# Presentation: 668175

## CAIR-CAMR:Annual Reconciliation

- EPA Region 7 Workshop
- Kansas City
- August 16, 2007
- Mary Shellabarger

## Where do Allowances Come From?

- CAIR NOx and CAMR
- Region-wide cap divided into State budgets
- Distributed within State based on SIP/SP or FIP/FP
- Plus opt-in allocations (CAIR only)
- Plus CSP (CAIR NOx Annual only)
- CAIR SO2
- Utilizes already existing Acid Rain allowances
- Plus opt-in allocations

## State Budgets:  Initial Allocations

- Most sources receive a set amount of allowances for each control period (ozone season/calendar year) at least three years in advance
- determined by a methodology specific to each SIP/State Plan or FIP/Federal Plan
- total of initial allocations must be within State trading budget
- initial allocation period varies by SIP/SP, FIP/FP

## State Budgets: Set-Aside Allocations

- Sources may receive allowances from State set-aside accounts
- new units
- energy efficiency
- timing determined by effective rule
- usually once a year within control period

## Compliance Supplement Pool 

- Sources may receive CSP allowances in the NOx annual program only
- One time allocation of total of 200,000 allowances distributed among States
- Allocations will be made at end of 2009
- Determined by SIP/FIP
- Early reductions in 2007 or 2008
- Electric reliability concerns

## Opt-In Allocations under CAIR

- Not all States adopting opt-in provisions
- Opt-in is program specific
- Opt-in sources will receive allowances each year
- determined by opt-in methodology
- takes into account previous year’s operations

## Allowances

- Specific to each program in CAIR/CAMR
- Identified by 12 digit serial number
- first four digits are the compliance use date 			(aka “vintage”)
- last eight digits are sequential
- cannot use allowance for compliance prior to its vintage year
- Reported in blocks
- example:  201000123400 - 201000123499
- represents block of 100 allowances

## Private Allowance Transfers

- Negotiate the trade of allowances
- Transferor (seller) notifies EPA of transfer
- Log on to CAMD Business System (CBS) and perform transfer instantaneously
- e-mail confirmation to both parties
- Fill out and mail a paper form to EPA
- written confirmation to both parties via US mail

## Annual Reconciliation

- Annual process of deducting allowances to account for the control period emissions
- Separate process for each program*
- CAIR NOx annual
- CAIR NOx ozone
- CAMR
- *CAIR SO2 combined with Acid Rain

## Annual Reconciliation -- Eligible Allowances

- Allowances used for compliance
- only allowances of a “vintage” for the current year or an earlier year may be used
- Allowance transfer freeze
- the date after which allowances that may be used for compliance cannot be transferred into or out of a unit or overdraft account

## Annual Reconciliation Deadlines

- Ozone Season program:
- Nov 30 allowance transfer freeze
- final allowance transfers must be complete
- Annual programs:
- March 1 allowance transfer freeze
- final allowance transfers must be complete

## Process at EPA

- A few days before the allowance transfer freeze, EPA compares preliminary emissions data with allowance account holdings
- EPA makes courtesy calls to alert DR of potential problem
- Emissions data received from sources and quality-assured
- Final allowance transfers received from sources and processed

## Process, cont.

- Emissions and allowances compared by Allowance Management System and deductions are processed
- Currently we do this on one day for everyone
- New reporting system will allow us to do this on a source-by-source basis when emissions data are received
- Excess emissions penalties calculated (if necessary)

## Deductions for CAIR NOx and CAMR

- Emissions determined at monitoring level
- Unit or stack
- Conventional rounding to whole number
- Emissions summed to source total
- Source emissions total compared to allowance holdings in source account
- Deductions made at 1 : 1 ratio
- One allowance per ton (NOx) or ounce (Hg)

## CAIR NOx and CAMR: Excess Emissions

- When there are not enough allowances to cover emissions in the source account
- Allowances are deducted from following year’s allocation at 3:1 rate
- 3 allowances for each ton (NOx) or ounce (Hg) of excess
- Other enforcement action possible

## CAIR SO2Annual Reconciliation

- EPA Region 7 Workshop
- Kansas City
- August 16, 2007
- Mary Shellabarger

## Deductions for CAIR SO2

- Compliance is determined in 2 steps to meet the continuing requirements of title IV and new requirements of CAIR.
- Step 1: all Acid Rain deductions are made
- Step 2: any additional deductions to complete CAIR compliance are done

## “CAIR SO2 Allowance” definition specifies different values based upon vintage years
Retirement ratios do not apply to title IV sources outside the CAIR region.

- Retirement ratios do _not_ apply to title IV sources outside the CAIR region.

