The Emissions Reduction Credits Trading Program is an open market system of trading for emissions reduction credits (ERCs). The ERCs are rate-based units (1 ERC= 1ton/year) representing continuous, permanent emission reductions.
ERCs can be generated by stationary, mobile, or area (e.g., off-road equipment, consumer products) sources. NOx and VOCs are included because New Hampshire is in the Ozone Transport Region. There is also a provision for CO because one area of the state was formerly in nonattainment.

The Emissions Reduction Credits Trading Program is not intended to reduce emissions (for example, it is not an attainment strategy) but rather to give RACT sources and sources subject to New Source Review (NSR) compliance flexibility and the opportunity to reduce compliance costs. There is also an economic development aspect: shutdown credits can only be used by the generator (they cannot be traded). If the generator cannot use them, they become "public ERCs" in a state-controlled account. The state can then use these ERCs for purposes of job retention (highest priority), economic development, and job creation.

Other Notable Features

Allowable emissions reductions for stationary sources to generate ERCs include production curtailments and shutdowns (with some restrictions). ERCs can be used by stationary sources for RACT and NSR compliance and bubbling. Prohibited uses are as in EPA's Proposed Model Open Market Trading Rule (60 FR 39668, August 3 1995), such as BACT, LAER, and MACT. Allowable protocols for ERC generation by mobile sources are as in EPA's Guidance to States Developing Generic ERCs from Mobile Sources (MERC) Regulations (February 1994), such as vehicle scrappage, clean fuel fleets, and employee commute options. The DES will evaluate mobile source ERC-generation protocols to determine the applicability of the ERCs to stationary sources. If necessary, a discount factor reflecting emissions quantification uncertainty may be added. ERC-generation applications from area sources will be evaluated on a case-by-case basis.

ERCs cannot be banked for future use (though continuing, multi-year ERCs can be used to offset continuing, multi-year emission exceedances). ERCs require DES approval before they can be registered (and used) (i.e., they must be pre-certified). NOx for VOC trading is permitted at a 1:1 ratio, but not vice versa. This is intended to encourage NOx reductions, which contribute more than VOC reductions to ozone improvement in New Hampshire, which, as a rural state, is NOx-limited.

There is a "geographic distance discount" for NOx trades from outside the New England Modeling Domain, which comprises the New England states. The discount is an additional 5 percent for every 125 miles separating the generator and user. The current rule also has provisions for a noncompliance penalty discount and an implicit emissions quantification uncertainty discount (as part of the protocol approval process).

Another feature of the current rule is the possibility to delay compliance by making payments to an escrow account toward eventual compliance with ERCs. This might be allowed if, for example, more time is needed to contract with an ERC supplier, or the protocol for acquiring ERCs is delayed.