BOARD MEETING

DATE: January 12, 1996

AGENDA NO. 3

PROPOSAL: Set Hearing to Consider Staff Recommendation and Rulemaking Action Plan on Intercredit Trading--Increasing Flexibility for AQMD's Mobile and Stationary Source Emissions Credit Programs

SYNOPSIS: In April 1995, the Board initiated the Intercredit Trading Study. The objective of this study is to assess the feasibility of linking the AQMD's mobile and stationary emissions credit trading programs to increase compliance flexibility while achieving air quality goals. In October 1995, AQMD staff released for public review a draft paper on issues surrounding intercredit trading. Four workshops were held in November. Based on public comments received, staff is finalizing policy recommendations and an action plan for rulemaking. Actual rulemaking would occur later. The report will be made available prior to the February public hearing.

COMMITTEE: Mobile Source, December 15, 1995

RECOMMENDED ACTION:

1. Set a Public Hearing February 9, 1996, to consider recommendations and an action plan for the Intercredit Trading Study.

James M. Lents, Ph.D.
Executive Officer

BRW:CSL:EC:SN

Background

During the public hearing for Rule 1501.1 - Alternatives to Work Trip Reduction Plans held in April 1995, members of the public requested more open and flexible trading programs to provide additional compliance flexibility. In response to these requests, the AQMD's Governing Board directed staff to initiate an Intercredit Trading Study to assess the applicability of intercredit trading within the District's existing regulatory programs.

On October 13, 1995, the "Concept Paper for Increased Compliance Flexibility" was presented to the Governing Board and released to the public. This white paper outlined the AQMD staff's preliminary policy positions on key issues surrounding intercredit trading and was designed to initiate dialogue between the AQMD and the public on these key issues.

To seek public input, the AQMD staff conducted an extensive public outreach by inviting over 10,000 companies and other interested parties to participate in four public workshops held during November. To provide interested parties an additional opportunity to comment on this study, the public comment period has been extended from December 1, 1995 to January 12, 1996. This will allow sources affected by Rule 2202 and Regulation XVI that have expressed interest in this study to provide written comments.

Staff recommendations and an action plan will be prepared incorporating public comments and presented to the AQMD's Governing Board in February 1996.

Proposal

Set a Public Hearing February 9, 1996, to consider staff recommendations and an action plan for the Intercredit Trading Study. This study assessed the seven key issues surrounding intercredit trading, which included: Trading Interaction, Universe of Sources, Trading Instrument, Discount Factor, Interseasonal Trading, Banking, and Interpollutant Trading. These recommendations were developed with public input received during workshops and through written comments. The action plan will outline future activities, including possible rule amendments or adoption, or both, to implement the proposed recommendations.

Policy Issues

The following summarizes the seven key policy issues associated with this study:

1. Trading Interaction: How can intersource trading maximize trading opportunities?
2. Universe of Sources - Credit Generation and Use: How can the universe be expanded to maximize credit generation and use?
3. Trading Instrument: How can the trading instrument be standardized to facilitate trading in a universal market?
4. Discount Factor: Should a discount factor be applied? If so, when and where should it be applied?
5. Interseasonal Trading: Can incentives to shift VOC emissions to non-ozone season accelerate achievement of air quality goals?
6. Banking: Can an emissions banking program provide additional incentives to advance clean air technologies and be designed such that Reasonable Further Progress and Attainment Demonstrations are not compromised?
7. Interpollutant Trading: Should interpollutant trading, which is allowed for PM10 and its precursors under NSR, be retained or expanded to include other pollutants?
   
   

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