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Air and Noise Pollution Abatement Services: an Examination of U.S U.S. International Trade Commission COMMISSIONERS Stephen Koplan, Chairman Deanna Tanner Okun, Vice Chairman Marcia E. Miller Jennifer A. Hillman Charlotte R. Lane Daniel R. Pearson Robert A. Rogowsky Director of Operations Karen Laney-Cummings Director of Industries Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Air and Noise Pollution Abatement Services: An Examination of U.S. and Foreign Markets Investigation No. 332-461 Publication 3761 April 2005 This report was principally prepared by the Office of Industries Project Team Jennifer Baumert, Project Leader [email protected] Eric Forden, Deputy Project Leader [email protected] Judith Dean, Economist Staff assigned: William Chadwick, Lisa Ferens, David Ingersoll, Dennis Luther, Christopher Mapes, Erick Oh, Robert Randall, and Ben Randol Office of Operations Peg MacKnight With special assistance from: Lynette Gabourel and Cynthia Payne Primary Reviewers Alan Fox and Mark Paulson under the direction of Richard Brown, Chief Services and Investment Division ABSTRACT As requested by the United States Trade Representative (USTR), this report examines global markets for air and noise pollution abatement services and trade in these services markets for the purpose of providing information that would be useful in conducting trade negotiations and environmental reviews. The report indicates that demand for air and noise pollution abatement services is driven largely by government regulation and enforcement efforts, and to a lesser extent, by international treaty obligations, public sentiment, and private-sector financial resources. The majority of air pollution abatement services are reportedly delivered in conjunction with air pollution control equipment, with European, Japanese, and U.S. firms being the dominant suppliers of such services and equipment. Emissions trading, a financial service associated with air pollution abatement, is a newly emerging market that is gaining acceptance in developed countries. The market for noise pollution abatement services is small, as such pollution is often addressed through product standards, environmental and labor regulation, scheduling, and zoning restrictions. i Table of Contents Page Abstract .................................................................. i Executive summary .................................................. vii Acronyms and chemicals symbols ............................... ix Chapter 1. Introduction ............................................. 1-1 Purpose................................................................... 1-1 Air pollution abatement...................................................... 1-2 Noise pollution abatement.................................................... 1-3 Air and noise pollution abatement services in the World Trade Organization ............ 1-4 Scope .................................................................... 1-4 Methodological approach ..................................................... 1-5 Organization............................................................... 1-9 Chapter 2. Literature review ...................................... 2-1 Monitoring and testing....................................................... 2-1 Impact of monitoring and enforcement on environmental performance ............. 2-1 Impact of public disclosure programs ....................................... 2-3 Permit trading ............................................................. 2-4 Efficiency in design..................................................... 2-5 Effectiveness in practice ................................................. 2-6 Abatement technology ....................................................... 2-8 Impact of environmental regulations on technological innovation and diffusion ...... 2-8 Type of environmental regulation and technological innovation and diffusion ....... 2-10 References .............................................................. 2-11 Chapter 3. Factors affecting supply and demand ........... 3-1 Factors affecting supply ...................................................... 3-1 Factors affecting demand..................................................... 3-2 iii Table of Contents–Continued Page Chapter 4. Air pollution abatement services and equipment ................................................... 4-1 Technologies and methods ..................................................... 4-3 Market size and characteristics .................................................. 4-5 Key suppliers and consumers ................................................... 4-8 Related equipment............................................................ 4-9 Trade and investment ......................................................... 4-10 Chapter 5. Emissions trading .................................... 5-1 Introduction ............................................................... 5-1 Market segments ........................................................... 5-3 The U.S. Acid Rain Program (U.S. SO2 Program )................................. 5-4 The European Union Emissions Trading Scheme (EU ETS) .......................... 5-9 Overview ............................................................. 5-9 Market characteristics ................................................... 5-11 Market participants ..................................................... 5-12 Market activity......................................................... 5-14 The United Kingdom Emissions Trading Scheme (UK-ETS) ......................... 5-16 Chicago Climate Exchange (CCX) ............................................. 5-17 Trade and investment........................................................ 5-18 Market outlook............................................................. 5-21 Chapter 6. Noise pollution abatement services and equipment ................................................ 6-1 Introduction ............................................................... 6-1 Technologies and methods .................................................... 6-2 Market size and characteristics................................................. 6-5 Key suppliers and consumers.................................................. 6-6 Related equipment .......................................................... 6-6 Trade and investment........................................................ 6-7 Chapter 7. Summary of findings ................................. 7-1 iv Table of Contents–Continued Page Appendices A. Request letter............................................................... A-1 B. Federal Register notice....................................................... B-1 C. Cleaning services of exhaust gases and noise abatement services in the General Agreement on Trade in Services............................................. C-1 D. Country summaries .......................................................... D-1 E. Position of interested party .................................................... E-1 F. Glossary ................................................................... F-1 Boxes 4-1. U.S. EPA-listed industrial emitters equipment, sorted by OECD classification ......... 4-11 5-1. Emissions trading vs. command-and-control: Examples of potential cost savings ...... 5-3 5-2. Regional emissions trading schemes.......................................... 5-7 5-3. Anatomy of an EUA brokered trade.......................................... 5-13 Figures 1-1. Air and noise pollution abatement services: Core and cluster services .................. 1-6 3-1. GDP per capita and industry perceptions of air pollution regulations, by country, 2003 .... 3-7 3-2. Per capita GDP and CO2 emissions, by country, 2002 ............................... 3-8 5-1. U.S. SO2 Program, allowances prices and volumes arranged through brokers, January 2002-January 2005 ................................................ 5-10 5-2. EU emissions trading scheme, EU allowance prices and volumes arranged through brokers, July 2003-January 2005 ............................................ 5-15 5-3. Chicago Climate Exchange, volumes by month and vintage, 2004 ..................... 5-19 5-4. Chicago Climate Exchanges prices and volumes traded during January 2004- December 2004 ......................................................... 5-20 Tables 1-1. Data sources: Air and noise pollution abatement ................................... 1-8 3-1. Factors affecting supply and demand in the air and noise pollution abatement services and goods industries ......................................................... 3-12 4-1. Characteristic of selected country markets for air pollution abatement services and goods .............................................................. 4-14 5-1. Comparison of emissions trading schemes........................................ 5-5 v 04/05 ITC READER SATISFACTION SURVEY Air and Noise Pollution Abatement Services: An Examination of U.S. and Foreign Markets The U.S. International Trade Commission (USITC) is interested in your voluntary com- ments (burden less than 10 minutes) to help assess the value and quality of our reports, and to assist in improving future products. Please return survey by facsimile (202-205-2359) or by mail to the USITC, or visit the USITC Internet home page (http://reportweb.usitc.gov/reader_survey/readersurvey.html) to electronically submit a Web version
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