4 The record articles

WANTED: Emission Reduction Credits

Posted: January 11th, 2012

Author: All4 Staff 

Don’t be left looking for Emission Reduction Credits!  If you are a Major Facility for air quality permitting, you may not be aware that there is an increasing demand for Emission Reduction Credits (ERCs).  ERCs represent real emissions decreases and are required for projects that trigger certain requirements for Nonattainment New Source Review (NNSR) permitting.  Your company may even be missing out on an opportunity to make some money by becoming a seller of ERCs.

Why are ERCs in the spotlight?

The need for ERCs has recently increased in Pennsylvania, due in large part to the designation of several PM2.5 nonattainment areas. The list of nonattainment areas for particulate matter less than 2.5 microns in diameter (PM2.5) will likely increase because the Pennsylvania Department of Environmental Protection (PADEP) has recommended additional PM2.5 nonattainment areas in Pennsylvania in response to the 2006 revisions to the PM2.5 National Ambient Air Quality Standards (NAAQS).  Until the United States Environmental Protection Agency (U.S. EPA) finalizes guidance for PM2.5 NNSR permitting, PM10 is being used as a surrogate.  As a result, PM10 (particulate matter less than 10 microns in diameter) ERCs are now required in many areas of the State.  These requirements are in addition to the nitrogen oxide (NOx) and volatile organic compound (VOC) ERCs that have been historically required for permitting in ozone nonattainment areas across the entire state of Pennsylvania.  Once U.S. EPA finalizes its PM2.5 NNSR permitting guidance, there will be a need for PM2.5 ERCs including ERCs for the precursors to PM2.5 formation.  Both NOx and sulfur oxides (SOx) are PM2.5 precursors.  Read on as this article explains what ERCs are, why ERCs are important, and how ERCs can be generated for sale or use in air quality permitting.

What are ERCs?

ERCs are creditable actual emission reductions that companies can generate at their facilities. ERCs are an integral part to the criteria pollutant attainment program called NNSR permitting.  The NNSR permitting requirements were created by Congress in the 1970 Amendments to the Federal Clean Air Act (CAA).  They are implemented by U.S. EPA through air quality permitting regulations.  The concept behind the NNSR regulation is for facilities to be able to permit new or modified air emission sources in areas of the United States and its territories that are not attaining the NAAQS for certain criteria pollutants, while at the same time achieving a reduction in the overall emissions of those pollutants within the nonattainment area.  Net emission reductions are achieved by requiring the new or modified source to comply with the Lowest Achievable Emission Rate (LAER) for the nonattainment pollutant(s) or precursors and by requiring the source to offset the emissions, utilizing ERCs, at a ratio greater than the actual emissions increase.  The requirement for sources to demonstrate that there will be net emission decreases in nonattainment pollutants and precursors in response to new major sources or major modifications within the nonattainment areas is a primary driver to help bring these areas back to attainment status.

Why are ERCs important?

In Pennsylvania, if you are a major facility for NOX, VOC, or PM10 (and soon PM2.5) and your emission increases from current projects added with any emission increases that you have made in the last 10 years meets the significance criteria specified in the rule, you will need ERCs in order to obtain your construction permit.  You can either generate your own ERCs internal to your facility or you can purchase certified ERCs from others that have them available for sale.  Keep in mind that even if you plan to use your ERCs internally it is recommended that they be certified as detailed below.  ERCs generated from sources that have since shutdown have a limited shelf life of 10 years, while ERCs resulting from over-controlling emissions do not expire .  Historically, ERC prices have varied, depending in large part on their availability, with prices ranging from $2,000 – $8,000 per ton.  ERCs generated in the five (5) county Philadelphia area are typically worth more because only ERCs generated in this area, or in similarly classified nearby nonattainment areas, can be used in NNSR permitting within this area.

Are ERCs the same things as emissions allowances?

NNSR, including its ERC requirements, is a separate and distinct program from allowance-based emission reduction programs like the NOx Budget Program.  The programs differ in terms of their regulatory origins as well as their terms for quantifying the emission reductions and how these reductions are used.  ERCs are typically represented as an annual emission rate (i.e., tons per year) that carries forward from year to year, whereas an emission allowance is a discrete quantity of emissions that is only used once.  However, there are regulatory provisions that place some restrictions on the use of both ERCs and allowances that are designed to eliminate double counting of emission reductions that could occur between ERC and allowance-based emission reduction programs.

Who approves ERCs?

The CAA and U.S. EPA’s NNSR program regulations require that each air pollution control agency do one of two things to implement these requirements: (1) be granted U.S. EPA delegation to implement the Federal rules or (2)  have obtained U.S. EPA approval to adopt its own set of similar regulations through an amendment to its State Implementation Plan (SIP).  These approval procedures assure that the rules concerning ERC generation and use are consistent with the Federal requirements, and thus ERCs generated in one state can be used in another state if they also meet certain use requirements.

How are ERCs approved and certified?

Five (5) criteria must be met in order for emission reductions to be approved and certified as ERCs:

  • First, the emission reductions must be actual emission reductions, not just a reduction in an allowable level of emissions for an emissions source.
  • Second, the emission reductions must be surplus, meaning that the reductions are not mandated by any other regulatory requirement or by the CAA, and they must be included in the State’s current SIP emission inventory.
  • Third, the emission reductions must be permanent through a removal of the source, a permit requirement, or a revision to the State’s SIP.
  • Fourth, the emission reductions must be quantifiable through credible records and calculations that support the amount of the reductions.
  • Fifth and most important, the emission reductions must be federally enforceable through a federally approved operating permit program or a federally approved SIP requirement that limits these emissions.

How can I sell my ERCs?

There are two main steps to take eligible emission decreases at your facility and sell them to another company.  The first step in the process is the generation and certification of the ERCs.  An ERC can be generated from emission reductions resulting by either the permanent shutdown of an air emission source or by the installation and operation of emissions controls that reduce emissions to levels that are below the levels required by regulation.  In this step, an ERC application is developed and submitted to the regulatory agency.  In this application the five approval and certification criteria discussed above must be addressed.  The second and equally important step in the process is the “transfer and use” of a certified ERC to meet a specific regulatory requirement for an emission increase at a specified location.  This step also requires some limited paperwork, but for PM10 and PM2.5 ERCs, additional “use” justification may be required for offsite credits.  It is also possible to retire ERCs or remove them from an ERC registry for the sole purpose of reducing emissions to the environment.

When do my ERCs need to be certified?

The good news is that PADEP has opened a window of opportunity that lasts until May 18, 2008 for sources to apply for certification of ERCs for any criteria pollutant.  This one-year grandfathering provision was included in PADEP’s NNSR permitting amendments that were finalized in May 2007.  The rule allows for emission reductions which have occurred since January 1, 2002 to be submitted to PADEP for certification as ERCs.  After May 18, 2008, there will only be a two (2) year window to apply for ERCs, which starts from the date the reductions were made.  As discussed, ERCs can only be generated from credible emission reductions resulting from either the permanent shutdown of air pollutant emitting sources or from permitted actual emission reductions that go beyond the levels required by regulation.

For consideration…

What changes have occurred at your company in the last six (6) years (since January 1, 2002)?  Have you shut down sources or facilities?  Have you voluntarily installed emission control systems?  Perhaps it’s time to review those historical AIMS reports and see how your actual emissions profile has changed since 2002.  You may or may not need ERCs for future permitting at your facility.  Regardless, generating and registering ERCs is a sure way to potentially contribute to your company’s bottom line.  Dust off those emission inventories and see what treasures you may already have!


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