Sec. 242-5.3. CO2 allowance allocations

(a) Energy efficiency and clean energy technology account.

The department will allocate the CO₂ Budget Trading Program adjusted budget to best achieve the emissions reduction goals of the CO₂ Budget Trading Program by promoting or rewarding investments in energy efficiency, renewable or non-carbon-emitting technologies, and/or innovative carbon emissions abatement technologies with significant carbon reduction potential.

(1) NYSERDA will establish and administer the energy efficiency and clean energy technology account pursuant to 21 NYCRR Part 507.

(2) The department will allocate most of the CO₂ Budget Trading Program base budget or adjusted budget to the energy efficiency and clean energy technology account.

(3) NYSERDA will administer the energy efficiency and clean technology account so that allowances will be sold in a transparent allowance auction or auctions. The proceeds of the auction or auctions will be used to promote the purposes of the energy efficiency and clean energy technology account and for administrative costs associated with the CO₂ Budget Trading Program. The auction will be carried out to achieve the following objectives: achieve fully transparent and efficient pricing of allowances; promote a liquid allowance market by making entry and trading as easy and low-cost as possible; be open to participation by the categories of bidders determined by NYSERDA or its designee in consultation with the Auction Advisory Committee which meet the minimum financial requirements; monitor for and guard against the exercise of market power and market manipulation; be held as frequently as is needed to achieve design objectives; avoid interference with existing allowance markets; align well with wholesale energy and capacity markets; and be designed to not act as a barrier to efficient investment in relatively clean existing or new electricity generating sources.

(i) NYSERDA, or its agent, will not be obligated to sell any CO₂ allowances for less than the reserve price.

(ii) The department or its agent may retire unsold CO₂ allowances at the end of each control period.

(iii) The department or its agent may retire undistributed CO₂ allowances at the end of each control period.

(b) Cost Containment Reserve (CCR) allocation and rules for the sale of CO₂ CCR allowances.

The department shall allocate CO₂ CCR allowances, separate from and additional to the CO₂ Budget Trading Program base budget set forth in section 242-5.1 of this Subpart, to the energy efficiency and clean energy technology account. The CCR allocation is for the purpose of containing the cost of CO₂ allowances.

(1) The department shall allocate CO₂ CCR allowances in the following manner:

(i) The department shall initially allocate 1,946,639_CO₂ CCR allowances for allocation year 2014.

(ii) On or before January 1, 2015 and each calendar year thereafter, the department shall allocate CO₂ CCR allowances in an amount equal to 3,893,277, minus the number of CO₂ CCR allowances that remain in the energy efficiency and clean energy technology account at the end of the prior calendar year.

(iii) On or before January 1, 2021 and each calendar year thereafter, the department shall allocate CO₂ CCR allowances in an amount equal to the quantity in Table 6, minus the number of CO₂ CCR allowances that remain in the energy efficiency and clean energy technology account at the end of the prior calendar year.

Table 6. CCR Allowance Quantities from 2021 forward
2021	2022	2023	2024	2025	2026	2027	2028	2029	2030 and each year
2,905,627	2,817,577	2,729,528	2,641,479	2,533,429	2,465,380	2,377,331	2,289,281	2,201,232	2,113,183

(2) As set forth in 21 NYCRR Part 507, NYSERDA or its agent shall follow these rules for the sale of CO₂ CCR allowances:

(i) CO₂ CCR allowances shall only be sold at an auction in which total demand for allowances, above the CCR trigger price, exceeds the number of CO₂ allowances available for purchase at the auction, not including any CO₂ CCR allowances;

(ii) if the condition of subparagraph (i) of this paragraph is met at an auction, then the number of CO₂ CCR allowances offered for sale by NYSERDA or its agent at the auction shall be equal to the number of CO₂ CCR allowances in the energy efficiency and clean energy technology account at the time of the auction;

(iii) after all of the CO₂ CCR allowances in the energy efficiency and clean energy technology account have been sold in a given calendar year, no additional CO₂ CCR allowances will be sold at any auction for the remainder of the calendar year, even if the condition in subparagraph (i) of this paragraph is met at an auction; and

(iv) at an auction in which CO₂ CCR allowances are sold, the reserve price for that auction shall be the CCR trigger price;

(v) if the condition in subparagraph (i) of this paragraph is not satisfied, no CO₂ CCR allowances shall be offered for sale at the auction, and the reserve price for the auction shall be equal to the minimum reserve price.

