Netting, which was initiated in 1980, allows expansion of an existing plant without review as a new source if the plant does not increase its total emissions. It is a newer and potentially more useful procedure than offsets because it allows existing plants to become new plants over time. Netting was contested in the courts but upheld. Offset procedures, developed in 1976, allow new firms to operate in a region not in compliance with the national air quality standards as long as overall pollution does not increase. Thus, a new firm must obtain a counterbalancing reduction in emissions from an existing polluter in the region.
Banking is the fourth component of the permits program.
Banking allows dischargers to store emission reductions, but not BAT medallions. The existing trading system only superficially resembles the transferable pollution permit market envisioned by economists. More accurately, the EPA acts as the agent for several special-interest groups, including the environmental lobby, firms that manufacture pollution control equipment, firms that currently meet BAT emission limitations with control equipment in place, and the procontrol forces in the local air quality management region. Under the ERC trading system, the de facto pollution rights held by firms frequently are worth more than the returns they can capture through the limited trades allowed by existing regulations. Special interests have exploited this regulatory process to restrict competition and to solidify their market shares at the expense of new, more innovative competition.