In a slap at the environmental policies of former Gov. Christie Whitman, the McGreevey administration plans to scrap an air pollution control program that her environmental commissioner once touted as a national model.

Calling it a failure, state Department of Environmental Protection Commissioner Bradley Campbell said the state will pull the plug on the Open Market Emissions Trading program, which allows industries to pollute the air more than the government allows if they buy "credits" from companies that have reduced emissions below allowable levels.

The New Jersey program is a version of an emissions trading plan now being pushed on the national level by Whitman, who is head of the federal Environmental Protection Agency. The difference is that the New Jersey program places far fewer restrictions on the emissions of industries that buy credits. Campbell, in a letter to Whitman's EPA, said this hurt the state's effort to reduce air pollution.

"Our review of the ... program at the outset of the McGreevey Administration has led me to conclude that the program has failed," Campbell said in an Aug. 13 letter to the EPA. "The program's ostensible clean air benefits were limited by the failure to include safeguards to ensure that the program would in fact reduce emissions."

In response, the EPA's deputy regional administrator, William Muszynski, said the federal agency "stands ready to work with New Jersey to craft a program that achieves air quality benefits."

Over the years, some 39 companies have used the program to exceed air quality standards.

Under emissions trading, companies that reduce their emissions below government requirements receive emission "credits" that they can sell to other companies that have exceeded emissions standards. The program operates under the premise that because air pollution travels over long distances, there will be a net decrease in pollution even if some polluters are polluting more.

In 1997, for example, Public Service Electric & Gas switched two of its power plants in Mercer and Hudson counties from dirty coal generation to less-polluting natural gas and installed more advanced pollution controls.

The result was that the utility banked nearly 9,000 tons of credits. Two companies -- a specialty paper manufacturer and South Jersey Gas Co. --bought 63 tons of those credits at a price ranging from $950 a ton to $1,250 a ton.

Unlike the federal program, the New Jersey program places no limits on emissions from companies that use the credits to exceed pollution standards. It also allows companies to sell credits for emission reductions they made years earlier.

Campbell said this open market approach endangered the real gains the state has made on reducing air pollution.

Yesterday, Whitman, through spokesman Joe Martyak, praised the program as a voluntary effort "designed to achieve air quality benefits earlier and at a lower cost than conventional approaches."

"Her position at this point is that that's their call," Martyak said. "The most important thing is ... that, both as governor as well as administrator of EPA, she's sought creative ways to reduce the air pollution out there."

In August 1996, the Whitman administration introduced the program, saying it would provide a national, market-driven model for reducing air pollution. But over the past several years, a myriad of problems have surfaced.

Earlier this year, PSEG Fossil, the largest holder of pollution credits, agreed to forfeit thousands of them under a settlement with the state and federal governments for air pollution violations at its coal-fired power plants.

The settlement forced PSEG Fossil, which operates power plants around the state, to pull out of the emissions trading program and left companies that relied on the utility's credits scrambling to find ways to meet government air quality standards.

"That really affected the market in the state," said Neil Brown, a PSEG spokesman.

Subsequently, the DEP announced a settlement with Conectiv Energy of Wilmington, Del. The agency alleged that Conectiv had abused the program; Conectiv denied the charge, arguing that it could not buy enough credits because PSEG Fossil had pulled out. Conectiv's unusual settlement required the company to pay $2 million -- half of which was to be used to plant trees to help clean the air in South Jersey.

In addition, the private company hired to operate the emissions trading program pulled out last year, saying it could not make money. The EPA's inspector general also is close to wrapping up an investigation of the program, prompted by environmentalists who have long argued that it is a fraud.

"EPA's open market trading program is the three-card monte of pollution regulation," said Jeff Ruch, executive director of the Public Employees for Environmental Responsibility, a Washington, D.C.-based environmental advocacy group.

"I don't think (the program) would have helped us as much as they thought it would," said Andrew Hudson, clean air advocate for the New Jersey Public Interest Research Group. "Really what we end up doing is just shuttling the pollution around the state more."

Anthony S. Twyman covers the environment. He can be reached at atwyman@starledger.com or (609) 989-0322.

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