WASHINGTON, DC - May 14 - Experience with harnessing market forces to control air pollution has not been promising, according to analyses of three recent programs. These programs are analogous to the cap-and-trade plans now being considered by Congress as the principal mechanism for reducing greenhouse gases contributing to global warming, according to Public Employees for Environmental Responsibility (PEER).
The most studied program was the Regional Clean Air Incentives Market (RECLAIM) program by the South Coast Air Quality Management District to reduce nitrogen oxides (NOx) and sulfur oxides (SOx) emissions through a cap and declining balance set for more than 350 of the largest polluting facilities in Southern California. RECLAIM has the longest history and practical experience of any locally designed and implemented air emissions cap-and-trade program.
An audit of the nine-year RECLAIM record by the U.S. Environmental Protection Agency in November 2002 found that the program did not come close to living up to expectations:
- RECLAIM “produced far less emission reductions than either were projected...or could have been expected from [traditional control regulation]”;
- Contrary to claims about stimulating new technology, EPA found an extremely low “likelihood such programs will produce innovation”; and
- Overall, EPA found “little in the literature and reports by implementing agencies describing how the underlying theories or assumptions of market incentives programs are to be (or were) practically tested.”
“While cap-and-trade may be the most politically palatable approach for controlling greenhouse gases, it may be the most ineffective and unreliable,” stated PEER Executive Director Jeff Ruch., pointing to an open letter by EPA experts released last week detailing major impediments in implementing an effective trading program. “If steep reductions of greenhouse gases need to be made quickly, Congress should be sure it has the right tool for the job.”
The RECLAIM disappointment was not unique. In Chicago, a cap-and-trade program, called Emissions Reduction Market System (ERMS) for volatile organic materials (VOMs), also reduced emissions significantly below expectations, according to a 2006 analysis. In 2002, an EPA-sponsored emissions trading program based in New Jersey and Michigan completely collapsed due to crippling verification and enforcement deficiencies.
“While some proponents see a lucrative market in trading emissions credits, there is also a potential for environmental Enrons,” Ruch added, noting that the leading candidates in both parties have embraced market-based regulatory regimes to control greenhouse gases. “The call to harness market forces may in fact be a siren song to hitch our wagon to a scam.”
See the RECLAIM audit report (particularly pages 56-9)
View the analysis of ERMS
Look at the warnings of cap & trade vulnerabilities from EPA experts
Revisit the 2002 collapse of air pollution trading market
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