Valley Air District’s Emissions Bank Likely To Change Following Damaging State Review

Nov 10, 2020

 

Later this month, the San Joaquin Valley Air Pollution Control District is set to release a report detailing how well its clean air programs are meeting federal requirements for reducing emissions. It’s called an equivalency demonstration, and it’s released annually every November.

This year’s equivalency demonstration, however, will be a little different, because it will likely contain significant changes to a program that helps businesses offset their air emissions. The changes come in response to a state review published this past summer that suggested the Valley air district had over-estimated and even miscalculated credits it had granted to businesses for reducing their emissions.

 

“The issues identified in this report are substantial and complex, potentially impacting a wide array of stakeholders in the San Joaquin Valley,” the review by the California Air Resources Board (CARB) reads, including not only the businesses that rely on those credits to expand their operations, but also residents and community groups.

 

In an air basin that continually ranks among the most polluted in the country, clean air advocates and the state agency that oversaw the audit agree that fixing the problems is a matter of social and environmental justice. “Improvements need to be made,” said CARB Executive Officer Richard Corey. “There were clearly areas that need to be addressed and need to translate into a much more robust program.”

 

The main focus of the review, launched by the CARB at a January 2019 meeting in Fresno, was a Valley air district program that functions as an emissions bank. If a business reduces its pollution levels--for example, by upgrading engines, furnaces, or air filters--beyond what’s required by law or local regulation, the air district rewards that business with an emissions reduction credit (ERC) that can be used to offset its other emissions. Beneficiaries to the more-than-2,000 Valley ERCs include petroleum companies, manufacturers, and food processing plants.

 

Similar banking systems are used by air districts throughout the state, and are actually required by the Clean Air Act in “nonattainment areas” like the San Joaquin Valley that have failed to meet federal air quality standards. Those air districts then use equivalency demonstration reports to prove each year that ERCs in combination with offsets from other programs together meet federal reduction requirements.

 

The Valley’s ERC program fell under scrutiny after a 2018 report from the environmental advocacy group Earthworks argued that at least dozens of ERCs are out of date and lack the documentation to justify the millions of pounds of pollutants they offset. The authors, commissioned for the report by a handful of local clean air advocacy groups, reached their conclusions after combing through hundreds of pages of documents obtained from the air district or through the Public Records Act.

 

Following the Earthworks report, CARB carried out its own review of the ERC program and published its findings in June. Among other conclusions, it suggested that the air district had over-valued many of its ERCs. “In four of the 52 ERC projects reviewed, CARB determined that it is unclear whether the emission reductions were surplus of every federal, State, or district law, rule, order, permit, or regulation,” the review reads, which is in contradiction to rules that require ERCs to only be granted for emissions that are reduced beyond what’s already legally required. “This benefitted the applicant by providing a greater face value to the ERC.”

 

The review also revealed broader problems with the equivalency demonstration. The air district had miscalculated the reductions earned by some incentive programs, including one that upgrades the engines of old agricultural equipment, which could throw the air district out of equivalency for some pollutants. Without being able to demonstrate equivalency, old ERCs for those pollutants would need to depreciate instead of maintaining their full value from when they were issued, which would prevent businesses from cashing in on millions of pounds’ worth of offsets each year.

 

“Essentially what the report from CARB staff showed is that advocates’ initial concerns about the credits in the ERC system were not only valid, but extend even more deeply into the equivalency demonstration,” said Catherine Garoupa White, executive director of the Central Valley Air Quality Coalition. The advocacy group was one of many that commissioned the 2018 Earthworks report.

 

After CARB published its review, Garoupa White and representatives of 11 other advocacy groups penned a letter to CARB’s chair to request an overhaul of the entire ERC program. “Essentially what we want to see is elimination of credits that are invalid, discounting of credits that were overvalued to match their correct value, and the removal of these emission reductions that were claimed by the valley air district that were not legal,” said Garoupa White.

 

The review demonstrates that the air district has long valued industry over healthy air, Garoupa White said, and that those who have been harmed the most by over-valued emissions offsets are communities living alongside industrial emitters.

 

Richard Corey agreed that exposure to pollution in California is unequal, an issue that has also been raised by many of his agency’s board members. “There’s no doubt…that there’s regions in the state that are exposed to higher levels of air pollution and many of those areas are disproportionately lower-income communities of color,” Corey said, including those that live near ports, rail yards and warehouses. “Much, much more needs to be done in those communities. There’s just no doubt about it and it’s going to take much more than a single program.”

 

Because CARB approved decades of the air district’s previous equivalency demonstrations, Garoupa White argued the state agency also shares some of the blame for these over-valued offsets. Richard Corey acknowledged the agency focuses much of its attention on other sources of pollution, like vehicle exhaust. “Certainly the best case would have been to catch these issues that we’re talking about earlier,” he said. “Now we have to work through to improve the system. And we also have to take these learnings from this experience in our work with other districts.”

 

Morgan Lambert, deputy air pollution control officer of the Valley air district, said CARB’s review provided a welcome opportunity to enhance its clean air programs. “I understand from an advocacy perspective there's more work to be done, and we agree with that as well,” he said, but he added that some criticism of the ERC program stems from misconceptions about how it works. “A lot of people view ERCs as a way to basically buy your way out of meeting other air pollution control requirements, and that’s not the case.”

 

Instead, Lambert said, ERCs are one of the tools that have allowed air quality in the Valley to steadily improve over the last few decades. In response to the CARB review, the air district committed to adjusting its miscalculations of some offsets and revisiting others. The agency also agreed to create a new, public-facing equivalency database and convened a public working group to evaluate its annual equivalency process. “It's definitely one of our core values that we have here at the district to continue to try to increase transparency that we have and to do continuous improvement,” he said.

 

According to an air district presentation from early November, the agency has pulled some of its problematic offsets out of its equivalency demonstration following the CARB review. As a result, the air district will likely not be able to demonstrate equivalency for NOx and VOCs, two precursor pollutants to harmful and pervasive particulate matter. Until the air district can return to equivalency, all ERCs for those pollutants would lose much of their value, meaning businesses looking to use those ERCs would find themselves with far fewer offsets at their disposal.

 

The air district’s final equivalency demonstration report is due to be published by November 20.