Mobile Emission Reduction Credit
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A mobile emission reduction credit (MERC) is an emission reduction credit generated within the
transportation Transport (in British English) or transportation (in American English) is the intentional Motion, movement of humans, animals, and cargo, goods from one location to another. Mode of transport, Modes of transport include aviation, air, land tr ...
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 In the market, there is a wide variety of types of motorcycles, each with unique characteristics and features. Models vary according to the specific needs of each user, such as ''standard'', ''cruiser'', ''touring'', ''sports'', ''off-road'', '' ...
and
snowmobiles A snowmobile, also known as a snowmachine (chiefly Alaskan), motor sled (chiefly Canadian), motor sledge, skimobile, snow scooter, or simply a sled is a motorized vehicle designed for winter travel and recreation on snow. Their engines normally ...
), 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 () (or trioxygen) is an Inorganic compound, inorganic molecule with the chemical formula . It is a pale blue gas with a distinctively pungent smell. It is an allotrope of oxygen that is much less stable than the diatomic allotrope , break ...
forming emissions and for over 90 percent of all
carbon monoxide Carbon monoxide (chemical formula CO) is a poisonous, flammable gas that is colorless, odorless, tasteless, and slightly less dense than air. Carbon monoxide consists of one carbon atom and one oxygen atom connected by a triple bond. It is the si ...
(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 gas (GHG) emissions. Most proposed strategies to mitigate global
climate change Present-day climate change includes both global warming—the ongoing increase in Global surface temperature, global average temperature—and its wider effects on Earth's climate system. Climate variability and change, Climate change in ...
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 Protocol The was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change (UNFCCC) that commits state parties to reduce greenhouse gas emissions, based on the scientific consensus that global warming is oc ...
is an agreement made under the
United Nations Framework Convention on Climate Change The United Nations Framework Convention on Climate Change (UNFCCC) is the UN process for negotiating an agreement to limit dangerous climate change. It is an international treaty among countries to combat "dangerous human interference with th ...
(UNFCCC). The
Kyoto Protocol The was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change (UNFCCC) that commits state parties to reduce greenhouse gas emissions, based on the scientific consensus that global warming is oc ...
binds ratifying nations to a similar system, with the UNFCCC setting caps for each nation, and utilizes a
clean development mechanism The Clean Development Mechanism (CDM) is a United Nations-run carbon offset scheme allowing countries to fund greenhouse gas emissions-reducing projects in other countries and claim the saved emissions as part of their own efforts to meet internat ...
(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) The Clean Air Act (CAA) is the United States' primary federal air quality law, intended to reduce and control air pollution nationwide. Initially enacted in 1963 and amended many times since, it is one of the United States' first and most inf ...
is a federal law that requires the
United States Environmental Protection Agency The Environmental Protection Agency (EPA) is an independent agency of the United States government tasked with environmental protection matters. President Richard Nixon proposed the establishment of EPA on July 9, 1970; it began operation on De ...
(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'' Texas Commission on Environmental Quality websit
Implementing Emissions Banking and Trading under SB 1561
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 system 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 system 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 In atmospheric chemistry, is shorthand for nitric oxide () and nitrogen dioxide (), the nitrogen oxides that are most relevant for air pollution. These gases contribute to the formation of smog and acid rain, as well as affecting tr ...
(NOx),
carbon monoxide Carbon monoxide (chemical formula CO) is a poisonous, flammable gas that is colorless, odorless, tasteless, and slightly less dense than air. Carbon monoxide consists of one carbon atom and one oxygen atom connected by a triple bond. It is the si ...
s (CO),
carbon dioxide Carbon dioxide is a chemical compound with the chemical formula . It is made up of molecules that each have one carbon atom covalent bond, covalently double bonded to two oxygen atoms. It is found in a gas state at room temperature and at norma ...
s (CO2),
hydrocarbons In organic chemistry, a hydrocarbon is an organic compound consisting entirely of hydrogen and carbon. Hydrocarbons are examples of group 14 hydrides. Hydrocarbons are generally colourless and hydrophobic; their odor is usually faint, and may b ...
(HC),
sulfur oxides Sulfur oxide Sulfur oxides (SOx) are a group of chemical compounds formed by the combination of sulfur and oxygen. The most common SOx are sulfur dioxide (SO2) and sulfur trioxide (SO3). SOx are produced naturally through volcanic activity and are ...
(SOx),
particulate matter Particulate matter (PM) or particulates are microscopic particles of solid or liquid matter suspended in the air. An ''aerosol'' is a mixture of particulates and air, as opposed to the particulate matter alone, though it is sometimes defin ...
(PM) and
volatile organic compounds Volatile organic compounds (VOCs) are organic compounds that have a high vapor pressure at room temperature. They are common and exist in a variety of settings and products, not limited to house mold, upholstered furniture, arts and crafts sup ...
(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 trading Emissions trading is a market-oriented approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). One prominen ...
*
Carbon credit Carbon offsetting is a carbon trading mechanism that enables entities to compensate for offset greenhouse gas emissions by investing in projects that reduce, avoid, or remove emissions elsewhere. When an entity invests in a carbon offsetting p ...
*
Flexible mechanisms Flexible 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 ...
*
Emission factor Emission may refer to: Chemical products * Emission of air pollutants, notably: ** Flue gas, gas exiting to the atmosphere via a flue ** Exhaust gas, flue gas generated by fuel combustion ** Emission of greenhouse gases, which absorb and emit rad ...
*
Joint implementation Joint Implementation (JI) is one of three flexibility mechanisms set out in the Kyoto Protocol to help countries with binding greenhouse gas emissions targets (the Annex I countries) meet their treaty obligations. Under Article 6, any Annex I cou ...
*
Chicago Climate Exchange The Chicago Climate Exchange (CCX) was a voluntary, legally binding greenhouse gas reduction and trading system for emission sources and offset projects in North America and Brazil. CCX employed independent verification, included six greenhous ...
* European Climate Exchange *
European Union Emissions Trading Scheme The European Union Emissions Trading System (EU ETS) is a carbon emission trading scheme (or ''cap and trade'' scheme) that began in 2005 and is intended to lower greenhouse gas emissions in the EU. Cap and trade schemes limit emissions of spec ...
*
International Petroleum Exchange International is an adjective (also used as a noun) meaning "between nations". International may also refer to: Music Albums * ''International'' (Kevin Michael album), 2011 * ''International'' (New Order album), 2002 * ''International'' (The T ...
*
List of futures exchanges This is a list of notable futures exchanges. Those stock exchanges that also offer trading in futures contracts besides trading in securities are listed both here and the list of stock exchanges. Major derivatives exchanges Below ...
* Personal carbon trading


References

{{reflist, 2


External links


MERCS program
- California Air Resources Board's
Environmental Protection agency's Rule 27
Banking of Mobile Source Emission Reduction Credits
£400 million carbon credit trade with China
Emissions trading Emissions reduction