"California's smog market: Right to pollute"

Los Angeles -- Starting next January, smoggy firms in the smoggiest 
part of America -- the four counties that straddle the Los Angeles 
basin -- will be able to buy the right to pollute.  A smog-market 
scheme has at last been approved by the South Coast Air Quality 
Management District.  In theory, competition will now determine the 
most efficient way to curb pollution.  But it is a theory that has left 
many environmentalists and small businessmen unconvinced.

The Regional Clean Air Incentive Market, or RECLAIM as it prefers to be 
known, centres around the 390 local companies which each year emit more 
than four tons (3.6 tonnes) of nitrogen oxides and sulphur dioxide (two 
of the three main culprits responsible for Los Angeles's worsening 
pollution).  Over the next ten years each firm has to comply with new 
emission limits, which will be reduced by 5-8% a year.  By 2003 
emissions of nitrous oxides should have been cut buy 75% and sulphur 
dioxide by 60%.  Eager beavers who beat the clock can sell 
air-pollution credits to laggards.

RECLAIM's champions say that trading in pollution should save the 
region $90m a year and more than halve overall pollution levels at the 
firms involved.  A secondary market in sulphur-dioxide allowances has 
existed in a modest way since March, when the Chicago Board of Trade 
sold some 150,000 units (each unit will allow the purchaser to release 
a ton of sulphur dioxide into the atmosphere from 1995 onwards) to 
power companies. RECLAIM extends this idea from utilities to all large 
companies and adds nitrous oxides to the market.  There are plans to 
add hydrocarbon emissions in a year or two.

The project dovetails nicely with the business-friendly approach now 
taken by California's recession-battered government.  About 400,000 
manufacturing jobs have vanished over the past five years.  Once 
greener-than-green, California is being threatened with sanctions by 
the federal government for failing to enact about 60 out of 90 new 
anti-smog measures.  Under the 1990 amendments to the Clean Air Act, 
the Environmental Protection Agency (EPA) in Washington must freezer 
federal funds to renegade states.  California risks losing $1.8 billion 
of federal highway grants for next year alone.  The RECLAIM project may 
get the state off the hook.

The Los Angeles scheme is being closely watched by a dozen other 
cities, including Boston, Chicago and Houston.  The Clinton 
administration would like to enlarge the existing nationwide scheme 
that allows power stations (responsible for 70% of the country's acid 
rain) to trade their pollution rights.  In September the EPA announced 
plans to expand the market for air-pollution credits to other big 
emitters -- especially lead smelters, steel makers and heavy users of 
industrial boilers.

But will RECLAIM work?  There are doubters on all sides.  The Southern 
California Gas Company fears that its bigger customers will leave the 
district or switch to cleaner electricity.  Environmentalists call 
RECLAIM a way to delay the federal government's ant-smog plans.  Small 
companies have fought the scheme because they think that it means yet 
more paperwork.  Most benefits, they claim, will go to the utilities 
and refineries.

Most of southern California's biggest polluters have reluctantly 
endorsed RECLAIM.  The roll call includes oil refiners, such as 
Chevron, Arco, Mobil and Texaco, and power station operators, such as 
the Los Angeles Department of Water and Power and Southern California 
Edison.  Chevron, the biggest polluter of all, spews roughly 2,800 tons 
of nitrous oxides into the Los Angeles basin every year; now it will 
have to reduce that figure to little over 1,000 tons by 2000, and no 
more than 750 tons by 2003.

The project's critics are unimpressed.  They expect that big polluters 
will try to wriggle out of cutting their emission levels, leaving "hot 
spots" around their plants.  They are also sorry that under RECLAIM 
credits will also be given for cuts in emissions that would have 
happened anyway as obsolete machinery is replaced.  Big firms will also 
be able to earn credits by scrapping old petrol and diesel vehicles and 
making contributions to the city's public-transport systems.  Since 
cars and trucks account for 60% of the smog in the Los Angeles basin, 
that may be no bad thing.

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