chemical Manufacturers Association Coalition for Safer, Cleaner Vehicles Edison Electric Institute The Environmental Business Association The Environmental Business Council of the U.S., Inc. Environmental Law Institute Institute of Clean Air Companies Manufacturers of Emission Controls Association National Association for Environmental Management National Association of Manufacturers NESCAUM South Coast AQMD STAPPA/ALAPCO U.S.-Asla Environmental Partnership U.S. Environmental Technology Export Council (U.S. ETEC) Appendix A — Conference Program Page A- 1 ------- Conference Agenda September 8 7:30 - 8:30 a.m. Registration 8:30 - 9:15 a.m. Welcoming Remarks NORTH COTILLION BALLROOM Ihtroducfton fey WJcJftael HL Skajiiro, Aettog Assistant Adralaistrator, Office of Air and Radiation:,. CAS-EPA Speaker: The Honorable Carol M* Browner, Administrator, 1LS. EPA 9:30 -11:30 a.m. SESSION 1: CLEAN AIR ACT- JOBS, COMPETITIVENESS, EXPORTS NORTH COTILLION BALLROOM This panel presents a variety of perspectives on the impact of the Clean Air Act Amendments of 1990 on U.S. industry, specifically its effects on employment, export opportunities, and overall competitiveness. How compatible are clean air and economic growth? Moderator: Jeffrey C. Smith - Executive Director, Institute of Clean Air Companies Panelists: Robert Brenner - Acting Deputy Assistant Administrator, Office of Air and Radiation, U.S. EPA Dr. Richard Klimisch - Vice President, Engineering Affairs Division, American Automobile Manufacturers Association Daniel W. Noble - Vice President, Director of Research, Environmental Business International, Inc. John Quarles, Esq. - Partner, Morgan, Lewis & Bockius Paul Templet - Professor, Louisiana State University SESSION 2: POLLUTION PREVENTION AND THE CLEAN AIR ACT MARSHALL ROOM What is the connection between the Clean Air Act Amendments and pollution prevention? Our panelists view this question from both Federal government and private sector vantage points. Moderator: John S. Seitz - Director, Office of Air Quality Planning and Standards, U.S. EPA Panelists: Dr. Thomas Hauser - Executive Director, American Institute of Pollution Prevention Howard Klee, Jr. - Director, Regulatory Affairs, Amoco Corporation Amy Laspia - President, Environmental Management Consulting Dr. Dhiren C. Mehta - Manager, Technology Applications, Hughes Environmental Systems Eric Schaeffer - Director, Pollution Prevention Policy Staff, U.S. EPA The Clean Air Marketplace Conference and Exhibition Page A-2 Appendix A — Conference Program ------- September 8 (continued) 11:30 a.m. - 12:45 p.m. Lunch Break (Free Time) 1:00-1:45 p.m. Keynote Address NORTH COTILLION BALLROOM , Vasn&nfcergfc, Associate DeputyA<3mirustra^r, The Clean Air Marketplace Conference and Exhibition Appendix A — Conference Program Page A-3 ------- Septembers (continued) 2:00 - 4:00 p.m. SESSION 3: CONTROL TECHNOLOGIES AND SERVICES -1 These four panels begin the conference's focus on market developments in specific technology and service sectors. Panels A and B both delve into stationary source control technologies. Panel C addresses control technologies for traditional vehicular sources. Panel D looks to the future of alternative vehicular technologies, including electric cars and fuel cells. Panel A: Electric power technologies MARSHALL ROOM Moderator: Paul M. Stolpman - Acting Director, Office of Atmospheric Programs, U.S. EPA Panelists: Eugene C. Grassland - Manager of Business Development, Pure Air Corp. William R. Elliott - Vice President and General Manager, Electric Supply, Northern Indiana Public Service Co. Steven Feeney - Manager of Upgrade Projects and Services, Babcock & Wilcox, Inc. John U. Huffman -Project Development Manager, Kenetech/U.S. Wind Power Inc. Panel B: Stationary source VOCs/air toxics control HOLMES ROOM Moderator: Bruce C. Jordan, Jr. - Director, Emission Standards Division, Office of Air Quality Planning and Standards, U.S. EPA Panelists: C. Shepherd Burton - Senior Vice President, ICF Kaiser Engineers, Environment Group David A. Doles - Sales Engineer, Stationary Source Catalysts, Engelhard Corp. Dr. Orman A. Simpson - Director, Remote Sensing Technology, MDA Scientific Inc. Paul D. White - Business Director, Environmental Projects, Johnson Matthey Corp. Panel C: Vehicular emissions control technologies CALVERT ROOM Moderator: Bruce Bertelsen - Executive Director, Manufacturers of Emission Controls Association Panelists: John S. Hovvitt - Manager, New Technical Ventures, Allied Signal Corp. Reginald Modlin - Manager of Vehicle Emissions Regulatory Programs, Chrysler Corporation John Mooney - Manager, Technology and New Applications, Engelhard Corp. Dr. George M. Sverdrup - Program Manager, Battelle Memorial Institute Panel D: Alternative vehicle technologies WARREN ROOM Moderator: Phil Barnett - U.S. House of Representatives, Subcommittee on Health and Environment Panelists: Martin J. Bernard HI - Manager, National Station Car Association Gorik Hossepian - Director, Fuel Cell Program, Allied-Signal Aerospace Co. Dr. Roberta J. Nichols - Electric Vehicle External Strategy Manager, Ford Motor Company Paul Gifford - Director, Product Development, Energy Conversion Devices, Inc. The Clean Air Marketplace Conference and Exhibition Page A-4 Appendix A — Conference Program ------- September 8 (continued) 4:15 - 6:15 p.m. SESSION 4: CONTROL TECHNOLOGIES AND SERVICES - II These four panels continue our examination of specific technologies and services. Panel A examines service opportunities in the electric power market, notably including allowance trading and demand-side management. Panel B focuses on the increasingly important subject ofNOf control approaches, including fuel switching. Panel C examines the growth market in services related to vehicular emissions control. Panel D features a discussion about the leading candidate alternative fuels, including reformulated gasoline. Panel A : Electric power services (including DSM) MARSHALL ROOM Moderator: Renge Rico - Chief, Market Innovations Branch, Acid Rain Division, U.S. EPA Panelists: Carlton Bartels - Director, Environmental Brokerage Services, Cantor Fitzgerald William F. Hederman - Managing Director, R.J. Rudden Associates, Inc. John B. Henry, n - President, Clean Air Capital Markets Jeffrey W. VanSant - Vice President and Director of Fuel Supply, New England Power Company Panel B: Stationary source NOx control approaches (including fuel switching) HOLMES ROOM Moderator: Joseph A. Belanger - Director of Planning and Standards, Bureau of Air Management, Connecticut Department of Environmental Protection Panelists: Vincent M. Albanese - Vice President, External Affairs, Nalco Fuel Tech Joel Bluestein - Director, Gas-Based NOx Control Center Mitchell B. Cohen - Senior Consulting Engineer, Asea Brown Boveri, Combustion Engineering Systems Dr. Michael J. Wax - Deputy Director, Institute of Clean Air Companies Panel C: Vehicular emissions control services CALVERT ROOM Moderator: Kenneth Thomas - Marketing Manager, IM Systems, Horiba Systems, Inc. Panelists: William Dell - Director of Marketing, Systems Control Corp. Jay Gordon - President, Gordon Darby Corp. Daniel Grubbe - Manager, Vehicle Emissions Inspection Program, Arizona Department of Environmental Quality Gary Huggins - Executive Vice President, Coalition for Safer, Cleaner Vehicles Panel D: Alternative fuels WARREN ROOM Moderator: Charles L. Gray, Jr. - Director, Regulatory Programs and Technology, Office of Mobile Sources, U.S. EPA Panelists: William Holmberg - Regulatory Advisor, National SoyDiesel Development Board Jerrold L. Levine - Director for Corporate Studies, Amoco Oil Corporation Raymond Lewis - President, American Methanol Institute Carl Moyer - Chief Scientist, Acurex Environmental Corporation Jeffrey Seisler - Executive Director, Natural Gas Vehicle Coalition I The Clean Air Marketplace Conference and Exhibition Appendix A — Conference Program Page A-5 ------- Septembers (continued) 6:30 - 8:00 p.m. SOUTH COTILLION BALLROOM AND MEZZANINE Reception (cash bar) Reception will be held in exhibits area. Conference participants are encouraged to tour the exhibits. The Clean Air Marketplace Conference and Exhibition Page A-6 Appendix A — Conference Program ------- September 9 8:30 - 9; 15 a.m. Keynote Address NORTH COTILLION BALLROOM p^kfir; HlfeH0itor&l>le Sfenatp Max B9treu$» Ch^irtn^n of th« Senate Enviroameflt sftd 9:30 -11:30 a.m. SESSIONS: ROLE OF THE GOVERNMENT IN SUPPORTING THE CLEAN AIR MARKETPLACE Session 5 panels examine the role of all levels of government in facilitating and supporting the clean air marketplace. Panel A focuses on how Federal, state, and local government regulations can help shape the market for new clean air technologies. Panel B addresses government's role in directly supporting the development and diffusion of innovative technologies. Panel C is the first of several conference discussions about exports of clean air technologies, in this case how the Federal government can promote such exports. Panel A: Federal, state, and local regulatory programs MARSHALL ROOM Moderator: S. William Becker - Executive Director, State and Territorial Air Pollution Program Administrators Panelists: Michael Bradley - Executive Director, Northeast States for Coordinated Air Use Management Robert Brenner - Acting Deputy Assistant Administrator, OAR, U.S. EPA Bruce S. Carhart - Executive Director, Ozone Transport Commission David Jordan - Former Administrator, Indianapolis Air Pollution Control Division; Senior Project Manager, ERM Midwest Panel B: Technology development and diffusion HOLMES ROOM Moderator: Steve Harper - Senior Policy Analyst, Office of Air and Radiation, U.S. EPA Panelists: Dr. Joseph D. Ben-Dak - Chief, Global Technology Group, United Nations Development Programme Robb Lenhart - Director of Business Services, National Environmental Technology Applications Center Timothy Mohin - Senior Fellow, U.S. Senate Environment and Public Works Committee Nick Nikkila - Director, Economic Development and Business Retention, South Coast Air Quality Management District Panel C: Export promotion WARREN ROOM Moderator: Richard A. Wegman - Partner, Garvey, Schubert, and Barer Panelists: Lewis P. Reade - Director General, U.S .