(3) NYSERDA or its agent shall implement the reserve price in the following manner:

(i) no allowances shall be sold at any auction for a price below the reserve price for that auction; and

(ii) if the total demand for allowances at an auction is less than or equal to the number of allowances made available for sale in that auction, then the auction clearing price for the auction shall be the reserve price.

(c) Emissions containment reserve (ECR) withholding.

(1) The department shall convert and transfer any CO₂ allowances that have been withheld from any auction(s) by NYSERDA or its agent pursuant to 21 NYCRR Part 507 into the New York State ECR account. The ECR withholding is for the purpose of additional emissions reductions in the event of lower than anticipated emissions reduction costs.

(2) If the necessary condition in 21 NYCRR Part 507 is met at an auction, then the maximum number of CO₂ ECR allowances that NYSERDA or its agent will withhold from that auction will be equal to the quantity shown in Table 7 minus the total quantity of CO₂ ECR allowances that have been withheld from any prior auction(s) in that calendar year. Any CO₂ ECR allowances withheld from an auction by NYSERDA or its agent will be transferred into the New York State ECR account.

Table 7. ECR Allowance Quantities from 2021 forward
2021	2022	2023	2024	2025	2026	2027	2028	2029	2030 and each year
2,905,627	2,817,577	2,729,528	2,641,479	2,533,429	2,465,380	2,377,331	2,289,281	2,201,232	2,113,183

(3) Allowances that have been transferred into the New York State ECR account shall be retired.

(4) NYSERDA or its agent shall follow these rules for the withholding of CO₂ ECR allowances from an auction:

(i) CO₂ ECR allowances shall only be withheld from an auction if the demand for allowances would result in an auction clearing price that is less than the ECR trigger price prior to the withholding from the auction of any ECR allowances.

(d) Voluntary renewable energy market and eligible biomass set-aside allocation.

The department shall allocate 700,000 tons to the voluntary renewable energy market and eligible biomass set-aside account in 2020 and 900,000 tons in 2021 and each year thereafter from the CO₂ Budget Trading Program annual adjusted budget set forth in section 242-5.2 of this Subpart, as applicable. The department shall administer the voluntary renewable energy and eligible biomass set-aside account in accordance with the following procedures.

(1) The department will open and manage a general account for the voluntary renewable energy market and eligible biomass set-aside account.

(2) All submissions to the department required for the retirement of an allowance from the voluntary renewable energy market and eligible biomass set-aside account under this subdivision must be from the sponsor of a voluntary renewable energy purchase, herein referred to as the VREP applicant or the CO₂ authorized account representative for a CO₂ budget source co-firing eligible biomass.

(3) A VREP applicant or a CO₂ authorized account representative for a CO₂ budget source co-firing eligible biomass may submit a written request to the department to retire a specified number of CO₂ allowances in the voluntary renewable energy market and eligible biomass set-aside account, herein referred to as a VREEB application. A VREEB application must be submitted by the March 1st, immediately following the allocation year for which it is being made and must include information to assure that:

(i) a voluntary renewable energy purchase demonstrates accreditable CO₂ emissions reductions or avoidance during the control period in accordance with department measurement and verification protocol; or

(ii) for a CO₂ authorized account representative of a CO₂ budget source co-firing eligible biomass as a compliance mechanism, CO₂ emissions from the CO₂ budget source are attributable to the burning of fuel that the department has determined is eligible biomass.

(4) A VREEB application regarding a voluntary renewable energy purchase shall contain data documenting purchases of voluntary renewable energy that meet the requirements of this subdivision. Such data must be from reputable sources, which may include retail electricity providers, organizations that certify renewable energy products, and other parties as determined by the department. To be considered, data must be verifiable and document the following for voluntary renewable energy purchases:

(i) documentation of voluntary renewable energy or renewable energy attribute credit purchases by retail customers, by customer class, in the State during the control period immediately preceding the application date;

(ii) documentation that the renewable energy or renewable energy attributes related to voluntary renewable energy or renewable energy attribute credit sales were procured by the retail provider;

(iii) time period when the retail purchase(s) was made;

(iv) state where the electricity was generated or the renewable energy attribute credit was created, including documentation of facility name, unique generator identification number, and fuel type;

(v) time period when the electricity was generated or the renewable energy attribute credit was created.

