Tag: Cap and Trade

How We Have Used Emissions Reduction Credits to Our Advantage

Posted on by krichardson

In our lastpostwe talked about what emissions trading is and, as promised, this week we are going to talk about a specific situation in which we worked with one of our clients and used emissions trading to our advantage.

As a recap, emissions trading is the buying and selling of emissions allowances, or emission reduction credits (ERCs), in a market-based program and it is intended to reduce emissions based on established limits. Emissions trading programs are intended to provide an economic incentive for companies to voluntarily reduce their emissions as this will earn them ERCs.

Once banked, ERCs can be sold on the emissions market or saved for later use. Why would a company want to buy or save ERCs though? What is the motivation?

Well, ERCs can be quite useful primarily in two situations, if a company cannot obtain a permit for their operations in a specific region or if a company produces emissions over their limit. The ERCs can be used to offset any emissions produced.

The team at RECES Environmental has experience in the discovery, negotiation, and implementation stages of the process. We have worked with our clients in many situations where emissions credits were used to our advantage. One such situation took place with a large chemical company we work with.

The company has a facility in Sublet County in Wyoming. In this region, winter-level ozone levels are high so the EPA has established it as a non-attainment zone, which is an area considered to have air quality worse than the National Ambient Air Quality Standardsas defined in the Clean Air Act Amendments of 1970.

Receiving a permit for operations that emit ozone would be especially difficult in the region, but our client needed to operate in Sublet County. We were unable to obtain a permit, but we were able to obtain emissions credits would offset the ozone emissions.

We did so by working directly with the Wyoming Department of Environmental Equalityto find a qualified company that had ozone ERCs available for sale. The agency provided a list of companies in the area with credits, but unfortunately, none were willing to sell. Just like in the stock market, brokerage firms exist within the emissions market so we decided to take that route.

We contacted a firm called Elements Marketwho then found a company willing to sell the ERCs that we needed. In the end, our clients were able to operate after obtaining the ERCs despite not receiving a permit.

Non-attainment zones will typically see high rates of emissions trading because of the lower limits compared to other areas. Other examples of these zones are the Inland Empire in California where particulate matter (PM2.5 and PM10) levels are high, and the Gulf Coast where volatile organic compound (VOC) levels are high.

The rules and fees surrounding Emissions Reduction Credits and how to attain them can change greatly from region to region, so be sure to consult with the appropriate local, state, and federal regulators to find out what your limitations and requirements are. When used correctly, ERCs and emissions trading can be used to offset emissions or provide additional income for a company.

If you have any questions or comments about emissions credits or emissions trading, or would like a free consultation for your operations, please feel free to contact Kevin Moin, P.E. by email at kmoin@reces-llc.com or by phone at (281) 529-5087.

What is Emissions Trading and How Do I Use It?

Posted on by krichardson

When I first entered the regulatory and compliance industry, one of the terms I heard thrown around frequently was emissions trading. Often called “cap and trade” or “allowance trading”, I didn’t know what it was or how it worked but it seemed to be a very useful tool for companies in our space.

This post will be the first of a series over the next few weeks regarding what emissions trading and emissions credits are and how they work. With today’s post, I want to answer this question: What exactly is emissions trading?

First, we need to start with what emissions limits and emissions trading programs are. Emissions limits, or caps, are set by the EPA and restrict the overall amount of pollution that sources are allowed to emit in a state, group of states, or nationally. They are typically set lower than the current pollution levels in order to ensure that overall pollution is eventually reduced.

Emissions tradings programs are created by the EPA and distribute emissions allowances to any affected sources according to the emissions limits. For example, facilities are given allowances to emit no more than one ton of sulfur dioxide (SO2) per year by the EPA.

This raises the question, what if a facility emits less than their allowance in a given year? Well, emissions trading programs are intended to provide economic incentives to facilities reducing their emissions below the limits. Any facility that does this would then have the ability to either save the remaining balance for later use or sell it to another facility through the program. This is a nice incentive, right?

For these emissions trading programs to work, however, extremely accurate methods must be used when recording and reporting data so a facility’s emissions can be measured against their allowance. Once data is received by the emissions trading program, it is made available to the public.

Facilities will face penalties if their data is inaccurate or if they do not have enough allowances to cover their emissions at the end of the given year. We talked about the importance of recordkeeping in our previous posts, so this further emphasizes the point.

In summary, emissions trading is the buying and selling of emission allowances on the allowance market. It is an effective vehicle for reducing overall emissions while providing appropriate incentives for doing so. If your facility takes part in an emission trading program and has made the commitment to accurate and consistent recordkeeping, then emission trading can be taken advantage of.

In the next post of this series, I want to talk about specific situations in which companies have used emissions trading. In the meantime, if you have any questions or comments, feel free to contact Kevin Moin by email at kmoin@reces-llc.com or by phone at (281) 529-5087.