-Asia Environmental Partnership, U.S. AID F. Bradford Smith - President and CEO, Environmental Elements Corporation Rodney Sobin - Analyst, U.S. Congress, Office of Technology Assessment The Clean Air Marketplace Conference and Exhibition Appendix A — Conference Program Page A-7 ------- September 9 (continued) 11:30 a.m. -12:45 p.m. Lunch Break (Free Time) 1:00 - 1:45 p.m. Keynote Address NORTH COTILLION BALLROOM r, Apling Deprty Assistant A&ainisftatqr. Speaker; Donald A. JPeieso* President and CEO of Research»CottreH Compaoies The Clean Air Marketplace Conference and Exhibition Page A-8 Appendix A — Conference Program ------- September 9 (continued) 2:00-4:00 p.m. SESSION 6: CONNECTIONS AMONG CLEAN AIR ACT/ISTEA/ MARSHALL ROOM ENERGY POLICY ACT This panel brings senior Federal and local policymakers together -with leaders from the NGO and corporate sectors to examine the many interfaces among the Clean Air Act Amendments, the Intermodal Surf ace Transportation Efficiency Act, and the Energy Policy Act of 1992, Moderator: Susan F. Tierney - Assistant Secretary, Office of Policy Planning and Program Evaluation, U.S. Department of Energy Panelists: G.B. Arrington, Jr. - Director of Strategic and Long-Range Planning, Tri-Met Joseph Goffman - Senior Attorney, Environmental Defense Fund Ben G. Henneke - President, Clean Air Action Corporation Michael J. Stanton - Director, Federal Liaison Department, American Automobile Manufacturers Association Mary Margaret Whipple - Vice Chairman, Arlington County Board, and Member, Washington Metropolitan Area Transit Authority Board SESSION 7: THE GLOBAL CLEAN AIR MARKETPLACE - HOLMES ROOM EXPORT OPPORTUNITIES This panel continues the conference's examination of export issues. The focus this time is on specific export opportunities that companies with competitive clean air technologies and services can capitalize on. Executives of companies which have been successful in the export market share their experiences. Moderator: Donald L. Connors, Esq. - President, Environmental Business Council of the U.S., Inc. Panelists: Alvin L. Aim - Senior Vice President, Science Applications International Corp. Alan N. Scarsella - Director, International Business Development, Wahlco Environmental Systems, Inc. John T. Schofield - President & CEO, Thermatrix, Inc. Roger Strelow - Vice President, Environmental Affairs, Bechtel Corporation Russell Sturm - Program Director, Private Sector Activities, International Institute for Energy Conservation SESSION 8: LOOKING TO THE FUTURE - NEW DIRECTIONS FOR WARREN ROOM ENVIRONMENTAL TECHNOLOGY Where is the next generation of clean air, pollution prevention, and energy efficiency technology headed? These experts provide their diverse perspectives on this important topic. Moderator: Richard E. Ayres, Esq. - Partner, O'Melveny & Myers Panelists: Braden R. Allenby - Research Director, Technology and Environment, AT&T Howard Geller -Executive Director, American Council for an Energy Efficient Economy Dr. Richard Klimisch - Vice President, Engineering Affairs Division, American Automobile Manufacturers Association Bruce Smart - Senior Fellow, World Resources Institute The Clean Air Marketplace Conference and Exhibition Appendix A — Conference Program Page A-9 ------- September 9 (continued) 4:15-6:15 p.m. SESSION 9: PUBLIC/PRIVATE PARTNERSHIPS IN CLEANING THE AIR MARSHALL ROOM Cleaning the air requires more than state-of-the-art technology. At the state and local level it requires building coalitions of diverse interests. This panel features public and private sector leaders from several different states who have helped build effective public/private partnerships. Moderator: Steven Howards - President, Environmental Strategies Panelists: Steven Coffin - Vice President, Colorado Interstate Gas Company; Vice Chairman, Colorado Air Quality Control Commission Daniel Greenbaum - Commissioner, Massachusetts Department of Environmental Protection Bfln G. Henneke - President, Clean Air Action Corporation Isaac Manning - North Texas Air Coalition SESSION 10: FINANCING THE CLEAN AIR MARKETPLACE Financing the clean air marketplace presents many challenges and opportunities. Panel A focuses onfmancing specific companies and projects. Panel B addresses the financing of exports and foreign investments. Panel A: Financing companies and projects HOLMES ROOM Moderator: Robert Brenner - Acting Deputy Assistant Administrator, Office of Air and Radiation, U.S. EPA Panelists: Jerry Esmay - Environmental Project Specialist, International Finance Corporation Robert Grady - Vice President, Robertson Stevens & Co. James H. McCall - President, Environmental Capital Corporation Frank Pope - General Partner, Technology Funding, Inc. Jake Tarr - Vice President, Arete Ventures Panel B: Financing exports and investments WARREN ROOM Moderator: William A. Delphos - President, Delphos International Panelists: Harvey Himberg - Director, Development Policy and Environmental Affairs, Overseas Private Investment Corp. Edward Sanders - President, Sanders International John Wisniewski - Vice President, Export-Import Bank of the United States The Clean Air Marketplace Conference and Exhibition Page A-10 Appendix A — Conference Program ------- Clean Air Marketplace Steering Group Richard E.A;pm, Esq. Pdrmr O'Melveagwitf Myers Urtice Bertelsen Michael Bradley Dale Brooks Conmtiwt ftrrnksmd Associates OonaldJU. Cheryl M. Fates-, JEsq, r. Thomas Haiuser . Muggins Vic* President CoaM&rt for Safer, CU&mr VMtks William I, King ufatpry Manager, •Ford Motor Campatty ErifeJ.Mcyas - Gettertit Cffw&el Environmental Law Institute NickNikkito , Kcottowc Dewfopment Program Robert Px OuelfeEfe, Sr. Deborah Sheiman Resource Spzdtitist Natural Resources Offense Comtil Jeffrey C Smith Sx&cutive director Paul Wilkinson Director, Pettey and Environmental Anatysiy American Gas Association Appendix A — Conference Program PageA-U ------- APPENDIX B Exhibitors ------- Exhibitors Air Daily 4418 Mac Arthur Boulevard Washington, DC 20007 (202) 298-8201 Fax (202) 298-8210 The American Institute of Chemical Engineers 345 East 47 Street New York, NY 10017 (212) 705-8124 Fax (212) 752-3294 Berty Reaction Engineers Ltd. 1806 Bent Pine Hill Fogelsville, PA 18051-1501 (215) 391-1676 Fax (215) 391-9434 Black & Veatch B & V Waste Science and Technology 100 CambridgePark Drive Cambridge, MA 02140 (617) 547-2553 Fax (617) 547-1416 Brown & Root Environmental 910 Clopper Road Gaithersburg, MD 20878-1399 (301) 258-8705 Fax (301) 258-2568 Columbia Scientific Industries Continous Emissions Monitoring Systems 11950JollyvilleRoad Austin, TX 78759 (609) 783-6313 Fax (609) 784-3759 EPA and DOE Climate-Wise 401 M Street, SW Washington, DC 20460 (202) 260-4407 Fax (202) 260-0512 Design for the Environment 401 M Street, SW Washington, DC 20460 (202) 260-0880 Fax (202) 260-0981 Engineering-Science, Inc. 10521 Rosehaven Street Fairfax, VA 22030-2899 (703) 934-2319 Fax (703) 591-1305 Entropy, Inc. P.O. Box 12291 , Research Triangle Park, NC 27709-2291 (919) 781-3550 Fax (919) 787-8442 Environmental Business Council of the U.S., Inc. 1601 Trapelo Road Waltham, MA 02154 (617) 890-4242 Fax (617) 890-2881 Environmental Law Institute 1616 P Street, NW, Suite 200 Washington, DC 20036 (202) 939-3833 Fax (202) 328-5002 U.S. Environmental Technology Export Council 2000 K Street, NW, Suite 750 Washington, DC 20006 (202) 466-6933 Fax (202) 466-8009 Environmental Resources Management, Inc. 855 Springdale Drive Exton, PA 19341 (215) 524-3500 Fax (215) 524-7335 EPA Green Lights Program, Energy Star Programs 401 M Street, SW Washington, DC 20460 (202) 233-9099 Fax (202) 233-9569 Ford Motor Company 1350 I Street, NW Washington, DC 20005 (202) 962-5379 Fax (202) 962-5457 Appendix B — Exhibitors Page B-l ------- Exhibitors (continued) Information Resources, Inc. Oxy-Fuel News Octane Week 499 South Capitol Street, SW, Suite 406 Washington, DC 20003 (202) 554-0614 Fax (202) 554-0613 Lancaster Laboratories, Inc. 2425 New Holland Pike Lancaster, PA 17601-5994 (717) 656-2301 Fax (717) 656-2681 The Mcllvaine Company 2970 Maria Avenue Northbrook, IL 60062 (708) 272-0010 Fax (708) 272-9673 MG Refining & Marketing Inc. 1000 Louisiana Houston, TX 77002 (713) 759-0510 Fax (713) 759-9426 Nalco Fuel Tech 101 Frontenac Road Naperville, IL 60563-1746 (708) 983-3242 Fax (708) 983-3240 National Association for Environmental Management 1455 Pennsylvania Avenue, NW, Suite 1000 Washington, DC 20004 (202) 737-3415 Fax (703) 391-2178 National Geothermal Association Geothermal Resources Association 803 Prince Street Alexandria, VA 22314 (703) 922-5473 Fax (703) 922-5473 Omstar Clean Air Corporation 126 Marine Avenue Wilmington, CA 90744 (310) 835-6909 Fax (310) 835-0723 Scott Environmental Technology 6205 Route 611 Plumsteadville, PA 18949 (215) 766-7230 Fax (215) 766-2051 Scott Specialty Gases, Inc. 6141 Easton Road P.O. Box 310 Plumsteadville, PA 18949 (215) 766-8861 Fax (215) 766-2070 Thermacon Enviro Systems 111 West 40th Street New York, NY 10018 (212) 704-2111 Fax (212) 704-2089 U.S.