Overview | Effects | SO2 Program | NOx Program | Emissions | Conservation
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Overview | Effects | SO2 Program | NOx Program | Emissions | Conservation |
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Program OverviewThe overall goal of the Acid Rain Program is to achieve significant environmental and public health benefits through reductions in emissions of sulfur dioxide (SO2) and nitrogen oxides (NOX), the primary causes of acid rain. To achieve this goal at the lowest cost to society, the program employs both traditional and innovative, market-based approaches for controlling air pollution. In addition, the program encourages energy efficiency and pollution prevention. Title IV of the Clean Air Act sets as its primary goal the reduction of annual SO2 emissions by 10 million tons below 1980 levels. To achieve these reductions, the law requires a two-phase tightening of the restrictions placed on fossil fuel-fired power plants. Phase I began in 1995 and affects 263 units at 110 mostly coal-burning electric utility plants located in 21 eastern and midwestern states. An additional 182 units joined Phase I of the program as substition or compensating units, bringing the total of Phase I affected units to 445. Emissions data indicate that 1995 SO2 emissions at these units nationwide were reduced by almost 40% below their required level.
The Act also calls for a 2 million ton reduction in NOx emissions by the year 2000. A significant portion of this reduction will be achieved by coal-fired utility boilers that will be required to install low NOx burner technologies and to meet new emissions standards.
Key Features of the Acid Rain Program
Operating Principles: Feasible, Flexible, AccountableThe Acid Rain Program is implemented through an integrated set of rules and guidance designed to accomplish three primary objectives:
Each individual component fulfills a vital function in the larger program:
Together these measures ensure the achievement of environmental benefits at the least cost to society.
Environmental BenefitsAcid rain causes acidification of lakes and streams and contributes to damage of trees at high elevations (for example, red spruce trees above 2,000 feet in elevation). In addition, acid rain accelerates the decay of building materials and paints, including irreplaceable buildings, statues,and sculptures that are part of our nation's cultural heritage. Prior to falling to the earth, SO2 and NOx gases and their particulate matter derivatives, sulfates and nitrates, contribute to visibility degradation and impact public health. Implementation of the Acid Rain Program under the 1990 Clean Air Act Amendments will confer significant benefits on the nation. By reducing SO2 and NOx, many acidified lakes and streams will significantly improve so that they can once again support fish life. Visibility will improve, allowing for increased enjoyment of scenic vistas across our country, particularly in National Parks. Stress to our forests that populate the ridges of mountains from Maine to Georgia will be reduced. Deterioration of our historic buildings and monuments will be slowed. Finally, reductions in SO2 and NOx will reduce sulfates, nitrates, and ground level ozone (smog), leading to improvements in public health. For more information, see Environmental Effects
Allowance TradingThe Acid Rain Program represents a dramatic departure from traditional command and control regulatory methods which establish specific, inflexible emissions limitations with which all affected sources must comply. Instead, the Acid Rain Program introduces an allowance trading system that harnesses the incentives of the free market to reduce pollution. Under this system, affected utility units were allocated allowances based on their historic fuel consumption and a specific emissions rate. Each allowance permits a unit to emit 1 ton of SO2 during or after a specified year. For each ton of SO2 discharged in a given year, one allowance is retired, that is, it can no longer be used. Allowances may be bought, sold, or banked. Any person may acquire allowances and participate in the trading system. However, regardless of the number of allowances a source holds, it may not emit at levels that would violate federal or state limits set under Title I of the Clean Air Act to protect public health. During Phase II of the program, the Act sets a permanent ceiling (or cap) of 8.95 million allowances for total annual allowance allocations to utilities. This cap firmly restricts emissions and ensures that environmental benefits will be achieved and maintained. For more information, see Allowance System Annual ReconciliationAnnual Reconciliation refers to EPA's task of reconciling the annual emissions of a unit with its allowance holdings. At the end of the year, utilities are granted a 30-day true-up or grace period, during which SO2 allowances may be purchased, if necessary, to cover each unit's emissions for the year. At the end of the grace period, the allowances a unit holds in its compliance account must equal or exceed the annual SO2 emissions recorded by the unit's monitoring system. Any remaining allowances may be sold or banked for use in future years. The EPA must consider a number of issues related to the operation of the unit over the past year, including the unit's SO2 emissions, whether or not the unit was "underutilized," and whether the unit is subject to special provisions (e.g., a state law limiting emissions on an system-wide basis.) For more information, see Annual Reconciliation
The Allowance Tracking SystemEPA has instituted an electronic recordkeeping and notification system called the Allowance Tracking System (ATS) to track allowance transactions and the status of allowance accounts. ATS is the official tally of allowances by which EPA determines compliance with the emissions limitations. Any party interested in participating in the trading system may open an ATS account by submitting an application to EPA. Accounts contain information on unit account balances, account representatives (which must be appointed by each trading party), and serial numbers for each allowance. ATS is computerized to expedite the flow of data and to assist in the development of a viable market for allowances. For more information, see Allowance Tracking System