(5) By the October 31st following the March 1st application deadline established in paragraph (2) of this subdivision, the department shall determine the actual MWh of voluntary renewable energy market purchases that occurred during the allocation year. The department shall retire CO₂ allowances in the voluntary renewable energy and eligible biomass set-aside account in an amount up to the number of tons of CO₂ represented by actual voluntary renewable energy market purchases, based on actual MWh purchases demonstrated by each project sponsor as follows:

CO₂ tons = MP x EF

where:

CO₂ tons, rounded down to the nearest whole ton, is the number of allowances to be placed in the retirement account.

MP is the MWh of voluntary renewable energy purchased in the State during the control period that meets the requirements of this subdivision.

EF is the CO₂ emissions factor for the control area where the electricity represented by the sale was generated.

(6) A VREEB application submitted by a CO₂ authorized account representative for a CO₂ budget source co-firing eligible biomass as a compliance mechanism shall contain the following information:

(i) documentation of the department’s determination that fuel combusted at the CO₂ budget source is eligible biomass;

(ii) the number of tons of CO₂ emissions from the CO₂ budget source attributable to the burning of eligible biomass during the allocation year, as calculated pursuant to section 242-8.7 of this Part and any other department-approved method;

(iii) by the October 31st following the March 1st application deadline established in paragraph (2) of this subdivision, the department shall determine the actual number of tons of CO₂ emissions from the CO₂ budget source attributable to the burning of eligible biomass during the allocation year. The department shall retire CO₂ allowances in the voluntary renewable energy and eligible biomass set-aside account in an amount up to such number of tons of CO₂ emissions.

(7) If more than one VREP applicant or CO₂ authorized account representative requests the retirement of CO₂ allowances pursuant to this subdivision, and the number of CO₂ allowances that are subject to department approved requests exceeds the number of CO₂ allowances in the voluntary renewable energy market and eligible biomass set-aside account as of December 31st of the previous calendar year, the department will retire CO₂ allowances from the account for the VREP applicants and CO₂ authorized account representatives in the order in which the VREP applicants and CO₂ authorized account representatives submitted approvable retirement requests. For purposes of this paragraph, VREEB applications will be considered simultaneous if they are made in the same month. Should approvable VREEB applications in excess of the allocation to the relevant voluntary renewable energy market and eligible biomass set-aside account as of December 31st of the previous calendar year be submitted in the same month by different VREP applicants and CO₂ authorized account representatives, the department will retire CO₂ allowances for those VREP applicants and CO₂ authorized account representatives on a basis proportional to the number of CO₂ allowances requested by each VREP applicant and CO₂ authorized account representative.

(8) Flow back of undistributed CO₂ allowances from the voluntary renewable energy market and eligible biomass set-aside account. After retiring allowances pursuant to this subdivision for an allocation year, any remaining CO₂ allowances will either remain in the voluntary renewable energy market and eligible biomass set-aside account or be transferred to the energy efficiency and clean energy technology account.

(e) Long term contract set-aside allocation.

The department shall allocate 1,500,000 tons to the long term contract set-aside account from the CO₂ Budget Trading Program annual adjusted budget set forth in section 242-5.2 of this Subpart, as applicable. The department shall administer the long term contract set-aside account in accordance with the following procedures.

(1) The department will open and manage a general account for the long term contract set-aside account for each allocation year.

(2) The sponsor for a long term contract hardship demonstration must establish a compliance account under subdivision 242-6.2(a) of this Part. All submissions to the department required for the reward of allowances from the long term contract set-aside account under this section must be from the CO₂ authorized account representative for the compliance account, herein referred to as the LTC applicant.

(3) The LTC applicant may submit a written request to the department for the reward of a specified number of CO₂ allowances in the long term contract set-aside account. This request must be submitted by the December 1st, immediately preceding the allocation year for which it is being made and must include information to assure, to the department’s satisfaction, that:

(i) the long term contract was entered into prior to March 2006;

(ii) the LTC applicant’s purchase of allowances at auction or in the secondary market leads to financial hardship, because the LTC applicant is unable to pass on the cost of CO₂ allowances to the purchasing party under the conditions of the long term contract; and

(iii) each CO₂ budget unit at the CO₂ budget source covered by the long term contract uses natural gas as its primary fuel, or the CO₂ budget source’s emission rate is no higher than 1100 lbs/MWhr.

