The traditional form of environmental regulation imposes “one-size fits all” rules on pollutant sources. This could take the form of performance standards, in which all sources have to comply with the same outcome standard. For example, the outcome could take the form of emissions per mile for a vehicle or emissions per kilowatt-hour at a utility. Alternatively, the regulation could take the form of a technology standard that requires all sources to install the same technology, such as a scrubber on a smokestack.

Technology standards tend to have higher costs to achieve a given level of emissions abatement because the common requirement on all sources fails to account for the heterogeneity in the abatement opportunities among these sources. Mandating a common technology will impose high costs on some sources, and much lower costs on other sources. Total costs of achieving a given level emissions abatement would be lower if the standard was less stringent for the high-cost sources and more stringent on the low-cost sources. Performance standards provide some additional flexibility to sources, but they also tend to result in variation in costs among sources and higher total costs than necessary. In addition, in the context of regulating conventional air pollutants, differential command and control standards have been implemented for existing and new facilities.  Such an approach, by imposing more stringent standards on the new facilities, can effectively limit market entry and slow the turnover of the pollution-intensive capital stock.

		Scope and Point of Regulation in a Mandatory Climate Policy William Pizer Weathervane Backgrounder | February 2007 This paper describes options concerning the scope and point of regulation for federal polices to control greenhouse gas (GHG) emissions. The scope of a control program is an important policy choice determining which sectors and activities will be directly affected by the policy. The exact form of the policy is also important: broader market-based policies (versus narrower or non-market-based policies) offer greater opportunities to incorporate low cost mitigation options. The point of regulation turns out to be an important part of this choice because broader market-based policies may require us to think differently about who and where we regulate emissions. This analysis highlights the interconnectedness of the decisions regarding scope and point of regulation, identifies policy options, and identifies concerns that could be used to evaluate these options.
		Choosing Environmental Policy: Comparing Instruments and Outcomes in the United States and Europe Winston Harrington, Richard Morgenstern, Thomas Sterner, eds. RFF Press, 2004
		Environmental Law and Public Policy Richard L. Revesz and Robert N. Stavins Discussion Paper 04-30 REV, June 2004 Revised September 2004