26.09.02.03

.03 Distribution of CO2 Allowances and Compliance.

A. The Maryland CO2 Budget Trading Program consists of allowances to cover CO2 emissions for the following:

(1) 18,671,045 tons for 2018;

(2) 17,931,922 tons for 2019;

(3) 17,483,623 tons for 2020;

(4) 16,790,271 tons for 2021;

(5) 16,281,475 tons for 2022;

(6) 15,772,679 tons for 2023;

(7) 15,263,882 tons for 2024;

(8) 14,755,086 tons for 2025;

(9) 14,246,290 tons for 2026;

(10) 13,737,494 tons for 2027;

(11) 13,228,698 tons for 2028;

(12) 12,719,902 tons for 2029; and

(13) 12,211,106 tons for 2030 and each succeeding calendar year.

B. CO2 Allowances Available for Allocation. For allocation years 2014 through 2031, the Maryland CO2 Budget Trading Program adjusted budget shall be the maximum number of allowances available for allocation in a given allocation year, except for CO2 offset allowances and CO2 CCR allowances.

C. Cost Containment Reserve Allocation. The Department shall allocate CO2 CCR allowances, separate from and in addition to the Maryland CO2 Budget Trading Program base budget set forth in §A of this regulation, to the Consumer Energy Efficiency Account. The CCR allocation is for the purpose of containing the cost of CO2 allowances. The Department shall allocate CO2 CCR allowances in the following manner:

(1) The Department shall initially allocate 1,135,217 CO2 CCR allowances for calendar year 2014.

(2) On or before January 1, 2015, and each calendar year thereafter through 2020, the Department shall allocate CO2 CCR allowances sufficient to replenish Maryland’s 22.6 percent proportional share of the CCR.

(3) On or before January 1, 2021, and each calendar year thereafter, the Department shall allocate current vintage year CCR allowances equal to the following:

(a) 2,236,466 CCR allowances for 2018, 2019, and 2020;

(b) 1,679,027 CCR allowances for 2021;

(c) 1,628,147 CCR allowances for 2022;

(d) 1,577,267 CCR allowances for 2023;

(e) 1,526,388 CCR allowances for 2024;

(f) 1,475,508 CCR allowances for 2025;

(g) 1,424,629 CCR allowances for 2026;

(h) 1,373,749 CCR allowances for 2027;

(i) 1,322,869 CCR allowances for 2028;

(j) 1,271,990 CCR allowances for 2029; and

(k) 1,221,110 CCR allowances for 2030 and each succeeding calendar year.

(4) The Department shall withdraw the number of CO2 allowances that remain in the Consumer Energy Efficiency Account at the end of the prior calendar year.

D. Emissions Containment Reserve Withholding. The Department shall convert or transfer any CO2 allowances that have been withheld from any auction(s) into the Emissions Containment Reserve Account. The ECR withholding is for the purpose of additional emissions reduction in the event of lower than anticipated emissions reduction costs. The Department shall withhold CO2 ECR allowances in the following manner.

(1) If the condition in COMAR 26.09.04.06B(4)(a) is met at an auction, then the maximum number of CO2 ECR allowances that will be withheld from that auction will be equal to the following, minus the total quantity of CO2 ECR allowances that have been withheld from any prior auction(s) in that calendar year:

(i) 1,679,027 for 2021;

(ii) 1,628,148 for 2022;

(iii) 1,577,268 for 2023;

(iv) 1,526,388 for 2024;

(v) 1,475,509 for 2025;

(vi) 1,424,629 for 2026;

(vii) 1,373,749 for 2027;

(viii) 1,322,870 for 2028;

(ix) 1,271,990 for 2029; and

(x) 1,221,111 for 2030 and each succeeding calendar year.

(2) Any CO2 ECR allowances withheld from an auction will be transferred into the Emission Containment Reserve Account.

(3) Allowances that have been transferred into the Emission Containment Reserve Account shall not be withdrawn.

E. Serial Numbers for CO2 Allowances. Before allowances are made available for allocation, the Department shall assign a unique serial number to each allowance including digits that will identify the year the allowances are made available.

