Arco Drops Support for ‘Smog Exchange’ Plan : * Ecology: The goal was flexibility in handling pollution. Now the plan is overloaded, the firm says.
Just as planning begins in earnest for the “smog exchange” proposed by the South Coast Air Quality Management District, Atlantic Richfield Co. has withdrawn its support for the idea.
The move is a vote of no confidence at a crucial moment by one of the largest oil refiners in Southern California, according to observers of the AQMD plan. Other oil companies whose refineries would be key participants in the proposed market were also said to be unhappy with the rough outline of the market, released Wednesday by the AQMD.
Arco, like most other businesses operating in the South Coast Air Basin, had backed the concept of such a market. But in recent weeks the company had voiced concern, and then opposition, when the AQMD released its latest formal staff recommendations.
“The plan has been loaded with so much other stuff that it doesn’t resemble a market to us anymore,” Kenneth G. Riley, Arco vice president for business management and new ventures, said Friday.
Arco is just one of the parties now lobbying the AQMD as it considers which industries should be in or out of the market, as well as how the proposed pollution credits would actually work.
To create the market, the AQMD would set pollution-emission limits--to be lowered each year--for each polluting facility. Companies willing to invest in pollution-control equipment, or which found other ways to lower their emissions below these limits, would receive credits for their extra achievement. These could be sold to other companies that found it more economical not to make the investment in pollution control.
But beyond that general concept, almost all the details are yet to be decided by the AQMD.
Most companies, unlike Arco, continue to criticize the market plan from their positions as members of the AQMD’s advisory and steering committees.
Many Southern California businesses--and their rare allies, the environmentalists--are calling for a livelier market than the AQMD has proposed, with virtually all polluting businesses able to trade. The AQMD describes two markets open to 2,700 companies--in contrast to 17,000 polluting firms in the region--at least in the beginning.
“The more people you have in the program, the more active the market will be, the greater the job savings, the greater the economic savings, and the greater the innovation in new pollution technologies,” said attorney Robert A. Wyman of the law firm of Latham & Watkins in Los Angeles and a member of the AQMD’s advisory and steering committees.
Environmentalists, banding under the Coalition for Clean Air, agree that more companies should be involved. But they object to the AQMD’s proposal to create markets for both nitrogen oxides and hydrocarbons, worried that hydrocarbon pollution cannot yet be adequately monitored.
Labor groups, for their part, worry that some marginal companies will just cash in their smog credits and leave. The Los Angeles County Federation of Labor wants at least a percentage of any gains from a departing company to go for job retraining and job creation in Southern California.
Arco objects to any clean-air mechanism--including the smog market--that focuses on stationary pollution sources, such as refineries and power plants, but not mobile sources, such as cars. Arco has “already lowered emissions significantly,” Riley said, and estimates that the market system of the AQMD plan, under the staff recommendations, would require the company to reduce existing air pollution by 70% to 100% beyond current levels by the year 2010. Arco says it has already reduced air emissions at its manufacturing sites by about 70% and at its service stations by about 95%.
Possible Smog Market Mechanisms
The South Coast Air Quality Management District staff is pondering what kind of “smog exchange” would best ease trading in air-pollution emissions credits, scheduled to begin in 1993. The idea is that companies would be able to lower their emissions or buy credits to continue their emissions from companies that have already lowered theirs. Several market mechanisms are being considered by the district.
* A direct search market, much like buying and selling a house without using a real estate broker. The AQMD expects this market to develop in addition to more formal market mechanisms.
* A brokered market, in which brokers bring buyers and sellers together. This too could exist alongside more organized markets.
* Trading at an organized, auction-style exchange, such as the New York or Pacific stock exchanges.
* A dealer-driven or quote-driven market, in which buyers and sellers deal with an agent who keeps a standing inventory of credits.
* Possibly an auction specifically for new or relocating companies coming into the South Coast Air Basin.
