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Published byTyrese Parmalee Modified over 10 years ago
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Emissions Trading 101 Corky Martinkovic Arizona Dept. of Environmental Quality Air Quality Division ~ Planning Section WESTAR BART Technical Conference August 31 – September 1, 2005 ~ Portland, Oregon
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World Before Trading Stationary sources would obtain permit Emissions would be monitored and reported Compliance with permit conditions tracked Go on like this for next 5 years or until a modification tripped a permit revision
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In a constant universe… There would be no changes to regulations or air quality There would be no need for source to change its production capacity There would be no fluctuation in the market for the source’s materials There would be no demographic shifts
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However… Faced with change – sources could: …apply controls …find a way out of applying controls …shutdown …Or, they could trade
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How emissions trading was born Some sources could afford to apply controls and wanted to reap the benefits, and offset the cost of controls Some sources could not afford to apply controls and wanted to reap the benefits of increased capacity, and offset the cost of controls But how to find each other…
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The World of Trading The concept of trading is as old as dirt Emissions trading began in 1970’s EPA’s 1990 Acid Rain Program capped sulfur dioxide emissions in the east Trading became “institutionalized” But, with or without a trading program, sources can trade emissions
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Flexibility requires structure Before trading was given a structure sources needed to discover on own: Where can I find available emissions? How do I know these emissions are any good? Is the cost of the trade realistic, fair? How do I account for these emissions? Can I keep these emissions for a rainy day? I’m new – how can I get some emissions?
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Essential Elements Because trading must be: EfficientTransparentReliable Emissions reductions must be: QuantifiablePermanentEnforceable
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How is that done? You build a trading parlor Foundation and walls = permits Décor = monitoring and reporting Nails and wiring = compliance Tables with place cards = registry Servers = brokers or agents Cashier = administrator No uninvited guests, no back room tables, no flies in the soup, and no watered-down drinks
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Will they come to my trading parlor? Emission caps - sorry, we have a drink limit Law of supply and demand – sorry, we’re all out of lobster Backstop milestones – sorry, we can’t seat you until 2018 Compliance – sorry, we don’t serve your kind here
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Optimizing Trading programs need a “critical mass” of traders – buyers and sellers Programs that capture more traders increase critical mass Trading must be cost-effective Trading allows for flexibility in a changing market, making reductions more likely It’s bad business to poison the customer
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