Regional Clean Air Incentives Market
Encyclopedia
Regional Clean Air Incentives Market (RECLAIM) is an emissions trading
program operating in the state of California
since 1994. Under the trading program, hundreds of polluting facilities are required to cut their emissions of nitrogen oxide
s (NOx) and sulfur oxide
s (SOx).
Under the system, which operates as a cap-and-trade program, each participating facility is given a certain number of emission rights (the 'cap') for free. In each consecutive year, the number of emission rights given is reduced such that the facilities have to either reduce their emissions or buy up emission rights from facilities with enough to trade.
The system was designed to reduce emissions of NOx by 70% from 1994 to 2003, and it was hoped to achieve this more cheaply than the traditional 'command and control' regulations it replaced. However, due to the setting of too generous caps, emissions were reduced at only a fraction of the rate expected at the time of the program's adoption. The US Environmental Protection Agency
(EPA) considers RECLAIM a general lesson for market-based systems, namely that market-based programs require significant planning, preparation, and management during
development and throughout the life of the program.
Emissions trading
Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
program operating in the state of California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
since 1994. Under the trading program, hundreds of polluting facilities are required to cut their emissions of nitrogen oxide
Nitrogen oxide
Nitrogen oxide can refer to a binary compound of oxygen and nitrogen, or a mixture of such compounds:* Nitric oxide, also known as nitrogen monoxide, , nitrogen oxide* Nitrogen dioxide , nitrogen oxide...
s (NOx) and sulfur oxide
Sulfur oxide
Sulfur oxide refers to one or more of the following:* Lower sulfur oxides * Sulfur monoxide * Sulfur dioxide * Sulfur trioxide *Higher sulfur oxides Sulfur oxide (SOx) refers to one or more of the following:* Lower sulfur oxides (SnO, S7O2 and S6O2)* Sulfur monoxide (SO)* Sulfur dioxide (SO2)*...
s (SOx).
Under the system, which operates as a cap-and-trade program, each participating facility is given a certain number of emission rights (the 'cap') for free. In each consecutive year, the number of emission rights given is reduced such that the facilities have to either reduce their emissions or buy up emission rights from facilities with enough to trade.
The system was designed to reduce emissions of NOx by 70% from 1994 to 2003, and it was hoped to achieve this more cheaply than the traditional 'command and control' regulations it replaced. However, due to the setting of too generous caps, emissions were reduced at only a fraction of the rate expected at the time of the program's adoption. The US Environmental Protection Agency
United States Environmental Protection Agency
The U.S. Environmental Protection Agency is an agency of the federal government of the United States charged with protecting human health and the environment, by writing and enforcing regulations based on laws passed by Congress...
(EPA) considers RECLAIM a general lesson for market-based systems, namely that market-based programs require significant planning, preparation, and management during
development and throughout the life of the program.
Scope of the Program
As of 2004, The NOx trading program includes 311 participating facilities, and among these 33 also participate in the SOx trading program. The facilities include a large number of electric power stations, in addition to other types of installations.Environmental results
Emissions of NOx were reduced, albeit in the first many years more slowly than had been expected (see figure), and more slowly than under previous regulations. In its 2003 evaluation of RECLAIM, EPA concluded:- The initial allocations were excessively high and well beyond what was needed to account or allow for recovery from the "recessionary" economic conditions at the time RECLAIM was initiated. As indicated elsewhere, the initial allocations were roughly 40-60 percent above actual emissions during the first two years (1994-1995). EPA was unable to locate analyses justifying such a growth allowance based on economic data. Further, the data that has been provided in SCAQMD reports indicates that the Gross Regional Product has increased by approximately 13 percent since start of the program. This is not of sufficient magnitude to explain a rate of emissions decrease of less than half the initial projections.
Costs
The program was founded on the principle that it would not only achieve the same environmental results as the traditional (successful) 'command and control' regulations, but that it would do so more cheaply. As EPA pointed out in its 2003 review of the program, it first of all failed to reduce emissions as much as otherwise, due to too generous emission caps, and even then much of the emissions reduced came at a price (per tonne) higher than would have been the case under the subsumed command-and-control program.Allowance prices
The emission rights in RECLAIM are called RECLAIM Trading Credits (RTC), with one RTC for each tonne of NOx or SOx emissions. During 2005, NOx RTC average prices ranged from a low of $1,200 per ton for the Compliance Year 2004 RTCs, to $9,730 per ton for Compliance Year 2008 NOx RTCs, to $10,193 per ton of NOx RTCs for Compliance Years 2010, and leveled off at around $9,800 per ton for RTCs valid for Compliance Years 2010 and beyond. For SOx, average 2005 prices ranged from $1,400 per ton for Compliance Year 2004 SOx RTCs to around $4,450 per ton of SOx RTCs valid for Compliance Year 2007 and beyond.External links
- South Coast Air Quality Management District RECLAIM official site at SCAQMD.