Emissions Banking is a program that allows for the deposit of air pollution reductions which occur as companies shut down old sources or voluntarily reduce emissions by adding new control equipment to existing sources. Emission reductions for banking may also occur when a company changes its process or reformulates to less polluting materials, curtails its operations, or accepts more stringent operating conditions
To qualify for a banking credit, new controls must go beyond the control levels already required by Bay Area Air Quality Management District (District) regulations or Best Available Retrofit Control Technology (BARCT) levels in the Clean Air Plan and must also be real, permanent, quantifiable, and enforceable.
The banked emission reductions may be used as offsets to mitigate increases in emissions from new projects which are subject to District permit requirements. Deposits may also be traded or sold to other companies for their use. Currently, reductions of the following pollutants may be banked: precursor organic compounds, non-precursor organic compounds, particulate matter, sulfur dioxide, nitrogen oxides, and carbon monoxide.
The District established its emissions bank on March 7, 1984.
What Is The No Net Increase Permit Program?
The no net increase permit program is required by the California Clean Air Act of 1988. It affects all air districts which have not attained the state ambient air quality standard for ozone. This includes the Bay Area. The program requires all future increases in emissions of ozone forming compounds (i.e., precursor organic compounds (POC) and nitrogen oxides (NOx)) that result from new permit activities at facilities that emit more than 10 tons per year of POC or NOx to be offset.
What Is The District's Small Facility Banking Account?
The Board of Directors recognized that smaller, existing sources and new facilities, with emissions less than 35 tons per year, may have difficulty in providing all or a portion of any required POC and NOx offsets. To assist these facilities in obtaining offsets required by the no net increase permit program, a Small Facility Banking Account has been established under Regulation 2-4-414.
Offsets may be provided at no cost to facilities which qualify consistent with applicable regulatory requirements. To qualify, an applicant must first use all banking credits they already hold in the District's Emissions Bank.
How Are Emission Reductions Banked?
The timing of the submittal of a complete banking application may affect the quantity of emissions that may be banked. To maximize the amount of emission reductions that may be banked, applicants are encouraged to contact the District for consultation months prior to instituting a change that may result in the generation of bankable emissions. At a minimum, an applicant for emissions reduction credit must complete a District banking application and remit applicable banking fees. The fees for banking of emissions are calculated identically to those for new and modified sources under Regulation 3, Section 311. The applicant is ordinarily required to submit District approved documentation to substantiate the emissions (e.g., a copy of actual log records, a copy of actual throughput records, a copy of actual fuel use records) and that the emission reduction is real, quantifiable, permanent, and enforceable. If the shutdown or control of a source is undertaken to provide offsets for a new project that is subject to permitting, the District will issue a banking certificate, at no charge, for any qualifying emission reductions which exceed the offsets required for the new project at no charge so long as the new project and the emission reduction are evaluated in the same permit application.
How Are Actual Emission Reduction Credits Calculated?
Calculation procedures can be found in Regulation 2-2-605. The burden of quantifying the emission reduction is placed on the applicant, and is subject to District approval.
To qualify as an "emission reduction credit or ERC," the decreases must also be permanent and enforceable, in addition to being real and quantifiable.
How Long Are Bank Deposits Valid?
Banking Certificates are permanent until used by either the depositor or the transferee. Future changes to District regulations, which could change the way reductions are generated, will not affect the face value of an existing Banking Certificate.
How Are Emission Reduction Credits Traded?
A company may transfer a Banking Certificate to another party, in part, or as a whole, by completing Form(P-402) and surrendering the certificate to the District for re issuance. The costs associated with a transfer are determined by the market place and not by the District. However, a nominal fee is assessed whenever all or a portion of a Banking Certificate is transferred to another party or withdrawn from the bank for the purpose of providing offsets.
What Are Offset Ratios?
Offsets are always required at greater than a one to one ratio or greater. To determine the amount of emission offsets required for a project - tons of offsets per ton of increase in emissions - several factors are considered, including the pollutant involved and the facility's emissions in tons per year. Any changes in offset ratios will not affect the face value of a Banking Certificate already issued. District offset ratios are specified in Regulation 2, Rule 2, Sections 302 and 303.
How Much Do Offsets Cost?
As mentioned above, the cost of purchasing an existing Banking Certificate to use as an offset is determined by the market value and is not controlled by the District. Each year the California Air Resources Board is required to publish the cost of all purchases of emission reduction credits (ERCs) that occur in the state.
Emission offsets in the District's Small Facility Banking Account may be provided at no cost to qualifying applicants.
What Reductions Do Not Qualify For Banking?
There are a number of restrictions on what emission reductions will qualify for a banking certificate. All reductions must exceed any reductions required by measures in the District's Air Quality Management Plan, or District rules and regulations, or federal or state laws.
Emission reductions due to the control or shutdown of sources which are exempt from District permit requirements cannot be banked. Also, reductions cannot be banked from sources such as gasoline service stations and dry cleaners, where the District determines that no "real" emission reduction is likely to result, because of the "elastic" nature of the services supplied.