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8 Cards in this Set

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6.2 Policy Analysis Considerations and Implementation Lessons


6.2.1 Using Previous policy experience in RECLAIM

SCAQMD used technical assistance from the EPA in the formation of the RECLAIM program

(the following 4 are the most effective elements of the RECLAIM development)

6.2.1 (A) Democratic forums for implementation discussion

RECLAIM holds public workshops to obtain input in interested parties

The result was a draft concept paper prepared by SCAQMD that reflected a collaborative, multi-stakeholder effort.

(This exercise improved the political feasibility of the program and its refinements and fostered stakeholder collaboration.)

6.1.2 (B) Ex Ante assessments of RECLAIM’s distributive costs

- The State Legislature required RECLAIM to be assessed for socioeconomic impacts.

- The Draft Environmental Assessment conducted for RECLAIM indicated that significant negative impacts were not expected for the local communities.

- (This measure helped gain support from industries and communities that might had otherwise been skeptical about the implementation of the environmental regulatory measures because they could believe that it would hurt their communities)

6.2.1 (C) Information management systems and technological progress in emissions monitoring

- RECLAIM program managements and market functions are strongly information management systems and online communications.

- (this makes the program more efficient, improve data quality and has made the process easier for the participants to input their data and it's more efficient)

- RECLAIM’s management systems ensure that RTC transfers are “certifiable and official ownership is recorded”

(The "SCAQMD 2007" reports describes the challenge to balance automation needs with costs, complexity, accessibility and enforceability, all characteristics that depend on an "information dissemination system" that makes important marker information available to all market participants.)

6.2.1 (D) Incorporating new emitters into the program

- RECLAIM grants free permits to existing emitters

- (In order to reduce barriers to entry for new firms or facilities, and to enhance political feasibility, RECLAIM provides...)

- provides RTCs to companies that are clean and that create job ( this is in a way an incentive for more new companies to be greener and who can create jobs. )

- Starting 2007, RECLAIM provides a bank of 91 tons/year for each new participant

- In addition private brokerage firms provide the bulk of RTC’s to new emitters

6.2.2 The Policy implementation experience

- During the years of implementation RECLAIM has encountered technological, political, and economic obstacles.

- That stage of the RECLAIM’s develop can now offer key policy lessons for future market-based policy designed and implementation.

6.2.2 (A) Policy Results

- At the beginning of the program, the SCAQMD projected compliance-cost savings relative to command-and-control regulations averaging $56 million annually. (a 42% saving)

-The RECLAIM program has achieved a ⅔ reduction in total emissions and a reduction in the cost of emission allowances. (despite the 2001 price hikes, actual job loss arising from the emissions control has been a fraction of the expected levels)

- trading is high and expand every year as the market includes transactions for the future

- Health benefits from reduced smog levels are also significant

- fewer lost days of school and work in the population due to respiratory illnesses

RECLAIM facilities show that their compliance costs under SCAQMD ETS program were on average 24% lower than those not participating in the program

(RECLAIM projected the allowances to trade for $25,000, but in actuality the market prices range around $200 to $10,000 per ton.)

There was a 1.06% employment gain during 2011 for RECLAIM facilities.

6.2.2 (B) Technical considerations and policy dynamics

- RECLAIM demonstrates that cap-and-trade system can be implemented for various sources

- RECLAIM demonstrates that it is possible to incorporate spatial and inter-temporal restrictions on trading

- RECLAIM failed to incorporate VOC due to technical difficulties in creating environmental commodities from polluting substances (when faced with effective political lobbying to avoid or delay controls)

6.2.2 (C) Political feasibility

- Certain features are created to satisfy politicians and constituents

- Grandfathering was more politically accepted than the more efficient method of initial auction. (because it benefited the older participants)

- Over-allocations of RTC’s occurred at the beginning of the program due to flexible system of choosing baseline years and conversion of conventional ERC’c into RTC’s due to the lobbying of consumers and industrial organizations.

6.2.2 (D) Administrative efficiency

- (The RECLAIM ETS replaced multiple conventional regulations and standards that required expensive monitoring and inspection duties by SCAQMD.)

- RECLAIM uses a decentralized regulatory approach, and allows firm flexibility on making emissions control investment decisions, it minimizes the regulator’s enforcement costs

- Development costs and capital investments in electronic data management systems and monitoring technology are upfront expenses

- The role of the regulator becomes that of a bookkeeper and overseer to assure the environmental integrity of the program

6.2.2 (E) Legality

Market oversight is a requirement, since fraud and abuse can occur as in any other commodity trading market.

6.3 Summary of Policy Lessons

- Program designed is impacted by the controlled substance:

- NOx- a non-uniformly mixed pollutant - Monitoring NOx emissions is more complex, and the trading of NOx RTCs is constrained by spatial and inter-temporal restrictions

- Trading rules and flexibility:

- RECLAIM demonstrates that social, economic, and political forces influence the design of market-based policies

- there is a trade off between political feasibility and cost-effectiveness

- (all aspects of society affect policy making)

- Allocation method, economic considerations, and political feasibility:

- Grandfathering RTCs enhanced the political feasibility of RECLAIM

- Information, transparency, and credible commitment:

- predictability is an essential part of long term planning

- SCAQMD reduced the maximum emissions of NOx in July, 2000 when demand for RTCs began to increase. When the energy crisis hit in 2001 some electric generators fell into non compliance.

6.3 Summary of policy lessons continued...

- Energy sector and environmental policy coordination:

- price reflects a polluters behaviour and can thus force them to decrease their use of energy production and thus decrease emissions

- ETS for air quality management must be designed to react quickly and effectively to unforseen external factors.

- Cost Control and market intervention:

- actions taken to change or stabilize the market should be incremental and market-based rather than programmatic.

- Fine-tuning and adequately informed regulation:

- regulators need to understand the regulated facilities and the factors impacting their decision making

- (a good way to keep all this in track is to have accurate monitoring and reporting emissions. Have participants invest in CEMS technology from all sources)

- Environmental justice considerations:

- Regulators have to address the issue of environmental justice so that not just affluent areas are been taken into consideration but so are all areas of the city.