Colorado’s GEMM Phase 2 Rule

The Colorado Department of Public Health and Environment (CDPHE) Air Pollution Control Division (Division) submitted a proposal for Phase 2 of the Greenhouse Gas Emissions and Energy Management for Manufacturing (GEMM) rulemaking (GEMM 2) to the Air Quality Control Commission during the September 21-22, 2023 meeting. The GEMM 2 rule was adopted on September 22, 2023. The new rule extends greenhouse gas (GHG) emissions reduction requirements to several facilities in Colorado’s industrial manufacturing sector.

What is GEMM?

GEMM is a regulation that was passed by the Colorado Air Quality Control Commission in October 2021 to help Colorado meet its GHG emissions reduction goals. Phase 1 of GEMM (GEMM 1) became effective on December 15, 2021 and applies to certain industrial facilities in Colorado with reported direct GHG emissions equal to or greater than 50,000 metric tons of carbon dioxide equivalent (CO₂e) per year. A list of the facilities subject to GEMM 1 can be found here.

GEMM 1 requires affected facilities to conduct an energy and GHG audit every 5 years, beginning in 2022, through 2037. The audit must demonstrate that the facility is using Best Available Control Technologies (BACT) for control of GHG emissions and Energy Best Management Practices (energy BMPs) to achieve an additional 5% reduction in GHG emissions.

What facilities are subject to GEMM 2?

GEMM 2 applies to manufacturing stationary sources in Colorado that generate 25,000 metric tons or more of CO₂e emissions per year. A list of the facilities subject to GEMM 2 can be found here.

The rule states that facilities subject to GEMM 2 will remain subject to the rule even if the facility reports less than 25,000 metric tons of CO₂e emissions for any year thereafter the facility became subject to GEMM 2. Once a facility becomes subject to GEMM 2, the facility will always be subject to GEMM 2.

What are the requirements of GEMM 2?

Beginning in 2024, GEMM 2 requires affected facilities to reduce their GHG emissions to a certain percentage below the GEMM 2 Facility GHG Baseline Emissions (Baseline Emissions). A facility’s Baseline Emissions are the higher reported direct GHG emissions from either the 2021 or 2022 calendar year. The required yearly GHG reduction percentages, as established in 5 CCR 1000-27, Part B, Tables 1-5, are based on a comparison of the facility’s reported 2015 GHG emissions to the Baseline Emissions.

For example, a facility’s 2015 GHG emissions were 40,000 metric tons of CO₂e, and their Baseline Emissions are 34,000 metric tons of CO₂e (i.e., a 15% reduction as compared to the 2015 GHG emissions). Pursuant to 5 CCR 1000-27, Part B, Table 2, for the years of 2024-2029, the facility must comply with a GHG emissions requirement of 1.25% less than the Baseline Emissions (i.e., 33,575 metric tons of CO₂e per year). In 2030 and beyond, the facility must meet a GHG emissions requirement of 7% less than the Baseline Emissions (i.e., 31,620 metric tons of CO₂e per year).

There are multiple ways that each facility could achieve the required GHG reduction. The first method is direct GHG reductions from the GEMM 2 facility. The facility must implement all technologically feasible and cost-effective reduction measures. If these measures do not achieve the required reduction, the facility may use additional offsite compliance options, such as purchasing GHG credits or achieving reductions at other industrial facilities located in Colorado that are owned and operated by the same company or one of its affiliates.

GEMM 2 also requires affected facilities to develop and submit a GHG Reduction Plan to the Division, along with an independent third-party evaluation and findings of the plan, no later than September 30, 2025 (except for glass container manufacturing facilities, which have a later compliance date). The independent third party is an engineering or consulting firm contracted by the State of Colorado that will review the GHG Reduction Plan for the accuracy and completeness of the plan, including but not limited to cost projections, assumptions and data sources, emissions impacts, and compliance with the GEMM 2 requirements. The GHG Reduction Plan must then be certified by the independent third party as adhering to the requirements of GEMM 2. The GHG Reduction Plan is also subject to a public comment period and at least three public meetings. The Division must issue an approval or request for modification of the GHG Reduction Plan by December 31, 2025.

If you have questions or need assistance determining GHG reduction strategies or planning for compliance with GEMM 2, please contact Sarah Raver at sraver@all4inc.com or (610) 422-1161.