Auctions and Direct SaleEPA holds an allowance auction annually. The auctions help to send the market an allowance price signal, as well as furnish utilities with an additional avenue for purchasing needed allowances. The direct sale offered allowances at a fixed price of $1,500 (adjusted for inflation). Anyone could buy allowances in the direct sale, but independent power producers (IPPs) could obtain written guarantees from EPA stating that they had first priority. These guarantees, which were awarded on a first-come, first-served basis, secured the option for qualified IPPs to purchase a yearly amount of allowances over a 30 year span. This provision enabled IPPs to assure lenders that they would have access to the allowances they needed to build and operate new units. The direct sale was eliminated in 1997 because this provision proved to be unnecessary. For more information, see Allowance Auctions
Voluntary Entry: The Opt-in ProgramThe Opt-in Program expands EPA's Acid Rain Program to include additional sulfur dioxide (SO2) emitting sources. Recognizing that there are additional emission reduction opportunities in the industrial sector, Congress established the Opt-in Program under section 410 of the Clean Air Act Amendments of 1990. The Opt-in Program allows sources not required to participate in the Acid Rain Program the opportunity to enter the program on a voluntary basis, reduce their SO2 emissions, and receive their own acid rain allowances. The participation of these additional sources will reduce the cost of achieving the 10 million ton reduction in SO2 emissions mandated under the Clean Air Act. As participating sources reduce their SO2 emissions at a relatively low cost, their reductions -- in the form of allowances -- can be transferred to electric utilities where emission reductions are more expensive. The Opt-in Program offers a combustion source a financial incentive to voluntarily reduce its SO2 emissions. By reducing emissions below its allowance allocation, an opt-in source will create unused allowances, which it can sell in the SO2 allowance market. Opting in will be profitable if the revenue from allowances exceeds the combined cost of the emissions reduction and the cost of participating in the Opt-in Program. For more information, see The Opt-in Program Pollution PreventionThe allowance trading system contains an inherent incentive for utilities to prevent pollution, since for each ton of SO2 that a utility avoids emitting, one fewer allowance must be retired. Utilities that reduce emissions through energy efficiency and renewable energy are able to sell, use, or bank their surplus allowances. As also provided in the Act, EPA has set aside a reserve of 300,000 allowances to stimulate energy efficiency and renewable energy generation. Those utilities that either implement demand-side energy conservation programs to curtail emissions or install renewable energy generation facilities may be eligible to receive bonus allowances from this reserve. For more information, see Conservation and Renewable
Energy Reserve The NOx ProgramThe Clean Air Act Amendments of 1990 set a goal of reducing NOx by 2 million tons from 1980 levels. The Acid Rain program focuses on one set of sources that emit NOx, coal-fired electric utility boilers. As with the SO2 emission reduction requirements, the NOx program is implemented in two phases, beginnning in 1996 and 2000. The NOx program embodies many of the same principles of the SO2 trading program in its design: a results-orientation, flexibility in the method to achieve emission reductions, and program integrity through measurement of the emissions. However, it does not "cap" NOx emissions as the SO2 program does, nor does it utilize an allowance trading system. Emission limitations for the NOx boilers provide flexibility for utilities by focusing on the emission rate to be achieved (expressed in pounds of NOx per million Btu of heat input). Two options for compliance with the emission limitations are provided:
These options give utilities flexibility to meet the emission limitations in the most cost-effective way and allow for the further development of technologies to reduce the cost of compliance. If a utility properly installs and maintains the appropriate control equipment designed to meet the emission limitation established in the regulations, but is still unable to meet the limitation, the NOx program allows the utility to apply for an alternative emission limitation (AEL) that corresponds to the level that the utility demonstrates is achievable. Phase I of the program, which was delayed a year due to litigation, began on January 1, 1996, and affects two types of boilers (which are among those already targeted for Phase I SO2 reductions): dry-bottom wall-fired boilers and tangentially fired boilers. Dry-bottom wall-fired boilers must meet a limitation of 0.50 lbs of NOx per mmBtu averaged over the year, and tangentially fired boilers must achieve a limitation of 0.45 lbs of NOx per mmBtu, again, averaged over the year. Approximately 170 boilers must comply with these NOx performance standards during Phase I. The regulations to govern the Phase II portion of the program, which begins in 2000, were proposed in January of 1996. These regulations would set lower emission limits for Group 1 boilers first subject to regulations in Phase II. In addition, these regulations would establish initial NOx emission limitations for Group 2 boilers, which include boilers applying cell-burner technology, cyclone boilers, wet bottom boilers, and other types of coal-fired boilers. The final rule was promulgated December 19, 1996. For more information, see Phase I (affecting Group 1