-Asia Environmental Partnership 1133 20th Street, NW, Suite 300 Washington, DC 20036 (202) 835-0333 Fax (202) 835-0366 Vara International Calgon Carbon Corporation 1201 19th Place Vero Beach, FL 32960 (407) 567-1320 Fax (407) 567-4108 ViGYAN, Inc. 5203 Leesburg Pike, Suite 900 Falls Church, VA 22041-2406 (703) 931-1100 Fax (703) 820-4322 W. L. Gore & Assoc., Inc. P.O. Box 1100 Elkton, MD 21922-1100 (410) 392-3300 Fax (410) 392-6624 Welsh Technologies P.O. Box 4214 River Edge, N] 07661 (201) 489-3465 Fax (201) 489-3110 Page B-2 Appendix B — Exhibitors ------- APPENDIX C Participants ------- Participants Dan Abbasi U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-4332 Richard F. Abrams CeraMem Separations 20 Clematis Avenue Waltham, MA 02154 (617) 899-0467 Eman Ahmed Saudi Education Mission 600 New Hampshire Avenue, NW Washington, DC 20037 (202) 298-8833 Vincent Albanese NALCO Fuel Tech 1001 Frontenak Road Naperville, IL 60563 (708) 983-3254 Braden R. Allenby AT&T 131 Morristown Road Basking Ridge, NJ 07920 (609) 639-2244 Alvin Aim Science Applications International Corporation 1710 Goodrich Drive McLean, VA 22102 (703) 821-4530 Arlene Anderson U.S. Department of Energy 1000 Independence Avenue, SW Washington, DC 20585 (202) 586-3818 Linda Anderson-Carnahan EPA Region 4 345 Courtland Street, NE Atlanta, GA 30365 (404) 347-2864 Phillip Andres STAR Compliance Services 4333 Stern Avenue, Suite 106 Sherman Oaks, CA 91423 (818) 784-3304 Mike Andrews Int'l Brotherhood of Painters & Allied Trades 1750 New York Avenue, NW Washington, DC 20006 (202) 637-0744 Vernon Anthony Delmar Publishers, Inc. 5105 Cemetary Road Milliard, OH 43026 (614) 771-7028 Edward J. Apple SC Johnson Wax 1525 Howe Street Racine, WI 53403 (414) 631-2761 Doug Ardell The Mcflvaine Co. 2970 Maria Avenue Northbrook, IL 60062 (708) 272-0010 Ross Ardell The McDvaine Co. 2970 Maria Avenue Northbrook, IL 60062 (708) 272-0010 G.B. Arrington Tri-Met 4012 Southeast 17th Avenue Portland, OR 97202 (503) 238-4977 Dwight Atkinson U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-6921 Rob Atkinson U.S Congress Office of Technology Assessment Washington, DC 20510 James Austin NY Senate Environ. Conservation Committee New York State Senate, Room 310, L.O.B. Albany, NY 12247 (518) 455-3411 Bob Axlerad U.S. EPA Appendix C — Participants PageC-1 ------- Participants (continued) Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9315 Eric Aynsley Scott Environmental Technology 6205 Route 611 P.O. Box 369 Plumsteadville, PA 18949 (215) 766-7230 Richard E. Ayres O'Melveny & Myers 555 13th Street, N.W., Suite 500 West Washington, DC 20004 (202)383-5211 Alan Bahl Red Star Yeast 2100 Van Deman Street Baltimore, MD 21224 (410) 633-8575 Michael Baker Committee for Economic Development 2000 L Street, NW, Suite 700 Washington, DC 20036 (202) 2%-5860 Paul Balasic Environmental Elements Corp. P.O. Box 1318 Baltimore, MD21203 (410) 368-7143 Jennifer Barber White Lung Association P.O. Box 1483 Baltimore, MD21203 (410) 243-5864 Mark Bareta Black and Veatch 11401 Lamar Ave. Overland Park, KS 66062 (913) 339-2000 Christina Barnes Stevens Publishing 1170 National Press Building Washington, DC 20045 (202) 942-1422 Phil Barnett U.S. House of Representatives 2415 Rayburn House Office Building Washington, DC 20515 (202) 225-4952 Jerry Barnhill AquAeTer, Inc. P.O. Box 1187 Brentwood, TN 37024 (615) 373-8532 Randy Barrett Washington Technology 1953 Gallows Road Vienna, VA 22182 (703) 848-2800 Carlton Bartels Cantor Fitzgerald One World Trade Center New York, NY 10048 (212) 938-5000 Jim Barton Columbia Scientific Industries Corporation 11950Jollyville Road Austin, TX 78759 (512) 258-5191 Philip Barton Fidelity Management and Research Co. 82 Devonshire Street Boston, MA 02109 (617) 570-7911 Robert M. Bates Southwest Marine, Inc. 1300 Crystal Drive, Suite 1709S Arlington, VA 22202 (703) 979-2270 Max Baucus U.S. Senate SH-511 Hart Sehate Office Building Washington, DC 20510-2602 (202) 224-2651 Earl Beaver American Institute of Chemical Engineers 345 East 47 Street New York, NY 10017 (212) 705-7407 S. William Becker Page C-2 Appendix C — Participants ------- Participants (continued) State & Territorial Air Pollution Program Admin. 444 North Capitol Street, NW, Suite 307 Washington, DC 20001 (202) 624-7864 William Beeman Committee for Economic Development 2000 L Street, NW, Suite 700 Washington, DC 20036 (202) 296-5860 Joseph A. Belanger Connecticut Department of Environmental Protection DEP-79 Elm Street, P.O. Box 5066 Hartford, CT 06102 (203) 566-2506 Roy Belden Chadbourne & Parke 1101 Vermont Avenue, NW Washington, DC 20005 (202) 962-4526 Alan Belkin ECRA Laboratories 273 Franklin Road Randolph, NJ 07869 (201) 361-4252 DeWain Belote Doed Motor Co. Joseph Ben-Dak United Nations Development Programme One United Nations Plaza New York, NY 10017 (212) 905-5027 Jeffrey A. Berg Raymond James & Associates 880 Carillon Parkway St. Petersburg, FL 33716 (813) 573-3800 Joan Berkowitz Farkas Berkowitz & Co. 1220 19th Street, NW Washington, DC 20031 (202) 833-7530 Timothy Bernadowski Virginia Power P.O. Box 26666 Richmond, VA 23261 (804) 771-3246 Martin J. Bernard National Station Car Association 501 14th Street, Suite 210 Oakland, CA 94612 (510) 444-8707 Jeffrey Bernardo Kidder Peabody & Co., Inc. 10 Hanover Square, 15th Floor New York, NY 10005 (212) 510-3792 Bruce Bertelsen Manufacturers of Emission Controls Association 1707 L Street, NW Washington, DC 20036 (202) 296-4797 Jozsef Berty Berty Reaction Engineers, Ltd. 1806 Bent Pine Hill Fogelsville, PA 18051-1501 (215) 391-1676 Clifton Bittle Environmental Science & Engineering, Inc. P.O. Box 1703 Gainesville, FL 32607 (904)333-6601, Thomas Black U.S. General Accounting Office 441 G Street, NW Washington, DC 20548 (202) 512-2867 Donald Bliss O'Melveny & Meyers 555 13th Street, NW, Suite 500 West Washington, DC 20004 Bernard Bloom Grumman 1760 Business Center Drive Reston, VA 22096 (703) 438-5479 Appendix C — Participants Page C-3 ------- Participants (continued) Joel Bluestein Gas-Based NOX Control Center 1655 N. Fort Myer Drive, Suite 600 Arlington, VA 22209 (703) 243-4947 Debbie Boger Design for the Environment, U.S. EPA 401 M Street, NW Washington, DC 20460 (202) 260-0880 Ben Bonifant Management Institute for Environ, and Business 1220 16th Street, NW Washington, DC 20036 (202) 833-6556 Stuart Bone Environmental Business Journal Wood Bouldin Columbia Scientific Industries Corporation 11950 Jollyville Road Austin, TX 78759 (512) 258-5191 Ella S. Bowman WNC Regional Air Pollution Control Agency Buncombe County Courthouse Asheville, NC 28801-3569 (704) 255-2655 Herbert Braden Noell, Inc. 2411 Dulles Corner Park, Suite 410 Herndon, VA 22071 (703) 793-6500 Hazel Bradford McGraw-Hill/ENR 1200 G Street NW - Main Office Washington, DC 20005 (301) 229-1001 Michael Bradley Northeast States for Coordinated Air Use Mgmt. 85 Merrimac Street Boston, MA 02114 (617) 367-8540 Michael Brandon S+ME, Inc. 3100 Spring Forest Road Raleigh, NC 27604 (919) 872-2660 Ronald Braun IT Corp. 11499 Chester Road Cincinnati, OH 45246 (513) 782-4600 Rhea Brekke New Jersey Department Environmental Protection & Energy 401 East State Street, CN 402 Trenton, NJ 08625-0402 (609) 984-1484 Robert Brenner U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-7400 Jeanne Briskin U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-5520 Kevin Bromberg Law Offices of Kevin L. Bromberg 1725 K Street, NW Washington, DC 20006 (202) 775-8146 Dale Brooks American Institutue of Chemical Engineers 1300 Eye Street, NW Suite 1090 - East Tower Washington, DC 20005 (202) 962-8690 Gregory A. Brown Stone & Webster Engineering Corporation 1201 Connecticut Avenue, NW Washington, DC 20036 (202) 466-7415 Page C-4 Appendix C — Participants ------- Participants (continued) Carol M. Browner U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-4700 Susie Bruninga BNA 1231 25th Street, NW Washington, DC 20037 (202) 452-5358 Kevin R. Bryson Stone & Webster Engineering Corporation #3 Executive Campus Cherry Hill, NJ 08034 (609) 482-3677 Tom Burgum Burgum and Grimm, Ltd. 106 North Carolina Avenue, SE Washington, DC 20003 (202) 546-3414 Richard M. Burke Lancaster Laboratories 2425 New Holland Pike Lancaster, PA 17601-5994 (717) 656-2301 C. Shepherd Burton ICF Kaiser Engineers Environment Group 101 Lucas Valley Road San Raphael, CA 94903 (415) 507-7101 Barbara Bush American Petroleum Institute 1220 L Street, NW Washington, DC 20005 (202) 682-8450 Bill Byers CH2M Hill Co. 2300 NW Walnut Boulevard Corvallis, OR 97330-3538 (503) 752-4271 Jeff Campbell Board of Trade of the City of Chicago 141 West Jackson Boulevard Chicago, IL 60604 (312) 341-7264 Melissa Carey Electronic Industries Association 2001 Pennsylvania Avenue Washington, DC 20006-1813 (202) 457-8733 Bruce Carhart Ozone Transport Commission 444 N. Capitol Street, Suite 604 Washington, DC 20001 (202) 508-3840 David Carlton Mitchell International 9889 Willow Creek Road San Diego, CA 92131 (619) 530-8955 Mark V. Carney U.S. Generating Company 7475 Wisconsin Avenue Bethesda, MD 20814 (301) 718-6800 Gale J. Carr Ogden Martin Systems Inc. 2200 Wilson Boulevard, #600 Arlington, VA 22201 (703) 875-8900 David Carstater LICA Systems, Inc. 10400 Eaton Place, Suite 302 Fairfax, VA 22030 (703) 359-0996 Donald Carter S+ME, Inc. 3100 Spring Forest Road Raleigh, NC 27604 (919) 872-2660 Bhaskar Chandan Carnot 15991 Red Hill Ave Tustin, CA 92626 (714) 259-9520 Appendix C — Participants Page C-5 ------- Participants (continued) Peter Charrington ERM Inc. 855 Springdale Drive Exton, PA 1^341 (215) 