EMISSIONS

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 oxides of nitrogen (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.

BGC Environmental Brokerage Services 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.

Brokerage

BGC Environmental Brokerage Services offers a full service suite of brokerage and clearing services tailored to meet the client's individual trading needs.  Trades are confirmed by voice, however, bid and offer information is available electronically.  NOx Transaction types include:

• Spot Trades
• Forward Settlements
• Options
• Swaps

These transactions can be executed using the master brokerage agreement, which enables clients to transact simply and anonymously with over 400 clients who have enacted similar agreements.  This is the preferred method of transacting, as it eliminates the need to negotiate bilateral agreements with each counter-party, thereby making the transactions quick and efficient.  BGC also provides assistance to clients who choose to settle using a bilateral contract, most commonly used in more complicated structured transactions.
BGC also offers clearing services which provide additional security and anonymity to both counter-parties.  Both NOx allowances and purchase monies are escrowed by BGC in order to assure performance by all parties to the transaction.

Consulting

In addition to providing a marketplace for NOx SIP Call, BGC Environmental Brokerage Services also offers emissions trading consulting services.  For industry coalitions, private companies, and government entities we offer:  

• Assessment of the impacts of current and future rules and regulations.
• delivery of expert testimony. market assessments to determine the type, usability, availability, expected cost, and feasibility of transacting NOx.
• market penetration studies for clients seeking to understand how environmental credits can be leveraged to help launch or gain better market penetration for technologies that reduce pollution.
• emissions trading feasibility studies, offered to regional, foreign. and state governments to assist them in determining if environmental problems can be addressed using market based programs.
• Emission Trading Seminars - often requested by companies that have a need for a better understanding of the emissions markets pertinent to their business.  These customized seminars offer detailed information on relevant emissions markets, trading strategies, regulatory and fiscal impacts of trading.