First NOx credits transaction in eastern US

Natsource LLC, an emissions credits broker, said it completed the first trade of nitrogen oxide emissions credits under the Environmental Protection Agency’s State Implementation Plan (SIP Call) in the eastern US for $3,400/ton.

The New York company did not name the buyer or seller in the transaction. New restrictions on NOx emissions will begin in 2003, assuming legal challenges to the law are unsuccessful.

“If you burn stuff and are kind of big, you will get tagged,” said David Oppenheimer, principal with Natsource. “Industrials like pulp and paper mills, steel mills, and power plants will have to comply.”

The market will reward companies that install pollution reducing equipment on their facilities. These facilities will benefit by selling their allocations of credits to the companies that don’t make investments to comply with the new NOx emissions rules.

Any number of reasons would explain why a company might prefer to buy the credits than make permanent investments in pollution control, market analysts said.

Some plants and equipment might be close to retirement. In order to operate for a short time more, it might be more cost effective to buy credits than invest in expensive pollution control equipment, explained Oppenheimer. Also, a plant might want to take advantage of short-term profit opportunities and exceed its emissions allowances to capture a peak market

He estimated the NOx credits market will be close to $100 million/year, not big enough or liquid enough to support an exchange but vibrant enough to sustain a voice-brokered market.

This particular trade involves more than 50 tons/year of NOx allowances between 2003-2007, said Mike Intrator, head of emissions trading at Natsource.

The transaction is an attempt by companies to prepare for coming emissions restrictions under the Clean Air Act that will require NOx emissions be cut 25% relative to historical levels. The SIP Call provisions of the Clean Air Act refer to the compliance programs being created by the states that will allocate certain emissions allowances to each facility.

The regulatory provisions are still a few years out, but companies are already devising their compliance strategies including emissions trading, said Intrator. The states involved in the SIP Call are all states east of Wisconsin except Maine, New Hampshire, Vermont, and Florida, said Oppenheimer.

No posts to display