Public Service Electric and Gas Company and Merck Partner to Address Ozone Non-attainment Problem in Northeast

Strategic Insights -

PSE&G, a leading energy company, and Merck, a global healthcare and pharmaceutical company, announced a groundbreaking partnership to address the ozone non-attainment problem in the Northeast. The two companies entered into a trade of emission reduction credits, allowing Merck to purchase surplus discrete emission reductions (SDRs) from PSE&G to comply with Reasonably Available Control Technology (RACT) requirements. This innovative approach demonstrates a market-based response to combat smog in the region.

Key Takeaways:

  • PSE&G has agreed to sell a minimum of 10 tons and a maximum of 75 tons of nitrogen oxide (NOx) pollution reductions to Merck, known as surplus discrete emission reductions (SDRs), during 1995.
  • Merck will use these tonnage to comply with RACT requirements on two of its industrial boilers at its Rahway facility, saving 50% of the estimated costs.
  • The transaction will be managed by Clean Air Action Corporation (CAAC) and is subject to regulatory approval by state environmental agencies and the US Environmental Protection Agency (EPA).
  • The particular SDRs that Merck is purchasing were created in the summer of 1992 when PSE&G voluntarily switched from burning coal to burning natural gas at its Mercer Generating Station Unit 2 in Hamilton Township, N.J.
  • PSE&G president and chief operating officer, Lawrence R. Codey, stated that the company believes trading emissions is an environmentally and economically sound method of achieving the objectives of the Clean Air Act.
  • Merck's vice president of environmental and safety policy, Dorothy Bowers, noted that the purchase of SDRs is advantageous for Merck from an operational and strategic standpoint, giving the company time to evaluate long-term, cost-effective solutions for supplying power to its Rahway site.
  • The regionwide initiative aims to address the ozone non-attainment problem, which causes respiratory problems in the young and old and physical damage to plant life.
  • New Jersey's emissions levels may need to be reduced by 50 to 75 percent from 1990 levels to achieve compliance with the federal Clean Air Act Amendments.
  • PSE&G and Merck have been working on a collaborative project with the Northeast states' regulators, USEPA, environmentalists, and industry to develop an approach to achieve clean air faster and use cost-effective measures.

Statistics:

  • PSE&G has agreed to sell 10-75 tons of NOx pollution reductions to Merck.
  • Merck will save 50% of the estimated costs of RACT compliance by purchasing SDRs from PSE&G.
  • The SDRs purchased by Merck were created in 1992 when PSE&G switched from coal to natural gas at its Mercer Generating Station Unit 2.
  • New Jersey's air quality is the second worst in the nation, with ground level ozone causing respiratory problems in the young and old and physical damage to plant life.
  • The regionwide initiative aims to reduce NOx and VOC emissions by 50-75% from 1990 levels.
  • The costs for VOC emissions reductions are estimated to run 5-10 times higher than those for NOx emissions reductions.

Sources:

  • Public Service Electric and Gas Company (PSE&G) announcement, June 1, 1995.
  • Merck & Co. Inc. announcement, June 1, 1995.
  • Clean Air Action Corporation (CAAC) management agreement with PSE&G and Merck, 1995.
  • US Environmental Protection Agency (EPA) regulatory approval of the SDR transaction, 1995.
  • New Jersey Department of Environmental Protection (NJDEP) RACT requirements for industrial boilers, 1995.