Emission Reduction Credit Frequently Asked Questions (ERC)

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General Questions

What is the Purpose of Colorado’s Emissions Reduction Program?

The purpose of Colorado’s Emission Reduction Program is to assure ambient air quality progress and continued air quality maintenance and encourage development of innovative pollution control methods and technologies, while promoting economic development and lowering the cost of meeting pollution control requirements.

Which pollutants are involved?

This program applies to any pollutant regulated under the Colorado Air Quality Control Act or the regulations promulgated thereunder.

Does this program apply to nonattainment areas?

Yes, this program applies to all attainment, attainment/maintenance, and nonattainment areas in Colorado.

What kind of reductions are prohibited?

The following reductions are prohibited for potential credit:

  • Reductions down to compliance levels.
  • Reductions relied upon by the Division in demonstrating attainment of the National Ambient Air Quality Standards or reasonable further progress towards attainment, or in establishing a baseline concentration.
  • Emission reductions otherwise required by the Federal Act or State regulations.

Is approval by the Air Quality Control Commission required?

The Commission shall determine whether to approve all bubble and alternative compliance method transactions, or any offset transactions that, pursuant to Regulation 3, Part A, Section V.H.3, require a state implementation plan revision.

The Commission may approve the use of a certified emissions reduction credit as an alternative compliance method in lieu of a specified control technique method or reasonably available control technology (“RACT”).

Does this program apply to mobile sources?

No emission reduction credits are allowed from mobile sources unless those sources are subject to ambient impact and new source review permitting.

Where can I find what ERCs have been issued or used?

The Division maintains a record of certification, expiration and use of emission reductions in the ERC registry.  

What are the application fees?

Applicants for certification of an emissions reduction, or for approval of any emission credit use , will be assessed fees based on a hourly rate for administrative time spent by Division personnel, time spent by Division personnel in evaluating such applications in accord with the normal criteria for assessment of emissions permit fees, and for compliance oversight and enforcement.  Where more than one person applies for approval of a use, all such persons shall be jointly liable for the fees assessed. Applicants are responsible for paying the applicable fees regardless of whether the Division approves or denies an application. For more information about Air Pollution Emission Notice (APEN) and permitting fees, visit Emissions and permitting fees.

The total fees for an ERC certification and permit will include:

  • APEN fees of $191.13 per APEN submitted at the time of an application;
  • Permit fees of $95.56 per hour;
  • ERC review fee of $955.60 for 10 hours per APEN or emission point requesting ERC; and
  • ERC certification and compliance fee of $1,624.52 for 17 hours per APEN or emission point requesting ERC.

The total fees for use of ERC and permit will include:

  • APEN fees of $191.13 per APEN submitted at the time of an application; and
  • Permit fees of $95.56 per hour.

The total fees for an ERC application which is not approved will include:

  • APEN fees of $191.13 per APEN submitted at the time of an application;
  • Permit fees of $95.56 per hour; and
  • ERC review fee of $955.60 for 10 hours per APEN or emission point requesting ERC.

NOTE: These values reflect the fee amount as of July 1, 2018. These fees will adjust in accordance with APEN and permit processing hourly fees in Regulation Number 3, Part A, Section VI.

Creation of ERCs

What criteria do emission reductions have to meet to become certified as ERCs?

To be considered for certification as credits, emission reductions must meet certain criteria.  ERCs can only be generated for emission reductions which are:

  • Surplus - means the emission reduction is not required by current regulations, relied on for state implementation plan planning purposes, and not used to meet any other regulatory requirement.
  • Permanent - means the reduction is unending or indefinite.
  • Quantifiable - means the actual emissions reduced are able to be calculated.
  • Federally enforceable - means the reduction is enforceable through rule or permit.

How will ERCs be quantified?

Each certified reduction of a pollutant’s emissions shall be quantified in the same unit of measurement used in the standard or regulation applicable to the pollutant.

What is the certification process?

File an application for certification, following the checklist, prior to the occurrence of the reduction and submit all data, calculations and/or source tests to the Division necessary to verify baseline emissions or the reduction of emissions below the base level. The Division will review the application and if the Division concurs with the application, credits will be issued to the operator. For more information, visit Apply for emission reduction credits.

How will the amount of the emissions reduction be certified?

The amount of emissions reduction credit depends on whether the reduction occurs in a nonattainment area for the pollutant being reduced.  Reductions will be adjusted in a certification by the following amounts:

  • Attainment or Attainment/Maintenance Area - 90% of the amount by which emissions have been reduced below the baseline emissions.
  • Nonattainment Area - 80% of the amount by which emissions have been reduced below the baseline emissions.

What is required to obtain an ERC for shut down equipment?

Shut down equipment for which ERCs are granted must be permanently removed from the state and affixed with a nonremovable readily visible indicator of its status. Decommissioning equipment and abandoning it in place may be allowable with a certification by a responsible official that the emission point will never be used again, at that location or any other in Colorado. This requirement applies regardless of age or technology of the equipment.

Will the Division grant ERCs for finite emission reductions, i.e. those in the form of a specific number of tons instead of at an annual emission rate?