F. Adjustment for First Control Period Banked Allowances. By January 15, 2014, the Department shall establish the adjustment for first control period banked allowances as 1,863,361 allowances applicable to allocation years 2014 through 2020.

G. Adjustment for Second Control Period Banked Allowances. On March 15, 2014, the Department shall establish the adjustment for second control period banked allowances as 3,106,578 allowances applicable to allocation years 2015 through 2020.

H. Third Adjustment for Banked Allowances. On March 15, 2021, the Department shall establish the third adjustment for banked allowances quantity for allocation years 2021 through 2025 through the application of the following formula:

TABA = ((TA - TAE)/5) x RS%

Where:

(1) TABA is the third adjustment for banked allowances quantity in tons;

(2) TA, third adjustment, is the total quantity of allowances of vintage years prior to 2021 held in general and compliance accounts, including compliance accounts established pursuant to the CO2 Budget Trading Program, but not including accounts opened by participating states, as reflected in the CO2 Allowance Tracking System (COATS) on March 15, 2021;

(3) TAE, third adjustment emissions, is the total quantity of 2018, 2019, and 2020 emissions from all CO2 budget sources in all participating states, reported pursuant to the CO2 Budget Trading Program as reflected in the CO2 Allowance Tracking System (COATS) on March 15, 2021;

(4) RS% is Maryland’s budget divided by the regional budget.

I. CO2 Budget Trading Program Adjusted Budgets.

(1) On April 15, 2019 the Department shall establish the Maryland CO2 Budget Trading Program adjusted budgets for the 2018 through 2020 allocation years as follows:

(a) 13,701,106 allowances in 2018;

(b) 12,961,983 allowances in 2019; and

(c) 12,513,684 allowances in 2020.

(2) On April 15, 2021, the Department shall establish the Maryland CO2 Budget Trading Program adjusted budgets for the 2021 through 2025 allocation years by the following formula:

AB = BB – TABA

Where:

(a) AB is the Maryland CO2 Budget Trading Program adjusted budget;

(b) BB is the Maryland CO2 Budget Trading Program base budget; and

(c) TABA is the third adjustment for banked allowances quantity in tons.

(3) After making the determinations required by §I(1) and (2) of this regulation, the Department will post on the Department website the CO2 trading program adjusted base budgets for the 2021 through 2025 allocation years.

J. General Distribution of CO2 Allowances.

(1) The Department shall open and manage a general account for the following:

(a) The Limited Industrial Exemption Set-aside Account;

(b) The Long Term Contract Set-aside Account;

(c) The Clean Generation Set-aside Account; and

(d) The Consumer Energy Efficiency Account.

(2) On or before January 31 of each calendar year, the Department shall allocate all CO2 allowances from the CO2 Budget Trading Program to the Consumer Energy Efficiency Account, except as directed in §J(3) and (4) of this regulation.

(3) The Department shall allocate CO2 allowances from the Consumer Energy Efficiency Account to each of the following accounts, except as directed in COMAR 26.09.02.09, so that the total number of allowances in each account is:

(a) The following number of allowances in the Limited Industrial Set-aside Account:

(i) 3,465,101 for 2018;

(ii) 2,976,734 for 2019;

(iii) 2,488,367 for 2020;

(iv) 2,000,000 for 2021and each succeeding calendar year.

(b) 1,600,000 in the Long Term Contract (LTC) Set-aside Account; and

(c) The following number of allowances in the Clean Generation Set-aside Account:

(i) 1,687,679 for 2018;

(ii) 1,500,159 for 2019;

(iii) 1,312,639 for 2020;

(iv) 1,125,119 for 2021; and

(v) 937,599 for 2022.

(4) If, on December 31 of each year, allowances have been sold or awarded from a set-aside account such that the number of allowances in the set-aside account falls below the required allocation in §J(3)(a)—(c) of this regulation, as applicable, that account shall be replenished from the Consumer Energy Efficiency Account in the following calendar year using allowances from that calendar year.

K. Demonstrating Compliance.

(1) Unless otherwise specified in this chapter, a CO2 budget source shall demonstrate compliance with its CO2 budget emissions limitation by holding one CO2 allowance in its compliance account for every ton of CO2 that it emits in a control period, by the allowance transfer deadline for that control period.

