National Policy National Policy Issues i. Acid Rain Program ii. NOx SIP Call iii. Clean Air Interstate Rule iv. Clean Air Mercury Rule v. Retrofit Technology vi. Industrial Boiler MACT

State Policy State Policy Issues i. Mercury

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National Legislation and Regulations

Clean Air Interstate Rule

Summary:

• Three separate cap and trade programs make up the Clean Air Interstate Rule (CAIR): an annual SO2 reduction program to reduce fine particulate matter formation (PM2.5), an annual NOx reduction program also to reduce PM2.5 formation, and a seasonal NOx reduction program to reduce ozone formation.
• The affected region is comprised of 28 mostly eastern states and DC.
• Affected facilities include fossil fuel-fired electric generating units (EGUs) greater than 25MW and co-generation units of greater than 25MW where 1/3 of electric output is for sale.  Large (>250mmBtu/hr) industrial boilers can opt into CAIR and non-EGUs that are currently participating in the NOx SIP call can participate in the CAIR ozone season program.

The Clean Air Interstate Rule (CAIR) was finalized on March 10, 2005.  A significant difference between CAIR and CSA is that CAIR requires only SO₂ and NOx reductions from a region comprised of 28 mostly eastern states and the District of Columbia compared to nationwide in the CSA.  Because emissions can be transported through air currents across state lines, impacting air quality in other “downwind” states, the regulation seeks to cap emissions in these selected states to improve state and regional air quality. 

(Source: EPA)

CAIR will cap SO₂ and NOx emissions in two phases.  NOx will be reduced beginning in 2009 for Phase 1 and 2015 for Phase 2.  SO₂ will be reduced in Phase 1 in 2010 and Phase 2 in 2015.  For states required to reduce PM2.5 emissions, both SO₂ and NOx must be reduced over an annual period.  For states required to reduce ozone, only NOx reductions are required in the summer (May 1 through September 30, the same as the NOx SIP Call).  For states in both programs, they will be subject to three separate cap and trade programs: one for annual SO₂ emissions (to reduce PM2.5), one for annual NOx emissions (to reduce PM2.5), and one for summertime NOx emissions (to reduce ozone pollution).  States are able to choose whether to participate in the trading program for any of the reduction programs.  The emission reductions achieved by CAIR for the affected region are summarized below:

Incentives for early reductions are part of each of the trading programs.  For the SO₂ annual program, allowances are already allocated through the ARP cap and trade system.  CAIR will go beyond the ARP reduction requirements, reducing SO₂ emissions by an additional 50% by 2010 and 65% by 2015.  Allowances from the ARP can be banked and used for compliance of the CAIR rule.  Retirement of allowances is based on the vintage year of the allowance.  SO₂ allowances from 2009 or earlier will be retired on a 1:1 basis (1 allowance per ton of emissions).  Vintage 2010-2014 allowances will be retired on a 2:1 ratio (2 allowance per ton of emissions) and vintage 2015 allowances and beyond will be retired on a scale of 2.86:1 (2.86 allowances per ton of emissions).

The early reduction incentive in the annual NOx program is based on units reducing NOx emissions above and beyond current state and federal regulation in 2007 or 2008, prior to the 2009 Phase 1 cap coming into effect.  The EPA has designed a Compliance Supplemental Pool (CSP) of 200,000 tons of NOx allowances, divided among the states, to distribute to facilities that either overcomply with current regulations in 2007 or 2008 or units that are in need of additional allowances.

The incentive for early ozone season NOx reductions is based on the current NOx SIP Call, which will be replaced by the ozone CAIR program in 2009.  Units in states that are part of the SIP Call can bank allowances beginning in the 2005 ozone season to use in future years in the CAIR program.  The ozone season allowances banked through the NOx SIP call program can only be used for the CAIR summertime ozone season NOx program.  Allowances between the CAIR annual and ozone season NOx programs cannot be traded.  Non-EGUs that are currently part of the NOx SIP Call will be allowed to participate in the CAIR ozone season program and participate in the cap and trade program.

For more information:

EPA Clean Air Interstate Rule website: http://www.epa.gov/cair/