• Why is RECLAIM being amended?
• What is proposed?
• How will mobile and area source NOx credits be generated for the mitigation program?
• What is the structure and timing of the proposed changes?
• What is the next step?
• RECLAIM Background

RECLAIM, the Regional Clean Air Incentives Market, is being amended to:

• Allow power plants to generate sufficient energy to mitigate the energy crisis;
• Reduce smog-forming emissions during the next few years from power plants and other facilities; and
• Increase the supply and reduce the price of nitrogen oxide (NOx) RECLAIM Trading Credits.

• Separating existing power plants from the RECLAIM market until at least 2004 and requiring them to install best available retrofit air pollution controls as soon as possible, but no later than Jan. 1, 2003 for boilers and Jan. 1, 2004 for turbines;
• Establishing a temporary mitigation fee program for the next four years, where power plants would pay AQMD $7.50 per pound of NOx emissions in excess of their RECLAIM credit holdings. AQMD would use the fees collected to seek emission reductions from mobile, area and stationary sources (see below). Excess emissions would be deducted from the facility's future account holdings to ensure the environment is made whole. Once emission reductions were generated from the mitigation fees, deductions would be credited back to the facility's account;
• Requiring non-power plant RECLAIM facilities that emit 50 tons per year or more to submit compliance plans demonstrating how future RECLAIM allocations can be met;
• Creating a temporary Air Quality Investment Program for the next four years for new power plants, and small RECLAIM facilities that have installed best available retrofit controls, to offset nitrogen oxide emissions by paying a fee of $7.50 per pound, if reductions are available. AQMD is pre-funding this program with $2 million from the AES settlement to obtain marine vessel emission reductions;
• Requiring the identification of RECLAIM credit buyers and sellers, and the filing of trades with AQMD in a timely manner to improve trading information; and
• Requiring facilities with emissions of 25 to 50 tons per year to submit annual informational forecast reports.

As originally developed, RECLAIM envisioned the development of mobile and area source credit generation programs to increase the supply of RECLAIM credits. Toward this end the Board in March adopted Rule 1612.1, Mobile Source Credit Generation Pilot Program, allowing facilities to generate mobile source credits by replacing heavy-duty diesel trucks, warehouse yard hostlers and certain refuse trucks with clean-fueled, lower-emission models.

AQMD also is proposing adoption on May 11 of the following mobile source credit generation pilot programs:

• Proposed Rule 1631 – Pilot Credit Generation Program for Marine Vessels, where old diesel engines are replaced or repowered with lower-emission diesel models;
• Proposed Rule 1632 – Pilot Credit Generation Program for Hotelling Operations, where diesel power is replaced by electricity to power ships in the harbor; and
• Proposed Rule 1633 – Pilot Credit Generation Program for Truck/Trailer Refrigeration Units, where such units are powered by electricity rather than auxiliary diesel engines.

In addition, the Board will consider one area source credit measure, Proposed Rule 2507 – Pilot Credit Generation Program for Agricultural Pumps, where diesel-powered pumps are replaced with electric equipment.

AQMD's Governing Board will conduct a public hearing on Friday, May 11 to consider amending existing RECLAIM rules and adopting three new rules:

• Proposed Rule 2009 -- Compliance Plans for Power Producing Facilities;
• Proposed Rule 2009.1 -- Compliance Plans and Forecast Reports for Non-Power Producing Facilities; and
• Proposed Rule 2020 -- RECLAIM Reserve, which governs the mitigation fee program and Air Quality Investment Program.

AQMD staff will report back to the Board in November on projected emissions reductions and their impact on overall program compliance.

RECLAIM was adopted by AQMD's Board in October 1993 to provide a more flexible compliance program for some 360 facilities, representing the largest emitters of nitrogen and sulfur oxides.

At the outset of the program, each facility was given an annual emissions limit, which decreases each year through 2003. Firms that emit less than their respective limit may sell RECLAIM Trading Credits to firms that emit more than their limit. As long as total emissions from all of the firms stay under the aggregate limit, the region’s air becomes cleaner and businesses gain regulatory flexibility and potential cost savings.

All went well until last summer when the supply of emissions credits grew tight as power plants in the region operated at record levels to meet the state’s demand for electricity. Generators purchased most of the available credits, causing prices to rise and become unaffordable for many other businesses in the region.

In October 2000, the Board directed staff to form an advisory committee to examine the program and recommend changes to stabilize prices. That led staff to develop a RECLAM white paper in January 2001. Since then, staff has developed the proposed rule changes through an open, public process with a working group of affected industries, environmental agencies, environmental groups, credit brokers and others.

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This page updated: March 01, 2004
URL: http://www.aqmd.gov/news1/RECLAIM_fact_sheet.htm