The Discrete Emissions Reductions Trading Program is an open market system of trading for discrete emissions reductions (DERs). The DERs are mass-based units (1 DER = 1 ton) representing discrete, retrospective emission reductions.

The Discrete emissions Reductions Trading Program is intended to give RACT sources and sources subject to New Source Review (NSR) compliance flexibility and the opportunity to reduce compliance costs. Although it is not an attainment strategy, the program benefits the environment by requiring that 10 percent of all credits are retired (discounted) before they are used.

Other Notable Features

Stationary sources cannot generate DERs from productions curtailments and shutdowns. DERs can be used by stationary sources for RACT and NSR compliance. Prohibited uses are as in EPA's Proposed Model Open Market Trading Rule (60 FR 39668, August 3, 1995), such as BACT, LAER, and MACT. Allowable protocols for DER generation by mobile sources are as in EPA's Guidance to States Developing Generic ERCs from Mobile Sources (MERC Regulations February 1994), such as vehicle scrappage, clean fuel fleets, and employee commute options. The DES will evaluate mobile source DER-generation protocols to determine the applicability of the DERs to stationary sources. If necessary, a discount factor reflecting emissions quantification uncertainty may be added. DER-generation applications from area sources will be evaluated on a case-by-case basis.

DERs can be banked for future use, and they do not require the DES's approval before use. However, the buyer may be liable if the DES finds any shortfalls. NOx for VOC trading is permitted at a 1:1 ratio, but not vice versa. This is intended to encourage NOx reductions, which contribute more than VOC reductions to ozone improvement in New Hampshire, which, as a rural state, is NOx-limited.

There is a "geographic distance discount" for NOx trades from outside the New England Modeling Domain, which comprises the New England states. The discount is an additional 5 percent for every 125 miles separating the generator and user. The current rule also has provisions for a noncompliance penalty discount and an implicit emissions quantification uncertainty discount (as part of the protocol approval process).

Another feature of the current rule is the possibility to delay compliance by making payments to an escrow account toward eventual compliance with DERs. This might be allowed if, for example, more time is needed to contract with a DER supplier, or the protocol for acquiring DERs is delayed.