California’s South Coast Air Quality Management District (SCAQMD or AQMD) is a pioneer in the use of emission trading systems (ETS) at the local level. In 1994, amidst poor economic conditions, SCAQMD implemented the Regional Clean Air Incentives Markets (RECLAIM) in the Los Angeles air basin; it was the first cap-andtrade system to address the pervasive problem of ground ozone (i.e., smog). The program affects four counties (Los Angeles, Riverside, San Bernardino, and Orange), and their jurisdictions include 161 cities. In its design, administrators made a point of incorporating local community and businesses interests by considering impacts to the economy, environmental justice aspects, and cost-effectiveness. RECLAIM’s emission caps decline over time to ensure that the environmental goal established through the policy formulation process will be met. Emission credits under this program are valid for one year only, and they may not be saved for use in future compliance years. The program also introduces incentives to encourage business to utilize advanced emissions control technologies to further reduce emissions.