DEP Commissioner Takes
Action to End New Jersey's Open Market Emissions Trading
(03/112) TRENTON -- Citing the program's
lack of safeguards to prevent increased air pollution, Department
of Environmental Protection (DEP) Commissioner Bradley M.
Campbell proposed a formal rule to terminate New Jersey's
Open Market Emissions Trading (OMET) program.
"While emissions trading, with the
appropriate safeguards, can be an effective tool to achieve
clean air goals, we recognized at the start of the McGreevey
Administration that New Jersey's trading program failed,"
said Commissioner Campbell. "We can learn from the
mistakes in the past program's design and create environmentally
sound trading programs in the future."
Prompting the proposed termination of OMET,
Commissioner Campbell outlined several aspects of the program's
original design and implementation that contributed to its
The program allowed facilities to increase their emissions
today based on reductions that occurred many years ago.
The program also failed to establish a cap on overall
The prior Administration had chosen to privatize the
work of verifying the validity of credits under the
OMET program. An enforcement investigation by the DEP
raised questions about whether that work had been performed
correctly and effectively.
The prior Administration had privatized the development
and operation of the program's registry of credit transactions
and telephone hotline. The company contracted to operate
the registry and hotline shutdown in 2001, leaving the
program without a reliable means to track credit transactions.
Another enforcement investigation revealed that some
facilities may have built a portion of their compliance
strategy entirely on the prospect of using emission
credits, even though there has never been a guarantee
that they would find a willing seller of the credits
needed for compliance.
New Jersey's OMET program was introduced
in 1996, allowing participating parties to reduce smog-causing
emissions below federal clean air standards and then reserve
any unused portion of their allowance as credits that could
be used at a later date or be sold. Approximately 19 sources
participated in the OMET program.
The DEP first communicated its intention
to terminate the existing OMET program to the federal Environmental
Protection Agency (EPA) in August 2002. In response, the
EPA withdrew a proposed, conditional approval of a revision
to New Jersey's State Implementation Plan (SIP) for ozone,
which reflected the adoption of the OMET program rules.
In that withdrawal, the EPA indicated its intention to work
with New Jersey to address air compliance issues for sources
that currently hold or have been using credits under the
If adopted, the DEP's rulemaking proposal
would end the OMET program effective on the operative date
of the adoption (60 days from the rulemaking proposal on
July 21, 2003). Under the proposal, DEP would provide impacted
parties a period of 12 months from OMETs termination to
phase out their use of discrete emission reduction (DER)
credits and come into compliance with the DEP's rules limiting
volatile organic compound (VOC) and oxides of nitrogen (NOx)
The DEP remains committed to more effective
emissions trading to help attain the health-based National
Ambient Air Quality Standards and for meeting increasingly
stringent emissions standards. For example, New Jersey continues
to participate in the Ozone Transport Commission's (OTC)
multi-state cap and trade initiative called the NOx Budget
Program, which sets a regional budget or cap on NOx emissions
from power plants and other large combustion sources during
the ozone season from May through September.
In contrast to OMET, the OTC trading program
includes safeguards to ensure that pollution goals are met.
Also, unlike the EPA's Clear Skies cap and trade program,
the OTC NOx budget caps are phased in through an aggressive
timeline, requiring power plants to use more effective pollution
control technologies and actively driving significant emission
reductions throughout the region. The Clear Skies emission
caps are too loose and are phased in too slowly to help
states attain federal standards for fine particulates and
ozone by required dates. Under the Clear Skies program alone,
new power plants built in New Jersey would actually be required
to meet less strict emission requirements than those already
required and in effect.
Reinforcing his strong commitment to combat
pollution and promote clean air, Governor James E. McGreevey
recently joined other Northeast governors and pledged support
of a multi-state effort to limit carbon dioxide emissions
from power plants through a regional cap-and-trade program.
"Under Governor McGreevey's leadership,
New Jersey is actively working with states throughout the
Northeast to comprehensively address air pollution and its
contribution to global climate change," added Commissioner
The DEP's rule changing proposal to terminate
the OMET program was published in the July 21, 2003 issue
of the New Jersey Register and can be accessed at: http://www.nj.gov/dep/aqm/OMETrepealproposal.pdf.
A public hearing concerning this proposal will be held at
1:00 p.m. on Wednesday, September 10, 2003 at the War Memorial
Building on West Lafayette Street, Trenton.
The written public comment period is 60
days. Comments should be submitted by October 3, 2003, to:
Attn: Alice Previte, Esq.
DEP Docket No. 15-03-0 7/379
Office of Legal Affairs, NJ Department of Environmental
PO Box 402
Trenton, NJ 08625-0402