California Moves to Revoke Carbon Credits After InquiryLynn Doan
California, operator of the nation’s biggest carbon market, plans to revoke offset credits issued to EOS Climate Inc. and Environmental Credit Corp. for ozone-depleting substances destroyed at a plant in violation of its federal permit.
The companies operated projects that delivered refrigerants, proven to destroy the earth’s ozone layer, to a Clean Harbors Inc. complex in El Dorado, Arkansas, for disposal. California is proposing to invalidate 231,154 of the credits they generated from the projects in 2012 because the El Dorado plant was found to be selling a brine byproduct instead of disposing of it as federal law requires.
The credits in question represent about 5 percent of the total under investigation because of Clean Harbors’ permit violation. The probe prompted the project registry group Climate Action Reserve last week to lower its forecasts for credits through 2017, saying the inquiry had chilled the offsets market.
“In the short term, this helps the market because they didn’t invalidate the vast majority of the credits out there,” said Jon Costantino, a Sacramento-based senior adviser at law firm Manatt, Phelps & Phillips LLP and executive director of the Association of Carbon Market Participants. “In the long term, I think you’re going to see this invalidation risk becoming a bigger deal.”
Plants must be operating “in accordance with all local, state or national environmental and health and safety regulations” to qualify for California offset credits, the state air resources board said in a report on its website. The credits that aren’t subject to invalidation will be returned to their proper owners, said the board, which removed the ones under investigation in May.
The agency is taking public comment on the findings for 10 days. The board’s executive officer will then have 30 days to issue a final determination.
“Obviously, everybody should be in compliance with all the laws, but there are a lot of laws out there,” Costantino said. “The air board has now made it clear that you have to worry about the whole facility.”
Each credit permits the release of a metric ton of carbon dioxide and can be used by California’s polluters to cover as much as 8 percent of their emissions regulated under the state’s cap-and-trade system. They must use allowances, allocated and auctioned by the state and subsequently traded, to cover the rest.
December futures contracts based on allowances that can be used for compliance as early as this year were bid at $12.12 a ton and offered at $12.14 today, according to broker BGC Partners Inc. They settled at $12.10 yesterday, data compiled by Intercontinental Exchange Inc. based in Atlanta show.
Derek Six, chief executive officer of State College, Pennsylvania-based Environmental Credit Corp., said by telephone today that the company is reviewing the air board’s findings.
EOS said it plans to submit comments, adding that the air board’s findings were based on an “incorrect interpretation and characterization of a number of fundamental facts.”
“The Clean Harbors facility has been destroying ODS in full conformance” with regulations, the company said in an e-mailed statement. “At no point has the facility been the subject of any enforcement action related to ODS destruction.”
Phillip Retallick, a Columbia, South Carolina-based spokesman for Clean Harbors, said by telephone that the Norwell, Massachusetts-based company is reviewing the decision and plans to file comments to the state.