These mechanisms include pollution taxes and tradeable pollution permits.

The idea behind what are called cap-and-trade arrangements is to issue a limited number of pollution permits and then allow companies to buy and sell them.

Certainly, heavy polluters are better off because they do not have to buy pollution permits or invest in new technology.

They told of senior company executives ordering them to ignore requirements for pollution permits.

State officials say the law will allow them to regulate companies that had operated for decades without pollution permits.

He threatened that unless they complied, no new pollution permits could be issued for streams where the new limits were not being enforced.

Meeting the same goal by allowing unrestricted trading in pollution permits would cost just $1.5 billion, the agency found.

Further innovations being considered include the issuing of auctionable pollution permits.

The agency's policy addresses mounting complaints by civil rights and environmental advocates that state agencies are guilty of racial discrimination in granting pollution permits.

This trading of pollution permits is the Administration's favored approach for letting the marketplace choose how to reduce emissions.