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Emissions Reduction Market System (ERMS) Account Officer Training

Emissions Reduction Market System (ERMS) Account Officer Training. 2012 Version. Basics. Purpose of ERMS. Contribute to attainment Minimize costs of further reduction by using a “market based approach” providing flexibility and allowing sources to determine the best way to reduce emissions

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Emissions Reduction Market System (ERMS) Account Officer Training

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  1. Emissions ReductionMarket System (ERMS)Account Officer Training 2012 Version

  2. Basics

  3. Purpose of ERMS • Contribute to attainment • Minimize costs of further reduction by using a “market based approach” providing flexibility and allowing sources to determine the best way to reduce emissions • Maintain the “status-quo” for current control programs

  4. Past: Command and Control • Rules developed based on industry type (e.g., printing, coating, chemical manufacturing) • All companies required to implement the same reduction percentage • Cost not considered per company • Sometimes had a threshold for implementation • Usually not “one size fits all”

  5. ERMS: Market Based • Overall reduction mandated • Allotments (emissions) given to the companies based on a baseline • Up to the companies to determine how/if reductions are made • Make reductions and have allotments to sell • May be cheaper to buy allotments rather than reduce

  6. Possible Approaches • Upgrade control measures on existing units where it can be done most economically and effectively • Enhance control measures when existing units are replaced • Switch production out of the trading season • Purchase ATUs

  7. Affected Sources • Stationary sources located in the Chicago ozone nonattainment area • Cook, DuPage, Kane, Lake, McHenry and Will counties • Aux Sable Township, Goose Lake Township in Grundy county and Oswego Township in Kendall county

  8. Affected Sources - continued • Required to obtain a Clean Air Act Permit Program (CAAPP) permit OR Federally Enforceable State Operating Permit (FESOP) • VOM emissions of at least 10 tons per season(May 1 - September 30)

  9. Affected Sources - Exemptions • Can accept a limit of 15 tons/season • 10 tons/season is the threshold for identifying you as a participating source, but accepting a limit of 15 tons/season will keep you out of being a participating source in ERMS • Make a reduction of 18% from your baseline • Participating sources make a 12% reduction

  10. Types of ERMS Sources

  11. Types of ERMS Sources • Participating Source • New Participating Source • General Participant • Special Participant

  12. Participating Source • Operating prior to May 1, 1999 • Located in the Chicago nonattainment area • Potential to emit >=25 tons/year of VOM • Required to obtain a Title V (CAAPP) or FESOP (Federally Enforceable State Operating Permit) permit • VOM emissions >=10 tons/season

  13. New Participating Source • Not operating prior to May 1, 1999 • Located in the Chicago nonattainment area • Potential to emit >=25 tons/year of VOM • Required to obtain a Title V (CAAPP) permit • VOM emissions >=10 tons/season • Do not get an annual allotment

  14. General Participant • Not a Participating Source • Not a New Participating Source • Any person/entity that obtains a Transaction Account • Can think of this as a “broker” • Can buy and sell ATUs • Need to have a trained account officer

  15. Special Participant • Any person/entity that registers with the Agency • Cannot sell ATUs • Can buy ATUs • Any purchased ATUs are immediately retired • No account officer training needed

  16. Baselines, Allotments & Reconciliation

  17. Allotment Trading Unit (ATU) • The “currency” of the ERMS • Equivalent of 200 pounds VOM emissions • Each ATU is valid for the season of issuance and the following season • Unless used for emission compensation

  18. Baseline Emissions • Based on historical emission data • Adjusted upward for over-compliance • Adjusted downward for non-compliance • Can substitute years • Allotment of ATUs will be set from the baseline emissions • generally reduced by 12% • Allotment amount included in your permit

  19. Exclusion from Further Reductions • Insignificant emission units • Emission units complying with NESHAP or MACT • Fuel combustion units (e.g., boilers and engines) • Emission units where a LAER demonstration was approved

  20. Baseline Years • Average of the two highest years of 1994, 1995 or 1996 • No justification needed • Can substitute any year from 1990-1993 or 1997 if that year is more representative • Requires justification • Substitute one whole year

  21. Emission Calculation Methodology • The methodology used to calculate baseline emissions will be included in your permit • Must be used to calculate emissions for the season – no deviations • Changes to calculation methodologies require a permit revision • Baseline and allotment will be recalculated based on the new methodology

  22. Annual Allotment • Each year the number of ATUs in your permit will be deposited in your account automatically • Historically done in March/April • No notification • List will appear under the Allocation Reports menu option of the web page

  23. Reconciliation Period • The three months (October – December) following seasonal allotment period • Time to compile actual seasonal emission data • Submit seasonal component of annual emission report

  24. Reconciliation Period - continued • Conduct end of year trades • Can trade throughout the whole year • Only trades agreed to by December 31st can be counted towards the seasonal emissions for that year • We don’t close the books at midnight December 31st, but wait a few days for paper trades to come in

