New Jersey Rejects EPA Plan for Trading Pollution Credits

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New Jersey Rejects EPA Plan for Trading Pollution Credits

Rebuked EPA Weighs Enforcement Against Companies Using Credits

Washington, DC – Calling air pollution credit trading a “failure,” New Jersey Department of Environmental Protection Commissioner Bradley Campbell has informed the U.S. Environmental Protection Agency (EPA) that the state will “terminate” the program, according to a letter released today by Public Employees for Environmental Responsibility (PEER).This move by New Jersey is the latest blow to the Bush Administration’s campaign to implement market-based pollution controls.

In an August 13 letter to EPA, Campbell expressed doubts that trading plans will actually reduce pollution due to crippling verification and enforcement deficiencies. Under then-Governor and now EPA Administrator Christie Whitman, New Jersey had pioneered “open market” trading of air pollution credits which, unlike traditional cap-and-trade programs, allows unlimited trading between different pollution sources for different pollutants. Campbell, a former EPA official and now an appointee of New Jersey Governor James McGreevey, faulted:.

  • “The program’s … failure to include safeguards that the program would in fact reduce emissions;”
  • “Credits based on emissions reductions that occurred years before the credits are actually used;” and
  • The inability to “verify the validity of credits under the program.”

Campbell also noted in the letter “I understand EPA may be contemplating its own enforcement action against credit users” because New Jersey under Whitman fostered trading before such transactions had been approved by EPA.Campbell urged that EPA extend a form of amnesty to companies who purchased credits in good faith.

Campbell’s letter echoes concerns raised by EPA employees represented by PEER in a white paper, Trading Thin Air, describing the vulnerability of open market trading to manipulation. Following a proposal in 2001 by Whitman’s EPA to legalize open market trading in New Jersey and Michigan, PEER convinced the EPA Office of Inspector General to investigate these plans. That investigation is near completion. PEER also revealed Michigan’s dependence on plant closures to generate credits, an illegitimate practice that does not represent any improvements in pollution control.

“EPA’s open market trading program is the three-card-monte of pollution regulation,” commented PEER Executive Director Jeff Ruch. “As illustrated in the Enron debacle, trading schemes require rigorous enforcement of safeguards to prevent rip-offs, but rigorous enforcement is the last thing the Bush Administration appears to offer.”

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