PERSPECTIVE ON POLLUTION : RECLAIM: Can the Regional Clean-Air Incentives Program Work? : Make it mandatory for large firms who will reap the most benefits, voluntary for others.

After months of rule revisions and meetings with the South Coast Air Quality Management District’s staff, the debate between RECLAIM proponents and opponents is expected to come to a head Friday. That is when the district’s governing board will decide the fate of the long-delayed emissions trading program---a decision that will likely have a dramatic impact on Southern California’s economy.

Under the Regional Clean Air Incentives Market program, nearly 400 businesses in the Southern California region could participate in a plan to trade emissions credits as long as the end result is a 70% reduction in pollution. Leading the opposition against the RECLAIM program have been the Gas Co., many of its customers and dozens of business, economic development and industry groups, who believe the program is unfair to smaller facilities. These businesses would be forced to pay higher costs unrelated to emissions reductions while larger facilities would receive most of RECLAIM’s economic benefits. Opponents also say RECLAIM’s costly and proscriptive rules and requirements would pose increased risks and make it more difficult to conduct business, contributing to business flight and further weakening an already depressed economy.

While the Gas Co. was among the first companies to support a market-based approach to improve air quality, the current RECLAIM program fails to deliver the promised flexibility and lower-cost potential envisioned in a market-based emissions reduction plan.

We believe the program, which allocates a number of emissions trading credits for four tons or more of nitrogen oxides and sulfur oxide to nearly 400 facilities, could work effectively, however, if district staff made changes to make it fairer and more equitable to all businesses.

One way to achieve this is to make RECLAIM mandatory for the larger facilities--those emitting 50 tons of nitrogen oxides or more per year--and voluntary for all others. Under this change, facilities emitting below the 50-ton threshold would remain under current air-quality rules and regulations, or choose to participate in RECLAIM. Smaller facilities, which face diminished economic benefits under RECLAIM compared to larger facilities, would be free to make an economic choice about how to share in the cost of cleaning up the air we breathe.

A 50-ton mandatory program for the larger facilities with an opt-in for smaller facilities would ensure a greater likelihood of RECLAIM’s success because initial participants would be capable of making it work. The larger facilities, because they have more resources, are better able to understand and manage the complexities of RECLAIM, and can derive the potential benefits. Smaller businesses, most of whom have limited resources, can choose traditional air-quality rules, or gradually learn about RECLAIM and opt-in to the program later.

Operating with this change would also achieve environmental objectives as it would capture 85% to 90% of the starting nitrogen oxides emissions included under the currently proposed RECLAIM program. Furthermore, it would make RECLAIM more attractive to new businesses and helpful in retention of existing ones. Businesses wishing to expand or locate in the Los Angeles Basin are most likely to be facilities under the 50-ton threshold. With this revision, these smaller businesses won’t have to buy emissions trading credits on a recurring annual basis at unknown and possibly very high prices.

The Gas Co. believes participation in a true free market should not be mandated by regulatory fiat, rather it should reflect choices resulting from market forces at work. A mandatory program for larger facilities and an opt-in for others can end the contentious debate and allow Southern California to get on with economic recovery and cleaning up our air.