524-3500 Rahul Chettri ViGYAN Inc. 5203 Leesburg Pike, Suite 900 Falls Church, VA 22041 (703) 931-1100 Steve Cochran U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-7428 Steven Coffin Colorado Interstate Gas Company P.O. Box 1087 Colorado Springs, CO 80944 (303) 573-4425 Mitchell B. Cohen Asea Brown Boveri Combustion Engineering Systems 1000 Prospect Hill Road Windsor, CT 06095 (203) 285-2482 Kenneth Cole American Nuclear Services P.O. Box 87 Etna, OH 43018-0087 (614) 964-0130 Libby Conde Entropy, Inc. P.O. Box 12291 Research Triangle Park, NC 27709-2291 (919) 781-3550 Raymond Connor Manufacturers of Emission Controls Association 1707 L Street, NW, Suite 570 Washington, DC 20036 (202) 296-4797 Donald' L. Connors Environmental Business Council of the U.S., Inc. Choate, Hall & Stewart 53 State Street Boston, MA 02109 (617) 482-1390 Glenn Conover Sutron Corporation 21300 Ridgetop Circle Sterling, VA 20166 (703) 406-2800 Nancy Cookson Chemical Manufacturers Association 2501 M Street, NW Washington, DC 20037 (202) 887-1241 Clare Corcoran Bruce Environmental 1850 K Street, NW, Suite 290 Washington, DC 20006 (202) 775-6655 Julie Crippen The Crippen Companies 10132 G&H Colvin Run Road Great Falls, VA 22066 (703) 759-5900 Linda Critchfeld U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9087 Ted Cromwell Chemical Manufacturers Association 2501 M Street, N.W. Washington, DC 20037 (202) 887-1383 Eugene Grassland Pure Air Corporation 7540 Windsor Drive Allen town, PA 18195 (215) 481-5589 Page C-6 Appendix C — Participants ------- Participants (continued) John K. Crum American Chemical Society 1155 16th Street, NW Washington, DC 20036 (202) 872-4534 Thomas V. Crumley Energy and Environmental Sales Corporation 650 Poydras, Suite 2045 New Orleans, LA 70130 (504) 523-1509 Richard Cudahy SYCOM Enterprises 7475 Wisconsin Avenue Bethesda, MD 20814 (301) 718-6600 Kate Cudlipp Environmental Business Journal 2415 20th Street, NW Washington, DC 20009 Kevin Curtis Virginia Power P.O. Box 26666 OJRP/9 Richmond, VA 23261 (804) 771-6358 Gene D'Andrea CSCV National Education Resource Center U.S. Highway 1 Morrisville, PA 19067 (215) 295-0722 Robert Daly Balston, Inc. 260 Neck Road Haverhill, MA 01835 (508) 374-7400 Kathleen Daniel R. Gene Darnell EPA - CERT/Univ. of Michigan 2565 Plymouth Road Ann Arbor, MI 48105 (313) 741-7851 John Darrow W.L. Gore & Associates, Inc. 101 Lewisville Road Elkton, MD 21921 (410) 392-3300 Carolyn Dawson Coal & Synfuels Technology 1616 North Fort Meyer, Suite 1000 Arlington, VA 22209 (703) 528-1244 David De Bruyn EPA Region 10 1200 6th Avenue/8T-082 Seattle, WA 98101 (206) 553-4973 Rich Deblasi Environmental Maintenance Solutions, Inc. P.O. Box 37 Thornwood, NY 10594 (914) 747-1583 Mike Deegan Teledyne Environmental Systems 2111 Wilson Boulevard, Suite 1100 Arlington, VA 22201 Donald A. Deieso Research-Cottrell Companies P.O. Box 1500 Somerville, NJ 08876 (908) 685-4255 William Dell Systems Control Corporation 755 North Mary Avenue Sunnyvale, CA 94086 (410) 280-0088 William A. Delphos Delphos International 3000 K Street, NW, Suite 690 Washington, DC 20007 (202) 237-6300 Faustin Denis Industrial Environmental Technologies 234-18 133rd Avenue Rosedale, NY 11422 (718) 276-2300 Carolyn DeVinny The DeVinny Group 13101 Washington Boulevard Los Angeles, CA 90066 (310) 306-8584 Appendix C — Participants Page C-7 ------- Participants (continued) Deborah DeYoung Committee on Environmental and Public Works U.S. Senate Washington, DC (202) 224-6176 Scott R. Dismukes Doepken Keevican Weiss & Medved 37th Floor, USX Tower, 600 Grant Street Pittsburgh, PA 15219 (412) 355-2641 Karen Doerschug ICF Incorporated 9300 Lee Highway Fairfax, VA 22031-1207 (703) 218-2509 David A. Doles Engelhard Corporation 101 Wood Avenue Iselin, N] 08830 (908) 205-5237 Cathy Dombrowski Airtech News 14120 Huckleberry Lane Silver Spring, MD 20906 (301)871-3299 Lise Dondy Connecticut Innovations, Inc. 845 Brook Street Rocky Hill, CT 06067 (203) 258-4305 Perle Don- National Geothermal Association 803 Prince Street Alexandria, VA 22314 (703) 836-3654 Donna Downing U.S. Congress Office of Technology Assessment Washington, DC 20510 Brenda Doyle U.S. EPA 401 M Street, SW Washington, DC 20460 David Driesen Natural Resources Defense Council 1350 New York Avenue, NW, Suite 300 Washington, DC 20005 Elizabeth Drye U.S. Senate 316 Senate Hart Building Washington, DC 20510 (202) 224-4042 Dennis Dubberley Brown & Root Environmental 910 Clopper Road Gaithersburg, MD 20878-1399 (301) 258-8621 Dana Dudley Texas Instruments Inc. P.O. Box 650311, M/S 3933 Dallas, TX 75265 (214) 917-6212 Damian Durrant Greenpeace 1436 U Street, NW Washington, DC 20009 (302) 319-2518 Shari Effman Thermacon Enviro Systems 345 New Albany Road Moorestown, N] 08057 (609) 235-9471 Scott Ellensworth Chemical Manufacturers Association 2501 M Street, NW Washington, DC 20037 (202) 887-1286 William Elliott Northern Indiana Public Service Company 801 E. 86th Avenue Merrillville, IN 46410 (219) 647-6024 Kathy Ellis NAVFAC Chesapeake Division Barbara Ennis National Association for Environ. Management 131 Morristown Road Basking Ridge, NJ 07920 Page C-8 Appendix C — Participants ------- Participants (continued) Richard C. Entz Lancaster Laboratories 2425 New Holland Pike Lancaster, PA 17601-5594 (717) 656-2301 Michael Epstein National Inst. of Standards and Technology A303/222 Chemical Science & Technology Laboratory Gaithersburg, MD 20899 (301) 975-3385 Jerry Esmay International Finance Corporation 1850 I Street, NW Washington, DC 20433 (202) 473-0661 Caren Ewing U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-2556 Heidi Farber U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-2632 Alan Farkas Farkas Berkowitz & Co. 1220 19th Street, NW Washington, DC 20031 (202) 833-7530 Ralph Fasano White Cap, Inc. 1819 N. Major Avenue Chicago, IL 60639 (312) 637-2000 Denis Faustin Industrial Environmental Technologies 234-18 133rd Avenue Rosedale, NY 11422 (718) 276-2300 Steven Feeney Babcock & Wilcox, Inc. 20 South Van Buren Avenue, P.O. Box 351 Barberton, OH 44203-0351 (216) 860-2783 Sarah S. Fehrer Science and Policy Associates, Inc. West Tower, Suite 400,1333 H Street, NW Washington, DC 20005 (202) 789-1201 Stephen Felix Lenzing USA Corp. Danielle Fern Manufacturers of Emission Controls Association 1707 L Street, NW Washington, DC 20036 (202) 296-4797 Larry Ferrell B&W Nuclear Technologies 3315 Old Forest Road Lynchburg, VA 24501 (804) 385-3560 Louis Fiorucci EMS Environmental, Inc. 801 East Street Frederick, MD 21701 (301) 695-5828 T. Gary Flynn Santa Fe Technologies 2642 Wild Cherry Place Reston, VA 22091 (703) 715-2556 Marcie Francis TAS, Inc. 1000 Potomac Street, NW Washington, DC 20007 (202) 337-1744 Patricia Franco Electronic Industries Association 2001 Pennsylvania Avenue, NW, Suite 1100 Washington, DC 20006 (202) 457-8703 Appendix C — Participants Page C-9 ------- Participants (continued) Julie Frieder U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-2741 James Frock Scott Environmental Technology 6205 Route 611, P.O. Box 369 Plumsteadville, PA 18949 (215) 766-7230 Charles L. Fryxell Mojave Desert Air Quality Management District 15428 Civic Drive, Suite 300 Victorville, CA 92392 (619) 245-1661 Celeste Furr Information Resources, Inc. 499 S. Capitol Street, SW Washington, DC 20003 (202) 554-0614 Lee D. Garrigan American Consulting Engineers Council 1015 15th Street, NW, Suite 802 Washington, DC 20005 (202) 347-7474 Walter Gehlmann ViGYAN Inc. 5203 Leesburg Pike, Sbite 900 Falls Church, VA 22041 (703) 931-1100 Howard Geller American Council for an Energy Efficient Economy 1001 Connecticut Avenue, NW, Suite 801 Washington, DC 20036 (202) 429-8873 Mary Beth Gentleman Foley, Hoag & Eliot One Post Office Square Boston, MA 02109 (617) 482-1390 Rodney A. Gibson Geraghty and Miller, Inc. 2840 Plaza Place, Suite 350 Raleigh, NC 27612 (919) 571-1662 Paul Gifford Energy Conversion Devices, Inc. 1707 Northwood Drive Troy, MI 48084 (313) 362-1750 Carl A. Gilbert Dravo Lime Company 3600 One Oliver Plaza Pittsbugh, PA 15222 (412) 566-5501 Eric Gilchrist 9130 Weant Drive Great Falls, VA 22066 (703) 820-4524 Debra Giles Ferrofluidics 40 Simon Street Nashua, NH 03061 (603) 883-9800 Jennifer Giles Enviro-Management and Research, Inc. 1015 18th Street, NW Washington, DC 20036 (202) 293-5300 Jajiet Gille Alliance for Acid Rain Control 444 N. Capitol Street, Suite 602 Washington, DC 20001 (202) 624-8199 Jerry Gillespie Callidus Technologies, Inc. 7130 South Lewis, Suite 635 Tulsa, OK 74136 (918) 496-7599 William Gillespie District of Columbia 2100 Martin Luther King Jr. Boulevard, SE Washington, DC 20020 (202) 404-1180 Joseph Goffman Environmental Defense Fund 1875 Connecticut Avenue, Suite 1016 Washington, DC 20006 (202) 387-3500 Page C-10 Appendix C — Participants ------- Participants (continued) Thomas Goldsmith National Association for Environmental Mgmt. 1455 Pennsylvania Avenue, NW, Suite 1000 Washington, DC 20004 (202) 737-3415 Jay Gordon Gordon Darby Corporation 2410 Ampere Drive Louisville, KY 40299 (502) 266-5798 L. Barry Goss Science Applications International Corporation P.O. Box 2502 Oak Ridge, TN 37831 (615) 481-4609 Robert Grady Robertson Stevens & Company 555 California Street San Francisco, CA 94123 (415) 781-9700 Geneva Graham The Port Authority of New York & New Jersey One World Trade Center, Room 64E New York, NY 16048 (212) 435-4065 Anne Grambsch U.S. EPA 401 M Street, SW PM 221 Room 3009 Washington, DC 20460 (202) 260-5728 Charles L. Gray U.S. EPA 2565 Plymouth Road Ann Arbor, MI 48105 (313) 668-4404 Neil Gray Highway Users Federation 1776 Massachusetts