Boilers) or Phase II (affecting Group 1 and Group 2
Boilers) of the NOX Reduction Program. Emissions Monitoring and ReportingUnder the Acid Rain Program, each unit must continuously measure and record its emissions of S02, NOx, and CO2, as well as volumetric flow and opacity. In most cases, a continuous emission monitoring (CEM) system must be used. There are provisions for initial equipment certification procedures, periodic quality assurance and quality control procedures, recordkeeping and reporting, and procedures for filling in missing data periods. Units report hourly emissions data to EPA on a quarterly basis. This data is then recorded in the Emissions Tracking System, which serves as a repository of emissions data for the utility industry. The emissions monitoring and reporting systems are critical to the program. They instill confidence in allowance transactions by certifying the existence and quantity of the commodity being traded and assure that NOx averaging plans are working. Monitoring also ensures, through accurate accounting, that the SO2 and NOx emissions reduction goals are met. For more information, see Continuous Emissions Monitoring
Excess EmissionsIf annual emissions exceed the number of allowances held, the owners or operators of delinquent units must pay a penalty of $2,000 (adjusted for inflation) per excess ton of SO2 or NOx emissions. In addition, violating utilities must offset the excess SO2 emissions with allowances in an amount equivalent to the excess. A utility may either have allowances deducted immediately or submit an excess emissions offset plan to EPA that outlines how these cutbacks will be achieved. Designated RepresentativesEach source appoints one individual, the Designated Representative, to represent the owners and operators of the source in all matters relating to the holding and disposal of allowances for its units that are affected by the Clean Air Act. The Designated Representative is also responsible for all submissions pertaining to permits, compliance plans, emission monitoring reports, offset plans, compliance certification, and other necessary information. A source may appoint an Alternate Designated Representative to act on behalf of the Designated Representative. PermittingThe Designated Representative for each source is required to file a permit application for the source and a compliance plan for each affected unit at the source. The Acid Rain permits and compliance plans are simple, allow sources to fashion a compliance strategy tailored to their individual needs, and foster trading. For example, they allow sources to make real-time allowance trading decisions through the use of automatic permit amendments. The permits stipulate the initial allowance allocation for each affected unit at a source. Permit applications must certify that each unit account will hold a sufficient number of allowances to cover the unit's S02 emissions for the year, will comply with the applicable NOx limit, and will monitor and report emissions. Permits are subject to public comment before approval. For more information, see Permits Compliance Options: Freedom to ChooseThe Acid Rain Program allows sources to select their own compliance strategy. For example, to reduce SO2 an affected source may repower its units, use cleaner burning fuel, or reassign some of its energy production capacity from dirtier units to cleaner ones. Sources also may decide to reduce electricity generation by adopting conservation or efficiency measures. Some of the options afford the unit special treatment, such as a compliance extension or extra allowances. Most options, like fuel switching, require no special prior approval, allowing the source to respond quickly to market conditions without needing government approval. For NOx, the source may meet the performance standard on a utility-unit basis, enter into an emissions averaging plan, or apply for an alternative emissions limitation. In either case, the program allows affected utilities to combine these and other options in ways they see fit in order to tailor their compliance plans to the unique needs of each unit or system. A Model ProgramEPA gained broad input into the development of the Acid Rain Program by consulting with representatives from various stakeholder groups, including utilities, coal and gas companies, emissions control equipment vendors, labor, academia, Public Utility Commissions, state pollution control agencies, and environmental groups. EPA is maintaining this open door policy as it implements the program, and it continues to solicit ideas from the numerous and diverse individuals and groups interested in acid rain control. In addition, EPA is collaborating with groups who wish to evaluate the benefits and effects of the program through economic and environmental studies. The Acid Rain Program is already being viewed around the world as a prototype for tackling emerging environmental issues. The allowance trading system capitalizes on the power of the marketplace to reduce SO2 emissions in the most cost-effective manner possible. The permitting program allows sources the flexibility to tailor and update their compliance strategy based on their individual circumstances. The continuous emissions monitoring and reporting systems provide the accurate accounting of emissions necessary to make the program work, and the excess emissions penalties provide strong incentives for self-enforcement. Each of these separate components contributes to the effective working of an integrated program that lets market incentives do the work to achieve cost-effective emissions reductions. The General Accounting Office recently confirmed the beneftis of this approach, projecting that the allowance trading system could save as much as $3 billion per year -- over 50% -- compared with a command and control approach typical of previous environmental protection programs.
http://www.epa.gov/acidrain/overview.html Last Modified September 1997 |
