Mobile Emission Reduction Credit (MERC)
Encyclopedia
A mobile emission reduction credit (MERC) is an emission reduction credit
generated within the transportation sector. The term “mobile sources” refers to motor vehicles, engines, and equipment that move, or can be moved, from place to place. Mobile sources include vehicles that operate on roads and highways ("on-road" or "highway" vehicles), as well as nonroad vehicles, engines, and equipment. Examples of mobile sources are passenger cars, light trucks, large trucks, buses, motorcycles, earth-moving equipment, nonroad recreational vehicles (such as dirt bikes and snowmobiles), farm and construction equipment, cranes, lawn and garden power tools, marine engines, ships, railroad locomotives, and airplanes. In California, mobile sources account for about 60 percent of all ozone
forming emissions and for over 90 percent of all carbon monoxide
(CO) emissions from all sources.
(GHG) emissions. Most proposed strategies to mitigate global climate change
focus on reducing the dominant source of GHG emissions to the atmosphere – combustion of fossil fuels, which releases carbon dioxide. Carbon dioxide emissions represent about 84 percent of total U.S. GHG emissions. In the United States, most carbon dioxide (98 percent) is emitted as a result of the combustion of fossil fuels; consequently, carbon dioxide emissions and energy use are highly correlated.
is an agreement made under the United Nations Framework Convention on Climate Change
(UNFCCC). The Kyoto Protocol
binds ratifying nations to a similar system, with the UNFCCC setting caps for each nation, and utilizes a clean development mechanism
(CDM) system. The primary reduction strategy under the Kyoto Protocol is a trading system that essentially makes carbon credits a commodity like oil or gas.
(EPA) to develop and enforce regulations to protect the general public from exposure to airborne contaminants that are known to be hazardous to human health. The Clean Air Act (1990) or Clean Air Act amendments of 1990 authorized the use of market-based approaches such as emission trading to assist states in attaining and maintaining air quality for all criteria pollutants. EPA's subsequent interpretive rulings expressly allow owners of new sources to obtain emission credits from other companies that operate facilities located in the same air quality control region. To implement an emissions offset program, many states have developed regulations allowing sources to register their emissions reduction credits as ERCs that can be sold to companies required to offset emissions from new or modified sources. Brokerage companies typically handle sales between companies having surplus ERCs and those wanting to acquire such credits.
All commonly accepted ERCs in the United States must meet each of five criteria before they can be certified by the relevant regulatory authority as an ERC. Namely, the emission reduction must be real, permanent over the period of credit generation, quantifiable, enforceable, and surplus to emission reductions that are already needed to comply with an existing requirement (local, state, or Federal) or air quality plan. These criteria are intended to ensure that the emission reduction is a permanent reduction from the emissions that would otherwise be allowed to offset the permanent increase in emissions from the new or expanding source.
s (CO), carbon dioxide
s (CO2), hydrocarbons (HC), sulfur oxides (SOx), particulate matter (PM) and volatile organic compounds (VOCs). The emissions reduction technology may be selected from a group consisting of alternative fuels, vehicle repairs, vehicle replacements, vehicle retrofits and hybrid engines. The mobile source may be selected from a group consisting of passenger cars, light trucks, large trucks, buses, motorcycles, off-road recreational vehicles, farm equipment, construction equipment, lawn and garden equipment, marine engines, aircraft, locomotives and water vessels.
Emissions trading
Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
generated within the transportation sector. The term “mobile sources” refers to motor vehicles, engines, and equipment that move, or can be moved, from place to place. Mobile sources include vehicles that operate on roads and highways ("on-road" or "highway" vehicles), as well as nonroad vehicles, engines, and equipment. Examples of mobile sources are passenger cars, light trucks, large trucks, buses, motorcycles, earth-moving equipment, nonroad recreational vehicles (such as dirt bikes and snowmobiles), farm and construction equipment, cranes, lawn and garden power tools, marine engines, ships, railroad locomotives, and airplanes. In California, mobile sources account for about 60 percent of all ozone
Ozone
Ozone , or trioxygen, is a triatomic molecule, consisting of three oxygen atoms. It is an allotrope of oxygen that is much less stable than the diatomic allotrope...
forming emissions and for over 90 percent of all carbon monoxide
Carbon monoxide
Carbon monoxide , also called carbonous oxide, is a colorless, odorless, and tasteless gas that is slightly lighter than air. It is highly toxic to humans and animals in higher quantities, although it is also produced in normal animal metabolism in low quantities, and is thought to have some normal...
(CO) emissions from all sources.
