In 1999, the Environmental Protection Agency (EPA) established a cap and trade program that was to be implemented in two phases. This Ozone Transport Region cap and trade program is unlike the SO2 program because it is a regional initiative and is managed by the participating states. The formation of ground level ozone in the Northeast and Mid-Atlantic states is a seasonal issue. Therefore, generators are responsible for granting allowances solely for their emissions during this “NOx season,” which runs from May 1 through September 30.
The first phase of this cap program commenced May 1, 2009 and placed a cap on NOx emissions of 219,000 tons across the Ozone Transport Region. Phase Two of the program commenced 5/1/03, and lowered the cap on NOx emissions to 143,000 tons across the OTR. These caps have been divided amongst those states participating in the program, and generators receive allocations from the state in which their units are located. All sources with a maximum rated heat capacity of 250 MMBtu/hour or more, and all electric generating facilities with a rated capacity of 15 MW or greater are affected. Allocations of allowances to these sources are determined at the state level as are the dates by which compliance is required.
The most marked differences between the SO2 and the OTR NOx cap and trade program is with respect to banking of excess allowances. Under the OTR program, rolling unused allowances from a prior vintage year forward is possible, but with limitations. A mechanism known as "progressive flow control" is used to prevent a large inventory of banked allowances developing and to insure that real reductions of NOx emissions occur. This is a state specific decision, and triggers each year after compliance has been verified and the size of the bank, by state, has been taken into account. Due to progressive flow control, NOx allowances have very discreet values based upon vintage year. Similar to the SO2 program, at no point may a unit's NOx emissions exceed its state permitted levels.
Contacts:
Tom Gibson: +1 281-340-8300
Russell Harris: +1 281-340-8300
Jeffrey Johnston: +1 281-340-8300
Chris Konrad: +1 281-340-8300