Conceptual Framework for an Allowance Banking Protocol for Sulfur Dioxide Emissions

A. Y. Shah
L. W. Canter

DOI: 10.2190/982K-FLGX-W0GL-ULG3


Market-based emissions trading approaches such as the allowance trading program for sulfur dioxide impose unique recordkeeping requirements on the agency responsible for the administration of the program. An allowance banking protocol is a means of meeting these requirements. Recordkeeping and tracking of traded allowances is necessary to prevent misuse and double counting of traded allowances, and also to ensure that allowance allocation caps on various bonus reserves and during Phase II of the program are not exceeded at the time of allowance allocation. The conceptual framework for an allowance banking protocol for sulfur dioxide emissions is described herein. The protocol is based on the acid rain provisions of Title IV of the 1990 Clean Air Act Amendments. Key elements of the protocol include: 1) eligibility criteria for allowance allocation; 2) quantification procedures for allowance allocation; 3) certification, recordkeeping and accounting criteria; 4) criteria for compliance determination; 5) criteria for allowance allocation during subsequent years; 6) criteria for allowance banking; 7) eligibility criteria for allowance trading; 8) enforceability criteria for allowance trades; and 9) criteria for allowance adjustments. The proposed allowance banking protocol can be used to integrate allowance allocations, compliance determinations, trading/banking criteria, and enforcement criteria for trades into a single system. This expedites the process of approval of allowance allocations and allowance banking and trading. It also reduces the amount of paperwork involved. The allowance banking protocol is one means for the practical implementation of the rules and provisions of the allowance trading program; and it can make the flexibility offered by the program for achieving compliance and air quality goals a practical reality.

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