An Evaluation of the South Coast Air Quality Management District’s Regional Clean Air Incentives Market – Lessons in Environmental Markets and Innovation

The development of the Regional Clean Air Incentives Market (RECLAIM) was a milestone for air quality management in the Los Angeles area and for the use of market-based incentives in achieving clean air. This report looks at the RECLAIM program from its development to the present in an effort to better understand the issues impacting market based programs and the factors influencing their success. This report is based on practical implementation experience in the most active locally-implemented air emissions trading market in the United States. More specifically, the primary objectives of this effort were:

• To evaluate the program’s performance over its lifetime;
• To make recommendations about the functioning of RECLAIM that could improve its performance; and
• To identify lessons learned from RECLAIM’s experience that maybe of benefit to other incentive programs and may inform evolving policies.

To meet these objectives, the U.S. Environmental Protection Agency (EPA) reviewed program literature including annual reports from the South Coast Air Quality Management District (SCAQMD), to gain a better understanding of RECLAIM’s theoretical background, the anticipated results, and the program’s performancesinceinceptionin1993. In addition, the research team interviewed over 20 stakeholders from regulated facilities, environmental organizations, regulatory agencies, and brokerage firms to collect feedback on how the market has performed and the overall success of RECLAIM in achieving its intended objectives. These efforts enabled the research team to develop, based on qualitative information, recommendations and lessons applicable to both RECLAIM and market based programs in general.