September 12, 1996

Dear Mr. Dworek,

This is in response to the issue paper titled "Incentives for Ambient Air Quality Monitoring Under New NAAQS" prepared by the Base Program Analysis and Policies Work Group and dated 9/3/96. On behalf of the Economics Advisory Group consisting of Alan Krupnick, Deirdre Farrell, Rosalina Rodriguez, Ron Evans, Scott Mathias, Richard Chastain, Ed Watts and Jane Hall, we would like to offer the following comments.

Background Section:

As the Coordination WG suggested in their 9/4 conference call, it would be helpful if the paper began with more background on the monitoring issue than is provided. For example:

1. What does the current monitoring network consist of? (Where are monitors located, etc.)

2. How is it used? (This leads to a discussion of the disincentives to placing more)

3. What improvements are needed and why?

The paper goes into some detail describing the possible design of a comprehensive monitoring network. Perhaps it's scope should be broadened to incorporate a thorough review of options for the design of a revised/expanded monitoring network, (including enhanced focus on monitoring air quality in population centers) since the appropriateness of specific incentives to place additional monitors depends on specific characteristics of the desired network.

For example, a network could be designed to be minimally adequate for regulatory purposes. In this case, few if any incentives would be appropriate for supporting this network, but incentives could be established for voluntary efforts to go beyond what is minimally adequate. If, on the other hand, the network is to contain additional sites for special purposes, research, etc., then a different set of incentives would be appropriate.

Comments on specific incentives:

Incentive 1 (decouple designations from monitored pollution levels): The paper needs to emphasize the compatibility of this incentive with the proposed designation strategy based on AOVs and AOIs. In particular, moving to the AOV / AOI paradigm would remove the single greatest disincentive to placing additional monitors, namely the potential to induce mandatory regulatory action on the basis of a single monitored exceedance.

Incentive 2 (establish a category of special purpose/research monitors): A rationale is needed for why State and local governments and/or the private sector should be required to support a research/special network. If an acceptable rationale can be provided, thought should be given to measures for ensuring that these monitors will permanently be used for non- regulatory purposes.

Suggested Incentive: Average or population-weight monitored data for the purpose of measuring progress (ROP):

A future official indicator of progress might be based on a formula that would allow weather-adjusted, population-weighted monitor data, (as well as peak monitor readings), to be considered. Such a formula might stipulate that one aspect of demonstrating progress towards air quality goals (ROP) is to show a declining weather-adjusted population-exposure.

The most significant benefit to population-weighting of monitors is that it would provide an incentive to an area to place additional monitors in areas where people are. Particularly in the absence of a new designation scheme such as AOV / AOI, population-weighting of monitors should be included as a measure of progress in meeting air quality goals.

There would likely be more support for contributing to the financing of a new network if violations were based on averages of all monitors (once all monitors required for the new network are installed) rather than on several of the highest-reading monitors.

Suggested Incentive: Allow the use of less conservative modeling assumptions once an area has installed all the monitors required for the new network.

General Comments:

The discussion in the issue paper of using permit fee reductions as incentives seems to ignore the fact that shortfalls for funding other activities would need to be dealt with.

The organization is unclear. It is not clear how the list of "options" in the final section of the paper is meant to relate to the list of "incentives" in the middle section. Are the "options" meant to show how combinations of incentives can be fit together to form distinct and coherent units? If so, perhaps the resulting units could be summarized for the reader's comprehension, and each incentive drawn upon for the option could be explicitly quoted.