Avenue, NW Washington, DC 20036 (202) 857-1217 Daniel Greenbaum Massachusetts Dept. of Environmental Protection One Winter Street Boston, MA 02108 (617) 292-5856 Lestelle Greenwalt MEMA 1325 Pennsylvania Avenue, NW, Suite 600 Washington, DC 20004 (202) 393-6362 Daniel Grubbe Arizona Department of Environmental Quality 600 North 40th Street Phoenix, AZ 85008 (602) 207-7017 Tom Guay Environmental Compliance Alert 12413 Ellen Court Silver Spring, MD 20904 (301) 622-9078 Shannon Guernsey American Lung Association of Northern Virginia 9735 Main Street Fairfax, VA 22031 (703) 591-4131 Leah Gurowitz Podesta Associates, Inc. 1001 G Street, NW Washington, DC 20001 (202) 393-1010 Burl Haigwood Fuel Reformation 499 S. Capitol Street, SW, #406 Washington, DC 20003 (202) 554-0614 John Hakel AGC of California 1255 Corporate Center Drive Monterey Park, CA 91754 (213) 263-1500 Stephen Hall U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-5016 Ed Haltom United Elchem Industries, Inc. 11535 Reeder Road Dallas, TX 75229 (214) 241-6601 Appendix C — Participants Page C-11 ------- Participants (continued) George Hansen Arthur Andersen, & Co. 711 Louisiana Houston, TX 77401 (713) 237-5011 LuAnne Hansen Automotive Chemical Manufacturers Council 1325 Pennsylvania Avenue, NW Washington, DC 20004 (202) 393-6362 Penny Hansen U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 253-9150 Steve Harper U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-5580 Matthew Harrington Clean Air News 501 Slaters Lane, #320 Alexandria, VA 22314 (703) 549-3823 Thomas Hauser American Institute of Pollution Prevention c/o University of Cincinnati Mail Location 71 Cincinnati, OH 45221 (513) 556-2517 David Hawkins Natural Resources Defense Council 1350 New York Avenue, NW, Suite 300 Washington, DC 20005 (202) 783-7800 Richard Head SRS Technologies 1500 Wilson Boulevard Arlington, VA 22209 (703) 522-5588 William F. Hederman R.J. Rudden Associates, Inc. 1110 N. Glebe Road, Suite 725 Arlington, VA 22201 (703) 812-8500 Holly Hegner O'Melveny & Meyers 555 13th Street, NW, Suite 500 West Washington, DC 20004 (202) 383-5300 John Heiderscheit Chadbourne & Parke 1101 Vermont Avenue, NW, Suite 900 Washington, DC 20005 (202) 289-3000 Jeffrey Heim'erman U.S. EPA Crystal Station One 2805 Jefferson Davis Highway Arlington, VA 22202 (703) 308-8806 J Fred Heitman JAYCOR Environmental 1608 Spring Hill Road Vienna, VA 22182 (703) 847-4000 Gary Helms CH2M Hill P.O. Box 4400 Reston, VA 22090-1483 (703) 471-1441 Ben Henneke Clean Air Action Corporation 320 S. Boston, Suite 1501 Tulsa, OK 74103 (918) 592-0300 John B. Henry Clean Air Capital Markets 1250 24th Street, NW, Suite 300 Washington, DC 20037 (202) 466-0520 Pam Herman U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-8705 Page C-12 Appendix C — Participants ------- Participants (continued) Thomas M. Heron UEC Environmental Systems 600 Grant Street, Suite 770 Pittsburgh, PA 15219-4776 (412) 433-6572 f Robert Herzstein Southern California Edison 2244 Walnut Grove Avenue, Room 399 Rosemead, CA 91770 (818) 302-7479 Jon Hiler American Society of Agricultural Engineers 2950 Niler Road St. Joseph, MI 49085 (616) 429-0300 A. Judson Hill Florida First Processing One Church Street, Suite 801 Rockville, MD 20850 (301) 762-6115 William R. Hill Entech, Inc. 560 Oak Ridge Turnpike Oak Ridge, TN 32830 (615) 481-3231 Harvey Himberg Overseas Private Investment Corporation 1100 New York Avenue, NW Washington, DC 20527 (202) 336-8400 Russell A. Hinz American Lung Association of Northern Virginia 9735 Main Street Fairfax, VA 22031 (703) 591-4131 Barbara Hirsch APPA 1446 Duke Street Alexandria, VA 22314 (703) 684-1446 Robert Hirsch Parsons Environmental Services, Inc. 321 Norristown Road, Suite One Ambler, PA 19002 (215) 540-4211 James Holian Brown & Root Environmental 910 Clopper Road Gaithersburg, MD 20878-1399 (301) 258-8705 Elise Holland U.S. Congress Office of Technology Assessment Washington, DC 20510 (202) 228-6858 William Holmberg National SoyDiesel Development Board 499 S. Capitol Street, SW Washington, DC 20003 (202) 554-1025 John Hoppe Burns and Roe 812 Old Lee Highway Fairfax, VA 22031 (703) 207-0800 Dirk Horn Noell, Inc. 2411 Dulles Corner Park, Suite 410 Hemdon, VA 22071 (703) 793-6500 Betsy Horsman U.S. ETEC Gorik Hossepian Allied Signal Aerospace Company 2525 West 190th Street, P.O. Box 2960 Torrance, CA 90509 (310) 512-1932 Mark Howard National Association of Regional Councils 1700 K Street, NW, Suite 1300 Washington, DC 20006 (202) 457-0710 Steven Howards Environmental Strategies 1600 Wynkoop Street, Suite 200 Denver, CO 80202 (303) 436-1860 Appendix C — Participants Page C-13 ------- Participants (continued) John Howitt Allied Signal Corporation P.O. Box 580970 Tulsa, OK 74158 (918) 266-1406 John Huffman j Kenetech/U.S. Wind Power, Inc. 1730 M Street, NW, Suite 1050 Washington, DC 20036 (202) 833-8954 Gary Huggins Coalition for Safer, Cleaner Vehicles 321 D Street, NE Washingotn, DC 20002 (202) 543-4499 Carrie Hunter ECO Magazine 1212 New York Avenue, Suite 345 Washington, DC 20005 (202) 842-8416 Joe Ingram Island Press 1718 Connecticut Avenue, NW, Suite 300 Washington, DC 20009 (202) 232-7933 Susan Ishmael Associated Builders & Contractors 1300 North 17th Street Rosslyn, VA 22209 (703) 812-2039 Andy Jabali Environmental Maintenance Solutions, Inc. P.O. Box 37 Thorn wood, NY 10594 (914) 747-1583 Wendy B. Jacobs Foley, Hoag & Eliot One Post Office Square Boston, MA 02109 (617) 482-1390 John Jeffery ViGYAN, Inc. 5203 Leesburg Pike, Suite 900 Falls Church, VA 22041 (703) 931-1100 Robert Johnson Liquid Carbonic Industries 810 Jorie Boulevard Oak Brook, IL 60521 (708) 572-7231 Russ Jones American Petroleum Institute 1220 L Street, NW, Suite 1200 Washington, DC 20005 (202) 682-8450 Tom Jones Texas Instruments Inc. P.O. Box 650311, M/S 3933 Dallas, TX 75265 (214) 917-6217 Bruce C.Jordan U.S. EPA Research Triangle Park, NC 27711 (919) 541-5572 David Jordan ERM Midwest 8465 Keystone Crossing, Suite 190 Indianapolis, IN 46240 (317) 251-0708 Mark Joyce U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-4717 Mary Ellen Joyce American Petroleum Institute 1220 L Street, NW, Suite 1200 Washington, DC 20005 (202) 682-8450 Robert Jubach Team Environmental Services, Inc. 5320 Spectrum Drive Frederick, MD 21701 (301) 694-5202 Jacqueline Kaldon Emissions Exchange Corp. 1001 G Street, NW, Suite 400 Washington, DC 20001 (202) 638-1918 Page C-14 Appendix C — Participants ------- Participants (continued) Gerald Karey Oilgram News 1200 G Street, NW Washington, DC 20005 (202) 383-2250 Marie-Ange Katzeff Embassy of Belgium 3330 Garfield Street, NW Washington, DC 20008 (202) 333-6900 Morris Kaufman Stackhouse Garber 2 Todmorden Lane Wallingford, PA 19086 (215) 565-0852 Andy Kaupert General Motors 1660 L Street, NW Washington, DC 20036 (202) 775-5073 Heather Anne Keith Chemical Manufacturers Association 2501 M Street, NW Washington, DC 20037 (202) 887-1320 John Keller P.O. Box 768 Olney, MD 20830-0768 (301) 774-5086 Merilynn Kessi AMK Associates P.O. Box 1440 Columbia, MD 21044 (410) 964-9373 James Kiefer MidCon Development Corp. 701 E. 22nd Street Lombard, IL 60148 (708) 691-3514 William King Ford Motor Co. 1350 I Street, NW Washington, DC 20005 (202) 962-5379 John Kinsman Edison Electric Institute 701 Pennsylvania Avenue Washington, DC 20004 (202) 508-5711 ' Brian Klatt Rust Environment and Infrastructure 4738 N. 40th Street Sheboygan, WI 53083 (414) 458-8711 Howard Klee Amoco Corporation Mail Code 4808, 200 East Randolph Drive Chicago, IL 60601 (312) 856-2320 Andrea Klein Intertrade Development Corporation 4825 Reservoir Road, NW Washington, DC 20007 (202) 333-9112 Richard Klimisch American Automobile Manufacturers Association 7430 Second Avenue, Suite 300 Detroit, MI 48202 (313) 871-2300 Adam Klinger U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9122 Charles Knebl The Pollution Prevention Letter P.O. Box 13315 Silver Spring, MD 20911-3315 (301) 495-7747 Terresa Knierieman National Association of Manufacturers 1331 Pennsylvania Avenue, NW, Suite 1500 N. Washington, DC 20004 (202) 637-3175 Chris Knopes U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-6921 Appendix C — Participants PageC-15 ------- Participants (continued) Warren Koenig Scott Environmental Technology 6205 Route 611 Plumsteadville, PA 18949 (215) 766-7230 Steven A. Kohl Raymond James & Associates 880 Carillon Parkway St. Petersburg, FL 33716 (813) 573-3800 Zofia Kosim U.S. EPA Crystal Station One 2805 Jefferson Davis Highway Arlington, VA 22202 (703) 308-8733 Andrew Kralkov U.S. News and World Report 2400 N Street, NW Washington, DC 20037 (202) 955-2673 Colyn Kreger Cheryl Minor Consultants, Inc. P.O. Box 944 Rural Hall, NC 27045 (919) 969-5755 Sue Krieg Mojave Desert Air Quality Management District 22321 Shawnee Road Apple Valley, CA 92307 (619) 247-4876 Joe Krumenacker Scott Specialty Gases, Inc. 6141 Easton Road, P.O. Box 310 Plumsteadville, PA 18949 (215) 766-8861 Lisa Ann Kurbiel United Nations Development Programme John Paul Kusz Safety Kleen Corporation 1000 N. Randall Road Celyin, IL 60123 (708) 697-8460 Vincent Lajiness Coastal Corporation One Woodward Avenue Detroit, MI 48226 (313) 496-2447 Joe Lang Oregon Sandblasting and Coating P.O. Box 1171 Tualatin, OR 97062 (503) 692-3575 Robert M. Large Lancaster Laboratories 2425 New Holland Pike Lancaster, PA 17601-5994 (717) 656-2301 Amy Laspia Environmental Management Consulting 701 Fourth Avenue, S., Suite 500 Minneapolis, MN 55145 (612) 337-9537 John Laumer Elf Atochem North America 900 First Avenue King of Prussia, PA 19406 (215) 337-6813 Joseph Laznow SRS Technologies 