Emission Reduction Credits FAQs


"What is the purpose of Colorado's Emission Reduction Program? "]The purpose of Colorado’s Emission Reduction Program is to assure ambient air quality progress and continued air quality maintenance and encourage development of innovative pollution control methods and technologies, while promoting economic development and lowering the cost of meeting pollution control requirements.

"Which pollutants are involved? "]This program applies to any pollutant regulated under the Colorado Air Quality Control Act or the regulations promulgated there under.

"Does this program apply to nonattainment areas?"]Yes, this program applies to all attainment, attainment/maintenance, and nonattainment areas in Colorado.

"What kind of reductions are prohibited? "]The following reductions are prohibited for potential credit:

● Reductions down to compliance levels.

● Reductions relied upon by the Division in demonstrating attainment of the National Ambient Air Quality Standards or reasonable further progress towards attainment, or in establishing a baseline concentration.

● Emission reductions otherwise required by the Federal Act or State regulations.

"Is approval by the Air Quality Control Commission required? "]The Commission shall determine whether to approve all bubble and alternative compliance method transactions, or any offset transactions that, pursuant to Regulation 3, Part A, Section V.H.3, require a state implementation plan revision. The Commission may approve the use of a certified emissions reduction credit as an alternative compliance method in lieu of a specified control technique method or reasonable available control technology (“RACT”).

"Does this program apply to mobile sources? "]No emission reduction credits are allowed from mobile sources unless those sources are subject to ambient impact and new source review permitting.

"Where can I find what ERCs have been issued or used? "]The Division maintains a record of certification, expiration and use of emission reductions in the ERC Registry.

"What are the application fees? "]Applicants for certification of an emissions reduction, or for approval of any emission credit transaction, shall be assessed fees for time spent by Division personnel in evaluating such applications in accord with the normal criteria for assessment of emissions permit fees. Where more than one person applies for approval of a transaction, all such persons shall be jointly liable for the fees assessed. Applicants are responsible for paying the applicable fees regardless of whether the Division approves or denies an application.

Creation of ERCs

"What criteria do emission reductions have to meet to become certified as ERCs? "]To be considered for certification as credits, emission reductions must meet certain criteria. ERCs can only be generated for emission reductions which are:

● Surplus - means emission reductions not required by current regulations, relied on for state implementation plan planning purposes, and not used to meet any other regulatory requirement.

● Emission reductions achieved by shutting down an existing source or curtailing production or operating hours below baseline levels may be generally credited if such reductions are permanent, quantifiable, federally enforceable.

"How will ERCs be quantified? "]Each certified reduction of a pollutant's emissions shall be quantified in the same unit of measurement used in the standard or regulation applicable to the pollutant.

"What is the certification process? "]File an application for certification, following the checklist in Section 4.2.1, prior to the occurrence of the reduction and submit all data, calculations and/or source tests to the Division necessary to verify baseline emissions or the reduction of emissions below the base level. The Division will review the application and if the Division concurs with the application, credits will be issued to the operator.

"How will the amount of the emission reduction be certified? "]The amount of emissions reduction credit depends on whether the reduction occurs in a nonattainment area for the pollutant being reduced. Reductions will be adjusted in a certification by the following amounts:

● Attainment or Attainment/Maintenance Area - 90% of the amount by which emissions have been reduced below the baseline emissions.

● Nonattainment Area - 80% of the amount by which emissions have been reduced below the baseline emissions.

Use of ERCs

"Is there anything ERCs cannot be used for? "]ERCs may not be used to meet applicable technology based requirements for new sources such as New Source Performance Standards (“NSPS”), Best Available Control Technology (“BACT”), or Lowest Achievable Emission Rate (“LAER”). No transaction may be approved that is inconsistent with any standard established by the Federal Act, the state Act or the regulations promulgated under either, or to circumvent NSPS or BACT.

"Can an operator request a bubble transaction? "]The Division will consider any request for a bubble credit or transaction on a case by case basis.

