§ 145.342. CO2 allowance allocations.
(a) General allocations. The Department will allocate CO2 allowances representing 100% of the tons for each allocation year from the Pennsylvania CO2 Budget Trading Program base budget set forth in § 145.341 (relating to Pennsylvania CO2 Budget Trading Program base budget) to the air pollution reduction account, less those CO2 allowances set aside each allocation year under subsection (b).
(b) Set-aside allocations.
(1) Waste coal set-aside account. The Department will allocate CO2 allowances to a waste coal set-aside account for each allocation year from the Pennsylvania CO2 Budget Trading Program base budget set forth in § 145.341, as provided under subsection (i).
(2) Strategic use set-aside account. The Department will allocate undistributed CO2 allowances to the strategic use set-aside account for each allocation year from the waste coal set-aside account, as provided under subsection (j).
(3) Combined heat and power set-aside account. The Department will allocate CO2 allowances to a combined heat and power set-aside account for each allocation year from the Pennsylvania CO2 Budget Trading Program base budget set forth in § 145.341, as provided under subsection (k).
(c) CO2 allowances available for allocation. For each allocation year, the Pennsylvania CO2 Budget Trading Program adjusted budget shall be the maximum number of CO2 allowances available for allocation in a given allocation year, except for CO2 offset allowances and CO2 CCR allowances. In any year in which there is no adjusted budget, the adjusted budget shall equal the base budget.
(d) Cost Containment Reserve (CCR) allocation. To contain the cost of CO2 allowances, the Department will allocate CO2 CCR allowances, separate from and additional to the Pennsylvania CO2 Budget Trading Program base budget set forth in § 145.341, to the air pollution reduction account. The Department will allocate CO2 CCR allowances by doing the following:
(1) The Department will initially allocate CCR allowances for calendar year 2022 in an amount equal to 10% of the Pennsylvania CO2 Budget Trading Program base budget for 2022 set forth in § 145.341(a).
(2) On or before January 1, 2023, and on or before January 1 of each calendar year thereafter, the Department will allocate current vintage year CCR allowances equal to 10% of the Pennsylvania CO2 Budget Trading Program base budget for the calendar year and withdraw the number of CO2 CCR allowances that remain in the air pollutant reduction account at the end of the prior calendar year.
(e) Emissions Containment Reserve (ECR) Withholding. To provide additional emissions reductions in the event of lower than anticipated emissions reduction costs, the Department will convert and transfer any CO2 allowances that have been withheld from any auction into the Pennsylvania ECR account. The Department will withhold CO2 ECR allowances by doing the following:
(1) If the condition in § 145.382(d)(1) (relating to general requirements) is met at an auction, then the maximum number of CO2 ECR allowances that will be withheld from that auction will be equal to 10% of the Pennsylvania CO2 Budget Trading Program base budget for that calendar year minus the total quantity of CO2 ECR allowances that have been withheld from any prior auction in that calendar year. Any CO2 ECR allowances withheld from an auction will be transferred into the Pennsylvania ECR account.
(2) CO2 allowances that have been transferred into the Pennsylvania ECR account will remain in the Pennsylvania ECR account as CO2 ECR allowances and not be withdrawn.
(f) Adjustment for banked allowances. The Department may determine whether any adjustments for banked allowances will be made by using the following formula:
ABA = ((A - AE)/Y) x RS%
Where:
ABA = The adjustment for banked allowances quantity in tons.
A (adjustment) = The total quantity of CO2 allowances of vintage years held in general and compliance accounts, including compliance accounts established under the CO2 Budget Trading Program, but not including accounts opened by participating states, as reflected in COATS.
AE (adjustment emissions) = The total quantity of emissions from all CO2 budget sources in all participating states, reported under the CO2 Budget Trading Program as reflected in COATS prior to the year of the adjustment.
RS% = The Commonwealth’s adjustment year budget divided by the adjustment year regional budget.
Y = The time period in years over which the adjustment occurs.
(g) CO2 Budget Trading Program adjusted budget. The Department may establish the Pennsylvania CO2 Budget Trading Program adjusted budget for an allocation year by the following formula:
AB = BB - ABA
Where:
AB = The Pennsylvania CO2 Budget Trading Program adjusted budget.
BB = The Pennsylvania CO2 Budget Trading Program base budget.
ABA = The adjustment for banked allowances quantity in tons.
(h) Publication. If the Department determines to adjust the budget for banked allowances under subsections (f) and (g), the Department will publish in the Pennsylvania Bulletin the CO2 Budget Trading Program adjusted budget for the allocation year.
(i) Waste coal set-aside allocation. The waste coal set-aside allocation will consist of tons from the Pennsylvania CO2 Budget Trading Program base budget set forth in § 145.341, as applicable. The Department will administer the waste coal set-aside account in accordance with the following:
(1) Applicability. This subsection applies to waste coal-fired units located in Pennsylvania that commenced operation on or before April 23, 2022, that are subject to the CO2 Budget Trading Program requirements under § 145.304 (relating to applicability).
