SERA Improving EPA's Performance
with Program Evaluation
An Evaluation of the SCAQMD Regional Clean Air Incentives
Market: Lessons in Environmental Markets & Innovation
Series No. 4
By continuously evaluating its programs, EPA is able to capitalize on lessons learned and incorporate that
experience into other programs. This enables the Agency to streamline and modernize its operations while promoting
continuous improvement and supporting innovation. This series of short sheets on program evaluation is intended
to share both the results and benefits of evaluations conducted across the Agency, and share lessons learned
about evaluation methodologies in this evolving discipline. For more information contact EPA's Evaluation Support
Division at www.epa.gov/evaluate.
At a Glance
Evaluation Purpose
To investigate causes of increases in RECLAIM
trading credit prices and program effectiveness.
Evaluation Type
Outcome Evaluation
Publication Date
November 2002
Partners
EPA Region 9 (San Francisco) Air Division
Contacts
Ken Israels, Region 9 (415) 947-4102;
Richard Grow, Region 9 (415) 947-4104
Web Link
http: / /www.epa.gov/region09 /air /reclaim /
index.html
Background: Why was an evaluation
performed?
Adopted in 1993, RECLAIM, the Regional Clean Air Incentives
Market, is a federally approved "emissions trading program"
developed and implemented by the South Coast Air Quality
Management District (SCAQMD) in EPA Region 9. RECLAIM
sets a factory-wide pollution limit for participating facilities that
emit sulfur oxides (SO ) and nitrogen oxides (NO ). As part of
the program, businesses decide what equipment, processes, and
materials they will use to meet their emission limits. Facilities
that successfully reduce emissions more than required can sell or
trade air pollution credits to other companies that need more time
to clean up their emissions or that find the cost of buying credits
cheaper than buying and installing new equipment. No matter
who buys or sells credits, RECLAIM requires that total emissions
from all participating companies be reduced each year. Between
2000 and 2001, the prices of RECLAIM credits increased.
Additionally, some facilities experienced difficulty meeting
emissions levels. As a result, EPA conducted an evaluation to
investigate the causes of the events and to examine the
NCEI
NATIONAL CENTER FOR
ENVIRONMENTAL INNOVATION
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effectiveness of the RECLAIM program. Three key
performance questions were posed: (1) whether
expected emission reductions were achieved; (2) what
type of emission control strategies had been applied
by market participants; and (3) whether the program
was cost effective overall.
Basic Evaluation Approach: How
did they do it?
The evaluation was completed using the four steps
outlined below.
Step I: Review existing RECLAIM background
materials on program implementation and
performance.
Step II: Conduct interviews with 20 stakeholders
representing regulated facilities,
environmental organizations, regulatory
agencies, and brokerage firms.
Step III: Analyze background data and interview
results.
Step IV: Report findings and lessons learned.
Evaluation Results: What was
learned?
The evaluation revealed the following results.
• Market-based programs require significant planning,
preparation, and management during development
and throughout the life of the program. Market
information is a key factor affecting facility
decision-making. This includes providing sufficient
information about market trends.
• Regulators should strive to create confidence and
trust in the market by making a full commitment to
the program and ensuring consistency in the market
and their policies.
• Unforeseen external circumstances (like energy
deregulation) can have dramatic impacts on market-
based programs. Therefore, these programs must
be designed to react quickly and effectively to
unforeseen external factors. Periodic evaluation,
revisiting of program design assumptions, and
contingency strategies are crucial to keeping
programs on track.
• RECLAIM'S experience suggests that a market based
approach can work with the Clean Air Act's New
Source Review program. This may be a function of
the types of sources included or the controls in place
at many facilities.
• Regulators need to have a strong understanding of
the regulated facilities and the factors impacting
companies' decision-making.
Evaluation Outcome: What
happened as a result?
The evaluation identified key design features of the
RECLAIM program that, if designed differently, might
have addressed the unexpected increase in the price
of RECLAIM emission credits. Office of Air and
Radiation staff are using the lessons learned from the
evaluation as they monitor existing programs and
consider the development of similar emissions trading
programs. The evaluation results are also being used
in other forums, such as the Clean Air Act Advisory
Committee, which met in November 13, 2002 to
inform other innovative regulatory efforts.
Approach for this Evaluation
Step I
Review Existing RECLAIM Background Materials
Step II
Conduct Interviews
Step III
Analyze Resulting Information
Step IV
Report Findings and Lessons Learned
United States
Environmental Protection
Agency
Office of Policy,
Economics and Innovation
(1807T)
June 2003
EPA-100-F-03-008
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