Environmental Markets

Environmental Markets

ICAP Energy LLC is a leader in emissions brokerage. Formerly, United Power, we were one of the first companies to launch an emissions brokerage desk to cover these markets. Our brokers have developed deep relationships with key players in the industry ranging from financial traders to unregulated utilities to regulated utilities.

From the beginning of the EPA’s Clean Air Markets Division, ICAP has been a leader in meeting our customer’s needs for buying and selling allowances. The goal of the emissions team is to provide the best advice to clients who wish to trade in these markets. Below is a brief description or summary of the various markets that ICAP Energy monitors and focuses their expertise on.

Domestic Emissions Trading

The US Acid Rain Program (SO2 trading) authorized by the 1990 Amendments to the Clean Act has undergone a number of legal and regulatory set-backs in recent years. The courts have vacated attempts by the Bush EPA to further strengthen the SO2 and NOx regulations (in the form of the CAIR rule) and hence trading in these markets has fallen off dramatically since the Court ruling of July 11, 2008. The Obama EPA has been in the process of drafting new CAIR replacement rules since 2009 and released its Cross State Air Pollution rule in July 2011 that will become effective on January 1, 2012.

Title IV of the 1990 Amendments to the Clean Air Act

The impacts of this law will become secondary to the more stringent CSAPR regulations and with approximately 14 million banked allowances still in this program, trading volumes of these acid rain allowances has slowed. The western states of the US still fall under the rules and regulations of this Title IV program.

CAIR- Clean Air Interstate Rule

This Bush era proposal was struck down by the DC Court on July 11, 2008 but was temporarily reinstated until EPA could issue its new CSAPR rule. Allowances issued under this program will become invalid and will be pulled from EPA files effective January 1, 2012.

CSAPR - Cross State Air Pollution Rule

This rule was released by the EPA on July 7, 2011 and is scheduled to become effective on January 1, 2012. It will impact approximately 28 states in the Eastern US. There are four distinct trading programs contained in this new EPA regulation: Group 1 SO2 trading, Group 2 SO2 trading, Annual NOx trading, and Seasonal NOx trading.

Allowances for this trading program are expected to be allocated and placed into compliance accounts in the Fall of 2011. Entities that are impacted by the new rule have 60 days from CSAPR’s publication in the Federal Register to file suit against EPA over this new rule. CSAPR was published in the Federal Register on August 8, 2011.

REC's Trading

Approximately 29 states have independently adopted renewable energy standards and have created tradable renewable credits. The rules and requirements for each of these state programs differ widely and ICAP Energy brokers are well equipped to advise clients as to the unique features of each state program. Many of the programs place premiums on the advancement of renewable solar and wind generation.

There is also trading in very specific state and regional programs, such as the South Coast Air District in the LA region that ICAP Energy Brokers monitor but these are again confined to very specific regions and locals and have limited trading in these markets.

C02 Trading: Regional Greenhouse Gas Initiative (RGGI)

The regional GHG trading program became effective January 2009 for 10 Northeastern and Mid-Atlantic States who by agreement sought to lower CO2 emissions in this region over a 10 year period. The participating states are: CT, DE, MA, MD, ME, NH, NJ, NY, RI, and VT. The program covers all fossil fuel-fired power plants, 25 megawatts or greater in size and the initial annual regional cap is set at $188 million short tons per year. This program includes auctions of the RGGI allowances and OTC trading of these allowances.

CO2 Trading: California's - AB32 Program

In 2006 the California Assembly passed the Global Warming Solutions Act of 2006 and it was signed into law by then Governor Schwarzenegger. This legislation puts into place a program to achieve the ambitious reduction goal of returning to 1990 emission GHG levels by 2020 for the state. The cornerstone of this program is the use of an allowance based cap and trade program to achieve these CO2 reductions. Recently various environmental organizations challenged the use of the AB32 trading program and currently the California Air Resources Board is in the process of responding to the Court as to its justification for the use of this trading program and hopefully trading in this new allowance market will begin in 2012. An offset trading program is also an integral part of this new California AB32 rule. Please contact an ICAP Energy broker for updates as to the status of the ongoing legal process of AB32.