US: Clean Harbors set to exit California carbon market

Source: Heren

2014/11/12

A Clean Harbors regulatory official said the company will no longer incinerate ozone-depleting substances (ODS) for California offset projects at its Arkansas facility, potentially impacting the future offset supply in the California market.

Clean Harbors’ Arkansas facility is at the centre of a review of 4.4m ODS credits generated at the site by the ARB, the cap-and-trade regulator. Those credits have been under review since 29 May after Clean Harbors settled a violation of a federal environmental law with the Environmental Protection Agency ( see EDCM 29 May 2014 ).

The ARB announced a preliminary decision to invalidate 231,154 of the 4.4m credits after the regulator determined the site was in violation of the federal environmental law and did not conform to the ARB’s regulations that require regulatory compliance for all projects ( see EDCM 8 October 2014 ).

A final decision is expected before 16 November, the last day of the 30-day period.

Phillip Retallick, Clean Harbors’ senior vice-president of regulatory affairs, said the company will exit the market regardless of the ARB’s final decision on the ozone-depleting substance (ODS) credits under review.

“We are not going to manage any incineration of any ARB projects,” Retallick told ICIS. “We are going to terminate those contracts. The developers understand. We might win the battle, but we aren’t going to win the war.”

Retallick said there is a small chance the company could change its position if the ARB revised its regulation to place boundaries or restrictions on the regulatory compliance. However, he did not foresee the California regulator doing that.

The company said in its October comments to the ARB that it was considering leaving the market ( see EDCM 20 October 2014 ).

Offset developers and carbon advisors have been pushing the ARB to narrow the focus of the regulatory compliance issues. Their issue is the broadness of the regulation allows for minor offenses to pose invalidation risks, and those violations could cause compliance entities to lose investments in offsets.

Retallick said it would be difficult to mitigate risk without a narrowed rule on regulatory compliance, and the current regulation would make it difficult to operate as an incineration facility in that market.

Clean Harbors’ exit will likely have some impact on the future supply of ODS credits because of the volume of credits produced from that site, offset developers said. Developers said some of the impact will be unknown until the company follows through with its intention of pulling out of the market.

Based on ARB statistics, an offset market without Clean Harbors could be significantly different. Clean Harbors has produced nearly 4.4m of the 5.6m ODS credits, according to ARB data. The remaining credits have come from two sites in the US, but there few sites capable of doing ODS incinerations in the US.

Developers said an exit by Clean Harbors could create a gap in the amount of offset supply that comes to the market because ODS credits are such a large supplier to the market. ODS supply has made up roughly 45% of the total offset supply. Dan X. McGraw