(2) As of the CO2 allowance transfer deadline for an interim control period, the owners and operators of each CO2 budget source and each CO2 budget unit at the source shall hold, in the source’s compliance account for deduction under §K of this regulation, CO2 allowances for no less than 50 percent of the total CO2 emissions for the interim control period from all CO2 budget units at the source.

(3) Allowances Available for Compliance Deduction. The following CO2 allowances may be deducted from a compliance account for purposes of complying with a budget source's CO2 budget emissions limitation for a control period or an interim control period:

(a) CO2 allowances that are not CO2 offset allowances and are identified as allowances falling within a prior control period, the same control period, or the same interim control period for which the allowances are deducted;

(b) CO2 allowances that are held or transferred into the CO2 budget source's compliance account as of the CO2 allowance transfer deadline for that control period or for the interim control period contained within that control period;

(c) CO2 offset allowances that are available to be deducted for compliance during a control period or an interim control period where the quantity of allowances is limited to:

(i) 3.3 percent of the CO2 budget source’s CO2 emissions for that control period; or

(ii) 3.3 percent of the CO2 budget source’s CO2 emissions for an interim control period multiplied by 0.50.

(4) Deduction of CO2 allowances:

(a) The Department shall deduct allowances from the CO2 budget source's compliance account until:

(i) The number of CO2 allowances deducted equals 50 percent of the total CO2 emissions for an interim control period; or

(ii) The number of CO2 allowances deducted equals the total CO2 emissions for the control period.

(b) No deduction shall be made for CO2 emissions attributable to the burning of eligible biomass.

(5) The identification of available CO2 allowances for compliance deduction by serial number or by default is as follows:

(a) The CO2 authorized account representative for a source's compliance account may request that specific CO2 allowances, identified by serial number for a control period or interim control period, be deducted; and

(b) In the absence of an identification or in the case of a partial identification of available CO2 allowances by serial number, the Department shall deduct CO2 allowances for a control period or interim control period in the following descending order:

(i) For the first control period, all CO2 allowances purchased by direct sale from the Department during years 2009, 2010, and 2011 resulting from the occurrence of the $7 auction clearing price;

(ii) All CO2 allowances for a control period allocated to a CO2 budget unit from the Long Term Contract Set-aside Account or the Clean Generation Set-aside Account;

(iii) Subject to the relevant compliance deduction limitations identified in §K(3)(c) of this regulation, any CO2 offset allowances transferred and recorded in the compliance account, in chronological order; and

(iv) Any CO2 allowances, other than those identified in §K(5)(b)(i)—(iii) of this regulation, that are available for deduction in the order they were recorded.

(6) Deductions for Excess Emissions.

(a) If a CO2 budget source has excess emissions, the Department shall deduct CO2 allowances from the CO2 budget source's compliance account equal to three times the excess emissions.

(b) If a source’s compliance account holds insufficient CO2 allowances to cover the excess emissions, the source shall immediately transfer sufficient allowances into its compliance account.

(c) CO2 offset allowances may not be deducted to account for the source's excess emissions.

(d) No CO2 allowance deduction shall relieve the owners or operators of the CO2 budget units at the source of liability for any fine, penalty, assessment or obligation to comply with any other remedy, for the same violation, as ordered under applicable State law.

(7) Guidelines.

(a) The following guidelines apply in assessing fines, penalties, or other obligations:

(i) For purposes of determining the number of days of violation, if a CO2 budget unit has excess emissions for a control period or interim control period, each day in the control period or interim control period, as applicable, constitutes a separate day of violation unless the owners or operators of the unit can demonstrate to the satisfaction of the Department that a lesser number of days should be considered; and

(ii) The Department shall consider the amount of excess emissions in determining the severity of the violation.

(b) Each ton of excess interim emissions is a separate violation.

(8) If the CO2 budget source's compliance account no longer exists, the CO2 allowances shall be deposited in a general account selected by the owner or operator of the CO2 budget source.

(9) Adjustments and Errors.

(a) The Department may review and conduct independent audits concerning any submission under this subtitle and make appropriate adjustments to the information, if necessary.

(b) The Department may correct any error in any account and, within 10 business days of making any correction, notify the CO2 authorized account representative for the account.