[From Law & Policy, 7(4):457-489 (1985)]

ERROL MEIDINGER

. . .

B. THE CONCEPT OF MARKET MECHANISMS

. . . I should define the term "market mechanisms." Although it may have a somewhat peculiar meaning in the U.S. regulatory context, commentators generally invoke two basic ideas with the term. The first is that the allocation of pollution control should be inversely related to its costs. Thus polluters for whom pollution control is cheap should reduce emissions greatly, and polluters for whom control is expensive should reduce them little or not at all. Accordingly then, as if a market allocated pollution, any given level of pollution control would be achieved at the lowest feasible total cost to society (as paid by polluters and reflected in the costs of the products and services they provide to society).

Second, no more pollution control should be carried out than that for which society is willing to pay. At some point the cost of additional pollution control will exceed the value of the amenities members of society are willing to give up for it, and at that point no more pollution control should occur. At that optimal point, no one would be willing to trade anything she has (or could get with the same amount of resources) to obtain any further pollution control. In the jargon, the marginal cost of increased pollution control would equal the marginal benefit. That is where the price of pollution control would hover until tastes changed, pollution control grew cheaper, or something else happened to alter either the cost or the value of pollution control.

The problem with this conception, of course, is that there is no good way of ascertaining that price. There is not, and cannot be, a market for pollution control. We cannot go to a store and buy pollution control the way we can buy, say, hamburger. If I were to go to a polluter and pay for a reduction in emissions of ten pounds of sulfur dioxide per year, it would do me little good. Not only would I get little actual benefit from the reduction, but I would share it with a multitude of others who paid nothing for it. Moreover, any other polluter could increase emissions and wipe out the benefits for which I paid. To boot, pollution costs lives and years of lives, and, as we know, lives are very hard to value. Finally, of course, it is not at all clear that people should have to pay not to suffer pollution.

Nonetheless, even if it is not possible to use the market to decide how much pollution we should have, it does not follow that the market cannot be used to decide who should have the privilege of creating whatever level of pollution society will tolerate. American regulatory discourse has focused on two means of so using the market: emissions charges and marketable permits. Emissions charges would require polluters to pay a fixed price for every unit of pollution emitted. Assuming polluters are economically rational, they would only pay those emissions charges lower than the cost of pollution control; they would therefore reduce emissions until the unit cost of further reductions exceeded the unit tax. And, of course, controls would be concentrated among polluters for whom reductions are most extensive, thus minimizing the total social cost of pollution control.

Marketable Permits would seek the same end in a slightly different fashion. Instead of taxing all emissions, they would require all emissions to be covered by permits. Only a limited number of permits would be available. Therefore, those polluters for whom emissions controls are most expensive would buy up the permits while those for whom controls are least expensive would reduce emissions. Each form of market mechanism has intrinsic advantages and disadvantages, but we need not go into them here.¹ The important point is that neither form has been attempted in the United States, or, until recently, even seriously discussed in the policy arena. To understand why, and to understand the forms which have actually been attempted, it is necessary to place the market mechanism debate in historical context.

. . .

The 1970 U.S. Clean Air Act (CAA) probably ranks as one of the more complicated statutes yet produced by a modern industrial state. That is in part because of air pollution is a very complicated problem, and in part because the Act as created in a climate of great distrust of both agencies and industries.

Structurally, the CAA falls in an emergent paradigm which has come to be called (mostly at the instance of economists) "social" regulation. It differs from traditional economic regulation in several significant ways. First, rather than regulating a particular sector of the economy, the agency regulates a particular type of problem across sectors (see Weidenbaum, 1980). Second, rather than regulating entry, services, and prices, it regulates particular production practices both within firms and across sectors. The regulatory agency is then primarily responsible not for allowing fair rates of return to particular types of firms, but for, e.g., controlling pollution in society at large. Third, the implementing agency is typically located within the executive branch rather than given formally independent status. While the difference between regular executive agencies and independent commissions is not as clear or significant as the labels might suggest, the choice of the executive form reflects a rising presumption that agencies should be subject to established channels of political authority. Fourth, however, the agency is also subjected to a new channel of political authority: parties other than regulatees are given rights to participate in agency proceedings, obtain judicial review of agency decisions, enforce agency-set standards on polluters, and, in many cases, force the agency to promulgate standards or act in other specified ways.⁴

. . .