Background
Government agencies worldwide have struggled with finding new and innovative approaches to address the growing problem of air pollution and global warming. Experts in the field have recognized the importance of developing solutions to reduce greenhouse gasGreenhouse gas
A greenhouse gas is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone...
(GHG) emissions. Most proposed strategies to mitigate global climate change
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
focus on reducing the dominant source of GHG emissions to the atmosphere – combustion of fossil fuels, which releases carbon dioxide. Carbon dioxide emissions represent about 84 percent of total U.S. GHG emissions. In the United States, most carbon dioxide (98 percent) is emitted as a result of the combustion of fossil fuels; consequently, carbon dioxide emissions and energy use are highly correlated.
General emission reduction strategies
The two main approaches that have been developed to address this problem include a command-and-control regulatory system and Emissions credit trading. Three broad types of emissions credit trading programs have emerged: reduction credit, averaging, and cap-and-trade programs. In such programs, a central authority, such as an air pollution control district or a government agency, sets limits or "caps" on certain pollutants. Companies or fleets of vehicles that intend to exceed these limits may buy emission reduction credits (ERCs) from entities that are able to remain below the designated limits. This transfer is usually referred to as a trade.International approach to emission reduction credits
Emission trading is contemplated on an international level. The Kyoto ProtocolKyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
is an agreement made under the United Nations Framework Convention on Climate Change
United Nations Framework Convention on Climate Change
The United Nations Framework Convention on Climate Change is an international environmental treaty produced at the United Nations Conference on Environment and Development , informally known as the Earth Summit, held in Rio de Janeiro from June 3 to 14, 1992...
(UNFCCC). The Kyoto Protocol
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
binds ratifying nations to a similar system, with the UNFCCC setting caps for each nation, and utilizes a clean development mechanism
Clean Development Mechanism
The Clean Development Mechanism is one of the "flexibility" mechanisms defined in the Kyoto Protocol . It is defined in Article 12 of the Protocol, and is intended to meet two objectives: to assist parties not included in Annex I in achieving sustainable development and in contributing to the...
(CDM) system. The primary reduction strategy under the Kyoto Protocol is a trading system that essentially makes carbon credits a commodity like oil or gas.
United States approach to emission reduction credits
The United States (which did not ratify the Kyoto Protocol) has the most experience with domestic emissions trading markets. The Clean Air Act (1970) is a federal law that requires the United States Environmental Protection AgencyUnited States Environmental Protection Agency
The U.S. Environmental Protection Agency is an agency of the federal government of the United States charged with protecting human health and the environment, by writing and enforcing regulations based on laws passed by Congress...
(EPA) to develop and enforce regulations to protect the general public from exposure to airborne contaminants that are known to be hazardous to human health. The Clean Air Act (1990) or Clean Air Act amendments of 1990 authorized the use of market-based approaches such as emission trading to assist states in attaining and maintaining air quality for all criteria pollutants. EPA's subsequent interpretive rulings expressly allow owners of new sources to obtain emission credits from other companies that operate facilities located in the same air quality control region. To implement an emissions offset program, many states have developed regulations allowing sources to register their emissions reduction credits as ERCs that can be sold to companies required to offset emissions from new or modified sources. Brokerage companies typically handle sales between companies having surplus ERCs and those wanting to acquire such credits.
All commonly accepted ERCs in the United States must meet each of five criteria before they can be certified by the relevant regulatory authority as an ERC. Namely, the emission reduction must be real, permanent over the period of credit generation, quantifiable, enforceable, and surplus to emission reductions that are already needed to comply with an existing requirement (local, state, or Federal) or air quality plan. These criteria are intended to ensure that the emission reduction is a permanent reduction from the emissions that would otherwise be allowed to offset the permanent increase in emissions from the new or expanding source.
Steps to create a MERC
The steps involved to create a MERC are as follows:- Identifying an emissions reduction technology for a pollutant
- Identifying a mobile source
- Utilize a Portable Emissions Measurement SystemPortable Emissions Measurement Systema portable emissions measurement system is essentially a lightweight ‘laboratory’ that is used to test and/or assess mobile source emissions for the purposes of compliance, regulation, or decision-making...
to measure emissions of the pollutant and take first measurements of the pollutant from the mobile source - Analyze the measurements to develop a baseline emissions amount
- Apply the emissions reduction technology to the mobile source to provide a modified mobile source
- Connect the Portable Emissions Measurement SystemPortable Emissions Measurement Systema portable emissions measurement system is essentially a lightweight ‘laboratory’ that is used to test and/or assess mobile source emissions for the purposes of compliance, regulation, or decision-making...
