The South Coast Air Quality Management District on Friday significantly tightened its pollution credit trading program for the first time since it was created in 1993 likely costing businesses hundreds of millions of dollars.
The 330 power plants, oil refineries and other large manufacturing facilities that participate in the program will be asked to reduce their cumulative emissions of nitrous oxides by 7.7 tons per day by 2011.
In making the changes, the air district's board softened the original staff proposal, which called for a 2010 deadline, while businesses had sought a two-year extension.
"It was kind of a split decision," said Bob Wyman, an attorney who represents businesses in the program.
The program was established to give the region's largest polluters flexibility in the way they meet regulations that mandate they reduce their emissions of smog-forming nitrous oxides.
Under the program, the facilities are given an annual emission limit that steadily decreases over time. Facilities that install pollution control equipment and reduce emissions more than they are required can then sell credits to companies that have not done so.
Since the program was adopted there has been a 50 percent reduction in nitrous oxide emissions, but more reductions are required to meet state and federal clean air standards.
Under the changes adopted Friday, the board also said it would be willing to consider adding credits to the program after 2008 should the average price of a credit exceed $15,000 per ton. However, the board rejected a mechanism that would have automatically triggered the addition.
Some industry representatives estimated the total cost of the program could total $300 million to $500 million or more, but environmentalists said the figures were widely overblown and could be closer to $200 million.
The board also loosened restrictions it had placed on power plants in 2001, when the energy crisis forced the plants to buy up credits in order to keep producing power at higher levels.
The plants had essentially been taken out of the program, but will now be able to do some limited trading through 2007, until all restrictions are removed the following year.
In addition, the board established criteria by which a limited number of facilities can gain exemptions from the program.
Todd Campbell, an environmental advocate with the Coalition for Clean Air, also characterized the board's decisions as a compromise.
"I thought the board was very generous (with the businesses) but at least we are moving forward," he said.
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