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Environmental Markets / Carbon Allowances


Carbon Allowances 


Carbon allowances are issued by a government under an emissions cap-and-trade regulatory program. Each allowance (or emissions permit) typically allows its owner to emit one tonne of a pollutant such as CO2e. Under a cap-and-trade system, the supply of GHG allowances is limited by the mandated 'cap'.

Below are some examples of carbon allowance programs



Under the cap-and-invest program, businesses responsible for roughly 75% of Washington’s greenhouse gas emissions will have to obtain allowances to cover their emissions emitting more than 25,000 tCO2e/year. 

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The State of Washington has recently launched a new "cap-and-invest" program to reduce greenhouse gas emissions and combat climate change.



Facilities in all sectors located in California that emit more than 25,000 tons/CO2e are required to offset all emissions with carbon allowances and offsets

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California’s objective is to reduce greenhouse gas emissions by 40 percent below 1990 levels by 2030 – the most ambitious target in North America.  Any facility that emits more than 25,000 tons of CO2e annually as well as fuel suppliers must comply with this program. 



Power generating facilities located in 11 states (CT, DE, ME, MD, MA, NH, NJ, NY, PA, RI, VT, and VA) are required to offset all emissions with carbon allowances and offsets

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Their first carbon dioxide (CO2) auction of RGGI allowances was held in 2008.The program was created for the purpose of limiting carbon dioxide emissions from power plants in the participating states. 


Houston-Galveston-Brazoria (HGB)

The Houston-Galveston Brazoria (HGB) area includes the counties of Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and Waller come under the nonattainment status for ground-level ozone under the 8-hour standard).

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The HECT Program is a market-based cap-and-trade program that implements an annual HRVOC emission cap for applicable facilities in Harris County. Program participants are required to use allowances to cover HRVOC emissions on an annual basis. The allowances available for use each year are capped at a level necessary to attain the National Ambient Air Quality Standard for ozone. Affected sites are required to participate.




Cross-State Air Pollution Rule (CSAPR)

The Cross-State Air Pollution Rule (CSAPR) a program run by the United States Environmental Protection Agency (EPA) that requires certain states to reduce power plant emissions that contribute to ozone and/or fine particle pollution that cross the borders into other states.

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The Cross-State Air Pollution Rule (CSAPR) sets new standards for power plants that emit nitrous oxide (NOx) and sulfur dioxide (SO2). CSAPR went into effect on January 1, 2015, after a few years of litigation, for SO2 and NOx pollutants.


SO2 Acid Rain Program

The Acid Rain Program is a market-based initiative taken by the United States Environmental Protection Agency in an effort to reduce overall atmospheric levels of sulfur dioxide and nitrogen oxides, which cause acid rain.

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The Acid Rain Program was established under Clean Air Act. The SO2 program sets a permanent cap on the total amount of SO2 that may be emitted by electric generating units in the United States. Under this system, EPA sets a cap on overall emissions. The program is an implementation of emissions trading that primarily targets coal-burning power plants, allowing them to buy and sell emission permits, or allowances, according to individual needs and costs.



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