Undeserved Credit: Shining a light on pollution systems in the Golden State

In the age of climate change, some governments have set ambitious goals to reduce pollution from fossil fuels. In the US, California leads the way with plans to cut the state’s greenhouse gas emissions 80 percent by 2050. Getting there will be challenging, and virtually every source of pollution will need to be examined.

With this in mind, Earthworks took an in-depth look at the San Joaquin Valley Air District’s emission reduction credit (ERC) bank. The credits in these banks represent quantities of greenhouse gases, volatile organic compounds (VOCs), and other pollutants. Companies wishing to build or expand operations that will pollute beyond legal limits can first secure ERCs—which are “banked” when pollution from another source is reduced.

Launched nationwide as part of the US Clean Air Act in the late 1970s, ERCs were viewed as a way to incentivize industries to curtail pollution. Today, the ERC approach (just like its sister, cap-and-trade) is under scrutiny for being insufficient given current pollution challenges, and for worsening environmental injustice.

Our report, Undeserved Credit, documents significant problems with the San Joaquin ERC system—leading us to conclude that it’s likely to be having an unintended, negative impact on air quality.

A review of hundreds of pages of publicly available documents on energy-related credits revealed several cases in which credits were issued despite evidence that they didn’t meet legal requirements under air district or federal banking rules. In fact, we estimate that about 30% of the credits in the bank for VOCs and 60% of credits in the bank for carbon dioxide equivalent (CO2e, which represents greenhouse gases) may be invalid.

A significant problem is that unlike in some other states, ERCs in California don’t have expiration dates—so they can be purchased and used for decades regardless of whether they still help limit pollution. In addition, the District has sometimes issued ERC certificates despite concerns about their validity raised by state and federal officials.

Such problems aren’t just an administrative concern. If credits are invalid, the wells, refineries, and other operations that use them to obtain permits may in reality generate more pollution than regulators are led to believe. In the end, air pollution and related health impacts could get worse.

The San Joaquin Valley can ill afford to take this risk. Located among pollutant-trapping mountains and intensive agricultural and industrial development—including about 40,000 oil and gas wells—the region has some of the worst air quality in the nation. According to the American Lung Association, Bakersfield and Fresno-Madera are among the Most Polluted cities nationwide for ozone and particle pollution, both of which can cause respiratory, pulmonary, and cardiovascular conditions and even premature death.

Fortunately, our partners that initially sounded the alarm about ERC banking problems—in particular the Central Valley Air Quality Coalition, Californians Against Fracking and Dangerous Drilling, and Earthjustice—have worked hard to convince officials at the California Air Resources Board (CARB) to take a closer look at the Valley’s ERC system. In late January, members of the Board voted to direct CARB staff to conduct an audit of the Valley Air District ERC bank, based on a request from nearly 20 state and local groups and Earthworks’ report.

Around the same time, the city of Los Angeles was debating what to do with aging gas-fired power plants. Officials ultimately opted to close them and phase in renewable sources of electricity instead. It’s well worth looking at whether other dinosaurs of the fossil fuel age—like old and poorly managed ERCs—are also due for retirement.

Photo: The San Joaquin Valley – Nasty Smog by Lisa Brettschneider