ENVIRONMENTAL ASSESSMENT FOR PROPOSED E NERGY CONSERVATION

ST ANDARDS FOR RESIDENTIAL WATER HEATERS, DIRECT HEATING

EQ UIPMENT, AND POOL HEATERS

TA BLE OF CONTENTS

1.0 INTRODUCTION

........................................................................................................ EA­1

2.0 METHODOLOGY

....................................................................................................... EA­2

EA­iENVIRONMENTAL ASSESSMENT FOR PROPOSED E NERGY CONSERVATION

ST ANDARDS FOR RESIDENTIAL WATER HEATERS, DIRECT HEATING

EQ UIPMENT, AND POOL HEATERS

1.0 INTRODUCTION

The Department of Energy (DOE) w ill conduct an environmental assessment as part of

th e notice of proposed rulemaking. DOE will assess t he impacts of proposed energy conservation

st andards for residential water heaters, d irect heating equipment, and pool heaters on certain

en vironmental indicators using a v ariant of the U.S. DOE/Energy Information Administration

(E IA)’s National Energy Modeling System (NEMS). a EIA uses NEMS to produce the Annual

1 Energy Outlook (AEO). D OE will use a v ariant known as NEMS­BT to provide key inputs to

th e analysis, b ased on the 2008 version of the AEO ( AEO2008 )

. Results of the environmental

as sessment will be similar to those provided in AEO2008

.

The intent of the environmental impact assessment is to fulfill requirements to properly

qu antify and consider the environmental effects of all new F ederal rules. D OE intends the

en vironmental assessment to provide emissions results to policymakers and other stakeholders,

an d to fulfill requirements that the environmental effects of all new Federal rules be properly

qu antified and considered. The primary environmental effects of energy conservation standards

fo r heating products would be reduced power plant emissions resulting from reduced

co nsumption of electricity as well as reduced household emissions from gas appliances. Th e

en vironmental assessment considers three pollutants— sulfur dioxide (SO 2 ), nitrogen oxides

(NO

x ), and mercury (Hg)—as well as carbon emissions. The only form of carbon emissions

tr acked by NEMS­BT is carbon dioxide (CO 2 ), so the carbon discussed in this report is in the

fo rm of CO 2

. For each of the trial standard levels, D OE will calculate total emissions using

NEMS ­BT, using additional external analysis as needed.

Al though DOE p lans to consider only SO 2 , NO

x , Hg, and CO 2 in its environmental

as sessment, there are other air pollutants which are of concern. Specifically, the Clean Air Act

re quires the Environmental Protection Agency (EPA) to set National Ambient Air Quality

St andards for the following six common air pollutants, a lso know a s “criteria pollutants”: (1)

oz one, (2) particulate matter (PM), (3) carbon monoxide (CO), (4) nitrogen dioxide, (5) SO 2 , and

2 (6) lead. But none of the “criteria pollutants” not already considered (i.e., o zone, PM, C O, and

le ad) are driven significantly by either electric utility power plants or fuel­fired appliances.

The refore, DOE does not intend on addressing them in the environmental assessment. In the case

of ozone and particulate matter, other pollutants are precursors to their formation and

at mospheric conditions are the driver behind their formation. Also, SO 2 and NO

x are the primary

pr ecursors to ozone and PM, r espectively, and will already be addressed by the environmental

as sessment. In the case of CO, electric utilities and fuel­fired appliances are not significant

so urces. For electric power plants, a lmost all carbon emissions come out in the form of CO 2 as

a For more information on NEMS, please refer to th e U.S. Department of Energy, Energy Information

Ad ministration d ocumentation. A u seful summary is National Energy Modeling System: An Overview 2 003

, DO E/EIA­0581(2003), M arch 2003. EIA approves u se of the name NEMS to d escribe only a n official version of the

mo del w ithout any modification to c ode or data. Because this analysis e ntails some minor code modifications and

the m odel is run under various policy scenarios that are variations on EIA assumptions, DOE refers to th e model as

NE MS­BT ( BT is DOE’s Building Technologies P rogram). NEMS­BT was p reviously called NEMS­BRS.

EA ­1the combustion process is lean enough not to yield CO i n significant amounts. F or fuel­fired

ap pliances, p roper appliance maintenance, installation, and use can prevent dangerous levels of

CO

. A well­designed and properly functioning heating appliance should not produce toxic or

le thal levels of CO, as most CO poisoning occurs in the home as a r esult of malfunctioning

ap pliances. Finally, with regard to lead, the ban on the use of leaded gasoline has resulted in a

d ramatic decrease in lead emissions since the mid 1970s. C urrently, industrial processes (not

el ectric utilities), including primary and secondary lead smelters and battery manufacturers, a re

re sponsible for most of the lead emissions and all violations to the lead air quality standards.

2.0 METHODOLOGY

DO E will conduct the environmental assessment as a p olicy deviation from the AEO

20 08

, using the same basic set of assumptions. F or example, the emissions characteristics of an

el ectricity generating plant will be exactly those used in AE O2008

. The NEMS reference case

an d alternative growth scenarios are as described in the utility impact analysis (see Chapter 13 of

th e technical support document).

