Corruption Destroys Free-Market Anti-Pollution System
|September 18, 2002||Posted by Staff under Progress Report, The Progress Report|
New Jersey Abandoning Anti-Pollution Trading System
Great Plan, Poor Execution
Corruption and impatience have apparently ruined an innovative anti-pollution program in New Jersey.
Here are portions of an article from the Newark Star-Ledger noting the program’s demise.
by Anthony S. Twyman
In a slap at the environmental policies of former Gov. Christine Todd Whitman, the McGreevey administration plans to scrap an air pollution control program that her environmental commissioner once touted as a national model. Calling it a failure, state Department of Environmental Protection Commissioner Bradley Campbell said the state will pull the plug on the Open Market Emissions Trading program, which allows industries to pollute the air more than the government allows if they buy “credits” from companies that have reduced emissions below certain levels.
The New Jersey program is a version of an emissions trading plan now being pushed on the national level by Whitman, who is head of the federal Environmental Protection Agency. The difference is that the New Jersey program places far fewer restrictions on the emissions of industries that buy credits. Campbell, in a letter to Whitman’s EPA, said this hurt the state’s effort to reduce air pollution.
Over the years, some 39 companies have used the program to exceed air quality standards.
Under emissions trading, companies that reduce their emissions below government requirements receive emission “credits” that they can sell to other companies that have exceeded emissions standards. The program operates under the premise that because air pollution travels over long distances, there will be a net decrease in pollution even if some polluters are polluting more.
In 1997, for example, Public Service Electric & Gas switched two of its power plants in Mercer and Hudson counties from dirty coal generation to less-polluting natural gas and installed more advanced pollution controls. The result was that the utility banked nearly 9,000 tons of credits. Two companies — a specialty paper manufacturer and South Jersey Gas Co. — bought 63 tons of those credits at a price ranging from $950 a ton to $1,250 a ton.
Unlike the federal program, the New Jersey program places no limits on emissions from companies that use the credits to exceed pollution standards. It also [foolishly] allows companies to sell credits for emission reductions they made years earlier. In August 1996, the Whitman administration introduced the program, saying it would provide a national, market-driven model for reducing air pollution. But over the past several years, myriad problems have surfaced.
Earlier this year, PSEG Fossil, the largest holder of pollution credits, agreed to forfeit thousands of them under a settlement with the state and federal governments for air pollution violations at its coal-fired power plants. The settlement forced PSEG Fossil, which operates power plants around the state, to pull out of the emissions trading program and left companies that relied on the utility’s credits scrambling to find ways to meet government air quality standards.
“That really affected the market in the state,” said Neil Brown, a PSEG spokesman.
Subsequently, the DEP announced a settlement with Conectiv Energy of Wilmington, Del. The agency alleged that Conectiv had abused the program. The unusual settlement required the company to pay $2 million — half of which was to be used to plant trees in South Jersey.
In addition, the private company hired to operate the emissions trading program pulled out last year, saying it failed to make money. The EPA’s inspector general also is close to wrapping up an investigation of the program, prompted by environmentalists who have long argued that it is a fraud.
A sound, free-market approach to curbing air pollution would have worked just fine, but failed due to corruption, fraud, and poor execution. Will this discourage other states from using free-market methods against pollution? What’s your opinion? Tell your views to The Progress Report!