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There are other tradable allowances, credits and commodities in regional and national trading systems that can be used by businesses to meet their compliance targets.
RECs and ROCs
Renewable Energy Certificates (RECs) and Renewable Obligation Certificates (ROCs) are tradable environmental commodities that represent 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource.
In markets that have a REC/ROC program, a green energy provider (such as a wind farm) is credited with one REC for every 1 MWh of electricity it produces. The green energy is then fed into the electrical grid, and the accompanying REC can then be sold on the open market.
The UK Emission Trading Scheme (UK ETS) enables companies to buy or sell UK Allowances (UKAs) to meet their emissions targets.
SOx and NOx
SOx and NOx Allowance trading is the centrepiece of the EPAs Acid Rain programme and allowances are the currency with which emissions compliance can be achieved.
An emitting source may choose pollution control technology such as flue gas desulfurisation (FGD) for SO2 and selective catalytic reduction (SCR) for NOx, fuel switching, and/or participation in the respective cap and trade markets. The decision is primarily driven by the regulatory environment, fuel input type, the level of emission output, and compliance costs, the latter of which affects wholesale and retail electricity prices.
The primary unit of trade in the New Zealand Emissions Trading Scheme is a New Zealand Unit (NZU) issued by the Crown. Participants are required to surrender NZUs to meet their obligations under the scheme. During the transition phase (July 2010 to December 2012) one NZU will be required to cover every two metric tonnes of greenhouse gas emissions in a calendar year. After this, one NZU will be equal to one tonne of emissions. Participants can also surrender a range of ‘Kyoto units’ (CERs/ERUs) which they can buy overseas.
Voluntary markets are available for corporations and individuals who want to offset their emissions for non-regulatory purposes. Emission offsets in this category are verified by independent agents, but are not certified by a regulatory authority for use as a compliance instrument, and are commonly referred to as Verified Emission Reductions (VERs). These carry only the possibility, but not a guarantee, that governments will allow them to be applied against future emission reduction requirements.
Trading Solutions in Focus
Additional risk management services to help you manage the cost of emissions compliance.