Economic Assessment of the Regional Clean Air Incentives Market: A New Emissions Trading Program for Los Angeles

This article documents the methodology used to compare policy alternatives considered for RECLAIM, an emissions trading program for Los Angeles which commenced January 1994. RECLAIM reduces NO x and SO x emissions from stationary sources with declining emissions credit allocations. The emissions trading model (ETM) includes credit supply and demand, spatial restrictions, and opportunity costs of owning credits. The ETM solves interactively with a regional model that estimates economic impacts. Predicted emissions distributions are input into airshed and exposure models. The models predict similar improvements in air quality and public health as command and control regulations, but with lower costs and employment impacts.