While the above features reflect significant structural departures (contra Lowi, 1984), the CAA also showed important continuities with traditional regulation. Perhaps the two most important were the heavy reliance on administrative expertise and the use of uniform, categorical rules as basic regulatory building blocks. To understand the metamorphosis of air pollution regulation toward a market mechanism paradigm it is helpful to understand the key provisions of the CAA.

2. The Clean Air Act.

    a. National Ambient Air Quality Standards. The CAA decided the basic question of how much pollution is to be allowed by directing the newly created Environmental Protection Agency (EPA) to set nationwide ambient air quality standards (NAAQA) for major, widespread pollutants having adverse effects on public health or welfare. These NAAQS essentially set limits on the total concentrations of selected pollutants allowed in the atmosphere over any given period of time. "Primary" NAAQS were to be health-based, and sufficiently stringent to prevent new injury or aggravation of pre-existing injury even to unusually sensitive members of society. "Secondary" NAAQS were to prevent other negative effects on public welfare, such as diminished soil or water productivity. The primary NAAQS requirements were interpreted as prohibiting the Administrator from considering the costs of attainment in setting them; thus the utilitarian trade-off analysis of how much pollution should be allowed was explicitly rejected in favor of an absolute, health-based standard.⁶ Moreover, the Administrator did not have open discretion to consider which pollutants would be subject to NAAQS. The detailed terms of the CAA required him to promulgate standards for the six "criteria" pollutants on which some technical data had already been compiled under predecessor statutes and to do so within 120 days of CAA enactment. It is worth noting that the first (and again most recent) administrator, William Ruckelshaus, managed to meet that feverish deadline, but that in the dozen years since then only one new ambient standard has been promulgated (for lead, under court order) and only one has been significantly revised (although revision of another should soon be complete).⁷ In any event, the CAA is filled with other similar discretion-limiting and action-forcing requirements.

    b. State Implementation Plans. The nature of the NAAQS meant that particular locales might be in "attainment" with regard to some ambient pollutants and out of attainment with regard to others. In theory, it was up to the states to devise plans ("state implementation plans" or SIPs) for bringing non-attainment areas into attainment and for preventing attainment areas (also called PSD areas) from sliding more than a set increment toward non-attainment.⁸ But they were to do so under significant federal constraints. First, the CAA set a 1975 deadline for attainment of most primary NAAQS; construction of major new pollution sources or modifications was prohibited where it would jeopardize meeting the deadline. (The deadline was generally not met, and moved back).⁹ Second, the states were to develop SIPs and submit them for EPA approval within nine months of the promulgation of the NAAQS. To be approved the SIPs had to meet manifold requirements, including: (1) specific "emissions limitations, schedules, and timetables for compliance"; (2) monitoring and data gathering programs; and (3) assurances of adequate state personnel, funding and legal enforcement authority. The clear intent of the statute was that states should carry out their regulatory activities by the use of emissions limitations and control equipment requirements for particular sources and classes of sources.

Third, two major types of new sources were to be subject to uniform federally set standards; states could be more stringent if they wanted to, but not less.

    c. Federal New Source Performance Standards. Major new stationary sources, and major modifications to existing ones, were to be subject to categorical emissions standards promulgated by EPA. These New Source Performance Standards (NSPS) were to be set at emission levels based on "application of the best system of emission reduction … the Administrator determines has been adequately demonstrated." Unlike the NAAQS, they could reflect cost considerations, but because they were to be uniform for all sources in a given category, only estimated average costs would be reflected. In setting these NSPS, and especially in reviewing state emissions regulations in SIPs, EPA tended to favor quite detailed regulations, with limits set for each individual emission point (often a particular subprocess) in a manufacturing complex, rather than for the complex as a whole. The same was generally true of standards set by states for types of stationary sources not directly covered by EPA standards. Such detailed regulations, it was apparently believed, would make emissions limits clearer and easier to enforce.

    d. Federal Mobile Source Standards. New mobile sources (cars, trucks, airplanes, etc.) were to meet standards directly set by Congress. partly in response to the cozy relationship the old line agencies were seen to have developed with major regulated industries, Congress gave EPA virtually no discretion with regard to setting automobile standards. Rather, it specified in the statute what emissions reductions were to be achieved over what periods of time. The CAA is filled with categorical, detailed requirements and regulatory deadlines analogous to the ones outlined above. They seem to reflect a general theory that the way to avoid repetition of past misuses of discretion is to minimize the amount of discretion delegated to any agency (while perhaps ironically maximizing the tasks it is to carry out).

