Carbon Trading to Protect the Environment

NOx Budget Trading Program (NOx SIP CALL)

Market Overview

 In 2003, the EPA began to administer the NOx Budget Trading Program under the “NOx SIP Call.”  The NOx Budget Trading Program is a market-based cap and trade program created to reduce emissions of nitrogen oxides (NOx) from power plants and other large combustion sources in the eastern United States.  NOx is a prime ingredient in the formation of ground-level ozone (smog), a pervasive air pollution problem in many areas of the eastern United States.  The NOx Budget Trading Program was designed to reduce NOx emissions during the warm summer months (May 1- September 30), referred to as the ozone season, when ground-level ozone concentrations are highest. Under the new CAIR rulings, NOx emissions will be cut by 1.7 million tons by 2009 and by 2 million tons by 2015.

Like its predecessor, the Ozone Transport Commission (OTC), the NOx SIP Call program developed an unprecedented, multi-state cap and trade program to control NOx emissions and address regional transport of ozone.  This market-based program, called the NOx Budget Program, set a regional “budget” (or cap) on NOx emissions from power plants and other large combustion sources during the “ozone season” (from May 1 through September 30).  To meet the budget, sources were required to reduce emissions significantly below baseline levels in each participating state. States allocated allowances to sources (each allowance equaled one ton of emissions), and sources could use emissions trading to achieve the most cost-efficient reductions possible.  If emissions were below budget levels, sources could “bank” unused allowances and use or trade the banked allowances to cover emissions in a subsequent ozone season.  To discourage the overuse of banked NOx allowances the OTC created progressive flow control.  Once the total regional bank reached a certain level, (10 percent of the regional budget) flow control provisions allowed a source to use a portion of its banked allowances on a one to one basis without penalty. The remaining banked allowances had to be surrendered on a 2:1 basis. (2 allowances for each ton of emissions.)

The NOx market is primarily a compliance driven market.  Utilities and industry are the main players in the NOx market.

CantorCO2e is a leading Brokerage in the NOx SIP Call program.  Our NOx SIP Call brokers are knowledgeable, experienced and professional.  We provide unmatched market access, and vital market information to our clients, through voice contact, real time market updates on our website and daily bulletin emails.