Los Angeles-Area Power Producers May Soon Cash in on Pollution Credits

By Published On: October 3, 2003

Power producers in the Los Angeles area may soon be able to recover some of the money they spent on air-pollution controls after the state’s power crisis by selling excess pollution credits under a plan to bring them back into a regional emissions-trading market. Under the South Coast Air Quality Management District’s proposed amendments to the Regional Clean Air Incentives Market (RECLAIM) program, 14 generating facilities will be reintroduced into the trading program, under which allowable annual emissions are capped for some 300 facilities. Those that emit less than their individual allocations can sell credits to facilities that want to exceed their emissions limits so that overall emissions from major industrial plants in the region remain under a total annual cap. “The power plants will hold extra credits and be looking to recoup some of the money they spent,” said Sam Atwood, spokesperson for SCAQMD. The district has operated the emissions-trading market since 1993. “Generators certainly will sell the excess credits, but it will be a very small fraction of the capital spent to control pollution,” said Don Vawter, vice president of AES Southland. However, Vawter expressed satisfaction with the agency’s plan. The agency removed power plants from the RECLAIM program during the power crisis of 2000-2001 because they had not installed enough pollution control equipment to stay under their caps. While operating near capacity to meet the demand for power, the plant operators needed to buy so many air-pollution credits that they drove the price of the pollution rights sky-high, from an average of $4,284 per ton of nitrogen oxides to more than $45,000 a ton, causing problems for other businesses operating under the market. Since being bumped from the market in 2001, the region’s power plants generally have installed pollution-control equipment and reduced their emissions by some 90 percent, according to SCAQMD. Consequently, they emit well below their allotments and, even with projected growth in demand for power in the region, are expected to have more pollution credits than they need through the remainder of the decade. An agency analysis projects that the 14 plants?owned by AES Corp., Reliant Energy, the Los Angeles Department of Water & Power, and other operators?will emit 930 tons of nitrogen oxides in 2010, while holding credits to emit up to 2,330 tons a year. Environmental groups have been battling to reduce emissions from every possible source. The air quality in the region’s inland valleys shows signs of deterioration for the second year in a row. “Obviously the utilities were pushing to get those credits,” said Todd Campbell, policy director for the Coalition for Clean Air and a member of the city council of Burbank, which operates a municipal power district. Campbell is advocating that?in fairness to the power producers that have spent money to reduce their pollution in the past couple of years?the excess credit allocations be eliminated by slightly reducing the emissions allocations for all of the 300 companies in the emissions-trading program. If the excess credits now planned for the power plants come on the market, Campbell said, it will be difficult for the region to meet the federal clean air standard by the 2010 Clean Air Act deadline. The RECLAIM rule amendments are set for adoption at a public hearing on November 7.

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