It is becoming apparent that the effort to so limit discretion had limited success, as agencies found large domains of discretion in scientific decision making, conflicting mandates, statutory gaps, threatening to use their discretion in perverse ways, and the like. Nonetheless, the CAA’s focus on uniform, detailed, source-specific emissions regulation is inconsistent with the forms of market mechanism regulation outlined above. The basic framework of the CAA, therefore, makes it difficult to allow individual sources to implement emissions controls most consistent with their particular cost structures. But despite this formidable structural constraint, EPA has over the past decade made very significant headway toward transforming the CAA from a categorically uniform, detailed-emissions-limit framework to a marketable-permit framework. This movement may be the most remarkable demonstration of all of the agency’s ability to create discretion where none was intended. At the same time, as will become evident below, it seems possible that the very creation of the market mechanism framework may significantly curtail EPA’s ability to marshal and exercise discretion in the future. How and why this transformation was pursued are the subjects to which I now turn.

The conceptual foundation for market mechanisms in pollution control had been sketched out in the largely hypothetical speculations of economists decades before the passage of the CAA. Indeed, as early as 1862 John Stuart Mill noted that "if from any revolution in nature the atmosphere became too scanty for the consumption, … air might acquire a very high marketable value." Pigou had developed an elaborate argument for using pollution taxes to equilibrate "private" and "social" costs by the 1920’s. The modern era in resource economics as applied to "fugitive" resources like air arguably began with an elegant 1954 analysis by H.S. Gordon of fisheries as common property resources. That was initially followed by a small number of comments and minor studies, and then in the early 1960s by R. H. Coase’s extremely influential article in which he argued that private bargaining will eliminate externalities in a far larger class of cases than commonly believed, and that government intervention is therefore much less often justified than commonly believed.

Significant battle lines had thus been drawn in the general terrain of then-reigning welfare economics. Thus when the physical environment came to be widely perceived as a serious and growing problem in the last half of the decade, a wide-scale debate ensued. The debate was framed in terms of the relative desirability of emissions charges, marketable permits, private bargaining, and traditional regulation for handling pollution problems. By the end of the decade, emissions charges had, not surprisingly, emerged as the alternative most favored in the literature. Traditional regulation, again not surprisingly, was the least favored alternative. And while most economists had come to believe that systematic state intervention was necessary to handle air pollution problems, a small but hardy band continued to assert the superiority of private bargaining. Marketable permits had received little serious attention at this time. They seem to have been viewed as an intriguing, but somewhat eccentric and uninspiring alternative.¹⁰

For all its energy, elegance and broad consensus on the inferiority of traditional regulatory techniques, the economic debate and literature had very little influence on the design of the CAA. The possibility of effluent charges was raised in the 1971 debates over proposed federal water pollution control legislation, but the Clean Water Act eventually imitated the CAA’s use of uniform emissions controls and detailed regulatory procedures. Very fragmentary evidence suggests this choice was based partly on grounds that it would be morally wrong to allow people to "pollute for a fee" and partly on grounds that a charge system would be harder to implement than an emissions control system.

In any event, at the genesis of the CAA, the narrow-discretion-uniform-rule-regulation and market-mechanism-regulation conceptions stood in a complex but only partly antagonistic relationship to each other. Although it was true that the chosen system of regulation distrusted "private" economic decision making while the alternative made it a central tenet of faith, it was also true that both conceptions shared a deep-seated distrust of administrative discretion and sought to maximize the predictability of EPA’s regulatory activities to the greatest possible degree. As things are working out, a marketable-permit system seems to be rising form the regulatory cracks of the narrow-discretion-uniform-rule system. Many important details of that process are obscure, and even what is reasonably well known is too involved to recount here, but the general contours of the process are easy enough to map.¹¹

