  Pulsars and central engines of long gamma ray burst -- collapsars -- may
produce highly magnetized (Poynting flux dominated) outflows expanding in a
dense surrounding (interstellar medium or stellar material). For certain
injection conditions, the magnetic flux of the wind cannot be accommodated
within the cavity. In this case, ideal (non-dissipative) MHD models, similar to
the Kennel and Coroniti (1984) model of the Crab nebular, break down (the
so-called sigma problem). This is typically taken to imply that the wind should
become particle-dominated on scales much smaller than the size of the cavity.
The wind is then slowed down by a fluid-type (low magnetization) reverse shock.
Recent Fermi results, indicating that synchrotron spectrum of the Crab nebula
extends well beyond the upper limit of the most efficient radiation
reaction-limited acceleration, contradict the presence of a low sigma reverse
shock.
  We propose an alternative possibility, that the excessive magnetic flux is
destroyed in a reconnection-like process in two regions: near the rotational
axis and near the equator. We construct an example of such highly magnetized
wind having two distinct reconnection regions and suggest that these
reconnection cites are observed as tori and jets in pulsar wind nebulae. The
model reproduces, qualitatively, the observed morphology of the Crab nebula. In
parts of the nebular the dissipation occurs in a relativistically moving wind,
alleviating the requirements on the acceleration rate.
