Clean Air Interstate Rule (CAIR)

Marilyn PowersDecember 8, 2006

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• Nitrogen Oxides contribute to the formation of both PM2.5 and ground-level ozone. Sulfur Dioxide (SO2) contributes to formation of PM2.5.

• Ozone and PM2.5 have been linked with premature death, serious illnesses such as chronic bronchitis and heart attacks, and respiratory illnesses such asthma exacerbations.

• NOx and SO2 are also linked with acid rain, eutrophication of water bodies including estuaries such as the Chesapeake Bay, and contribute to regional haze.

Pollutants and Concerns

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Electric Power Generation: A Major Source of Emissions

Source: SO2 and NOx data is from EPA’s 2003 National Emissions Inventory. “Other” sources of pollutants include transportation and other mobile sources and industrial sources.

SO2 Emissions

Total: 15.9 Million Tons

Power Sector22%

Other78%

Total: 20.8 Million Tons

10.9 Million Tons

5.0 Million Tons

4.5 Million Tons

16.3 Million Tons

NOx Emissions

69%

Power Sector

Other

31%

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Previous Programs Regulating NOx and SO2

• In 1995, EPA began implementation of the acid rain program under Title IV of the CAA

• In 1998, EPA issued the NOx SIP Call to 22 states and DC based on our finding that these states were significantly contributing to nonattainment of the 1 – hour ozone standard in downwind states. Region 3 states implemented the NOx SIP Call beginning in 2003.

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Long-Range Transport of Air Pollution

• Air pollution can travel hundreds of miles and cause multiple health and environmental problems on regionalor national scales.

• Emissions contributing to PM2.5 and ozone nonattainment often travel across state lines, especially in the eastern U.S.

• SO2 and NOx, and other pollutants, contribute to PM2.5 transport

• NOx and other pollutants contribute to ozone transport.

• Attaining national ambient air quality standards will require some combination of emission reductions from:• Sources located in or near nonattainment

areas (such as mobile sources) and• Sources, such as power plants, located

further from the nonattainment area.

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Dealing with Transport Problems

• Clean Air Act contains provisions for States and EPA to address interstate pollution transport.

• The NOx SIP Call (and now, CAIR) is needed because states have not met the CAA requirements for transported emissions

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Transport Contributes to Nonattainment of New Standards

• In 1997, EPA established more protective standards for fine particulates (PM2.5), and the more stringent 8-hour ozone standard

• In 2004, EPA designated 33 areas as nonattainment for ozone and 16 areas as nonattainment for PM2.5

• Nonattainment problems are caused by both regional and local emissions

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Areas Designated Nonattainment for Ozone and PM2.5 NAAQS in 2004

Nonattainment areas for both 8-hour ozone and fine particle pollution

Nonattainment areas for fine particle pollution only

Nonattainment areas for 8-hour ozone pollution only

126 ozone nonattainment areas with 474 counties

47 PM2.5 nonattainment areas with 224 counties

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Redesignations in Region 3

• Originally designated as nonattainment, many areas in the region have since monitored attainment

• This is largely because of reductions attributed to the NOx SIP Call

• Proof that cap and trade programs are indeed having a significant air quality benefit

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The Clean Air Interstate Rule

• Finalized in March 2005. Applies to 28 Eastern states and DC

• All Region 3 states were determined to have significant contribution to downwind nonattainment

• At full implementation, 73% reduction of SO2 and 61% reduction of NOx.

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Key Elements of CAIR

• CAIR sets an emission reduction requirement (budget) for each State, based on capping power plant emissions at levels that EPA believes are highly cost-effective to achieve.

• Provides an optional cap and trade program based on successful Acid Rain and NOx SIP Call programs as a method to implement the necessary reductions.

• Two-phase program with declining emission caps

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Key Elements of CAIR (cont.)

• Allows States flexibility on how to achieve the required reductions, including which sources to control and whether to join the trading program.

• Model rules that states can adopt.

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Caps and Reductions under CAIR

CapsReductions (from 2003 levels)

SO2

2010 3.6 million tons

45%

At full implementation

2.5 million tons

73%

NOx 2009 1.5 million

tons53%

2015 1.3 million tons

61%

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0

5

10

15

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1980 1985 1990 1995 2000 2005 2010 2015 2020

Mil

lio

n T

on

sNational NOx and SO2 Power Plant Emissions:Historic and Projected with CAIR

SO2

NOx

Source: EPA

Projected, w/ CAIR

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Cap and Trade Programs - General

• Each allowance equals 1 ton of pollutant

• EPA administers the trading aspects of the program, including tracking of allowances

• A source must have enough allowances to cover its emissions at the end of the year (or ozone season)

• Excess allowances can be banked for future compliance or sold on the open market

• Any person or entity may buy allowances

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Cap and Trade Program under CAIR

• 3 separate trading programs under CAIR: annual programs for SO2 and NOx, and an Ozone Season program for NOx

• Set aside for new units

• States may have a set aside for energy efficiency/renewable energy sources

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CAIR Model Rules

• States can participate in one or more of the EPA-administered cap and trade programs

• Includes automatic penalties for noncompliance

• Requires continuous monitoring

• Unrestricted banking

• Flexibilities for source allocations

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Maryland - Reductions Under CAIR

2003 Emissions (1000 tons)

2015 emissions, with CAIR (1000 tons)

Percent Reductions

Delaware NOx 10 4 60%

Maryland SO2 269 24 91%

NOx 68 12 82%

Pennsylvania

SO2 967 132 86%

NOx 174 77 56%

Virginia SO2 216 116 46%

NOx 69 38 45%

West Virginia

SO2 540 118 78%

NOx 203 44 78%

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CAIR Health and Environmental Benefits

By 2015, CAIR will result in:

$85-100 billion in health benefits each year, preventing:

–17,000 premature deaths–22,000 non-fatal heart attacks–12,300 hospital admissions–1.7 million lost work days–500,000 lost school days.

Almost $2 billion in improved visibility benefits each year.

Other non-monetizable benefits – reductions of mercury emissions, acid rain, nitrification, eutrophication, and more.

In 2015, CAIR will cost about $3.6 billion a year. Implementation beyond 2015 leads to higher annual benefits and costs.

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CAIR Implementation in Maryland

• Maryland is in the process of developing its CAIR rule

• The CAIR rule will overlay Maryland’s Healthy Air Act, which establishes more stringent caps for large EGUs in the State

• Maryland is also considering whether additional NOx and/or SO2 reductions are needed for attainment

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Additional Information:

www.epa.gov/CAIR/