Climate Change Roundup: Republicans Raise California Fraud as House Weighs Cap & Trade

By Published On: May 15, 2009

In an effort to discredit Democratic carbon cap-and-trade legislation aimed at cutting greenhouse gases, prominent House Republican leaders are dredging up a case of fraud that occurred in the Los Angeles area smog trading market. In a May 7 letter to federal Environmental Protection Agency Administrator Lisa Jackson, Representatives Joe Barton (R-TX), House Energy & Commerce Committee ranking minority member, and Greg Walden (R-OR), Energy & Commerce subcommittee on oversight and investigations ranking minority member, asked for extensive information about the agency’s role in investigating and prosecuting Anne Sholtz. They also asked about how the EPA oversees the Los Angeles area pollution trading program. Sholtz, through her firm Automated Credit Exchange, pled guilty to one count of felonious wire fraud in 2005 for selling fraudulent emissions credits in the South Coast Air Quality Management District’s Regional Clean Air Incentives Market. Three years later she was sentenced to one year of house arrest and five years of probation. In pleading guilty, Sholtz admitted that she used forged documents to defraud AG Clean Air, a New York company that traded in energy credits. That and other complaints against her prompted authorities to arrest her in 2004. Originally, federal authorities charged Sholtz with six counts of fraud, but when she pled guilty to one count federal prosecutors dropped the others. “We are concerned with the difficulties that EPA and other federal authorities have in preventing, investigating, and/or prosecuting fraud in relatively small pollution credit trading markets, and how EPA would help ensure the integrity of a proposed cap-and-trade market that would be enormous in scale,” wrote the two Republicans, taking aim at the Democratic proposal. The Republicans expressed consternation that it took three years to sentence Sholtz and that many of the documents in her case “remain under seal.” They also raised a question about whether similar fraud has occurred in an emissions trading program operated in the Northeast. They suggested that federal authorities are aware of fraud in that market, but have chosen not to investigate. As Congress approaches climate change, the two lawmakers said they want to “assess not only whether EPA has an adequate regulatory regime and surveillance capacity over pollution credit trading, but also whether there are any factors (e.g., resources, legal restrictions) constraining federal law enforcement in combating criminal cap-and-trade fraud.” * * * * The U.S. Senate Environment & Public Works Committee May 14 reported S. 849, a bill to require the federal Environmental Protection Agency to study the effects of black carbon emissions on climate change and health. The study, due in one year from the bill’s enactment, is to make recommendations on how to reduce black carbon emissions, which are thought to stem largely from diesel equipment. While Republicans and Democrats continue to disagree over the need for climate change legislation in the committee, S. 849 enjoyed bipartisan support. “While I contend carbon dioxide is not a hazard to human health, black carbon is and it needs to be studied,” said Senator James Inhofe (R-OK), ranking minority member of the panel and a cosponsor of the bill with committee chair Senator Barbara Boxer (D-CA). Senator Frank Lautenberg (D-NJ) noted that he was “terrified” to see the ice melting while on a recent visit to Greenland, but added that when it comes to black carbon “it’s nice to see the ice melt in this room.” Former California Air Resources Board chair Alan Lloyd was one of the early proponents of the need to control black carbon because of its contribution to climate change. When it settles on ice and snow, black carbon absorbs more of the Sun’s energy, causing faster melting. * * * * The Bay Area Air Quality Management District is planning to address climate change in updating its clean air plan this year. While the district has yet to release its 2009 draft plan, agency staff previewed ideas for the update in a series of public meetings held around the San Francisco Bay area late last month. Among the measures the district is eyeing are enhanced energy efficiency and conservation, alternative energy, and mitigating the urban heat island effect with cool roofs, cool paving, tree planting, and ventilation. The district intends to issue a draft plan in September and adopt a final version in the fall. Last year, the district became the first in the state to charge a fee on greenhouse gas emissions (Circuit, May 23, 2008).

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