The Origin and Demise of New Jersey’s Open Market Emissions Trading Program

Climate scientist Jim Hansen speaks to activists outside NRDC building , NY City (11/30/09)

“Cap and trade with  offsets would guarantee that we pass climate tipping points, locking in climate disasters for our children. Cap and trade benefits only Wall Street and polluters, sacrificing humanity and nature for their profits.” Dr. Jim Hansen (remarks at NY protest on Nov. 30, 2009)

The Hillary Clinton campaign sometimes suggests the need for inquiry into the record of her husband Bill Clinton’s administration.

So we thought we’d rehash an obscure but significant battle in this history, which shines a light on the Clinton – Gore – [Gingrich] “Reinventing government” initiative.

That initiative was a concession to the radical assault of the Newt Gingrich “Contract With America” and expanding power of the State’s rights Federalist Society. It promoted a Neoliberal corporate agenda to expand the use of market mechanisms, reduce regulatory burden and EPA oversight of State programs, and promote economic growth – all of which had dramatic impacts in weakening environmental policy.

From Gingrich to Gore to Whitman

Over 15 years before the myth of “free markets” and “third way” environmentalism were discredited by the failure of “cap and trade” climate legislation and the powerful critique in the 2014 book Green Capitalism: The God That Failed, we opposed and quietly killed a major air pollution trading scheme known as “OMET” – for Open Market Emissions Trading.

In 1996, in the midst of Clinton/Gore “Reinventing Government” and as the Neoliberal market oriented policy model was expanding, the “Open For Business” Whitman Administration followed the Clinton EPA lead and proposed a radical new air pollution trading scheme called OMET.

At that time, we were the Whitman Administration’s harshest critic, serving as Policy Director of the New Jersey Chapter of the Sierra Club. Of course, we worked hard to kill that proposal and ultimately succeeded in doing so.

After more than 5 years of behind the scenes bureaucratic warfare with US EPA, on Feb., 2002, Alex Nussbaum then with the Bergen Record wrote:

The federal Environmental Protection Agency gave preliminary approval to the plan last year, but it has yet to make the decision final a move that could clear the way for the New Jersey plan to be replicated elsewhere in the country. Now, the approval could be held up by the review of the EPA’s inspector general, an independent watchdog within the agency.

A bad report could be a rebuke for EPA chief Christie Whitman, New Jersey’s governor until she joined the Bush administration. She ushered in the trading program while in Trenton and has said she wants to use similar market-based efforts in other environmental areas.

Environmentalists, though, say the Open Market Emissions Trading plan could be a blueprint for avoiding controls on pollutants linked to smog, cancer, and global warming. The program relies on companies to report their own reductions, but it has no serious mechanisms to prove that the reports are accurate, the critics say. …

Critics who requested the audit last year welcomed the scrutiny.

“I think we raised significant and valid concerns about how the program originated and some of the flaws, and how New Jersey companies illegally used credits to violate the Clean Air Act,” said Bill Wolfe, policy director for the state Sierra Club.

Working with PEER and an EPA expert, we convinced the EPA Inspector General to investigate the OMET program, a move that resulted in a critical IG report that ultimately led to the program’s cancelation by Gov. McGreevey’s DEP Commissioner, Brad Campbell. See:

A significant deficiency in New Jersey’s OMET program derives from an inability to communicate and to confirm the program’s actual environmental benefit. The federal OMTR  was clear in its intention to simultaneously reduce the cost of compliance and to promote emissions reductions that provided immediate public health benefits. Federal guidance already in place also stipulated that any state seeking to incorporate EIP’s had to ensure they were “designed to benefit both the environment and the regulated entity.”49 The OMET program clearly violated this condition on all accounts. New Jersey’s own state implementation plan (SIP) submission to EPA for OMET’s approval boldly stated that “no VOC or NOx emissions reductions were projected to be associated with the implementation of the NJ OMET program.”50

However, the absence of any reductions in the state’s SIP did not thwart state efforts from promoting or publicizing the program’s ability to improve air quality. NJDEP administrators, elected officials, and corporate managers that had successfully lobbied for OMT regularly identified and promoted OMET on the basis of the program’s environmental benefits. For instance, they regularly stated that the emissions trading component of the 1995 air pollution control law amendments would result in lower pollution overall and companies expressed the program would clean up the air.51

Former NJDEP Commissioner Shinn went as far as to assert the program resulted in 10,000 tons of emissions reductions between 1995 and 1996,52 a statement that gave the impression that the OMET program was not merely an additional compliance option for industry, but also an innovative way to achieve environmental improvements.

The foundation for OMET’s environmental benefit claim, though, was masked by an overall goal to provide industry “with a flexible compliance alternative in meeting its continuing, shrinking emission reduction requirements, and, on the same hand, offering an environmental benefit, in that it encourag[ed] early emission reduction and guarantee[ed] a 10 percent retirement of emissions upon use.”53 While news organizations widely reported this claim of a 10% retirement benefit for the sake of the environment, no one publicized the fact that, according to one respondent, EPA officials would not allow the state to claim those reductions as a means to show that companies in New Jersey were spewing out less air pollution. In other words, EPA was in fundamental disagreement with New Jersey’s claim that its own guidance was sufficient to deter the production of bogus emissions credits.

Twenty years later, we continue to expose the lies, but the press has gotten a lot worse in reporting the true story.

And since then, despite being a leader of some very big wins in NJ – both defensively and offensively – we’ve been effectively marginalized from the NJ debate under the current Foundation Funded weenie regime.

We need to get more militant – as Bernie Sanders and Jill Stein say, the game is rigged.

Jim Hansen gets arrested at Obama White House (Aug. 29, 2011)

[End note: While the Clinton – Gore Reinventing Government initiative has impacted almost all federally delegated or federally funded air, water, land, and waste programs, see these posts for examples of ongoing effects of

• Christie DEP Budget Flouts EPA Oversight
• Christie DEP Says Decision to Recommend That EPA List A NJ Toxic Site on federal Superfund Is “Not a Public Process”
• “Sustainability” Has Served As Cover for Regulatory Rollbacks for 20 Years in NJ
• NJ Legislators Propose To Change State Role In Superfund Site Listing Process
•  EPA Playing Superfund Games at Dupont Site