(2) General account. The Department will open and manage a general account for the waste coal set-aside account.
(3) Allowance transfer. Except for 2022, by March 1 of each calendar year, the Department may transfer a portion of the CO2 allowances allocated to the air pollution reduction account to the waste coal set-aside account in an amount equal to legacy emissions from waste coal-fired units applicable under paragraph (1). The Department has determined that the total amount of legacy emissions equal 12.8 million tons.
(4) Compliance allocation. Except for 2022 and a year with an exceedance of legacy emissions under paragraph (5), by March 1 of each calendar year, the Department will allocate CO2 allowances from the waste coal set-aside account to the compliance account of each waste coal-fired unit in an amount equal to the actual number of CO2 emissions in tons emitted from the waste coal-fired unit during the previous year.
(i) After allocating CO2 allowances under this paragraph, the Department will transfer any undistributed CO2 allowances from the waste coal set-aside account to the strategic use set-aside account.
(ii) CO2 allowances allocated under this subsection must only be used for compliance with the CO2 budget emissions limitation for the waste coal-fired unit. The sale or transfer of CO2 allowances from the unit’s compliance account will be considered a violation of this subchapter.
(5) Exception for exceedance of legacy emissions. If the total actual CO2 emissions from waste coal-fired units exceed 12.8 million tons during a calendar year, the Department will account for the exceedance as follows:
(i) By February 15 of the year following the exceedance, the Department will determine the difference between each unit’s legacy emissions and the unit’s actual emissions during the previous year.
(ii) By February 15 of the year following the exceedance, the Department will allocate CO2 allowances from the waste coal set-aside account to the compliance account of each waste coal-fired unit in an amount equal to the actual number of CO2 emissions in tons emitted from the waste coal-fired unit during the previous year minus the exceedance of legacy emissions.
(iii) After the allocation under subparagraph (ii), if there are CO2 allowances remaining in the waste coal set-aside account, the Department may distribute CO2 allowances to each waste coal-fired unit requiring CO2 allowances to meet the CO2 requirements under § 145.306(c) (relating to standard requirements) in an amount proportionate to the exceedance.
(iv) By the CO2 allowance transfer deadline of the year following the exceedance, the owner or operator of each waste coal-fired unit requiring additional CO2 allowances to satisfy the CO2 requirements under § 145.306(c) must transfer CO2 allowances for compliance deductions under § 145.355 (relating to compliance) to the compliance account of the unit.
(6) Set-aside termination. If no CO2 allowances are allocated under paragraph (4) in any calendar year due to the fact that there were no actual CO2 emissions from waste coal-fired units subject to this subsection, then the CO2 allowances remaining in the waste coal set-aside account will be transferred to the strategic use set-aside account. No additional CO2 allowances will be allocated to the waste coal set-aside account under paragraph (3), and the Department will close the waste coal set-aside account.
(j) Strategic use set-aside allocation. The strategic use set-aside allocation will consist of undistributed CO2 allowances from the waste coal set-aside account. The Department will administer the strategic use set-aside account in accordance with the following:
(1) General account. The Department will open and manage a general account for the strategic use set-aside account.
(2) Allowance transfer. By April 1 of each calendar year, the Department will transfer undistributed CO2 allowances allocated to the waste coal set-aside account to the strategic use set-aside account.
(3) Allocation to eligible projects. The Department may distribute CO2 allowances from the strategic use set-aside account to eligible projects located in Pennsylvania that result in a greenhouse gas emission reduction benefit including the following:
(i) Implementation of energy efficiency measures.
(ii) Implementation of renewable or noncarbon-emitting energy technologies.
(iii) Development of innovative greenhouse gas emissions abatement technologies with significant greenhouse gas reduction potential.
(4) Strategic use application. To apply for CO2 allowances, the owner of an eligible project shall submit to the Department a complete application, in a format prescribed by the Department, that includes the following:
(i) Documentation that the project will result in greenhouse gas emission reductions.
(ii) Identification of the general account for the eligible project.
(iii) Specification of the number of CO2 allowances being requested.
(iv) The calculations and supporting data used to determine the greenhouse gas emission reductions and an explanation of the data and the methods on which the calculations are based.
(5) CO2 allowance determination. After verifying that the information submitted in the application under paragraph (4) is complete and accurate, the Department will determine the number of CO2 allowances to distribute based on the greenhouse gas emission reductions achieved. The Department will distribute the allotted CO2 allowances upon completion of the eligible project.
(6) General requirements. The Department will not award CO2 allowances to an eligible project that is required under any local, State or Federal law, regulation, or administrative or judicial order.
(7) Use of CO2 allowances. The owner of an eligible project may sell, transfer or submit a written request to the Department to retire allocated CO2 allowances.
(8) Transfer or retirement of CO2 allowances. At the end of each control period, the Department may retire or transfer to the air pollution reduction account any undistributed CO2 allowances from the strategic use set-aside account.
