Frequently Asked Questions—Emission Reduction Credits

What are Emission Reduction Credits?

Emission reduction credits (ERC) are a market-based air quality management tool used by the air districts throughout the state to encourage businesses to proactively reduce air pollution at their facilities and improve regional air quality. The pollution “credits” must result from voluntary action taken by a business to step beyond existing air quality regulations when reducing emissions at their facilities. Once approved, ERCs can be banked by a company and used at a later date when seeking to expand the business, or the ERCs can be traded as a valuable commodity through the public market to companies who need to reduce regional emissions but are limited at their facility. Emission credits can be generated for the five criteria pollutants: nitrogen oxides, volatile organic compounds, particulate matter, sulfur oxides and carbon monoxide.

How are ERCs used?

Under Air Pollution Control District of San Luis Obispo County’s (APCD) Rule 211, Emission Banking, companies that reduce air pollution beyond the regulated level can bank the cutback as emission credits. The pollution credits can be sold through public exchanges to other facilities throughout the region that are required to provide emission offsets for their operations. The marketplace used to buy and sell emission credits is similar to the exchange system used to buy and sell gold, oil or stocks. In addition to trading ERCs, the originating company may also use the credits to offset emissions from facility operations within the county. ERCs cannot be used to exceed a health based air quality standard.

How are emission credits calculated?

The APCD Rule 213, Calculations, specifies how emission credits are calculated. Rule 213 requires the Air Pollution Control Officer to conduct a thorough evaluation of the facility’s operating history, the potential emissions that could be emitted from the facility, and the overall emissions impact of a proposed modification to an emissions unit. To preserve the long-term air quality of the county, the APCD reduces the total amount of emission credits available for resale by a 20% safety margin. This safety margin, also called a discount factor, assures a 20% reduction in air pollution that is released into the San Luis Obispo County airways. The emission credits are also discounted the levels that are achievable under current emissions control technologies.

By granting the ERCs, will the emissions from the facility increase?

No! To ensure emission reductions are preserved, the APCD requires a minimum 20% discount of all emissions when a facility applies for ERCs. A procedure called discounting reduces the amount of pollution credit available for offsetting. By applying the discount factor to ERC applications, the amount of pollution credited and available for resale is at least 20% less than the actual emission reductions that occurred.

How do Duke’s ERCs relate to the proposed plant modernization?

Even though emissions from Duke’s new plant proposal will total less then the current air pollution from the existing plant, the Air District requires ERCs for every ton of air pollution projected to be emitted from the new plant. In their application for plant modernization, Duke is proposing to use the ERCs from abandoning fuel oil and from shutting down the existing plant.