The Arab street isn't the only bunch convinced that the Bush administration has hellish designs on the planet. The Green lobby is similarly apoplectic.

This is "the most damaging period for environmental policy in a generation" screams the League of Conservation Voters. The Natural Resources Defense Council warns darkly of an "unprecedented assault" on the environment via "subversive" and "under-handed" regulatory action. The main cause of this hysteria — the administration's supposed assault on the Clean Air Act — demonstrates that the Greens in Washington have as tenuous a grip on reality as the Islamists in Kirachi.

The root of the conflict goes back to the 1977 Clean Air Act Amendments, which established two sets of pollution rules for industrial facilities — one tough set for plants built after the law was passed and another, more lenient set for plants built before the law. Old plants can operate under the lighter pollution rules indefinitely. But if they are ever substantially modified, they become "new plants" for legal purposes and are hit in the teeth with the tighter pollution regulations.

Of course, this made no economic sense. But it did make political sense. The bifurcated regulations allowed Congress to satisfy environmentalists while also increasing the value of existing plants relative to potential competitors — buying off both warring parties in one fell legislative swoop.

A more explicit policy achieving the same result would have been a pollution tax with an exemption for existing firms, but the wealth transfer would have been more transparent and thus politically more difficult to get away with.

Still, there was a price for the incumbents to pay. Industrial plants are subject to endless routine maintenance, minor modifications, capacity expansions, and major upgrades to improve operational efficiency. In the course of a year, for instance, a pulp and paper mill may literally make 40,000 changes in equipment, procedures and operations.

When do those actions become so major that they transform an "old plant" into a "new plant"? In 1980, the EPA issued 20 pages of regulations to answer the question. Twenty years later, 4,000 pages of regulation have been issued and EPA officials, like IRS officials, still openly disagree about what the rules actually say.

Until a few years ago, the EPA's Office of Air & Radiation oversaw this program (known to the lawyers as "New Source Review") and warily cooperated with industry on a case-by-case basis to minimize uncertainty and regulatory conflict. The regulations were vague, but negotiation between the regulated and regulating communities kept things running (relatively) smoothly.

However, all that changed however in 1998, when the NSR regime was turned over to the EPA Enforcement Division. Federal prosecutors broadly redefined what constituted a "new facility" and applied this new understanding retroactively. Even though the feds never bothered to finalize this new interpretation of the rules, dozens of multi-million-dollar federal enforcement actions were swiftly filed against companies with accompanying press releases trumpeting the need to "hold to account" those who were "illegally releasing massive amounts of air pollutants for years, contributing to some of the most severe environmental problems facing the nation today."

It was rulemaking via enforcement and the press went wild.

Enter George Bush. The administration first put the prosecutions on hold until they could sort-out the merits of this new regulatory jihad. But hysteria forced the administration to back down and allow the Department of Justice, which sought billions of dollars in retroactive penalties and technology upgrades, to go forward.

The next skirmish was triggered by the administration's national energy plan, which announced an internal review of the entire NSR regime with findings due anytime now. The state attorneys general in the northeast — with their characteristic habit of understatement — charged that this threatened return to the pre-1998 NSR regime would "gut" the Clean Air Act. Environmentalists fulminated that the president was flirting with the most significant rollback of environmental protection in 30 years. Connecticut Attorney General Richard Blumenthal established the Green party line by declaring that the stakes were no less than "a matter of life and death."

Now, given trends in air pollution, however, that's not just hyperbole, it's unvarnished hysteria. Since 1989, for instance, concentrations of fine particulate matter in the atmosphere (the most serious pollutant from a human health perspective) have declined by 28 percent. The number of days in which Americans are exposed to unhealthy concentrations of smog is likewise down a stunning 62 percent over that same period. And sulfur dioxide emissions — the main cause of acid rain — have declined by 20 percent since 1985.

Regardless, the wrangling over emissions from the "grandfathered" power plants should have been made moot this February by the administration's so-called "Clear Skies" proposal, a program that would require both "old facilities" and "new facilities" in the electricity industry (the chief target of the NSR) to cut overall sulfur dioxide emissions by 73 percent, nitrogen oxide emissions by 67 percent, and mercury emissions by 69 percent (the top three pollutants on the environmentalists hit list).

The plan, however, allows utilities to trade a limited number of emissions credits to minimize the costs of compliance. This is a departure from the Stalinist "command-and-control" regime that would have the feds tell every company exactly how much to reduce emissions from each valve and smokestack and exactly how to go about achieving those emission reductions. Environmentalists love rules and lawyers but hate markets and economists, so the Green war drums continue to beat.

Perhaps more alarming to the Greens is that the "Clear Skies" plan makes the NSR superfluous as far as old power plants are concerned. After all, there's no need for an army of federal bureaucrats to police every minor change in pre-1977 plants if those facilities will now be subject to tough new emissions restrictions.

Environmentalists, however, are wedded to the Clinton prosecutions &$151; and the prospect of more to come — and the 4,000 pages of NSR rules as a matter of holy justice. Tagging the plan "radical" and "off-the-wall," Frank O'Donnell, executive director of "Clean Air Trust" and the Green point-man on this issue, said of "Clean Skies" that it's "as if the New York Yankees traded away Derek Jeter, Roger Clemens, Paul O'Neill, Andy Pettite and Bernie Williams in return for an unknown slugger from Sweden."

Beyond the fact that there's no particular reason to think that another round of pollution controls are necessary to secure improvements in air quality, it wasn't so long ago that liberals viewed the Clean Air Act as something more akin to the 1909 Chicago White Sox than the 2001 New York Yankees.

Yale Law Professor Bruce Ackerman, for instance, wrote a famous book 21 years ago titled Clean Coal, Dirty Air, subtitled "How the Clean Air Act became a multi-billion dollar bail-out for high sulfur coal producers and what should be done about it."

His answer? Treat old and new plants the same and get the feds out of the business of telling companies exactly how they're to go about complying with federal air pollution controls. That's pretty much what the administration is moving towards in "Clean Skies."

Arbitrary distinctions between "old" and "new" plants are maddening for both economists and businessmen. Economists hate it because it encourages old, polluting facilities to operate far beyond the point in which they would otherwise have been retired.

Moreover, rigid enforcement of NSR rules would discourage the very upgrades that environmentalists would otherwise champion: new energy efficient technologies and production processes that would cut down on pollution as a secondary matter as well.

Owners of the old plants hate it because there's no way to really know what the threshold is between permissible maintenance and impermissible upgrade until the police come knocking on the door.Moreover, what was okay with regulators yesterday can become a criminal act tomorrow.

Meanwhile, owners of new plants hate it because the bifurcated regulatory regime gives indefensible market advantages to their competitors.

This entire debate has become surreal. Environmentalists equate an assault on tangled and intellectually indefensible regulations as assaults on the environment as if they were one and the same. Reporters do a poor job untangling these complicated issues for their audience and thus trumpet simplistic and misleading charges that are more political fiction than policy fact. And businessmen and the politicians that cater to them seem genuinely incapable of standing up to this demagoguery in public.

The president is on the right track. Whatever we decide about permissible air pollution levels, the current regime is an economic, environmental and political abomination. It should be replaced root-and-branch and a universal cap-and-trade program, and the one outlined in the "Clear Skies" program is a good way to start.

Jerry Taylor is director of natural resource studies at the Cato Institute . Peter VanDoren is editor of "Regulation, the Cato Review of Business and Government."