1500 Wilson Boulevard Arlington, VA 22209 (703) 522-5588 Dennis Leaf U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9129 Robb Lenhart National Environmental Technology Applications Center 615 William Pitt Way Pittsburgh, PA 15238 (412) 826-5511 Page C-16 Appendix C — Participants ------- Participants (continued) Jerrold L. Levine Amoco Corporation 200 E. Randolph Drive Chicago, IL 60611 (312) 856-2605 Raymond Lewis American Methanol Institute 815 Connecticut Avenue, NW, Suite 800 Washington, DC 20006 (202) 467-5050 Sherri Lilienfeld Air Products and Chemicals, Inc. 7201 Hamilton Boulevard Allentown, PA 18195 (215) 481-7501 Rosanne M. Lindsay EPA Region 5 77 W. Jackson (AR-185) Chicago, IL 60604 (312) 353-1151 David P. Lingo Mid-Continent Area Power Pool 430 Century Plaza 1111 Third Avenue South Minneapolis, MN 55404 (612) 341-4618 Jan Linsenmeyer U.S. Congress Office of Technology Assessment Washington, DC 20510 Steve Linsenmeyer Liquid Carbonic Industries 8124 Norris Lane Baltimore, MD 21222 (202) 228-6863 George Linzer The Bruce Company 501 3rd Street, NW, Suite 260 Washington, DC 20001 (202) 434-9364 Stephen Lipmann Environmental Research and Analysis 140 North Broadway Irvington, NY 10533-1215 (914) 591-7414 Laura Litvan Nation's Business 1615 H Street, NW, Suite 300 Washington, DC 20062 (202) 463-5497 Olga Loera ViGYAN Inc. 5203 Leesburg Pike, Suite 900 Falls Church, VA 22041 (703) 931-1100 Lon Loken PACE, Inc. 9893 Brewers Court Laurel, MD 20723 (301) 490-9860 Frederick Long MEB 1220 16th Street, NW Washington, DC 20036 (202) 833-6556 Francois Louis Renault, USA 15 Volvo Drive, Building D Rockleigh, NJ 07647 (201) 784-4627 Barbara Loux Mojave Desert Air Quality Management District 22521 Shawnee Road Apple Valley, CA 92307 (619) 247-4876 Louis Luedtke Research-Cottrell P.O. Box 1500 Somerville, NJ 08876 (908) 685-4255 Ilmar Lusis Lockheed Environmental Systems & Technologies Co. 1901 N. Fort Myer Drive, Suite 305 Arlington, VA 22209 (703) 516-9091 W. Howard Macfadden 15112 SE 2nd Street Bellevue, WA 98007 (206) 641-0622 Appendix C — Participants Page C-17 ------- Participants (continued) Carole Macko BNA 1231 25th Street, NW Washington, DC 20037 (202) 452-4030 Bruce Maillet Wehran Envirotect 6 Riverside Drive Andover, MA 01810-1121 (508) 682-1980 John Malanchuk International Technology, Inc. 1133 21st Street, NW Washington, DC 20036 (202) 331-8510 Karen Malkin National Park Service 18th and C Street, NW Washington, DC 20240 (202) 208-4911 Isaac Manning North Texas Air Coalition 2421 Westport Parkway Fort Worth, TX 76177 (817) 224-6010 Bella Maranion U.S. EPA' Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9138 Stanley March Tenneco Gas-Environmental P.O. Box 2511 Houston, TX 77252-2511 (713) 757-8387 Jayne Mardock Clean Air Network/NRDC 1350 New York Avenue, NW, Suite 300 Washington, DC Larry Marigold . MG Refining & Marketing, Inc. 1000 Louisiana, Suite 6500 Houston, TX 77002 (713) 759-0510 Mary Markeete American Institute of Chemical Engineers 345 East 47 Street New York, NY 10017 (212) 705-7329 Chuck Marshall JACA Corporation 550 Pinetown Road Ft. Washington, PA 19034 (215) 643-5466 Mary Ann Massey Research-Cottrell P.O. Box 1500 Branchburg, NJ 08876 (908) 685-4185 Suzanne Mattei NYC Comptroller Municipal Building, Room 517 New York, NY 10007 (212) 669-7396 Damon Matteo Lawrence Livermore National Laboratory P.O. Box 808, L-795 Livermore, CA 94550 (510) 423-0366 Eric Maurer EPA Region 4 345 Courland Street Atlanta, GA 30365 (404) 347-2864 Carol May American Gas Association Susan Mayer Congressional Research Service Larry McAfee Air-Cure Environmental, Inc, 275 West Street, Suite 204 Annapolis, MD 21401 (410) 268-2450 James H. McCall Environmental Capital Corporation P.O. Box 1373 Solanal Beach, CA 92075 (619) 755-3535 Page C-18 Appendix C — Participants ------- Participants (continued) Maria McCann NYNEX Government Affairs 1300 I Street NW, Suite 400 West Washington, DC 20005 (202) 336-7882 Diana McCauley American Institute of Chemical Engineers 345 East 47 Street New York, NY 10017 (212) 705-7329 Dave McDonald Wessels, Arnold & Henderson 901 Marquette Avenue, Suite 2700 Minneapolis, MN 55402 (612) 373-6235 Peter McKenzie Brooklyn Union Gas One MetroTech Center Brooklyn, NY 11201 (718) 403-3009 Terrence McLaughlin DOE, Energy, Research, ER-8.2 1000 Independence Avenue Washington, DC 20585 (301) 903-6432 Gary McNeil U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9173 Paul McNeill Coalition for Safer, Cleaner Vehicles 321 D Street, NW Washington, DC 20002 (202) 543-4499 Peter Meeh Enseco Air-Toxics Laboratory 5033 Stoneybrook Boulevard Milliard, OH 43026 (614) 876-6834 Dhiren Mehta Hughes Environmental Systems Mail Stop MB/A20/SN206 P.O. Box 10011 Manhattan Beach, CA 90266 (310) 536-5487 Richard Mendez Defense Fuel Supply Center Cameron Station Alexandria, VA 22304 (703) 274-2840 Donna Mercado American Gas Association James Merkel Monex Resources, Inc. 45 NE Loop 410, Suite 700 San Antonio, TX 78216 (210) 349-4069 Dean Merkle 2500 Q Street, NW, Apartment 544 Washington, DC 20007 Susan Merther Science and Policy Associates, Inc. West Tower, Suite 400,1333 H Street, NW Washington, DC 20005 (202) 789-1201 Erik J. Meyers Environmental Law Institute 1616 P Street, NW, 2nd Floor Washington, DC 20036 (202) 328-5150 Jeffrey A. Meyers Columbia Gas Distribution Companies 200 Civic Center Drive Columbus, OH 43216-0117 (614) 460-5956 Matt Middaugh Can Manufacturers Institute 1625 Massachusetts Avenue, NW Washington, DC 20036 (202) 232-4677 Appendix C — Participants Page C-19 ------- Participants (continued) Ken Miller Gannet News Service 1000 Wilson Boulevard Arlington, VA 22229-0001 (703) 276-5806 Rich Miller Scott Specialty Gases 614 Easton Road, P.O. Box 310 Plumsteadville, PA 18949 Cheryl Minor Cheryl Minor Consultants, Inc. P.O. Box 944 Rural Hall, NC 27045 (919) 969-5755 Diane Miskowski BCM Engineers 3 Perry Lane Burlington, NJ 08016 (609) 235-6523 John Mizroch U.S. ETEC 2000 K Street, NW, Suite 750 Washington, DC 20006 (202) 466-6933 Reginald Modlin Chrysler Corporation 800 Chrysler Drive East Auburn Hills, MI 48326-2757 (313) 576-8077 Timothy Mohin U.S. Senate Environ. & Public Works Committee Washington, DC 20037 (202) 224-5031 John Mooney Engelhard Corporation 101 Wood Avenue Iselin, NJ 08830 Bruce Moore Central & South West Services, Inc. P.O. Box 660164 Dallas, TX 75266-0164 (214) 777-1288 Eileen Moran Public Service Resources Corporation One Riverfront Plaza, 9th Floor Newark, NJ 07102 (201) 596-6710 Michael Morley Vara International Calgon Carbon Corporation 1201 19th Place Vero Beach, FL 32960 (407) 567-1320 Patrick Morrissey General Motors 1660 L Street, NW Washington, DC 20036 (202) 775-5015 John Moses U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-6380 Ronald M. Moskal Calgon Carbon Corporation P.O. Box 717 Pittsburgh, PA 15230-0717 (412) 787-6314 Leslie Moy 2613 Arvin Street Wheaton, MD 20902 (301) 942-1637 Carl Moyer Acurex Environmental Corporation P.O. Box 7044 Mountain View, CA 94039 (415) 961-5700x3900 Andrew J. Murphy Acurex Environmental Corporation PO Box 13109 Research Triangle Park, NC 27709 (919) 544-4535 Paul Murray Herman Miller, Inc. 855 East Main Avenue Zeeland, MI 49464 (616) 654-5035 Page C-20 Appendix C — Participants ------- Participants (continued) Dean Murville Murvex International 3710 Garfield Street, NW Washington, DC 20007 (202) 338-5214 Jon Naimon IRRC 1755 Massachusetts Avenue, NW Washington, DC 20036 (202) 234-7500 Matt Naud ICF Incorporated 9300 Lee Highway Fairfax, VA 22031-1207 (703) 934-3933 John Nelson The Pearlman Group 2000 L Street, NW, #702 Washington, DC 20036 (202) 296-2739 I.L Newlin Rhone-Poulenc Inc. CN 5266 Princeton, NJ 08543-5266 (908) 297-0100 Robert Newman EA Engineering, Science & Technology 11019 McCormick Road Hunt Valley, MD 21031 (410) 584-7000 John Nichols Dovco Industrial Fabricators, Inc. 1700 Ridgely Street Baltimore, MD 21230 (410) 625-6000 Mary D. Nichols U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-2090 Roberta Nichols Ford Motor Company Village Plaza, Suite 1200 23400 Michigan Avenue Dearborn, MJ 48124 (313) 248-2369 Joseph Niemiec Brooklyn Union Gas One Metro-Tech Center, 19th Floor Brooklyn, NY 11201-3850 (718) 403-3247 Nick Nikkila South Coast Air Quality Management District 21865 Copley Drive Diamond Bar, CA 91765 (909) 396-2660 Jane Nishida Chesapeake Bay Foundation 164 Conduit Street Annapolis, MD 21401 (410) 268-8833 Daniel Noble Environmental Business Research 4452 Park Boulevard, Suite 306 San Diego, CA 92116 (619) 295-7685 Ola Nordquist Swedish Attache of Technology 10880 Wilshire Boulevard, #914 Los Angeles, CA 90024 (310) 475-0589 Claudia O'Brian Design for the Environment 401 M Street, SW Washington, DC 20460 (202) 260-0880 Eileen O'Hara Lafarge Corp. P.O. Box 4600 Reston, VA 22090-1415 (703) 264-3668 Jesse O'Neal Coerr Environmerital Corp. 6320 Quadrangle Drive, #320 Chapel Hill, NC 27514 (919) 419-0567 Carlos O'Neill U.S. EPA 1413 Fernandez Juncos Avenue Santurce, PR 00909 (809) 729-6952 Appendix C — Participants Page C-21 ------- Participants (continued) James T. O'Neill ViGYAN Inc. 5203 Leesburg Pike, Suite 900 Falls Church, VA 22041 (703) 931-1100 Nancy Olsen Island Press 1718 Connecticut Avenue, NW, Suite 300 Washington, DC 20009 (202) 232-7933 Greg Ondich U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-5748 Robert Ouellette BCM Engineers 3 Perry Lane Burlington, NJ 08016 Joanne Oxley Enviro-Management and Research, Inc. 1015 18th Street, NW, Suite 310 Washington, DC 20036 (202) 293-5300 Louis Paley U.S. EPA Crystal Station One 2805 Jefferson Davis