This is a partial transcript of Special Report with Brit Hume, December 3, that has been edited for clarity.

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(BEGIN VIDEO CLIP)

LEDFORD: What this administration is doing is looking for the lowest possible standard or the provision within the Clean Air Act (search) that allows them to be as lenient as they can get away with. And that's simply not fair to the women and children of America.

(END VIDEO CLIP)

BRIT HUME, HOST: Environmental groups say the administration is about to sell out again to corporate interests by weakening new rules on mercury pollution by power plants. The issue is how much mercury can be in the smoke that emanates from coal-burning, energy plants and ends up in rivers, and ultimately, in the bodies of fish causing, it is said, potential health hazards in children and unborn fetuses.

But is that all there is to it? One who says no is Chris Horner, senior fellow at the Competitive Enterprise Institute (search) here in Washington, that's a group that promotes free trade market solutions to environmental issues.

Welcome to you, sir.

CHRIS HORNER, FELLOW, COMPETITIVE ENTERPRISE INST.: Thank you.

HUME: So what's going on here?

HORNER: Well, what's going on is President Bush is proposing for the first time -- you'd never know that listening to today's rather hyperbolic remarks, particularly by Green group; for the first time regulating mercury emissions from utilities. Which is...

HUME: Now this was a problem that was leftover -- this idea was proposed to regulate this by the Clinton administration. And it didn't get done?

HORNER: It really wasn't. It really wasn't. Like it was of the family of the traps, if you will, that were laid by President Clinton (search) at the 11-hour. Over eight years, no regulation of mercury power plants issued from President Clinton. As he left town, he declared it, without taking public comment, but just as a final act declared it a hazardous air pollutant.

That's odd because the host of what comes out of utilities are actually something else, regulated under a flexible program, criteria pollutants. But if you call it a hazardous pollutant, well, it is very expensive to address. It's not flexible, it provides ample opportunity for Green groups to sue and make money from the federal government.

So, there is not a substantive reason that I can think of or have heard to regulate it as Clinton suggested but did not propose. It's being proposed soon, it appears, by the Bush administration. And it appears it's going to be in a flexible method and that's what's driving folks crazy.

HUME: Why is this considered to be softer than the rules that were suggested by President Clinton?

HORNER: Actually...

HUME: Type of rules?

HORNER: You're right. But they're softer because they allow you flexibility as opposed to a cap per facility. Here's your number, if you don't meet it, we fine you, an enforcement action or what's called a "citizen suit;" a Green group natural resources defense counsel.

For example, not to single them out, but they sell themselves, style themselves as a national environmental law firm. They make money on what are called citizen suits, built into the law to chase people because the government can't be everywhere at once. There are no such actions or enforcement actions in a cap and trade, flexibility environment.

HUME: Now, does cap and trade ... means what?

HORNER: You have an allowance, you have a cap. And if you don't emit up to your cap, you can sell the difference, the credits. They are hot air credits, they're illusory credits but it's not a property right. But you can sell it on the market because someone else may exceed their allotted number and they'll want to buy it.

HUME: So the idea is that there's net overall, you come out with the same reduced number of pollutants in the air.

HORNER: Actually, you are proposed to come out with the same, but in practice -- and this is what's confusing about the Green group hysteria almost. And that is you typically get -- history has shown with, for example, the acid rain program, sulfur dioxide cap and trade program, which they endorse, you get much lower emissions because of the market incentives. And you get it at a much lower cost.

And if I can, remember, regulating electricity production emissions is probably the highest in terms of regressive tax policy. Remember the BTU proposed increased?

HUME: Why is that?

HORNER: Well, because everybody pays for electricity and so it hurts the poor and seniors first and worst.

HUME: You mean because the cost of reducing these pollutants by the energy plants is passed on to customers in the form of higher rates?

HORNER: Right. It has to be.

HUME: Has to be. All right.

HORNER: Has to be because this is a business. And the poor and seniors also pay for electricity and so they don't have the disposable income that you or I do, and it hurts them first and certainly worst. So it's regressive.

If you want to adopt the rhetoric of the other side, you are forcing seniors to choose between heating and eating. Now is that fair? Or should we create a flexible mechanism? And look, the other side...

HUME: Then what's the matter -- why is there -- well, if that's the case then, are you saying that the environmentalists are actually in favor of the system that would result in more pollution? That's hard to believe.

HORNER: But that would result in not less pollution. How's that, because cap and trade has proven to be more efficient and less costly. So it's good for the seniors and the poor, if you're going to call the system good.

But it's -- it has typically resulted in lower emissions because of the incentives that individuals have to find efficiencies and possibly make money by selling them. That's what we've learned. It's why these groups like cap and trade. They propose something called the Kyoto Protocol that's cap and trade.

HUME: You say these groups like cap and trade, you mean why environmentalist groups...

HORNER: The groups seeking regulation.

HUME: ...have liked cap and trade in other areas?

HORNER: In other areas when it is proposed by someone not named Bush; to not put too fine a point on it.

HUME: So that's what it comes down to?

HORNER: It appears to.

HUME: Let me just ask you one other quick question before we go. And that is, yesterday one Russian official is quoted as saying -- top Russian official is saying Russia is not going to sign the Kyoto protocol. Today, other officials seem to be reversing that. Where in your judgment is that going to come out?

HORNER: I think at the end of the day the Russians will not ratify it. They've adopted our position, which is the same as the Clinton administration. We won't ratify it, but we won't withdraw from it.

Remember, the U.S. never withdrew; neither have the Russians. We remain signatories. So at any time, President Kerry or Lieberman could seek ratification. President Putin could seek ratification. They have got elections ... coming up Monday; Putin's is in March. The Greens are saying just wait. I don't think so, because they want to grow economically and they can't under that treaty.

HUME: All right, nice to have you. Thanks for coming in.

HORNER: Thank you.

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