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Washington, DC – Overriding objections from its own Office Of Inspector General, the U.S. Environmental Protection Agency is set to allow the State of Michigan to conduct “open market trading” in air pollution credits, according to documents released today by Public Employees for Environmental Responsibility (PEER). Rather than improve air quality, internal reviews indicate that the Michigan plan will simply mask increased pollution, hobble enforcement and legitimize regulatory evasion.

In an internal memo dated April 5, J. Rick Beusse, the Director for Program Evaluation on Air Quality Issues for the EPA Inspector General, wrote to Jeffrey Holmstead, the agency’s top air regulator, complaining that “EPA indicated that it intends to approve Michigan’s OMT (open market trading) program” despite unaddressed weaknesses. More than three quarters of Michigan’s most important credits are generated not by improvements in pollution control but by plant closures. The memo highlighted this issue:

“While in Michigan, we observed that approximately 23 percent of the State’s total open market emissions credits generated – and 80 percent of its volatile organic compound (VOC) emission credits generated – have resulted from shutdowns…under Michigan OMT rules, when permitted sources close facility operations in Michigan and receive emissions credits for shutdowns, these same or similar facility operations may be restarted in other states…”

“EPA is desperate to embrace any market-based plan, even one that doesn’t work,” commented PEER Executive Director Jeff Ruch, pointing to the agency’s embarrassment following the sudden collapse of New Jersey’s open market program in February just as EPA was poised to approve it. “Until EPA tightens the rules, open market trading will just be a giant shell game played at the expense of public health.”

Unlike traditional “cap-and-trade” plans, open market trading does not cap emissions yet it grants industries wide latitude to create, buy and sell emissions reduction credits across industrial sectors, pollution sources and even different pollutants. For example, under open market trading a company could increase its “smokestack” pollution by removing mobile pollution sources such as old cars or converting diesel buses to hydrogen.

The EPA Inspector General is currently investigating pending OMT plans following a complaint filed last year by PEER and the New Jersey Sierra Club. Last May, twenty major environmental groups petitioned EPA Administrator Christie Todd Whitman to fix an array of technical and regulatory problems before approving any OMT programs.

###EPA’s Memo

MI Air Trading Factsheet

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