** **

**Deductions for CAIR SO2, cont.**

_**Vintage year...**_                                        _**Authorizes...**_                           _**Implementing a ratio of...**_
**Pre-2010 **SO2 allowance             	        **1.00** tons of SO2 emissions
**2010 – 2014 **SO2 allowance**	****        0.50 **tons of SO2 emissions                    **2.00** - **to** - **1**
**2015 and Beyond** SO2 allowance	        **0.35** tons of SO2 emissions                    **2.86** - **to** - **1**

## Deductions for CAIR SO2:  Example 1

- Source W has 100 tons of SO2 emissions in 2012
- It is holding 70 vintage 2009 allowances and 70 vintage 2012 allowances
_***For Acid Rain:***_
-  70 vintage 2009 allowances and 30 vintage 2012 allowances are deducted:  compliance complete
_***For CAIR:***_
-  the tonnage equivalent of the above deductions is 85 tons
- ( 70 1-to-1 and 30 2-to-1= 70+15=85)
- 30 more vintage 2012 allowances are deducted at 2-to-1       (a tonnage equivalent 15 tons) = 100 tons accounted for:   compliance complete

## Deductions for CAIR SO2:  Example 2

- Source W has 100 tons of SO2 emissions in 2012
- It is holding 70 vintage 2009 allowances and 50 vintage 2012 allowances
_***For Acid Rain:***_
-  70 vintage 2009 allowances and 30 vintage 2012 allowances are deducted:  compliance complete
_***For CAIR:***_
-  the tonnage equivalent of the above deductions is 85 tons  (70 1-to-1 and 30 2-to-1= 70+15=85)
- the remaining 20 vintage 2012 allowances are deducted at    2-to-1 (a tonnage equivalent 10 tons) = 95 tons accounted for = 5 tons excess emissions

## Deductions for CAIR SO2  Example 2:  Excess Emissions

- Allowances are deducted at 3 times:
- (CAIR excess emissions – Acid Rain allowance penalty)
- from following year’s allocation, utilizing tonnage equivalent
- 3 x (CAIR excess emissions – Acid Rain allowance penalty)
- 3 x (5 – 0) = 15 ton penalty
- Penalty deduction is made from 2013 allocation
- Each 2013 allowance is worth 0.5 tons
- Penalty is 2 x 15 tons = 30 vintage 2013 allowances
- Other enforcement action possible

## Deductions for CAIR SO2:  Example 3

- Source W has 100 tons of SO2 emissions in 2012
- It is holding 70 vintage 2009 allowances and no other compliance allowances
_***For Acid Rain:***_
- 70 vintage 2009 allowances are deducted
- source has 30 tons of excess emissions
- Allowances are deducted from following year’s allocation at 1:1 rate -- plus monetary penalty
- 30 allowances deducted from 2013 allocation

## Deductions for CAIR SO2: Example 3, cont.

_***For CAIR:***_
-  the tonnage equivalent of the Acid Rain deductions is 70 tons  (70 1-to-1)
- Source has 30 tons excess emissions for CAIR
- Allowances are deducted at 3 times:
- (CAIR excess emissions – Acid Rain allowance penalty)
- from following year’s allocation, utilizing tonnage equivalent
- 3 x (30 tons CAIR excess emissions – 30 allowance Acid Rain penalty) = 0 deduction

## Deductions for CAIR SO2:  Example 4

- Source W has 100 tons of SO2 emissions in 2012
- It is holding 70 vintage 2009 allowances and 10 vintage 2010 allowances
_***For Acid Rain:***_
-  70 vintage 2009  and 10 vintage 2010 allowances are deducted
- source has 20 tons excess emissions for Acid Rain
- Allowances are deducted from following year’s allocation at 1:1 rate -- plus monetary penalty
- 20 allowances deducted from 2013 allocation

## Deductions for CAIR SO2: Example 4, cont.

_***For CAIR:***_
-  the tonnage equivalent of the Acid Rain deductions is 75 tons  (70 1-to-1 and 10 2-to1 = 70 + 5 = 75)
- Source has 25 tons excess emissions for CAIR
- Allowances are deducted at 3 times:
- (CAIR excess emissions – Acid Rain allowance penalty)
- from following year’s allocation, utilizing tonnage equivalent
- 3 x (25 tons CAIR excess emissions – 20 allowance Acid Rain penalty) = 3  x 5 = 15 ton** **deduction
- Penalty deduction is made from 2013 allocation
- Each 2013 allowance is worth 0.5 tons
- Penalty is 2 x 15 tons = 30 vintage 2013 allowances

## Conclusions

- Understand allowance management and CAIR SO2 compliance ratios
- Don’t get caught short of allowances
- Use our on-line systems to facilitate compliance
- www.epa.gov/airmarkets