"What is the difference between a trade and a transaction and change of credit ownership? "]The terms trade or transaction are used interchangeably and are equivalent to the use of an emission reduction credit in a permitting action with the Division for the purpose of avoiding or satisfying a regulatory requirement. A Change of Credit Ownership is the exchange of an emission reduction credit between parties.

"Do ERCs expire? "]Emission reduction credits expire after seven years following the certification date of the credits. Any transaction to use an emission reduction credit must commence (i.e. a complete application to the Division for a transaction must be submitted) within that seven year time frame to be valid. If a transaction is commenced, the seven year period will be tolled during the review of the application, until a final decision is made by the Division. If the Division rejects the transaction or if the transaction application is withdrawn, the seven year clock will recommence with the remainder of time calculated by subtracting from seven years the time in months and days from issuance of the certification until Division receipt of a complete application.

"What happens to expired ERCs? "]All expired emission reduction credits will be used by Colorado in demonstrations of attainment or reasonable further progress for National Ambient Air Quality Standards. Expired emission reduction credits are not available for transactions and they do not revert to the original owner, as credits are based on permanent emission reductions.

"What is required for the use of an ERC to be approved?"]The following is required for use of an ERC:

● The transaction must involve like pollutants.

● The source at which the emissions reduction occurred and the source using the emissions reductions must be in the same nonattainment area/PSD baseline area or the emissions reduction is to be used as an offset to meet the requirements of Regulation 3, Part D, Section V.A.3 and the conditions of that section are met for the use of an offset obtained from a source outside the nonattainment area.

● The terms of the transactions are incorporated in permits applicable to the originating and receiving emissions sources.

"What do I do to use an ERC? "]File an ERC Use Application (Form APCD-602) with the Division. If the transaction would require the modification of permits held by more than one person, the application shall be jointly submitted by all potentially affected permittees.

"Can the division approve the use of an ERC? "]Yes, the Division must determine whether to approve the use of an ERC for an offset in the following situations: a) Where the source using the emissions reduction would be allowed to increase emissions by less than one hundred tons per year, b) Where the use involves volatile organic compounds or oxides of nitrogen emissions, and c) Where the use involves sulfur dioxide, PM10 or carbon monoxide emissions, and all sources involved are within two hundred and fifty meters of one another. (Regulation Number 3, Part A, Section V.H.2)

"Is modeling required? "]Applications for approval of uses involving PM10, sulfur dioxide, carbon monoxide, lead and oxides of nitrogen (where visibility impacts are of concern) may be subject to ambient air quality modeling in accordance with the Colorado Modeling Guidance.

"Are offset transactions allowed? "]Yes. The owner or operator of a source at which an emissions reduction has occurred, and the owner or operator of another source who wishes to use the emissions reduction as an offset, may apply for approval of an offset transaction. Such offset transactions may be used either to avoid causing a violation of an increment in an attainment or attainment/maintenance area, to meet the requirements of Regulation 3, Part D, Section V.A.3 or to avoid contributing to visibility or other air quality related values impairment in a Class I area.

Interpollutant offsets may be approved by the U.S. EPA on a case-by-case basis provided that the applicant demonstrates that the emissions increases from the new or modified source will not cause or contribute to a violation of an ambient air quality standard.

"Can ERCs created at a minor source be used at a major source?"]ERCs created at minor sources may be used for offsets as long as all offset criteria are met.

"If a source submits an application for a major modification, will it need offsets for the full amount of increased emissions or just for those amounts about the significant level as described in Reg. 3, Part D, Section II.A.44.a?"]The source will need to account for the entire emissions increase with ERCs in accordance with the offset ratio for a nonattainment New Source Review permit. The offset ratios discussed in Regulation 3, Part D, Section V.A.3 are for the total actual emission reductions compared to the emissions increase, not just for the increment above the significance threshold.

"Is inter-precursor pollutant trading allowed for ozone? "]Interpollutant offsets may be approved by the U.S. EPA on a case-by-case basis (See Reg. 3, Part A, Section V.H.8).