For years, the Emission Reduction Credit (ERC) program has provided Houston-Galveston-Brazoria- (HGB) and Dallas/Fort Worth (DFW)-area companies with an excellent opportunity to recover costs related to reducing air emissions beyond what is required by permits or regulations. Examples include installing emission control technology or making process changes. ERCs can also be generated through permanent facility shutdowns. ERCs can be used by the owner for their future projects or sold to other companies needing emission offsets.
In the current state of the economy, the program could present another opportunity for generating revenue and, in some cases, reducing operational costs. Companies may be able to generate ERCs for efforts considerably less expensive than emission control technology, such as material substitutions or process changes. The credits received could also be sold for hundreds of thousands of dollars.
ERCs: How They Work
In the Lone Star State, the ERC program is under the authority of the Texas Commission on Environmental Quality (TCEQ) and the rules can be found at 30 Texas Administrative Code Chapter 101, Subchapter H, Division 1. The program’s objective is to reduce volatile organic compound (VOC) and nitrogen oxides (NOx) emissions in areas that exceed the Environmental Protection Agency’s National Ambient Air Quality Standard for ozone, such as the HGB and DFW areas.
Generally, there are two scenarios that would require a company to purchase ERCs, also known as emissions offsets. In the first scenario for HGB, a company is building a new facility that would result in major VOC or NOx emissions. As of this writing, the HGB area is classified as serious nonattainment for the 8-hour ozone NAAQS (2008), with a corresponding major source threshold for VOC and NOx 50 tons per year (tpy) each.[1] In the second scenario, a company that already is a major source plans to make a major modification (i.e., project emission increases of VOC or NOx of 25 tpy or more). In each case, the company would need to offset their project’s emissions by a ratio. A new major source that would emit 60 tons of VOCs per year, for example, would require 72 tons of VOC offset.
How do companies secure credits? There’s a market where companies can buy and sell ERCs. When looking to trade credits, a company should seek the help of an emissions broker such as EDGE’s trusted partner, Emission Advisors Inc. Say Company A plans to construct a chemical plant in Houston and needs ERCs. Company B plans to close 10 Houston facilities that had been generating 72 tons of VOCs per year. In the market, an ERC broker could coordinate a trade that benefits both companies. The value of ERCs varies considerably depending on supply and demand. In January 2020, VOC ERCs were trading in the range of $150,000 per ton and NOx ERCs sold for between $120,000 to $150,000 per ton.
In the New Normal
In today’s economic reality, generating revenue has become more important than ever. It’s important to know that facility changes that result in VOC and/or NOx reductions could result in ERCs. EDGE consultants are available to provide guidance on qualifying projects and on navigating the regulatory application and negotiation process.
At the same time, it could be worth companies’ efforts to look for innovative, cost-effective approaches to reducing their VOC and NOx emissions as a way to earn ERCs. These solutions could be as simple as finding replacements for VOC-heavy raw materials—or even opting for different low-VOC solvents to clean products. EDGE consultants can help with these efforts as well. In addition to answering questions about the ERC program, they can work with companies to develop outside-of-the-box approaches that could generate ERC revenue.
[1] If attainment with the 8-hour ozone NAAQS (2008) is not achieved by July 20, 2021, HGB would be reclassified as “severe.” Historically, ERCs have seen their highest values when the HGB area has been in “severe” status.