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

   1. (1) 12,663,369 tons for 2027;
   2. (2) 11,080,448 tons for 2028;
   3. (3) 9,497,526 tons for 2029;
   4. (4) 7,914,605 tons for 2030;
   5. (5) 6,331,684 tons for 2031;
   6. (6) 4,748,763 tons for 2032;
   7. (7) 3,165,842 tons for 2033;
   8. (8) 2,713,579 tons for 2034;
   9. (9) 2,261,316 tons for 2035;
   10. (10) 1,809,053 tons for 2036; and
   11. (11) 1,356,790 tons for 2037 and each succeeding calendar year.
2. B. CO₂ Allowances Available for Allocation. For the allocation year 2027 and each succeeding calendar year, the Maryland CO₂ Budget Trading Program base budget shall be the maximum number of allowances available for allocation in a given allocation year, except for CO₂ CCR tier 1 and CO₂ CCR tier 2 allowances.

3. C. Cost Containment Reserve Allocation.

   1. (1) The Department shall allocate CO₂ CCR tier 1 and CO₂ CCR tier 2 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..
   2. (2) On or before January 1, 2027, and each calendar year thereafter, the Department shall allocate 2,130,856 current vintage year CO₂ CCR tier 1 and 2,130,856 CO₂ CCR tier 2 allowances, and withdraw the number of CO₂ CCR tier 1 and CO₂ CCR tier 2 allowances that remain in the Maryland CO₂ Budget Trading Program at the end of the prior calendar year.
   3. (3) 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.
4. D. Repealed.
5. 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.
6. F. Repealed.
7. G. Repealed.
8. H. Repealed.
9. I. Repealed.

10. J. General Distribution of CO₂ Allowances.

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

       1. (a) The Long Term Contract Set-aside Account;
       2. (b) The Clean Generation Set-aside Account; and
       3. (c) The Consumer Energy Efficiency Account.
    2. (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. (3) The Department shall allocate CO₂ allowances from the Consumer Energy Efficiency Account to each of the following accounts, except as directed in Regulation .09 of this chapter, so that the total number of allowances in each account is:

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

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

          1. (i) 1,687,679 for 2018;
          2. (ii) 1,500,159 for 2019;
          3. (iii) 1,312,639 for 2020;
          4. (iv) 1,125,119 for 2021; and
          5. (v) 937,599 for 2022.
    4. (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.

11. K. Demonstrating Compliance.

    1. (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. (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 number of tons of CO₂ emissions for the interim control period from all CO₂ budget units at the source.

    3. (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:

       1. (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;
       2. (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;

       3. (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:

          1. (i) 3.3 percent of the CO₂ budget source’s CO₂ emissions for that control period; or
          2. (ii) 3.3 percent of the CO₂ budget source’s CO₂ emissions for an interim control period multiplied by 0.50.

    4. (4) Deduction of CO₂ allowances:

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

          1. (i) The number of CO₂ allowances deducted equals 50 percent of the total CO₂ emissions for an interim control period; or
          2. (ii) The number of CO₂ allowances deducted equals the total CO₂ emissions for the control period.
       2. (b) No deduction shall be made for CO₂ emissions attributable to the burning of eligible biomass.

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

       1. (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

       2. (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:

          1. (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;
          2. (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;
          3. (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, or, in the event that some, but not all, CO₂ offset allowances from a particular allocation year are to be deduced, CO₂ offset allowances shall be deducted by serial number, with lower serial number CO₂ offset allowances deducted before higher serial number allowances; and
          4. (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. (6) Deductions for Excess Emissions.

       1. (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.
       2. (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.
       3. (c) CO₂ offset allowances may not be deducted to account for the source's excess emissions.
       4. (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. (7) Guidelines.

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

          1. (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
          2. (ii) The Department shall consider the amount of excess emissions in determining the severity of the violation.
       2. (b) Each ton of excess interim emissions is a separate violation.
    8. (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. (9) Adjustments and Errors.

       1. (a) The Department may review and conduct independent audits concerning any submission under this subtitle and make appropriate adjustments to the information, if necessary.
       2. (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.

Authority: Environment Article, §§1-101, 1-404, 2-103, and 2-1002(g), Annotated Code of Maryland

Effective date: July 17, 2008 (35:14 Md. R. 1247)

Chapter revised effective May 18, 2009 (36:10 Md. R. 717)

Regulation .02 amended effective January 6, 2014 (40:26 Md. R. 2165)

Regulation .03 amended effective January 21, 2013 (40:1 Md. R. 22); January 6, 2014 (40:26 Md. R. 2165); December 31, 2018 (45:26 Md. R. 1249); March 30, 2026 (53:6 Md. R. 292)

Regulation .04A amended effective December 31, 2018 (45:26 Md. R. 1249)

Regulation .05A amended as an emergency provision effective December 28, 2009 (37:4 Md. R. 336); amended permanently effective May 3, 2010 (37:9 Md. R. 674); August 6, 2012 (39:15 Md. R. 964)

Regulation .05A amended effective January 6, 2014 (40:26 Md. R. 2165)

Regulation .05C repealed effective January 6, 2014 (40:26 Md. R. 2165)

Regulation .06 amended effective March 30, 2026 (53:6 Md. R. 292)

Regulation .06B amended effective January 21, 2013 (40:1 Md. R. 22); December 31, 2018 (45:26 Md. R. 1249)

Regulation .06D amended effective December 31, 2018 (45:26 Md. R. 1249)

Regulation .06G amended effective August 6, 2012 (39:15 Md. R. 964); January 21, 2013 (40:1 Md. R. 22); December 31, 2018 (45:26 Md. R. 1249)

Regulation .07 amended effective January 21, 2013 (40:1 Md. R. 22); December 31, 2018 (45:26 Md. R. 1249)

Regulation .07H amended effective January 6, 2014 (40:26 Md. R. 2165)

Regulation .07J adopted effective March 30, 2026 (53:6 Md. R. 292

Regulation .07N amended effective August 6, 2012 (39:15 Md. R. 964)

Regulation .08 amended as an emergency provision effective February 1, 2011 (38:4 Md. R. 263); amended permanently effective May 16, 2011 (38:10 Md. R. 617)

Regulation .08A amended effective January 21, 2013 (40:1 Md. R. 22)

Regulation .08C amended effective August 6, 2012 (39:15 Md. R. 964); January 21, 2013 (40:1 Md. R. 22)

Regulation .08D adopted effective February 12, 2018 (45:3 Md. R. 157)

Regulation .09 amended effective February 12, 2018 (45:3 Md. R. 157)

Regulation .09B amended effective January 21, 2013 (40:1 Md. R. 22)

Regulation .09H amended effective August 6, 2012 (39:15 Md. R. 964); January 21, 2013 (40:1 Md. R. 22)

Regulation .10 amended effective March 30, 2026 (53:6 Md. R. 292)

Regulation .11 D, E amended effective March 30, 2026 (53:6 Md. R. 292)

Regulation .11H amended effective December 31, 2018 (45:26 Md. R. 1249)