(4) The written request submitted pursuant to paragraph (3) of this subdivision shall contain, at a minimum, the following information:

(i) a copy of the long term contract and explanation that the LTC applicant is unable to:

(a) pass the cost of allowances on to the purchasing party; or

(b) renegotiate the terms of the contract;

(ii) financial statements from each of the previous five years that clearly demonstrate the revenues and expenses of the LTC applicant’s budget source;

(iii) fuel, total net output and emissions data from the previous three year period;

(iv) the portion of emissions from the CO₂ budget unit or units covered by the long term contract during the upcoming year;

(v) costs associated with the CO₂ Budget Trading Program compared to all other costs associated with the operation of the CO₂ budget unit or units; and

(vi) a demonstration that the LTC applicant will suffer losses in excess of the value of allowances sought, supported by projected costs and revenues for the allocation year for which the LTC application pertains.

(5) Except as may be modified by paragraph (6) or (9) of this subdivision, the department will determine the number of CO₂ allowances to be allocated to each LTC applicant that the department determines meets the eligibility requirements of paragraph (3) of this subdivision, in accordance with the following procedures:

LTC Allowances = (((LTCer) x (TO))/2000) -RLTCA;

where:

“LTC Allowances” are the result of the calculation;

“LTCer” is the applicable emission rate

“TO” is total net output from the LTC facility;

“RLTCA” is the number of allowances remaining in an LTC applicant’s compliance account

(i) For the purposes of this subdivision, total net output shall be the greatest total net output experienced by the unit for any single calendar year among the three calendar years, for which data is submitted, proceeding the date by which the department must make the CO₂ allocations pursuant to this subdivision.

(ii) For the purposes of this subdivision, the LTCer will be the lesser of the actual emission rate included in the application and 1100 lbs/MWhr.

(iii) For the purposes of this subdivision, there will be no RLTCA for the first application, but for each subsequent application, the department will determine the RLTCA to be the difference between the allowances allocated to the LTC applicant’s compliance account in the previous allocation year and actual emissions for that allocation year.

(6) The number of CO₂ allowances to be allocated to an eligible LTC applicant, as determined pursuant to paragraph (5) of this subdivision, shall be discounted by the department as follows, if applicable:

(i) by the percentage of CO₂ allowance cost that the LTC applicant is able to pass on to the purchasing party; and

(ii) by the percentage of CO₂ emissions from the CO₂ budget source that are not covered by the long term contract.

(7) Allowances will be allocated to the LTC applicant’s compliance account.

(8) Allowances allocated pursuant to this subdivision must only be used for compliance with the CO₂ budget emissions limitation for the source. The sale or transfer of allowances from the LTC applicant’s compliance account will be considered a violation of this subdivision.

(9) If more than one LTC applicant requests the award of CO₂ allowances and the number of CO₂ allowances that are subject to the department approved requests exceeds the number of CO₂ allowances in the relevant long term contract set-side account, the department will award CO₂ allowances for those LTC applicants on a basis proportional to the number of CO₂ allowances requested by each LTC applicant.

(10) Flow back of undistributed CO₂ allowances from the long term contract set-aside account. After allocating allowances pursuant to this subdivision for an allocation year, the department will transfer any remaining CO₂ allowances from the long term contract set-aside account to the energy efficiency and clean energy technology account.

(f) 2019 and 2020 program review allowance retirement set-aside account.

The department shall transfer 184,237 tons to the program review allowance retirement set-aside account from the CO₂ Budget Trading Program annual adjusted budget for 2020 set forth in section 242-5.2 of this Subpart, for the 2019 allocation year. The department shall transfer 179,632 tons to the program review allowance retirement set-aside account from the CO₂ Budget Trading Program annual adjusted budget for 2020 set forth in section 242-5.2 of this Subpart, for the 2020 allocation year. The department shall administer the program review allowance retirement set-aside account in accordance with the following procedures.

(1) The department will open and manage a general account for the program review allowance retirement set-aside account.

(2) The allowances allocated to the program review allowance retirement set-aside account shall be deemed retired and no longer available for use under the CO₂ Budget Trading Program.