One dirty little secret about California’s cap-and-trade program is the state’s limited control over how effective the carbon offsets a company buys are in reducing global pollution. But an action by the U.S. Environmental Protection Agency (EPA) in Arkansas is bringing the problem home.

The state’s innovative program attempts to grapple with the global threat of greenhouse gas emissions by compelling local companies that pollute to invest in enterprises worldwide that reduce that pollution. A lot of people who care about clean air would have preferred policies that directly address the problem by enforcing stricter pollution standards locally.

But instead of forcing companies to deploy better technology and otherwise shrink their destructive footprint to save local communities from their toxic output, the state established a marketplace where polluters could do good deeds elsewhere and get credit for it in California.

One place where California’s polluting companies do good deeds is El Dorado, Arkansas, home to the nation’s largest incinerator of chlorofluorocarbons, which are known as Freon when sold by DuPont. The incinerator is in Arkansas because California does not allow companies here to do what Clean Harbors Inc. does there, according to Dan Morain at the Sacramento Bee.

Clean Harbors incinerated 300 tons of cholorfluorocarbons at El Dorado in 2012, around 80% of what gets burned in the U.S., and is building a new incinerator there to handle the increased business spurred by California.

But on May 13, the EPA ordered Clean Harbors to pay a $581,236 penalty for “improperly identifying and disposing of hazardous waste, improper storage of hazardous waste, and failure to comply with air emissions standards” in El Dorado. The penalty was levied for violations found during inspection in 2009 and 2011.

These were not accidents. “As part of its operations, Clean Harbors generated hazardous waste that was improperly sold as a commercial substitute,” according to the EPA. As part of the agreement, Clean Harbors also agreed to spend $750,000 to route hazardous emissions from hazardous waste storage tanks to a secondary combustion chamber. “This will help protect the local community from harmful emissions” which, presumably, it is not presently protected from.

California companies buy offsets used in El Dorado through Eos Climate, “the global leader in refrigerant life cycle management.” Eos collects the nasty gas and ships it to El Dorado.

Two weeks after the EPA fine was announced, the California Air Resources Board (CARB) announced it was suspending the use of credits at El Dorado while it investigated whether the facility had been in compliance with federal permit provisions during their issuance.

This is all new territory for CARB and the nascent cap-and-trade program, and it’s unclear what the ramifications are for the 20 companies that paid for El Dorado offsets that let them pollute locally. It is possible the California companies could be on the hook for what could prove to be worthless pollution credits. A law firm representing some of the polluters put that figure at $43 million.

California’s cap-and-trade program allows companies to purchase four different kinds of credits. They can invest in efforts to protech forests, combat methane emissions on Midwest and Eastern dairy farms, clean up methane emissions in coal mines and destroy greenhouse gases.

None of that provides much solace to people directly affected by California polluters who can buy their way out of cleaning up their own mess with credits and fines. And probably neither does an investigation of Clean Harbors in Arkansas.

 –Ken Broder

To Learn More:

Cool Bid for State’s Pollution Program Is Lost on Arkansas Incinerator (by Dan Morain, Sacramento Bee)

Clean Harbors Hit with EPA Fine in El Dorado (by Luke Jones, Arkansas Business)

Activists Say California Fighting Pollution Globally but Not Locally (by Evan Halper, Los Angeles Times)

Critics Say Climate Program Would Create “Hidden Gas Tax” (by Marc Lifsher, Los Angeles Times)

EPA Settlement Protects Arkansas Community Company Will Invest $750,000 for Environmental Project (U.S. Environmental Protection Agency)

Compliance Offset Credits under Investigation (California Air Resources Board) (pdf)