    a. The Early Bubble Policy. The first concrete move toward transforming the framework apparently came only a year after the CAA went into effect, when the smelting industry and several officials in the Nixon administration proposed to use what eventually became known as the "bubble" concept. The basic idea of the bubble concept is that a given plant with any number of discrete emissions points should be envisioned for regulatory purposes as existing under a bubble with a single hole in the top, and that the only issue of interest to regulators should be the total emissions coming out of it. The smelters used this concept to argue that they should not be subject to the strict new NSPS emissions limitations for major plant modifications if the total quantity of pollutants coming out of the bubble did not increase. They thus hoped to avoid installing costly new control equipment for plant expansions or improvements simply by decreasing emissions at other points in the plant. The proposal was strongly opposed by the Office of Air Programs and Enforcement, which was responsible for administering the NSPS program, as an effort to evade the clear requirements of the Act. The proposal looked vulnerable as a legal matter for this reason and also because it seemed to undercut the "technology-forcing" purposes of the CAA (See Levin, 1982). The issue was put on a back burner for several years, but in 1975 EPA partially adopted the smelting industry’s proposal when it revised the NSPS regulations governing smelters to allow the use of bubbles for modifications of existing sources (but not for construction of new ones). EPA’s adoption of the NSPS bubble was eventually reversed in a quite critical and rather confusing opinion by the District of Columbia Court of Appeals.¹² Bubbles not involving NSPS requirements were later approved for use in attainment areas.¹³ But meanwhile the market mechanism concept had cropped up in different form under a separate CAA rubric.

    b. The Early Offset Policy. As 1975 approached it became increasingly clear that virtually no major non-attainment areas would succeed in meeting the deadline for coming into attainment. The CAA provided that no major new stationary sources or major modifications could be allowed where they would jeopardize attainment by that deadline. The possibility of a real, immediate conflict between environmental protection and economic growth thus began approaching reality; since most urbanized areas were non-attainment for some pollutants the CAA would preclude any significant industrial growth in them. EPA responded by proposing the offset" policy, which would allow major new stationary sources or modifications in industrial areas if they met three requirements. They must: (1) provide for an emission reduction (‘offset") from an existing source in the area greater than the increase in emissions due to their moving into the area, thus achieving economic growth simultaneously with a net improvement in local air quality; (2) utilize control equipment producing the "lowest achievable emission rate" (LAER) for the type of industrial process involved;¹⁴ and (3) insure that all their other emissions sources in the area were in compliance with applicable emissions limits. The next year Congress essentially ratified this innovative and rather unauthorized gambit in the Clean Air Act Amendments of 1977,¹⁵ and it extended the attainment deadline for most primary standards to 1982.

Although Congress ratified the offset policy, it also left the states the option of achieving growth in non-attainment areas simply by ordering added cutbacks among existing sources, and thereby creating room ("growth allowances") for new sources under the declining total emissions curve for the area. Thus the states have the option of using either market or regulatory means to allow new source growth in non-attainment areas.

    c. The Move to a Generalizable Emissions Trading Policy. The Offsets and Bubble Policies formed the cornerstones of what would become a unified policy approximating the marketable-permits model explicated a decade earlier by J.H. Dales (1968) and other economists. Both techniques of course allowed emissions to be "transferred" from less valuable to more valuable uses (bubbles allowing them within a plant and offsets between plants).¹⁶ In 1979 EPA promulgated regulations authorizing states to allow the "banking" of emissions reductions. Thus it would be possible to reduce emissions at one point in time, "deposit" them in the "bank," and use them later, either in the same plant (a bubble extended over time) or in another plant (an offset extended over time).¹⁷ Two years later the Agency proposed to authorize "netting" in nonattainment areas.¹⁸ Netting involves a form of bubble quite similar to that originally proposed by the smelting industry, but would allow the modifying source in a nonattainment area to avoid not only certain control technology requirements (LAER, but not NSPS), but also new source review requirements. In other words, a polluter would not even have to go through the lengthy federal review process to prove it qualified for a bubble exemption; state preconstruction review would still apply to determine and quantify such exemptions. At about the same time, EPA approved the use of a "generic" bubble policy, which would authorize states to allow existing source bubbles without amending their SIP’s for each case.¹⁹ Finally, EPA promulgated a common currency of sorts, the Emission Reduction Credit (ERC) and a unified name for the process, Emissions Trading (quaintly abbreviated ET), aimed at crystallizing a new, unified framework.²⁰

[The legality of the netting policy was challenged Chevron v. NRDC, which follows this excerpt:]

. . .