  25. Seasonal Emission Reports

  26. Seasonal Emission Reports • Applies to • Participating sources • New Participating sources • 18% reduction sources • 15 ton/season limit sources • Due date • October 31 for < 10 emission units • November 30 for >= 10 emission units

  27. Seasonal Reports – Content • Actual VOM emissions from May 1 – September 30 • Adjustments due to variance, consent order, emergency condition and so forth • Number of ATUs that equate to the seasonal emissions • HAP emissions for the season

  28. Seasonal Report – HAPs • HAPS = Hazardous Air Pollutants • Report VOM HAPs if • Major for HAPs • >= 10 tons/year for any individual HAP • >= 25 tons/year for all HAPs combined • Subject to NESHAP/MACT • Report only those units subject to NESHAP/MACT • Report to TRI

  29. Seasonal Reports – Checking • Signature • All emission units are reported • Emission calculations performed correctly • We find many math errors • Calculation methodology needs to be the same as in the permit • Production rate is used as a reasonableness check

  30. Compensation and Excursions

  31. Emission Compensation • This is the IEPA retiring (subtracting) the amount of ATUs, reported on your seasonal report, from your transaction account • Timing • Sometime in mid-January of each year when all previous year transactions have been entered and seasonal report has been accepted • Never before January 1

  32. Excursion • Occurs when your account does not hold enough ATUs to cover your seasonal emissions • If an excursion occurs, you are not in violation • The ERMS rule gives a mechanism for resolving an excursion

  33. Excursion Penalty • First excursion • Owe 1.2 times the amount of excursion • Second (or more) excursion in a row • Owe 1.5 times the amount of excursion • When multiplying by 1.2 or 1.5, if there is a fractional ATU, the value is always rounded up to the next higher ATU

  34. Excursion Resolution • Will send an excursion compensation notice • Only two choices for resolution • Purchase from ACMA (default) • Take from next year’s allotment • Notify us within 15 days • Choice is yours • If choosing ACMA, you will be sent a bill

  35. Annual “Flow” of ERMS • April: Allotment • May – September: Emissions • October – December : Reconciliation • Submit seasonal report • Trade as necessary (throughout the year) • January: Compensation and Excursion

  36. Other Facets of ERMS

  37. ACMA • Alternative Compliance Market Account • Reserve of ATUs managed by IEPA • Receives ATUs equivalent to 1% of each year’s allotment (about 1000 ATUs) • ACMA available during reconciliation period • Cost is lesser of 1.5 times the average market price or $10,000/ton

  38. Shutdowns • All operations at a source shut down and the permit is withdrawn (or is revoked or terminated) • 80% of allotted ATUs go to source and 20% to ACMA unless… • Source makes arrangement to trade whole allotment to a general participant before shutting down

  39. Emission Reduction Generators • ATUs created for creditable reductions at permitted sources that are not participating sources • Source needs to become a general participant or have a partner in ERMS who gets the ATUs • Reductions must be real, actual and surplus (can’t be shifted elsewhere in the area)

  40. Inter-Sector • Receive ATUs for making reductions in area source or mobile source categories • Cars – Cash for clunkers • Switch from gas to electric lawnmowers • Reformulate coatings purchased by the public (only Intersector to date) • Etc. • Request reviewed by the Agency

  41. Quick Facts

  42. Quick Facts • About 140 participating sources • About 5 new participating sources • About 90 sources with 15 ton/season exemption • About 75 general participants • About 7 special participants

  43. More Quick Facts • About 104,000 ATUs allotted each season • 100,000 from baseline • 2700 from Emission Reduction Generators • 1000 to ACMA • Around 40,000 ATUs retired each year • Around 59,000 ATUs expire each year

  44. Buyers/Sellers • Around 20 sources need to buy ATUs each year • Remaining sources (around 120) are possible sellers • A few (1-3) sources go into excursion each year • Mainly due to inaction on their part to buy ATUs

  45. ATU Prices ($/ATU) • 2011 = • 2010 = $20.10 • 2009 = $19.32 • 2008 = $18.22 • 2007 = $14.86 • 2006 = $17.01

  46. Transaction Account and Account Officers

  47. Transaction Account • Database where ATUs are kept • Has a unique identification number for the entity • All allocations, trades, retirements and expirations occur in the database • Trade is not accepted until it is enacted in the database • Think of it as your bank account

  48. Account Officer • A person who has been approved by the Agency who is responsible for one or more transaction accounts • Transaction account • Must have at least one account officer • Can have multiple account officers • An account officer may be associated with more than one transaction account

  49. Account Officers • Remember… • An account officer can freely trade ATUs in and out of the transaction account as long as he is associated with the account • If an account officer leaves a company, it is best to notify the Agency of that fact and that you wish to have him removed from the account • Account officer can still represent other accounts

  50. Expedited Approval ofAccount Officer • Used when an account officer unexpectedly leaves that position • Requested by the company • With expedited approval, the account officer can perform trades without training • Must take the account officer training within one year of request

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