(k) Combined heat and power set-aside allocation. The combined heat and power set-aside allocation will consist of tons from the Pennsylvania CO2 Budget Trading Program base budget set forth in § 145.341, as applicable. The Department will administer the combined heat and power set-aside account in accordance with the following:
(1) Applicability. This subsection applies to combined heat and power units located in Pennsylvania that are subject to the CO2 Budget Trading Program requirements under § 145.304.
(2) General account. The Department will open and manage a general account for the combined heat and power set-aside account.
(3) CO2 allowance retirement. The Department will retire CO2 allowances for a CO2 budget unit that is a combined heat and power unit. Based on information provided under paragraph (4), the CO2 authorized account representative of a CO2 budget unit may request one of the following:
(i) Retirement of CO2 allowances equal to the total amount of CO2 emitted as a result of providing useful thermal energy or electricity, or both, during the allocation year.
(ii) Retirement of CO2 allowances equal to the partial amount of CO2 emitted as a result of supplying useful thermal energy or electricity, or both, to an interconnected industrial, institutional or commercial facility during the allocation year.
(4) CO2 allowance retirement application. By January 30 of the year following the allocation year for which the retirement of CO2 allowances is being requested, the CO2 authorized account representative seeking the retirement of CO2 allowances for a combined heat and power unit shall submit to the Department a complete application, in a format prescribed by the Department, that includes the following:
(i) Documentation that the CO2 budget unit is a combined heat and power unit that satisfies the applicability under paragraph (1).
(ii) Identification of the compliance account for the CO2 budget unit.
(iii) Identification of the allocation year for which the retirement of CO2 allowances request is being made.
(iv) Specification of the amount of the retirement of CO2 allowances being requested, as determined under paragraph (5).
(v) The calculations and supporting data used to determine the amount of the retirement of CO2 allowances being requested and an explanation of the data and the methods on which the calculations are based.
(vi) If the CO2 budget unit is requesting retirement of CO2 allowances under paragraph (3)(i), then the application must include the following:
(A) Documentation that the useful thermal energy is at least 25% of the total energy output of the combined heat and power unit on an annual basis.
(B) Documentation that the overall efficiency of the combined heat and power unit is at least 60% on an annual basis.
(C) The percentage of useful thermal energy and overall efficiency must be calculated as follows:
Percentage of UTE = UTE / (UTE + TEO) x 100
OE = ((UTE + TEO) / HI) x 100
Where:
UTE = Useful Thermal Energy (MMBtu)
OE = Overall Efficiency
TEO = Total Electrical Output (MMBtu) = GG x 3.412
GG = Gross Generation (MWe)
HI = Total Heat Input (MMBtu)
(vii) If the CO2 budget unit is requesting retirement of CO2 allowances under paragraph (3)(ii), then the application must include documentation of the amount of useful thermal energy or electricity, or both, supplied to an interconnected industrial, institutional or commercial facility.
(5) CO2 allowance retirement determination. After verifying that the information submitted in the application under paragraph (4) is complete and accurate, the Department will determine the number of CO2 allowances to retire on behalf of a CO2 budget unit that meets the applicability requirements under paragraph (1) and the application requirements under paragraph (4).
(i) For a CO2 budget unit that meets the application requirements under paragraph (4)(vi), the Department will retire the number of CO2 allowances equal to the amount of CO2 that is emitted as a result of providing useful thermal energy or electricity, or both, during the allocation year.
(ii) For a CO2 budget unit that meets the application requirements under paragraph (4)(vii), the Department will retire the number of CO2 allowances equal to the amount of useful thermal energy or electricity, or both, supplied to an interconnected industrial, institutional or commercial facility during the allocation year.
(iii) The owner or operator of each CO2 budget unit requiring additional CO2 allowances to satisfy the CO2 requirements under § 145.306(c) shall transfer CO2 allowances for compliance deductions under § 145.355 to the compliance account of the unit.
(6) Retirement and transfer of CO2 allowances. At the end of each control period or interim control period, the Department will retire CO2 allowances from the combined heat and power set-aside account in an amount equal to the determination under paragraph (5) for each CO2 budget unit. The Department will transfer any remaining CO2 allowances to the air pollution reduction account to be available for auction.
Cross References This section cited in 25 Pa. Code § 145.302 (relating to definitions); 25 Pa. Code § 145.306 (relating to standard requirements); 25 Pa. Code § 145.343 (relating to distribution of CO2 allowances in the air pollution reduction account); 25 Pa. Code § 145.351 (relating to CO2 Allowance Tracking System (COATS) accounts); 25 Pa. Code § 145.354 (relating to recordation of CO2 allowance allocations); 25 Pa. Code § 145.382 (relating to general requirements); 25 Pa. Code § 145.393 (relating to general requirements); 25 Pa. Code § 145.401 (relating to auction of CO2 allowances); 25 Pa. Code § 145.403 (relating to auction timing and CO2 allowance submission schedule); and 25 Pa. Code § 145.409 (relating to approval of auction results).
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