The state of Maryland today unveiled a plan to allow corporations to by and sell air pollution rights in an attempt to attract new industry to the state.

The plan, proposed by the state's economic development administration at a special legislative hearing, is the first statewide attempt to use the marketplace to clean up the air. At the same time, the proposal is expected to reduce the cleanup cost to industry.

Basically, the plan would allow a company that was able to make a large reduction in air pollution to sel the results of those efforts to another company that might not have the technology or the money to meet federal air-quality standards.

Since federal air standards would still have to be met under the state plan, the overall impact of the proposal on the quality of the air would be the same as requiring both companies to reduce emissions equally. But architects of the plan insist the costs of cleaning up the air would be more efficiently distributed.

Economic Development Secretary James O. Roberson told the General Assembly committee hearing that the plan was being presented as a departmental proposal rather than an administration plan. Department officials acknowledged that Maryland Gov. Harry Hughes "is aware that this is a very hot potato."

The plan has three major parts. In areas where the air is better than required by federal standards, any industry could come in and pollute on a first-come, first-served basis. In areas where air is below federal standards, new companies may come in or existing companies may expand operations, but to do so, there must be a more-than-compensating reduction in pollution in the same area, to produce a net gain. In that case, a company could barter with another company to gain the required cleanup.

The third part of the plan deals with areas where an areawide rollback of pollution is required. In that case, determining which company cleaned up how much again would be left to the marketplace.

What various state and federal air pollution laws have done "is create an economic value for the right to pollute," said Roberson.

The market determines what (industry) is going to pay for land, what it's going to pay for labor, and we believe it also ought to determine what it pays for the use of the air," he said.

Roberson told the committee hearing that the proposal would encourage companies to locate in central areas where jobs are needed and where facilities to serve industry already exist. He said it would "reduce the unwarranted use of farmland" by companies looking for a piece of pollutable air.

Department of Economic and Community Development economists stressed that the plan doesn't change state or federal clean air standards. It just proposes a different way of achieving them, they said.

Roberson noted that the plan has not yet been completely worked out and that several issues remained to be sorted out -- including whether the state could acquire pollution rights for desirable industries through a process similar to eminent domain and whether companies could lease short-term pollution rights. Still another complication would be dealings in multistate areas such as suburban Washington.

Hughes had asked Roberson's department to lead an interdepartmental task force in developing proposals for managing air emission allocations. The proposal put forward today, however, was a preliminary proposal that came only from DECD.

The plan's ability to attract new industry lies in the economic incentives to existing industries to reduce pollution more than they are required to -- which would create a reservoir of clean air for new industry to pollute.

"In effect this ought to produce cleaner air because there is an economic incentive to do so," said Roberson. "Now you're going to reduce by a minimum."

No other state has adopted such a plan but similar experimental programs are in effect in Los Angeles, the San Francisco Bay area of California and Louisville, Ky., according to Maryland officials.

George Ferreri, state air pollution control director, told the hearing he supported some aspects of the plan but had questions about others. He said current law would not allow a company to come in without installing any pollution control equipment, no matter how much it was willing to pay. Depending on the area where it located, a company would have to conform with certain minimum standards for equipment, he said.

Implementing the proposed program would require both a "major legislative effort" by the General Assembly and changes in federal law in the case of the rollback provisions, Ferreri said.

Several General Assembly members questioned whether the marketplace proposal would be either an efficient or an equitable way to allocate the right to pollute. "My concern is that this whole program will not be effective in improving air quality," said Del. Steven Sklar (D-Baltimore City). Sklar said he saw "a multitude of inforcement problems" in the plan, including seeing that trade-offs were made properly.