Highway Arlington, VA 22202 (703) 308-8806 Keith Pandorf Pandorf's Haz Mat Training & Consulting 759 Columbus Avenue Lebanon, OH 45036 (513) 932-7669 Richard W. Parker Ria Patterson Elf Atochem North America 900 First Avenue King of Prussia, PA 19406 (215)337-6869 Carl Pavetto Systematic Management Services, Inc. 20201 Century Boulevard Germantown, MD 20874 (301) 353-0072 Bruce Perry Environmental Manager's Advisor EHM1, 10 Newmark Road Durham, NH 03824 (603) 868-1496 David Peterson PSA Peugeot Citroen/USTR 2000 Town Center #1700 Southfield, MI 48075 (313) 948-9600 Anne Phelan Environmental Law Institute 1616 T Street, NW, Suite 200 Washington, PC 20036 (202) 939-3853 Jennifer Phillips ViGYAN Inc. 5203 Leesburg Pike, Suite 900 Falls Church, VA 22041 (703) 931-1100 Richie D. Pickens Nalco Fuel Tech 1001 Frontenac Road Naperville, IL 60563-1746 (708)983-3511 Jane Piepho Babcock and Wilcox 20 S. Van Buren Avenue, P.O. Box 351 Barberton, OH 44203 (216) 860-6246 Mark Pine Arthur D. Little, Inc. Bill Piske IEA Field Services 120 South Center Suite 200 Morrisville, NC 27560 (919) 460-0852 Page C-22 Appendix C — Participants ------- Participants (continued) Mahesh Podar U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-5387 Terry Poles Engelhard Corporation 101 Wood Avenue Iselin, NJ 08830 (908) 205-6633 Robert Polito Environmental Resources Management, Inc. 855 Springdale Drive Exton, PA 19341 (215) 524-3500 Frank Pope Technology Funding, Inc. 2000 Alemeda De Las Pulgas, Suite 250 San Mateo, CA 94403 (415) 345-2200 Michael E. Porter Harvard University Business School Aldrich Hall #200, Soldier Field Road Boston, MA 02163 (617) 495-6309 Lawrence Pratt Environmental Law Institute 1616 P Steet, NW Washington, DC 20036 (202) 939-3800 Mary Prendergast ASME 1828 L Street, NW, #906 Washington, DC 20036 (202) 785-3756 Doris Price U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9067 Nancy Prolman U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-2744 John Quarles Morgan, Lewis & Bockius 1800 M Street, NW Washington, DC 20036 (202) 467-7000 Gloria Quinn Edison Electric Insititute 101 Wood Avenue Iselin, NJ 08830 Theresa Quinn B&V Waste, Science and Technology Corporation 100 Cambridge Park Drive Cambridge, MA 02140 (617) 547-2553 Walter D. Ramsay 4501 Arlington Boulevard, #324 Arlington, VA 22203 (703) 525-1780 Todd Ramsoter U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-6921 Dawn Randall Coalition for Safer, Cleaner Vehicles 321 D Street, NW Washington, DC 20002 (202) 543-4499 Fred Rappold ERM, Inc. 855 Springdale Drive Exton, PA 19341 (215) 524-3500 Jay Ratafia-Brown Science Applications International Corporation 1710 Coodridge Drive, P.O. Box 1303, 2-2-5 McLean, VA 22102 (703) 448-6343 Mick Rayder ECG, Inc. 8150 Leesburg Pike, Suite 401 Vienna, VA 22182 (703) 448-8900 Appendix C — Participants Page C-23 ------- Participants (continued) Maurice Raymond Rhone-Poulenc Specialty Chemicals CN 7500 Prospect Plains Road Cranbury, NJ 08512-7500 (609) 860-4506 Lewis Reade U.S. AID 320 21st Street, NW, Suite 3319 Washington, DC 20523-0064 (202) 647-9969 Lisa A. Reale Delmar Publishers Inc. 3 Columbia Circle Albany, NY 12212 (518) 464-3500 Isabel Reiff ICF Incorporated 9300 Lee Highway Fairfax, VA 22031-1207 (703) 934-3006 Ruth Reiman Texas Air Control Board 12124 Park 35 Circle Austin, TX 78741 (512) 908-1219 W. Rerman AAA News Service 1448 New York Avenue, NW Washington, DC 20005 (202) 942-2050 Byron Rettig Petrolite Polymers Division 1709 Industrial Boulevard Kilgore, TX 75662 (903) 984-5077 Richard Rhoden American Patroleum Institute 1220 L Street, NW Washington, DC 20005 (202) 682-8480 Michelle Rice MD Dept. of the Environment 2500 Broening Highway Baltimore, MD 21222 (410) 631-3240 Renee Rico U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9153 Marilyn Ripin JAYCOR 1608 Spring Hill RD Vienna, VA 22182 (703) 847-4106 Leslie S. Ritts Chadbourne & Parke 1101 Vermont Avenue, NW, Suite 900 Washington, DC 20005 (202) 289-3000 Eve Robinson Thompson Publishing Corp. , 1725 K Street, NW, Suite 200 Washington, DC 20006 (202) 872-4000 J. Thomas Robinson Nyacol Products, Inc. P.O. Box 349 Ashland, MA 01721 (508) 881-2220 Phyllis Robinson Business Publishers, Inc. 951 Pershing Drive Silver Spring, MD 20910-4464 (301) 587-6300 John Rolfe Pegasus Consultants 345 Third Street, Suite 640 Niagara Falls, NY 14303 (716) 285-3856 Paul Rosasco Harding Lawson Associates 707 17th Street, ARCO Tower 2400 Denver, CO 80202 (303) 292-5365 Page C-24 Appendix C — Participants ------- Participants (continued) Bob Rose U.S. EPA Crystal Mall II 1921 Jefferson Davis Highway Arlington, VA 22202 (703) 305-5511 Robert Rose Leon G. Billings Inc. 901 15th Street, NW #570 Washington, DC 20005 (202) 371-0764 Julie Rosenberg U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9154 Peter Rosenberg U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-8869 Carl S. Russell Sun Co. 1801 Market Street Philadelphia, PA 19126 (215) 977-6927 Rafael Sanchez U.S. EPA Crystal Station One 2805 Jefferson Davis Highway Arlington, VA 22202 (703) 308-8730 Ernest Sandelli K&M Engineering & Consulting Corporation 2001 L Street, NW, Suite 500 Washington, DC 20036 (202) 728-0390 Edward Sanders Sanders International 1616 P Street, NW, Suite 410 Washington, DC 20036 (202) 939-3480 Gary Saunders Engineering-Science Inc. 401 Harrison Oaks Boulevard, Suite 201 Gary, NC 24513 (919) 677-0080 Alan Scarsella Wahlco Environmental Systems, Inc. 3600 West Segerstrom Avenue Santa Ana, CA 92702-6495 (714) 979-7300 Eric Schaeffer U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-8636 Reeva Schiffman First Environment, Inc. 90 Riverdale Road Riverdale, NJ 07457 (201) 616-9700 John Schofield Thermatrix, Inc. 3590 North First Street, Suite 310 San Jose, CA 95134 (408) 944-0220 Barry Schroer U.S. EPA Douglas Schuessler Ecology and Environment, Inc. 1700 N. Moore Street Arlington, VA 22209 (703) 522-6065 Peter Scott Global Environmental Fund 1250 24th Street, NW, Suite 300 Washington, DC 20037 (202) 466-0529 Tony Scott Sutron Corporation 21300 Ridgetop Circle Sterling, VA 20166 (703) 406-2800 Appendix C — Participants Page C-25 ------- Participants (continued) James Seal OMSTAR Clean Air Corporation 4180 La Jolla Village Drive, Suite 415 La Jolla, CA 92037 (310) 835-5377 Jeffrey Seisler Natural Gas Vehicle Coalition 1515 Wilson Boulevard, Suite 1030 Arlington, VA 22209 (703) 527-3022 John S. Seitz U.S. EPA Research Triangle Park, NC 27711 (919) 541-5616 Jennifer Selber U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9177 David Selden American Management Systems, Inc. 1777 N. Kent Street Arlington, VA 22209 (703) 908-5087 U. SenGupta Vara International 1201 19th Place Vero Beach, FL 32960 (407) 567-1320 Andrea Shal al Fsa Reuters 1333 H Street, NW Washington, DC 20005 (202) 898-8465 Greg Shamitko USAir, Inc. Pittsburgh International Airport, P1T/K125 Pittsburgh, PA 15231 (412) 747-3070 Mark R. Shanahan Ohio Air Quality Development Authority 1901 Le Veque Tower 50 West Broad Street Columbus, OH 43215-5985 (614) 224-3383 Rich Shank Science Applications International Corporation 655 Metro Place S., Suite 745 Dublin, OH 43017 (614) 793-7600 Michael H. Shapiro U.S. EPA 401 M Street, SW Washington, DC 20460 Deborah Sheiman Natural Resources Defense Council 1350 New York Avenue, NW Suite 300 Washington, DC 20005 (202) 783-7800 Robert Sheriff Atlantic Environmental Inc. 2E-Blackwell Street Dover, NJ 07801 (201) 366-4660 Claire Sherry U.S. EPA David Sherve MTI 41762 Christy Street Fremont, CA 94538 (510) 490-0900 John Shoaff U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-1831 Jerry Shoemaker Engineering-Science 10521 Rosehaven Street Fairfax, VA 22030-2899 (703) 591-7575 Albert Short United States-Asia Environmental Partnership 1133 20th Street, NW, Suite 300 Washington, DC 20036 (202) 835-0333 Glyn Short Page C-26 Appendix C — Participants ------- Participants (continued) Richard Siegel B&V Waste Science and Technology Corporation 100 CambridgePark Drive Cambridge, MA 02140 (617) 547-2553 Daniel Silver U.S. - Asia Environmental Partnership 1133 20th Street NW, Suite 300 Washington DC, 20036 (202) 835-0333 Karl Simon U.S. EPA 401 M Street, SW (6405J) Washington, DC 20460 (202) 233-9299 John Simpson Public Utilities Reports 2111 Wilson Boulevard, Suite 200 Arlington, VA 22201 (703) 243-7000 Orman Simpson MDA Scientific, Inc. 3000 Northwoods Parkway, Suite 185 Norcross, GA 30071 (404) 242-0977 Kara Sissel Clean Air Report 1225 Jefferson Davis Highway Alexandria, VA 22202 (703) 892-8516 Richard Skaggs CalTest Instruments, Inc. Omstar Environmental Products 126 Marine Avenue Wilmington, CA 90744 (310) 835-5377 David Slaughter Thompson Publishing Group 1725 K Street, NW, Suite 200 Washington, DC 20006 (202) 872-4000 Anthony R. Sloan Anthony Sloan and Associates 23 Chestnut Lane Wayne, PA 19087 (215) 964-0620 Bruce Smart World Resources Institute 1709 New York Avenue, NW, Suite 700 Washington, DC 20006 (202) 638-6300 Alan Smith Environment Plus/Brooklyn Union Gas One Metrotech Center Brooklyn, NY 11201 (718) 403-3373 F. Bradford Smith Environmental Elements Corporation 3700 Koppers Street Baltimore, MD 21227 (410) 368-7090 Jeffrey Smith Institute of Clean Air Companies 1707 L Street, NW Washington, DC (202) 457-0911 Kenon Smith U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9164 Michael Smith Graseby Andersen Inc. 4801 Fulton Industrial Boulevard Atlanta, GA 30336 (404) 691-1910 Rodney Sobin U.S. Congress Office of Technology Assessment Washington, DC 20510-7025 (202) 228-6369 Daryl K. Solomonson TRW One Federal Systems Park Drive Fairfax, VA 