16. It should be noted that technically bubbles could be allowed between (and not just within) plants, so long as they both qualify as existing sources. The key distinction—and major issue in litigation—is what emissions will be treated as coming from existing versus new sources.

. . .

REFERENCES (excerpted)

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MILLS, J. S. (1862) Principles of Political Economy. New York: J. A. Hill.

NATIONAL COMMISSION ON AIR QUALITY (1981) Breathe Clean Air. Washington, D.C.

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SCHNAIBERG, A. (1980) The Environment: From Surplus Scarcity. New York: Oxford University Press.

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SYLLABUS: The Clean Air Act Amendments of 1977 impose certain requirements on States that have not achieved the national air quality standards established by the Environmental Protection Agency (EPA) pursuant to earlier legislation, including the requirement that such "nonattainment" States establish a permit program regulating "new or modified major stationary sources" of air pollution. Generally, a permit may not be issued for such sources unless stringent conditions are met. EPA regulations promulgated in 1981 to implement the permit requirement allow a State to adopt a plantwide definition of the term "stationary source," under which an existing plant that contains several pollution-emitting devices may install or modify one piece of equipment without meeting the permit conditions if the alteration will not increase the total emissions from the plant, thus allowing a State to treat all of the pollution-emitting devices within the same industrial grouping as though they were encased within a single "bubble." Respondents filed a petition for review in the Court of Appeals, which set aside the regulations embodying the "bubble concept" as contrary to law. Although recognizing that the amended Clean Air Act does not explicitly define what Congress envisioned as a "stationary source" to which the permit program should apply, and that the issue was not squarely addressed in the legislative history, the court concluded that, in view of the purpose of the nonattainment program to improve rather than merely maintain air quality, a plantwide definition was "inappropriate," while stating it was mandatory in programs designed to maintain existing air quality.

JUSTICE STEVENS delivered the opinion of the Court.

In the Clean Air Act Amendments of 1977, Pub. L. 95-95, 91 Stat. 685, Congress enacted certain requirements applicable to States that had not achieved the national air quality standards established by the Environmental Protection Agency (EPA) pursuant to earlier legislation. The amended Clean Air Act required these "nonattainment" States to establish a permit program regulating "new or modified major stationary sources" of air pollution. Generally, a permit may not be issued for a new or modified major stationary source unless several stringent conditions are met. The EPA regulation promulgated to implement this permit requirement allows a State to adopt a plantwide definition of the term "stationary source." Under this definition, an existing plant that contains several pollution-emitting devices may install or modify one piece of equipment without meeting the permit conditions if the alteration will not increase the total emissions from the plant. The question presented by these cases is whether EPA's decision to allow States to treat all of the pollution-emitting devices within the same industrial grouping as though they were encased within a single "bubble" is based on a reasonable construction of the statutory term "stationary source."

The EPA regulations containing the plantwide definition of the term stationary source were promulgated on October 14, 1981. 46 Fed. Reg. 50766. Respondents filed a timely petition for review in the United States Court of Appeals for the District of Columbia Circuit pursuant to 42 U. S. C. § 7607(b)(1). The Court of Appeals set aside the regulations. National Resources Defense Council, Inc. v. Gorsuch, 222 U. S. App. D. C. 268, 685 F.2d 718 (1982).

The court observed that the relevant part of the amended Clean Air Act "does not explicitly define what Congress envisioned as a 'stationary source, to which the permit program . . . should apply," and further stated that the precise issue was not "squarely addressed in the legislative history." Id., at 273, 685 F.2d, at 723. In light of its conclusion that the legislative history bearing on the question was "at best contradictory," it reasoned that "the purposes of the non-attainment program should guide our decision here." Id., at 276, n. 39, 685 F.2d, at 726, n. 39. Based on two of its precedents concerning the applicability of the bubble concept to certain Clean Air Act programs, the court stated that the bubble concept was "mandatory" in programs designed merely to maintain existing air quality, but held that it was "inappropriate" in programs enacted to improve air quality. Id., at 276, 685 F.2d, at 726. Since the purpose of the permit program -- its "raison d'etre," in the court's view -- was to improve air quality, the court held that the bubble concept was inapplicable in these cases under its prior precedents. Ibid. It therefore set aside the regulations embodying the bubble concept as contrary to law. . . .

