L.A. Floats New Plan to Curb Basin's Smog with the Nation Watching, Los Angeles Would Allow Emissions Trading between Industries in an Extensive Test of the Ability of Market Incentives to Limit Factory Pollution

By Scott Armstrong, writer of The Christian Science Monitor | The Christian Science Monitor, June 11, 1991 | Go to article overview

L.A. Floats New Plan to Curb Basin's Smog with the Nation Watching, Los Angeles Would Allow Emissions Trading between Industries in an Extensive Test of the Ability of Market Incentives to Limit Factory Pollution


Scott Armstrong, writer of The Christian Science Monitor, The Christian Science Monitor


IN what would be the most ambitious free-market experiment of its kind, authorities here are considering setting up a "smog exchange" to try to clean up the nation's dirtiest skies.

Businesses would be allowed to spew a certain level of pollutants and could buy or sell smog shares depending on whether they were ahead or behind in meeting their limits. The right to pollute would become a commodity like soybean futures.

The move would mark a dramatic departure from conventional efforts to control smog by regulating individual pollutants.

It would provide a far-reaching test of the ability of market incentives to curb pollution - a prospect that excites big business, worries some environmentalists, and has the rest of the country watching to see what the nation's premier laboratory for smog-busting will do.

"This goes to the heart of clean-air policy in this country," says Larry Berg, a political scientist and member of the board of the South Coast Air Quality Management District (AQMD), the local authority studying the concept.

Emissions trading is an idea that has been around for years but is only beginning to emerge. The federal Clean Air Act passed last year includes a program allowing pollution trading among utilities that produce sulfur dioxide, a source of acid rain.

Several cities operate pollution "offset" programs. Under these, a firm wanting to build a new plant is required to reduce smog in an area to make up for pollution the expansion would create. It can do this by buying smog rights from another company that has closed or cut emissions.

The market being considered by the AQMD would go way beyond this. It would institute smog trading among as many as 24,000 factories, refineries, bakeries, and other facilities that produce nitrogen oxides and hydrocarbons - two key components of smog - in the four-county Los Angeles basin.

It would be the world's first mass market for pollution trading.

A special committee appointed by the AQMD has been studying the idea for months. It is expected to make a recommendation to the AQMD board around the end of the year.

If adopted - and AQMD officials say it has a good chance - the agency would scrap nearly all the regulations it has been devising for these polluters for the next 20 years to help meet federal air-quality standards.

Until the trading concept is approved, however - something that would require a nod from both the state and US Environmental Protection Agency - AQMD will continue to work on its conventional rules. EPA officials, who are interested in market-based approaches to reducing smog, have been cautiously optimistic about the new approach so far.

UNDER the trading scheme, the agency would establish a benchmark level of pollution that each company could emit, represented by a certain number of shares. Each year the firms would have to reduce their nitrogen-oxide emissions by 5 percent and hydrocarbons by about 7 percent.

To do this, they could either install new technology, close a plant, or purchase shares from another company that had reduced emissions beyond its requirement. …

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