The world's first smog market, the Regional Clean Air Incentives Market, or Reclaim, will set limits for industrial emissions and will allocate trading credits to the 390 companies taking part in the venture.
The market was established by the South Coast Air Quality Management District, which controls emissions in four southern California counties, as a means of slashing industrial pollution. The 390 companies produce 80 per cent of industrial pollution in the area.
Under the plan, each credit is worth 1lb (2.2kg) of nitrogen oxides or sulphur oxides, two of the main local polluting agents.
Each company has been assigned an emissions limit for 'nox and sox,' as the pollutants are known, along with pollution credits. Those that keep emissions below the limit can sell their credits to those unable or unwilling to maintain theirs.
The credits will be auctioned twice a year, with the first sale to take place in March.
AQMD economists estimate that the 1994 price of a ton of nitrogen or sulphur will be about dollars 577. But as the emissions limit is reduced, prices are likely to soar. Economists expect a ton of nitrogen oxides to fetch more than dollars 11,000 by 1999, and a ton of sulphur oxides more than dollars 6,000.
The AQMD expects the 10- year plan to cut industrial nitrogen oxides by 75 per cent and sulphur oxides by 60 per cent.
Canada, Mexico and several European countries may introduce similar markets if California's succeeds.