II

When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.

"The power of an administrative agency to administer a congressionally created . . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress." Morton v. Ruiz, 415 U.S. 199, 231 (1974). If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. Sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency...

We have long recognized that considerable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer, and the principle of deference to administrative interpretations "has been consistently followed by this Court whenever decision as to the meaning or reach of a statute has involved reconciling conflicting policies, and a full understanding of the force of the statutory policy in the given situation has depended upon more than ordinary knowledge respecting the matters subjected to agency regulations. . . . ". . . If this choice represents a reasonable accommodation of conflicting policies that were committed to the agency's care by the statute, we should not disturb it unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned." United States v. Shimer, 367 U.S. 374, 382, 383 (1961).

In light of these well-settled principles it is clear that the Court of Appeals misconceived the nature of its role in reviewing the regulations at issue. Once it determined, after its own examination of the legislation, that Congress did not actually have an intent regarding the applicability of the bubble concept to the permit program, the question before it was not whether in its view the concept is "inappropriate" in the general context of a program designed to improve air quality, but whether the Administrator's view that it is appropriate in the context of this particular program is a reasonable one. Based on the examination of the legislation and its history which follows, we agree with the Court of Appeals that Congress did not have a specific intention on the applicability of the bubble concept in these cases, and conclude that the EPA's use of that concept here is a reasonable policy choice for the agency to make.

[In the omitted sections of this opinion the Court summarizes the legislative and regulatory history of the definition of "stationary source" under the 1970 Clean Air Act and of "major stationary source" in section 172(b)(6) of the 1977 Amendments. The Court concludes that in the period before 1980 neither Congress nor the agency had established a stable policy as to when the whole plant could or could not qualify as a source.]

IV

. . . The 1977 Amendments contain no specific reference to the "bubble concept." Nor do they contain a specific definition of the term "stationary source," though they did not disturb the definition of "stationary source" contained in § 111(a)(3), applicable by the terms of the Act to the NSPS program. Section 302(j), however, defines the term "major stationary source" as follows:

"(j) Except as otherwise expressly provided, the terms 'major stationary source' and 'major emitting facility' mean any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant (including any major emitting facility or source of fugitive emissions of any such pollutant, as determined by rule by the Administrator)." 91 Stat. 770.

V

The legislative history of the portion of the 1977 Amendments dealing with nonattainment areas does not contain any specific comment on the "bubble concept" or the question whether a plantwide definition of a stationary source is permissible under the permit program. It does, however, plainly disclose that in the permit program Congress sought to accommodate the conflict between the economic interest in permitting capital improvements to continue and the environmental interest in improving air quality. ...

VI

As previously noted, prior to the 1977 Amendments, the EPA had adhered to a plantwide definition of the term "source" under a NSPS program. After adoption of the 1977 Amendments, proposals for a plantwide definition were considered [by the EPA] ...

In August 1980, . . . the EPA adopted a regulation that, in essence, applied the basic reasoning of the Court of Appeals in these cases. The EPA took particular note of the two then-recent Court of Appeals decisions, which had created the bright-line rule that the "bubble concept" should be employed in a program designed to maintain air quality but not in one designed to enhance air quality. Relying heavily on those cases, EPA adopted a dual definition of "source" for nonattainment areas that required a permit whenever a change in either the entire plant, or one of its components, would result in a significant increase in emissions even if the increase was completely offset by reductions elsewhere in the plant. The EPA expressed the opinion that this interpretation was "more consistent with congressional intent" than the plantwide definition because it "would bring in more sources or modifications for review," 45 Fed. Reg. 52697 (1980), but its primary legal analysis was predicated on the two Court of Appeals decisions.

