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August 13, 2003

Contact: Amy Cradic
(609) 984-1795

DEP Commissioner Takes Action to End New Jersey's Open Market Emissions Trading Program

(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 failure:

  • 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 emissions.

  • 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 OMET program.

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) emissions.

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 Campbell.

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: 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 Protection
PO Box 402
Trenton, NJ 08625-0402



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