PROPOSAL:

Pre-Funding the Rule 2501 AQIP Emission Reduction Reserve

SYNOPSIS:

On May, 9, 1997, the Board adopted Rule 2501 - AQIP. Rule 2501 allows Regulations IV, XI and Rule 2202 sources to purchase emission reductions from the AQIP Emission Reduction Reserve as an alternative compliance option to specific emission limitation requirements. The adopting resolution directed staff to report back to the Board by January 1, 1998 regarding the type, origin, and amount of emission reductions that will pre-fund the AQIP Reserve. The pre-funding of emission reductions for the Reserve will be excess mobile source emission reductions achieved under Rule 2202 including VOC, NO_x, and CO emission reductions. These emissions will be returned to Rule 2202 once reductions are achieved through Rule 2501 investment fees.

COMMITTEE:

Administrative, November 21, 1997, Reviewed

RECOMMENDED ACTION:

Receive and file this report.

Barry R. Wallerstein, D. Env.
Acting Executive Officer

Under Rule 2501, the AQMD will establish a reserve of emission reductions that are real, quantifiable, enforceable, permanent and surplus. Sources seeking an alternative compliance option to a specific emission limitation requirement in Regulation IV or XI, and Rule 2202 may purchase emission reductions from the AQIP Reserve. Rule 2501 requires that emission reductions in the Reserve be pre-approved and have been generated prior to their use. Since sources electing to use the AQIP are only allowed to purchase AQIP reductions that have been generated, at the outset of the AQIP it is necessary to pre-fund the Reserve with emission reductions which have been generated external to the AQIP. Emission reductions used for pre-funding must meet the credit generation protocols specified by AQMD rules. This pre-funding of emission reductions will provide an initial supply of emission reductions that will gradually be replenished over time as new emission reductions are created by Emission Reduction Providers which receive funds from the AQIP.

During the adoption of Rule 2501, the Governing Board directed staff in the adoption resolution to report back to the Board by January 1, 1998 regarding the type, origin, and amount of emission reductions that will be the initial supply of emission reductions for the AQIP Reserve. This report summarizes staff’s proposal.

Proposed Pre-Funding Sources

Staff anticipates that the AQIP Emission Reduction Reserve will be pre-funded with emission reductions generated from the Rule 2202 AQIP. These emission reductions will consist of both VOC and NO_x emission reductions which have been generated from a variety of mobile sources. Approximately ninety percent of the emission reductions are generated from old-vehicle scrapping using the existing Rule 1610 - Old Vehicle Scrapping emission quantification protocol. The remaining emission reductions come from a variety of mobile source engine conversion projects; these emission reductions are generated from converting conventionally fueled engines to clean-burning engines. The proposed pre-funding amounts will be 105 tons of VOC, 17 tons of NO_x, and 648 tons of CO emission reductions. The emission reductions used for pre-funding are valid until 2001.

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