22033 (703) 803-4990 George Spencer Air Daily, Ltd. 4418 Mac Arthur Boulevard Washington, DC 20007 (202) 298-8202 Appendix C — Participants Page C-27 ------- Participants (continued) Sam Spencer Air Daily, Ltd. 4418 Mac Arthur Boulevard Washington, DC 20007 (202) 298-8202 Bryan C. Spielman Thermacon Industries 111 West 40th Street New York, NY 10018 (212) 704-2111 Curtis Spraitzar 2925-1 19th Street South Birmingham, AL 35209 (205) 879-5561 Beverly Stanton Manfacturers of Emission Controls Association 1707 L Street, NW, Suite 570 Washington, DC 20036 (202) 296-4797 Michael Stanton American Automobile Manufacturers Association 1620 Eye Street, NW, Suite 1000 Washington, DC 20006 (202) 775-2729 Lynne Steingass The Environmental Policy Center 2000 L Street, NW, Suite 710 Washington, DC 20010 (202) 296-7444 Stan Stephenson Coalition for Safer, Cleaner Vehicles The After Market Research Inst, Inc. Box 648 Southeastern, PA 19399 (215) 964-9820 Mary Stevens Weinberg, Bergeson, & Neuman 1300 1 Street NW, Suite 1000 W Washington, DC 20005 (202) 962-8528 Kevin Stickney Wheelabrator Technologies, Inc. Liberty Lane Hampton, NH 03842 (603) 929-3354 Jerry Stilkind USIA News 301 4th Street, NW Washington, DC 20008 (202) 619-4157 Lori Lee Stall Radian Corp. 2455 Horsepen Road Herndon, VA 22071 (703) 713-1500 Paul M. Stolpman U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9140 Mary Stone National League of Cities 1301 Pennsylvania Avenue, NW Washington, DC 20004 (202) 626-3030 Donald H. Stowe Dravo Lime Company 3600 One Oliver Plaza Pittsburgh, PA 15222 (412) 566-5574 Thomas Strang Motor and Equipment Manufacturers Assn. P.O. Box 13966 Research Triangle Park, NC 27709-3966 Roger Strelow Bechtel Corporation 50 Beale Street San Francisco, CA 94105 (415) 768-2759 Donna Strumbel East Ohio Gas Company 1717 E. Ninth Street, Room 826 Cleveland, OH 44114 (216) 736-5359 Russell Sturm International Institute for Energy Conservation 750 1st Street, NE, Suite 540 Washington, DC 20002 (202) 842-3388 Page C-28 Appendix C — Participants ------- Participants (continued) George Sugiyama Pilsbury, Madison & Sutro 1667 K Street, NW, Suite 1100 Washington, DC 20006 (202) 463-2382 Margaret Sullivan U.S. - Asia Environmental Partnership 1133 20th Street, NW, Suite 300 Washington, DC 20036 (202) 835-0333 Robert Sullivan JAYCOR 1608 Spring Hill Road Vienna, VA 22182 (703) 847-4008 Eric Summers Science and Policy Associates, Inc. West Tower, Suite 400, 1333 H Street, N.W. Washington, DC 20005 (202) 789-1201 Rupert Surcouf Energy and Environmental Sales Corporation 650 Poydras, Suite 2045 New Orleans, LA 70130 (504) 523-1509 Nancy Sutley U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-4123 George Sverdrup Battelle Memorial Institute 505 King Avenue Columbus, OH 43201-2693 (614) 424-5014 Kevin T. Swift Chemical Manufacturers Association 2501 M Street, NW Washington, DC 20037 (202) 887-1286 John Tallmadge Clean Air Network Yuji Tanaka Cosmo Oil of U.S.A., Inc. 280 Park Avenue, 22nd Floor, East Building New York, NY 10017 (212) 949-9710 Jake Tarr Arete Ventures 6110 Executive Boulevard Rockville, MD 20852 (301) 881-2555 Grant Taunton Human Resources Consulting Services 314 S. Smedley Street Philadelphia, PA 19103 (215) 893-9383 Lawrence Taylor Envirotest Systems, Inc. 2002 Forbes Boulevard Tucson, AZ 85745 (602) 620-1500x427 Valerie Taylor U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-0880 Paul Templet Louisiana State University 11831 Pride Point, Hudson Road Zachary, LA 70791 (504) 388-6428 Kenneth Thomas Horiba Instruments, Inc. 3901 Varsity Drive Ann Arbor, MI 48108 (313) 973-2171 Louis Thomas Columbia Gas 200 Civic Center Drive Columbus, OH 43216 (614) 460-6801 Gary Threatt A.O. Smith Water Products Co. Highway 1 North, P.O. Box 600 McBee, SC 29101 (803) 335-8281 Appendix C — Participants Page C-29 ------- Participants (continued) Susan Tierney U.S. Department of Energy Forrestal Bldg., 1000 Independence Avenue, SW Washington, DC 20585 (202) 586-5800 Maria Tikoff U.S. EPA 401 M Street, SW Washington, DC 20460 (703) 233-9178 Rex Tingle AFL-CIO 815 16th St., NW, Room 704 Washington, DC 20006 (202) 637-5203 Yves Tondeur Triangle Labs 6320 Quadrangle Drive # 240 Chapel Hill, NC 27510 493-0877 Jeffrey Tranen New England Electric Systems 25 Research Drive Westborough, MA 01582 (508) 366-9011 David Trossman Alex, Brown & Sons, Inc. 135 East Baltimore Street Baltimore, MD 21202 (410) 783-5330 Whitney Truelove-Cranor U.S. EPA Judiciary Square 2805 Jefferson Davis Highway Arlington, VA 22202 (703) 233-9036 Jose A. Trujillo K&M Engineering & Consulting Corporation 2001 L Street, NW, Suite 500 Washington, DC 20036 (202) 728-0390 Hank Trzcinski Advantage Plus Analysis Corporation 8503 Marquette Street Vienna, VA 22180 (703) 573-2441 Norman Umberger ViGYAN Inc. 5203 Leesburg Pike, Suite 900 Falls Church, VA 22041 (703) 931-1100 Hiroyuki Umetani Teijin America, Inc. 10 East 50th Street New York, NY 10022 (212) 308-8744 Kenneth Underwood AeroVironment, Inc. 222 E. Huntington Drive Monrovia, CA 91016 (818) 357-9980 Richard Vaccaro Killam Associates 27 Bleeker Street Millburn, NJ 07041 (201) 912-2455 Rene Van Breusegen Schriebner, Grana, & Yonley Inc. 271 Wolfner Drive Saint Louis, MO 63026 (314) 349-8399 Amy Van Kolken Michigan Department of Natural Resources P.O. Box 30028 Lansing, MI 48909 (517) 373-7040 Jeffrey W. VanSant New England Power Company Michael P. Vanderbergh U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-7960 Lynn Vendinello U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-8612 Page C-30 Appendix C — Participants ------- Participants (continued) Laura Viani American Metal Market 601 13th Street, NW, Suite 520 South Washington, DC 20005 (202) 639-6931 Karen von Clef Veriflo Corp. 250 Canal Boulevard Richmond, VA 94804 (215) 340-0756 Carol Vukmanic USAir, Inc. Pittsburgh International Airport, PIT/K125 Pittsburgh, PA 15231 (412) 747-3084 James S. Wallis Scott Specialty Gases, Inc. 6141 Easton Road, P.O. Box 310 Plumsteadville, PA 18949 (215) 766-8861 William Walsh Greenpeace 1436 U Street, NW Washington, DC 20009 (202) 319-2491 Anthony Walters Environmental Systems & Solutions, Inc. 3100 33rd Place, NW Washington, DC 20008 (202) 966-6698 Bruce Warden IT Analytical Services 11499 Chester Road Cincinnati, OH 45246 (513) 782-4600 Ann Watkins U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9113 Denise Watts City of Irvine 1 Civic Center Plaza Irvine, CA 92713 (714) 724-7322 Michael J. Wax Institute of Clean Air Companies 1707 L Street, NW Washington, DC 20036 (202) 457-0911 Wendy Webb GE Plastics One Plastics Drive BurkviUe, AL 36752 (205) 832-5611 Henry Weber H & W Management Science Consultants 415 East 52nd Street, Suite 1D/C New York, NY 10022 (212) 355-1448 Richard A. Wegman Garvey, Schubert, & Barer 1000 Potomac Street, NW, Suite 500 Washington, DC 20007 (202) 965-7880 Abbie Weiner Lean Power Corporation 8700 Georgia Avenue Silver Spring, MD 20910 (301) 588-2200 Stephanie Weisband Advanced Sciences, Inc. 2000 N. 15th Street, Suite 407 Arlington, VA 22201 (703) 243-4900 Roy Weiskircher USX Corp. Room 2206 USX Tower, 600 Grant Street Pittsburgh, PA 15219 (412) 433-5914 Ellyn Weiss Foley, Hoag, & Eliot 1615 L Street, NW, Suite 850 Washington, DC 20036 (202) 775-0600 Jeff Wells EPA 401 M Street, SW Washington, DC 20460 (202) 260-6787 Appendix C — Participants Page C-31 ------- Participants (continued) John Wells The Bruce Company 501 3rd Street NW, # 260 Washington, DC 20001 (202) 434-9358 Jonathan Welsh Welsh Technologies P.O. Box 4214 River Edge, NJ 07661 (201) 489-3465 Jeffrey Wendle CET Engineering Services 1240 North Mountain Road Harrisburg, PA 17112 (717)541-0622 Vaughn Whatley EPA Region 8 999 18th Street, Suite 500, 8-OEA Denver, CO 80521 (303)294-1111 J.E. Wheeler Eclipse Inc. 1665 Elmwood Road Rockford, IL 61103 (815) 877-3031 Mary Margaret Whipple Washington Metro Area Transit Authority Board 2100 Clarendon Boulevard, Suite 300 Arlington, VA 22201 (703) 358-3130 Paul White Johnson Matthey Corporation 460 East Swedesford Road Wayne, PA 19087-1880 (215) 971-3118 John P. Whitescarver Carter & Burgess P.O. Box 16525 Washington, DC 20047 (703) 471-9196 Mary Lynn Wilhere DR1/ McGraw-Hill 1200 G Street, NW, 10th Floor Washington, DC 20005 (202) 383-3544 Paul Wilkinson American Gas Association Richard D. Wilson U.S. EPA 401 M Street, SW Washington, DC 20460 (202) 260-7645 Sherie Winston Engineering News Record 1200 G Street, Suite 1100 Washington, DC (202) 383-2255 John Wisniewski Export-Import Bank of the United States 811 Vermont Avenue, NW Washington, DC 20571 (202) 566-8802 Rosemary Wolfe U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9176 Carol Woodyard The Clean Air Review 10400 Whitestone Road Raleigh, NC 27615 (919) 870-1845 Mitch Wool Geraghty & Miller 555 Clyde Avenue Mt. View, CA 94043 (408) 961-5700 Bob Wright MG Refining & Marketing, Inc. 1000 Louisiana, Suite 1000 Houston, TX 77002 (713) 759-0510 Lloyd Wright U.S. EPA Judiciary Square 501 3rd Street Washington, DC 20005 (202) 233-9191 Page C-32 Appendix C — Participants ------- Participants (continued) Sergey Yakubov Russian Embassy 1125 16th Street, NW Washington, DC 20036 (202) 347-5031 Helen Yoest Entropy, Inc. P.O. Box 12291 Research Triangle Park, NC 27709-2291 (919) 781-3550 Marcia Zalbowitz EV Inside 1915 Kalorama Road, NW #102 Washington, DC 20009 (202) 387-6185 Joseph Zeigler Joy Environmental Technologies Inc. 10700 N. Freeway, Towerpark North Houston, TX 77037 (713) 878-1037 Stanley Zwicker Dames & Moore 911 Wilshire Boulevard Los Angeles, CA 90017 (213) 683-1560 Appendix C — Participants Page C-33 ------- |