In 1981 a new administration took office and initiated a "Government-wide reexamination of regulatory burdens and complexities." 46 Fed. Reg. 16281. In the context of that review, the EPA reevaluated the various arguments that had been advanced in connection with the proper definition of the term "source" and concluded that the term should be given the same definition in both nonattainment areas and PSD areas.

In explaining its conclusion, the EPA first noted that the definitional issue was not squarely addressed in either the statute or its legislative history and therefore that the issue involved an agency "judgment as how to best carry out the Act." Ibid. It then set forth several reasons for concluding that the plantwide definition was more appropriate. It pointed out that the dual definition "can act as a disincentive to new investment and modernization by discouraging modifications to existing facilities" and "can actually retard progress in air pollution control by discouraging replacement of older, dirtier processes or pieces of equipment with new, cleaner ones." Ibid. Moreover, the new definition "would simplify EPA's rules by using the same definition of 'source' for PSD, nonattainment new source review and the construction moratorium. This reduces confusion and inconsistency." Ibid. Finally, the agency explained that additional requirements that remained in place would accomplish the fundamental purposes of achieving attainment with NAAQS's as expeditiously as possible. These conclusions were expressed in a proposed rulemaking in August 1981 that was formally promulgated in October. . . .

VII

In this Court respondents expressly reject the basic rationale of the Court of Appeals' decision. That court viewed the statutory definition of the term "source" as sufficiently flexible to cover either a plantwide definition, a narrower definition covering each unit within a plant, or a dual definition that could apply to both the entire "bubble" and its components. It interpreted the policies of the statute, however, to mandate the plantwide definition in programs designed to maintain clean air and to forbid it in programs designed to improve air quality. Respondents place a fundamentally different construction on the statute. They contend that the text of the Act requires the EPA to use a dual definition -- if either a component of a plant, or the plant as a whole, emits over 100 tons of pollutant, it is a major stationary source. They thus contend that the EPA rules adopted in 1980, insofar as they apply to the maintenance of the quality of clean air, as well as the 1981 rules which apply to nonattainment areas, violate the statute. . . .

The definition in § 302(j) tells us what the word "major" means -- a source must emit at least 100 tons of pollution to qualify -- but it sheds virtually no light on the meaning of the term "stationary source." It does equate a source with a facility -- a "major emitting facility" and a "major stationary source" are synonymous under § 302(j). The ordinary meaning of the term "facility" is some collection of integrated elements which has been designed and constructed to achieve some purpose. Moreover, it is certainly no affront to common English usage to take a reference to a major facility or a major source to connote an entire plant as opposed to its constituent parts. Basically, however, the language of § 302(j) simply does not compel any given interpretation of the term "source."

Respondents recognize that, and hence point to § 111(a)(3). Although the definition in that section is not literally applicable to the permit program, it sheds as much light on the meaning of the word "source" as anything in the statute. As respondents point out, use of the words "building, structure, facility, or installation," as the definition of source, could be read to impose the permit conditions on an individual building that is a part of a plant. A "word may have a character of its own not to be submerged by its association." Russell Motor Car Co. v. United States, 261 U.S. 514, 519 (1923). On the other hand, the meaning of a word must be ascertained in the context of achieving particular objectives, and the words associated with it may indicate that the true meaning of the series is to convey a common idea. The language may reasonably be interpreted to impose the requirement on any discrete, but integrated, operation which pollutes. This gives meaning to all of the terms -- a single building, not part of a larger operation, would be covered if it emits more than 100 tons of pollution, as would any facility, structure, or installation. Indeed, the language itself implies a "bubble concept" of sorts: each enumerated item would seem to be treated as if it were encased in a bubble. While respondents insist that each of these terms must be given a discrete meaning, they also argue that § 111(a)(3) defines "source" as that term is used in § 302(j). The latter section, however, equates a source with a facility, whereas the former defines "source" as a facility, among other items.

We are not persuaded that parsing of general terms in the text of the statute will reveal an actual intent of Congress. We know full well that this language is not dispositive; the terms are overlapping and the language is not precisely directed to the question of the applicability of a given term in the context of a larger operation. To the extent any congressional "intent" can be discerned from this language, it would appear that the listing of overlapping, illustrative terms was intended to enlarge, rather than to confine, the scope of the agency's power to regulate particular sources in order to effectuate the policies of the Act.