to the modified mobile source and take second measurements of the modified mobile source - Analyze the second measurements to develop a modified emissions amount
- Quantify the mobile emissions reduction produced by the emissions reduction technology
- Convert the mobile emissions reduction into a tradable commodity
Monetization of a MERC
The process of converting the mobile emissions reduction into a tradable commodity consists of converting the reduction or a portion of the reduction of emissions into at least one tradable credit, and marketing and monetizing the credit. This is followed by receiving information to identify a customer account, assigning the mobile emissions reduction to the customer account, calculating a MERC from the mobile emissions reduction, and crediting the MERC to the customer account. What follows is the exchanging of the MERC in the customer account for monetary assets this includes the following steps:- Debiting the MERC from the customer account
- Receiving information to identify a second customer or purchaser
- Calculating an emissions amount of the pollutant for the purchaser
- Assigning a liability value to the emissions amount for the purchaser
- Accepting payment from the purchaser
- Using the payment to purchase at least one MERC for the purchaser
- Crediting the MERC as assets against the liability value assigned to the second customer for the emissions amount, whereby the emissions amount and the liability value in the second customer account is reduced accordingly
Target pollutants of mobile emission reduction credits
At present, the pollutant may be selected from a group consisting of nitrogen oxides (NOx), carbon monoxideCarbon monoxide
Carbon monoxide , also called carbonous oxide, is a colorless, odorless, and tasteless gas that is slightly lighter than air. It is highly toxic to humans and animals in higher quantities, although it is also produced in normal animal metabolism in low quantities, and is thought to have some normal...
s (CO), carbon dioxide
Carbon dioxide
Carbon dioxide is a naturally occurring chemical compound composed of two oxygen atoms covalently bonded to a single carbon atom...
s (CO2), hydrocarbons (HC), sulfur oxides (SOx), particulate matter (PM) and volatile organic compounds (VOCs). The emissions reduction technology may be selected from a group consisting of alternative fuels, vehicle repairs, vehicle replacements, vehicle retrofits and hybrid engines. The mobile source may be selected from a group consisting of passenger cars, light trucks, large trucks, buses, motorcycles, off-road recreational vehicles, farm equipment, construction equipment, lawn and garden equipment, marine engines, aircraft, locomotives and water vessels.
See also
- Emissions tradingEmissions tradingEmissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
- Carbon creditCarbon creditA carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent equivalent to one tonne of carbon dioxide....
- Flexible mechanismsFlexible MechanismsFlexible mechanisms, also sometimes known as Flexibility Mechanisms or Kyoto Mechanisms), refers to Emissions Trading, the Clean Development Mechanism and Joint Implementation. These are mechanisms defined under the Kyoto Protocol intended to lower the overall costs of achieving its emissions targets...
- Emission factorEmission factorAn emission intensity is the average emission rate of a given pollutant from a given source relative to the intensity of a specific activity; for example grams of carbon dioxide released per megajoule of energy produced, or the ratio of greenhouse gas emissions produced to GDP...
- Joint implementationJoint ImplementationJoint implementation is one of three flexibility mechanisms set forth in the Kyoto Protocol to help countries with binding greenhouse gas emissions targets meet their obligations. JI is set forth in Article 6 of the Kyoto Protocol...
- Chicago Climate ExchangeChicago Climate ExchangeThe now defunct Chicago Climate Exchange was North America’s only voluntary, legally binding greenhouse gas reduction and trading system for emission sources and offset projects in North America and Brazil....
- European Climate ExchangeEuropean Climate ExchangeThe European Climate Exchange manages the product development and marketing for ECX Carbon Financial Instruments , listed and admitted for trading on the ICE Futures Europe electronic platform. It is no longer a subsidiary of the Chicago Climate Exchange but rather a sister company...
- European Union Emissions Trading Scheme
- International Petroleum ExchangeInternational Petroleum ExchangeThe International Petroleum Exchange, based in London, was one of the world's largest energy futures and options exchanges. Its flagship commodity, Brent Crude was a world benchmark for oil prices, but the exchange also handled futures contracts and options on fuel oil, natural gas, electricity ,...
- List of futures exchanges
- Personal carbon tradingPersonal carbon tradingPersonal carbon trading is a general term referring to a number of proposed emissions trading schemes under which emissions credits are allocated to adult individuals on a equal per capita basis, within national carbon budgets. Individuals then surrender these credits when buying fuel or electricity...
- Portable emissions measurement system (PEMS)
External links
- Homepage for California Air Resources Board's MERCS program
- Environmental Protection agency's Rule 27 Banking of Mobile Source Emission Reduction Credits
- [ftp://ftp.ncdc.noaa.gov/pub/data/paleo/icecore/trop/kilimanjaro/kilimanjaro.txt £400 million carbon credit trade with China]