APRIL 29, 1997

Good afternoon. My name is Jeffrey C. Smith and I am the Executive Director of the Institute of Clean Air Companies, Inc. ("the Institute" or "ICAC"). The Institute is pleased to participate in today's hearing, and applauds the Subcommittee for providing this opportunity to share different ideas and views on the important matter of EPA's proposed revisions to the particulate matter and ozone ambient standards (NAAQS).

By way of introduction, ICAC is the national association of companies that supply air pollution control and monitoring technology for emissions of air pollutants, including emissions of sulfur oxides (SOx), nitrogen oxides (NOx), volatile organic compounds (VOCs), and particulate matter (PM), which contribute either directly or as precursors to fine particulate matter and ozone in the atmosphere. ICAC businesses compete with each other, offer the full spectrum of technologies available, and serve all stationary source emitters that would be affected by the revised standards.

This afternoon I will briefly address, qualitatively, the impact of the proposed standards on the U.S. air pollution control technology industry and the overall cost of the proposal.

The U.S. air pollution control industry supports EPA' proposal to revise the ozone and particulate matter ambient standards. Suppliers of control technology for the pollutants that would be affected by the EPA proposal employ tens of thousands of people, and these firms in general have suffered disappointing earnings which have necessitated severe downsizing in many cases. The EPA proposal would benefit these businesses at an important time.

I should note also that nearly all suppliers of technology to control the emissions that are precursors of ozone and fine particulate matter are small businesses. Indeed, for the control of volatile organic compounds, a leading precursor of ozone, I estimate that over 95% of the 100+ control suppliers are "small businesses", i.e., have fewer than 500 employees. In the great majority of cases, these companies have far fewer than 500 employees.

Thus, resolving the admittedly tough clean air issues we face in a way that protects public health and the environment has an important side-benefit: it would also promote the air pollution control industry, which creates jobs as compliance dollars are recycled in the economy. This industry is currently generating a modest trade surplus to help offset the billions this Nation hemorrhages each month on international trade, and is providing technological leadership that can continue to be deployed in the fast-growing overseas markets for U.S. air pollution control technology.

With regard to the overall cost of the EPA proposal, I note first the Institute's support for the two-step process of setting ambient air quality standards, and then addressing implementation and cost issues. This process has received bipartisan support and worked well for over two decades. By clearly separating health science and cost/implementation issues, the process actually allows the public, as well as federal and state government authorities to rationally parse out an then balance all policy issues. In short, no emitting source will have to comply with the new standards before costs are thoroughly examined.

No one of course knows what the exact cost of the proposal will be. To be sure, there will be an implementation cost, but it is well to remember several important lessons of the past 27 years in implementing the Clean Air Act.

One of these is illustrated by my experience nearly a decade ago when I sat before various House and Senate Committees and presented detailed implementation cost estimates for the acid rain provisions of what became the Clean Air Act Amendments of 1990. Regulated industry claimed the removal costs of 502, the leading precursor to acid rain as well as a precursor to fine particulate matter, would reach thousands of dollars a ton, while EPA claimed a more modest sum of $1,500 to $2,000 a ton was about what we could expect. I disagreed, arguing that market and technical data supported a dollar-per-ton-removed cost of about $500. But I overestimated the cost, too, since today, in 1997's inflated dollars, a ton of 502 is removed for only $110 a ton.

The preeminent lesson of our Nation's 27-year history under the Clean Air Act is that actual compliance costs turn out to be much lower than the costs predicted at the outset of a regulatory action because the regulated community, markets, and control technology suppliers are smarter and more efficient at reducing costs than forecasters predict. This is even more true in light of today's emphasis on flexibility in compliance and authorized use of and credit for market-based approaches and pollution prevention. Those who predict gargantuan cost impacts ignore this important lesson, and also underestimate the wisdom of state and local officials who will be implementing these standards. Everyone has an interest in rational and prudent clean air policy, and the cost effectiveness of various compliance options will be considered during implementation. And there is no reason not to believe that, as has always been the case, all of us - regulated industry, government officials, and technology suppliers - will discover ever more cost-effective compliance solutions, especially since nearly a decade exists between now and when the impact of new standards would be felt.

For our part, members of the Institute continue to invest in research and development to improve removal efficiencies while lowering costs and simplifying operation. We have to. The air pollution control technology industry is innovative and highly competitive. And improvements in cost-effectiveness are what give one business or technology a competitive advantage over another.

It is no exaggeration to say that the clean air policy choices we make in 1997 will determine the amount of air pollution that affects the health and environment of ourselves and our children over the next decade and beyond. Ten years is a long time, nearly a life-time for childhood. We must, therefore, choose correctly, informed both by lessons learned from our nearly three decades of Clean Air Act experience, and by a vision for the future which reflects, as does every opinion poll, the American public's demand for a clean and healthy environment.

In closing, the Institute again expresses its appreciation to the Subcommittee for providing a forum for dialogue on this important issue. In our view, EPA has taken the proper course by its efforts to establish ozone and particulate matter standards that protect public health. If those health-based standards are revised, the U.S. air pollution control industry is ready to do its part to help our Nation achieve its clean air goals cost-effectively. Based on historical precedent, the current pace of control technology innovation, the use of market-based incentives, the years between now and compliance deadlines, and competition within the air pollution control technology industry and among technologies, we are confident that the actual cost of compliance will be less than most of us today imagine.