Air Agency Alters Smog Regulations

Southern California’s regional air quality agency tightened regulations on smokestack industries Friday, changing the rules of a market-based program to reduce smog that critics say has not cut pollution fast enough.

The South Coast Air Quality Management District toughened the requirements of the Regional Clean Air Incentives Market, a program that sets a ceiling on the amount of two key air pollutants that 330 large businesses can emit.

Under the program, known as RECLAIM, businesses that reduce emissions of nitrogen and sulfur oxides below the legal limit receive “pollution credits.” They can then sell those credits to businesses that exceed the cap, giving them a financial incentive to clean the air. Businesses that exceed their limits and do not purchase credits face fines.

Since it began a decade ago, the program has reduced the targeted emissions by 50%, according to air agency officials. But progress slowed in recent years after a glut of cheap pollution credits flooded the market -- the result of many companies meeting or beating their pollution-reduction goals.

The changes approved Friday by the air agency’s governing board raise the goalposts, requiring the businesses to reduce nitrogen oxide emissions an additional 7.7 tons per day by 2011.

The changes also would allow utilities, which were exempted from the program during the state’s energy crisis, to reenter the market in 2007. During the crisis, power plants were allowed to greatly exceed their pollution caps to meet power needs.

Air agency officials said Friday’s changes should get the program back on track, as well as comply with state law requirements that polluting industries use the best available technology to reduce emissions.

“Cost-effective technologies are available now that can significantly reduce emissions from facilities in the program,” said the air district’s executive officer, Barry Wallerstein. “We believe the changes meet state law requirements and maintain the integrity of the program, while continuing to move closer to the region’s air quality goals.”

Industry groups, which had been pushing for a looser cap, did not convince the air district’s governing board, but did receive an extra year to make the reductions. Environmentalists said the changes, on the whole, were positive, and should help reduce pollution in Los Angeles, Orange, Riverside and San Bernardino counties.

“The reductions have been very slow in coming” in recent years, said Julie Masters, an attorney for the Natural Resources Defense Council, which led a coalition of environmental groups that pushed for a tighter cap on emissions. “All in all, we are pleased with the rule and are pleased that they did not give in to industry pressure,” Masters added. “But the cap could have been stronger.”

Begun in 1993, RECLAIM has been unpopular with environmentalists who argue that the goal of cleaning up the air regionwide won’t be met as long as some companies are allowed to pollute -- even if they must pay for the privilege. Environmentalists have also criticized the program as susceptible to mismanagement and fraud.

Last year, one of the architects of the pollution credit market, Anne Sholtz, was arrested by federal authorities, who allege that she defrauded companies of millions of dollars.

Sholtz, who had gone into business as a trader in the market after helping to set it up, was accused by federal prosecutors of running an “$80-million Ponzi scheme” in which she sold the same pollution credits to several companies. The case is pending.