L.A. Power Plants Blocked from Emissions Trading Market

By Published On: December 14, 2003

Power plant operators in the Los Angeles area may not be able to cash in on excess air pollution credits as widely expected. Under pressure from the California Air Resources Board (CARB), the South Coast Air Quality Management District board declined?at least for now?to reinstate the region?s 14 power plants in the emissions trading market. The district?s surprise change of course leaves in limbo Calpine?s 670 MW power project in Riverside County. Calpine could have purchased scarce credits from other plant operators to offset emissions from the facility. To obtain the credits, said Calpine spokesperson Katherine Potter, the company may now resort to cleaning up mobile sources of air pollution?a potentially more complicated proposition. The move late last week by the South Coast district might help make the sprawling region?s air cleaner by forcing proponents of new power plants and industrial projects to develop credits by cleaning up motor vehicles instead of buying excess credits from other plant operators. Motor vehicles and off-road mobile sources, such as planes, ships, and construction equipment, emit almost 90 percent of total nitrogen oxides (NOx) in the area. ?Power-producing facilities achieved 90 percent control of nitrogen oxide emissions when they were removed from [the Regional Clean Air Incentives Market (RECLAIM)] and subjected to traditional source-specific emission limitations,? wrote Catherine Witherspoon, CARB executive officer, in a November 4 letter to the district. ?Given the success of this remedial action, we hope the district board will conclude it is unnecessary to return power-producing facilities to the RECLAIM program at all,? she added. The district still may reinstate the plants in its trading market, according to Sam Atwood, district spokesperson. But Witherspoon said that to meet state law, the district would have to adjust power plant credit holdings ?downward to reflect best available retrofit control technology? before returning them to the RECLAIM market. This would leave the plants without any excess credits to sell. Witherspoon?s stance appears to reflect the concerns of environmentalists who asked the air district to lower power plant emissions allocations before reinstating them in the trading program to avoid flooding the market with pollution credits. If the South Coast agency had amended its RECLAIM program rules on November 7 to bring the plants back into the market next year, power plant operators would have been allowed to sell 1,400 tons of excess credits. They hold 2,330 tons of NOx emissions credits but use only 930 tons a year to generate 10,600 gigawatt-hours of electricity. The plants were removed from RECLAIM in 2001 because they caused huge credit market price distortions. NOx credit prices soared from an average of $4,300/ton in 1999 to $45,000/ton in 2000, effectively crowding other industries out of the market. Subsequently, air pollution control equipment was installed on the power plants, and if they reentered the market, they could once again trade NOx credits.

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