In addition, respondents argue that the legislative history and policies of the Act foreclose the plantwide definition, and that the EPA's interpretation is not entitled to deference because it represents a sharp break with prior interpretations of the Act.

Based on our examination of the legislative history, we agree with the Court of Appeals that it is unilluminating. . . .

More importantly, that history plainly identifies the policy concerns that motivated the enactment; the plantwide definition is fully consistent with one of those concerns -- the allowance of reasonable economic growth -- and, whether or not we believe it most effectively implements the other, we must recognize that the EPA has advanced a reasonable explanation for its conclusion that the regulations serve the environmental objectives as well. Indeed, its reasoning is supported by the public record developed in the rulemaking process, as well as by certain private studies.

Our review of the EPA's varying interpretations of the word "source" -- both before and after the 1977 Amendments -- convinces us that the agency primarily responsible for administering this important legislation has consistently interpreted it flexibly -- not in a sterile textual vacuum, but in the context of implementing policy decisions in a technical and complex arena. The fact that the agency has from time to time changed its interpretation of the term "source" does not, as respondents argue, lead us to conclude that no deference should be accorded the agency's interpretation of the statute. An initial agency interpretation is not instantly carved in stone. On the contrary, the agency, to engage in informed rulemaking, must consider varying interpretations and the wisdom of its policy on a continuing basis. Moreover, the fact that the agency has adopted different definitions in different contexts adds force to the argument that the definition itself is flexible, particularly since Congress has never indicated any disapproval of a flexible reading of the statute.

The arguments over policy that are advanced in the parties' briefs create the impression that respondents are now waging in a judicial forum a specific policy battle which they ultimately lost in the agency and in the 32 jurisdictions opting for the "bubble concept," but one which was never waged in the Congress. Such policy arguments are more properly addressed to legislators or administrators, not to judges.

In these cases the Administrator's interpretation represents a reasonable accommodation of manifestly competing interests and is entitled to deference: the regulatory scheme is technical and complex, the agency considered the matter in a detailed and reasoned fashion, and the decision involves reconciling conflicting policies. Congress intended to accommodate both interests, but did not do so itself on the level of specificity presented by these cases. Perhaps that body consciously desired the Administrator to strike the balance at this level, thinking that those with great expertise and charged with responsibility for administering the provision would be in a better position to do so; perhaps it simply did not consider the question at this level; and perhaps Congress was unable to forge a coalition on either side of the question, and those on each side decided to take their chances with the scheme devised by the agency. For judicial purposes, it matters not which of these things occurred.

Judges are not experts in the field, and are not part of either political branch of the Government. Courts must, in some cases, reconcile competing political interests, but not on the basis of the judges' personal policy preferences. In contrast, an agency to which Congress has delegated policymaking responsibilities may, within the limits of that delegation, properly rely upon the incumbent administration's views of wise policy to inform its judgments. While agencies are not directly accountable to the people, the Chief Executive is, and it is entirely appropriate for this political branch of the Government to make such policy choices -- resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities.

When a challenge to an agency construction of a statutory provision, fairly conceptualized, really centers on the wisdom of the agency's policy, rather than whether it is a reasonable choice within a gap left open by Congress, the challenge must fail. In such a case, federal judges -- who have no constituency -- have a duty to respect legitimate policy choices made by those who do. The responsibilities for assessing the wisdom of such policy choices and resolving the struggle between competing views of the public interest are not judicial ones: "Our Constitution vests such responsibilities in the political branches." TVA v. Hill, 437 U.S. 153, 195 (1978).

We hold that the EPA's definition of the term "source" is a permissible construction of the statute which seeks to accommodate progress in reducing air pollution with economic growth. "The Regulations which the Administrator has adopted provide what the agency could allowably view as . . . [an] effective reconciliation of these twofold ends. . . ." United States v. Shimer, 367 U.S., at 383.

The judgment of the Court of Appeals is reversed.

It is so ordered.

JUSTICE MARSHALL and JUSTICE REHNQUIST took no part in the consideration or decision of these cases.

JUSTICE O'CONNOR took no part in the decision of these cases.