PRESS RELEASE

L.A. AIR POLLUTION TRADING GETS LOW MARKS FROM EPA

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Washington, DC – The prototype for President Bush’s plan to revamp air pollution regulation is performing substantially below expectations, requires more government involvement and remains critically vulnerable to industry manipulation, according to a new U.S. Environmental Protection Agency (EPA) evaluation. The evaluation’s findings undercut the premises behind new initiatives touted by the Administration, according to PEER.

The South Coast Air Quality Management District in California started the Regional Clean Air Incentives Market (RECLAIM) in 1993.It is regarded as the nation’s premier cap-and-trade program for reducing nitrogen oxides and sulfur dioxides. President Bush’s “Clear Skies” plan would expand this type of cap-and-trade authority as the replacement for the oldest and most effective of Clean Air Act programs for the utility sector – new source review (NSR).Similarly, under proposed Administration “reforms,” much of NSR would be replaced with “caps” in the form of “plant-wide applicability limits.”

EPA’s evaluation of RECLAIM finds that cap-and-trade is far from a pollution panacea:

The program has produced far less emission reductions than were either projected for the program or could have been expected from” the command-and-control system it replaced;

The program has been plagued by accounting abuses. For example, RECLAIM set caps that backdated the baseline emissions currency by about 60% above real emission levels. RECLAIM inflated baseline procedures – setting future caps based on emissions levels from 5 to 10 years in the past – are also a key feature of the Administration’s NSR “reforms”; and

RECLAIM, like most of the new trading programs, cannot rely upon market incentives to ensure program integrity. Contrary to the either-or scenario put forth by the Administration, the EPA evaluation shows that cap-and-trade actually works well in conjunction with NSR.

“Despite this latest in a series of negative reports, EPA is moving full steam ahead to embrace trading without addressing any of the safeguards needed to protect public health,” commented PEER Executive Director Jeff Ruch.”The central irony is that these market-based plans require more government oversight, not less, in order to work.”

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EPA’s Evaluation of RECLAIM can be found at http://www.epa.gov/region09.

Click here for a background sheet describing the relationship between RECLAIM, trading and NSR revisions.