The Division will consider and grant qualified ERCs for finite emission reductions as appropriate. Such ERCs cannot be used as offsets, as offsets are required to be in the form of annual emission rates.

Use of ERCs

Is there anything ERCs cannot be used for?

ERCs may not be used to meet applicable technology based requirements for new sources such as New Source Performance Standards (“NSPS”), Best Available Control Technology (“BACT”), or Lowest Achievable Emission Rate (“LAER”). No transaction may be approved that is inconsistent with any standard established by the Federal Act, the state Act or the regulations promulgated under either, or to circumvent NSPS or BACT.

Can an operator request a bubble transaction?

The Division will consider any request for a bubble credit or transaction on a case by case basis.  This document focuses on offset transactions.

What is the difference between a trade and a transaction and change of credit ownership?

The terms trade or transaction are used interchangeably and are equivalent to the use of an emission reduction credit in a permitting action with the Division for the purpose of avoiding or satisfying a regulatory requirement.  A Change of Credit Ownership is the exchange of an emission reduction credit between parties.

Do ERCs expire?

Yes. Emission reduction credits expire after seven years following the certification date of the credits.  Any transaction to use an emission reduction credit must commence (i.e., a complete application to the Division for a transaction must be submitted) within that seven year time frame to be valid.

If a transaction is commenced, the seven year period will be tolled during the review of the application, until a final decision is made by the Division.  If the Division rejects the transaction or if the transaction application is withdrawn, the seven year clock will recommence with the remainder of time calculated by subtracting from seven years the time in months and days from issuance of the certification until Division receipt of a complete application.

What happens to expired ERCs?

All expired emission reduction credits will be used by Colorado in demonstrations of attainment or reasonable further progress for National Ambient Air Quality Standards.  Expired emission reduction credits are not available for transactions and they do not revert to the original owner, as credits are based on permanent emission reductions.

What is required for the use of an ERC to be approved?

The following is required for use of an ERC:

  • The transaction must involve like-pollutants.
  • The source at which the emissions reduction occurred and the source using the emissions reductions must be in the same nonattainment area/PSD baseline area or the emissions reduction is to be used as an offset to meet the requirements of Regulation Number 3, Part D, Section V.A.3 and the conditions of that section are met for the use of an offset obtained from a source outside the nonattainment area.
  • The terms of the transactions are incorporated in permits applicable to the originating and receiving emissions sources.

What must I do to use an ERC?

File an ERC Use Application (Form APCD-602) with the Division.  If the transaction would require the modification of permits held by more than one person, the application shall be jointly submitted by all potentially affected permittees. For more information, visit Use emission reduction credits.

Can the Division approve the use of an ERC?

Yes. The Division must determine whether to approve the use of an ERC for an offset in the following situations:  a) Where the source using the emissions reduction would be allowed to increase emissions by less than one hundred tons per year; b) Where the use involves volatile organic compounds or oxides of nitrogen emissions; and, c) Where the use involves sulfur dioxide, PM10 or carbon monoxide emissions, and all sources involved are within two hundred and fifty meters of one another. (Regulation Number 3, Part A, Section V.H.2)

Is modeling required?

Offsets must represent reasonable further progress towards attainment of the National Ambient Air Quality Standards when considered in connection with other new and existing sources of emissions. For ozone and ozone precursor ERCs used as offsets, this requirements is satisfied where like-pollutant emissions are reduced and used within the same nonattainment area.  However, some increases of oxides of nitrogen may be subject to ambient air quality modeling in accordance with the Colorado Modeling Guideline.

Applications for approval of uses involving PM10, PM 2.5, sulfur dioxide, carbon monoxide, and lead may also be subject to ambient air quality modeling, either in accordance with the Colorado Modeling Guideline or to demonstrate a positive net air quality benefit in the area affected by the emissions.

Are offset transactions allowed?

Yes.  The owner or operator of a source at which an emissions reduction has occurred, and the owner or operator of another source who wishes to use the emissions reduction as an offset, may apply for approval of an offset transaction.

Such offset transactions may be used either to avoid causing a violation of an increment in an attainment or attainment/maintenance area, to meet the requirements of Regulation 3, Part D, Section V.A.3 or to avoid contributing to visibility or other air quality related values impairment in a Class I area.

Interpollutant offsets may be approved by the U.S. EPA on a case-by-case basis provided that the applicant demonstrates that the emissions increases from the new or modified source will not cause or contribute to a violation of an ambient air quality standard.

Can ERCs created at a minor source be used at a major source?

Yes. ERCs created at minor sources may be used for offsets as long as all offset criteria are met.

If a source submits an application for a major modification, will it need offsets for the full amount of increased emissions or just for those amounts above the significant level as defined in Reg. 3, Part D, Section II.A.44.a?

The source will need to account for the entire emissions increase with ERCs in accordance with the offset ratio for a nonattainment New Source Review permit.  The offset ratios discussed in Regulation Number 3, Part D, Section V.A.3 are for the total actual emission reductions compared to the emissions increase, not just for the increment above the significance threshold.

Is inter-precursor pollutant trading allowed for ozone?

Interpollutant offsets may be approved by the U.S. EPA on a case-by-case basis (See Regulation Number 3, Part A, Section V.H.8).

Other Information

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