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105
The excessive initial allocation of RTCs also contributed to the low prices of
RTCs. Since the implementation of the RECLAIM, the prices of RTCs have been low
for most part of this period. It was found that “most large companies attempt to weigh
the price of the credits and the marginal cost of compliance to determine whether they
should install control technology or purchase additional credits” (EPA, 2002, p. 18).
When the price of RTCs is low, it cannot provide a strong incentive for the industrial
participants to actively participate in either trading activations or adopt new
technology of emission reduction. The potential suppliers who have extra RTCs do not
want to sell as many of them as possible because emissions trading is not their major
business and cannot bring a lot of money, or they may worry about the loss of their
public reputation as a seller of pollution credits. Meanwhile, since generating profit
from emissions trading is not the main goal of industrial participants, they may choose
not to sell unused RTCs if they are in compliance status (EPA, 2002, p. 21). The
potential buyers are less likely to make technological innovation to reduce their
emission level because they can buy RTCs at low prices. A long period of low prices
of RTCs does not necessarily mean that the low prices will exist forever. However, the
wrong belief and long indulgence in low prices resulted in an extreme price strike in
2000, when the demand suddenly increased and the supply didn’t change. Thus, the
RECLAIM market collapsed and the politics worked.
On the other hand, rules of RECLAIM did not provide strong incentives for
technological innovation for emission reduction. For example, the average cost of best
available control technology for NOx was about fifty times of the average price of
emission credit of NOx in the early period of the implementation of the RECLAIM
Object Description
| Title | Processes, effects, and the implementation of market-based environmental policy: southern California's experiences with emissions trading |
| Author | Zhan, Xueyong |
| Author email | xzhan@usc.edu; xueyongzhan@gmail.com |
| Degree | Doctor of Philosophy |
| Document type | Dissertation |
| Degree program | Public Administration |
| School | School of Policy, Planning, and Development |
| Date defended/completed | 2008-07-01 |
| Date submitted | 2008 |
| Restricted until | Unrestricted |
| Date published | 2008-10-30 |
| Advisor (committee chair) | Tang, Shui-Yan |
| Advisor (committee member) |
Mazmanian, Daniel A. Henry, Ronald |
| Abstract | This research provides a positive explanation of the implementation processes and effects of market-based environmental policy by conducting a case study on RECLAIM (Regional Clean Air Incentives Market), the first regional emission permits trading program that has been implemented by South Coast Air Quality Management District (SCAQMD) to address air pollution problems in the Los Angeles air basin since 1994.; Firstly, I developed a game theoretic model of environmental policy implementation. This model integrates theories of administrative rulemaking, policy implementation, institutional rational choice and transaction cost politics. I argue that administrative agency tries to minimize political transaction costs of policy implementation when writing rules.; Based on the formal model, I conducted a quantitative analysis to examine the interactions between SCAQMD and its key stakeholders, such as federal, state and local governments, businesses, and environmental NGOs, during the rulemaking of RECLAIM. I found that SCAQMD is more likely to adopt rule changes suggested by state and federal environmental agencies. This research identifies the dominant role of organized interest groups, the existence of interagency lobbying, and the lack of citizen control over the rulemaking of RECLAIM. Furthermore, I conducted an evaluation of the rules governing the RECLAIM program, and I identify the major distortions of the RECLAIM rules in comparison with an ideal cap-and-trade emissions trading market. Also, I used OLS regression to examine the effects of policy difference on emission level in California between 1990 and 1999. This evaluation fails to reject the null hypothesis that using cap-and-trade (CAT) compared with using command-and-control (CAC) has no different effects on emission of both NOx and SO2 from point sources at the county level in California in the 1990's.; In summary, this research finds that the implementation of emissions trading is political, and interest group politics may distort the regulatory design and implementation of an emissions trading program. While cap-and-trade is promising to better protect our environment and natural resources, its implementation is conditioned by many political and administrative factors. Inadequate rules may come as the results of political compromises, and they may impact the functioning of an emissions trading system. |
| Keyword | emissions trading; rulemaking; RECLAIM; implementation; environmental governance |
| Geographic subject (city or populated place) | Los Angeles |
| Geographic subject (state) | California |
| Coverage date | 1990/2000 |
| Language | English |
| Part of collection | University of Southern California dissertations and theses |
| Publisher (of the original version) | University of Southern California |
| Place of publication (of the original version) | Los Angeles, California |
| Publisher (of the digital version) | University of Southern California. Libraries |
| Provenance | Electronically uploaded by the author |
| Type | texts |
| Legacy record ID | usctheses-m1719 |
| Contributing entity | University of Southern California |
| Rights | Zhan, Xueyong |
| Repository name | Libraries, University of Southern California |
| Repository address | Los Angeles, California |
| Repository email | cisadmin@lib.usc.edu |
| Filename | etd-Zhan-2335 |
| Archival file | uscthesesreloadpub_Volume44/etd-Zhan-2335.pdf |
Description
| Title | Page 116 |
| Contributing entity | University of Southern California |
| Repository email | cisadmin@lib.usc.edu |
| Full text | 105 The excessive initial allocation of RTCs also contributed to the low prices of RTCs. Since the implementation of the RECLAIM, the prices of RTCs have been low for most part of this period. It was found that “most large companies attempt to weigh the price of the credits and the marginal cost of compliance to determine whether they should install control technology or purchase additional credits” (EPA, 2002, p. 18). When the price of RTCs is low, it cannot provide a strong incentive for the industrial participants to actively participate in either trading activations or adopt new technology of emission reduction. The potential suppliers who have extra RTCs do not want to sell as many of them as possible because emissions trading is not their major business and cannot bring a lot of money, or they may worry about the loss of their public reputation as a seller of pollution credits. Meanwhile, since generating profit from emissions trading is not the main goal of industrial participants, they may choose not to sell unused RTCs if they are in compliance status (EPA, 2002, p. 21). The potential buyers are less likely to make technological innovation to reduce their emission level because they can buy RTCs at low prices. A long period of low prices of RTCs does not necessarily mean that the low prices will exist forever. However, the wrong belief and long indulgence in low prices resulted in an extreme price strike in 2000, when the demand suddenly increased and the supply didn’t change. Thus, the RECLAIM market collapsed and the politics worked. On the other hand, rules of RECLAIM did not provide strong incentives for technological innovation for emission reduction. For example, the average cost of best available control technology for NOx was about fifty times of the average price of emission credit of NOx in the early period of the implementation of the RECLAIM |