The Clean Air Act Amendments of 1990 set an SO 2 emissions cap on all power

ge neration. The attainment of this target, however, is flexible among generators through the use

of emissions allowances and tradable permits. A lthough NEMS includes a m odule for SO 2

allowance trading and delivers a f orecast of SO 2 allowance prices, a ccurate simulation of SO 2 trading implies that the effect of energy conservation standards on physical emissions will be

ze ro because emissions will always be at or near the ceiling. However, there is an SO 2 benefit

fr om energy conservation, in the form of a l ower SO 2 allowance expenditures. D OE will

ex amine the potential monetary impact or value of an SO 2 benefit that may arise from a s tandard.

NOX a nd Hg emissions are not currently subject to r egulatory emissions caps. Th e U.S.

Env ironmental Protection Agency (EPA) issued the Clean Air Interstate Rule (CAIR) on March

10

, 2005. 70 FR 25162 (May 12, 2005). On July 11, 2008, the U.S. Court of Appeals for the

Di strict of Columbia Circuit (D.C. Circuit) issued its decision in North Carolina v.

b Environmental Protection Agency , in which the court vacated the CAIR. 531 F.3d 896 ( D.C.

Ci r. 2008). If left in place, the CAIR would have permanently capped emissions of NOX i n 28

ea stern States and the District of Columbia. However, upon consideration of petitions for review,

th e D.C. Circuit decided on December 23, 2008 to allow C AIR to remain in effect until it is

re placed by a r ule consistent with the court's earlier opinion. No rth Carolina v. EPA, No. 05­

1 244, 2008 WL 5335481 (D.C. Cir. Dec. 23, 2008). Therefore, DOE’s Environmental Analysis

wi ll be based on CAIR, pending revision by EPA. See www.epa.gov/cleanairinterstaterule

. Similarly, the EPA i ssued the Clean Air Mercury Rule (CAMR). 70 FR 28606 (May 18, 2005).

CA MR would have permanently capped emissions of mercury for new a nd existing coal­fired

po wer plants in all States by 2010. On February 8, 2008, the D.C. Circuit issued its decision in

New J ersey v. Environmental Protection Agency c

, in which the D.C. Circuit, among other

ac tions, v acated the CAMR.

b Case No. 05­1244, 2008 WL 2698180 at *1 (DC Cir. July 11, 2008)

c Case No. 05­1097, 2008 WL 341338 at * ( DC Cir. Feb. 9,2008)

EA ­2Both with and without emissions caps, d ecreased power production at emitting power

pl ants can have environmental­related economic benefits. W hen NOX a nd Hg emissions are

sub ject to emissions caps, e lectricity demand reductions may result in incremental changes in the

pr ices of emissions allowances in cap­and­trade emissions markets rather than physical

em issions reductions. When there are physical emissions reductions, e conomic benefits can

ac crue from the decreased environmental damage from l ower emissions. T herefore, b oth with

an d without emissions caps, s tandards can produce an environmental­related economic benefit in

th e form of lower prices for emissions allowance credits or a m onetary value of the economic

be nefits of lower emissions. Therefore in addition to potential physical emissions reductions,

DO E will examine the potential monetary value of NOX a nd Hg benefits that may arise from a

s tandard.

NEMS does not estimate emissions at homes from gas­fired appliances (e.g., g as­fired

wa ter heaters, d irect heating equipment and gas pool heaters). Therefore, DOE p lans to conduct

an analysis that includes separate estimates of the effect of energy conservation standards on

CO 2 , NO

x , and SO 2 emissions from gas­fired appliances, b ased on simple emissions factors

5 derived from the literature. Although household NO

x and SO 2 emissions savings will be small,

DO E will report them because the emissions caps do not apply to the residential sector.

NEMS ­BT tracks carbon emissions using a d etailed carbon module; this approach

pr ovides good results because of its broad coverage of all sectors and inclusion of interactive

ef

fects. P ast experience with carbon results from NEMS suggests that the NEMS­generated

em issions estimates are somewhat lower than estimates based on simple average factors. O ne of

th e reasons for this divergence is that NEMS tends t o predict that conservation displaces

re newable generating capacity in the later years of its forecast. On the whole, NEM S­BT

pr ovides carbon emissions results of reasonable accuracy, at a l evel consistent with other

pub lished Federal results.

In addition to providing estimates of quantitative impacts of heating products standards on

ca rbon dioxide emissions and other emissions, D OE expects to base its estimates of the monetary

va lue of emissions reductions on the economic benefits likely to result from such reductions.

DO E will also examine a r ange of monetary values. D OE invites comment on how t o estimate

th e monetary value of emissions reductions or any widely accepted values which might be used

in DOE’s analyses.

The results for the environmental assessment are similar to a c omplete NEMS run, as

pub lished in the AEO

. These include emissions for SO 2 , NO

x , mercury, and CO 2 in five­year

fo recasted increments. D OE will report the outcome of the analysis for each trial standard level

as a d eviation from the AEO2008 reference (base) case results.

EA­3REFERENCES

1. U.S. Department of Energy ­ Energy Information Administration, Annual Energy

Ou tlook 2008 (Revised Early Release) with Projections t o 2030

, 2008. Washington, DC.

2. U.S. Environmental Protection Agency, National Ambient Air Quality Standards, 2 008.

(L ast accessed March 11, 2008.) < h ttp://www.epa.gov/air/urbanair/ >

3. U.S. Environmental Protection Agency, Clean Air Act

. 1990. http://www.epa.gov/air/caa/

4. U.S. Federal Register, Rule To Reduce Interstate Transport of F ine Particulate Matter

an d Ozone (Clean Air Interstate Rule); Revisions t o Acid Rain Program; Revisions t o the

NO X SIP Call, Final Rule, May 12, 2005, 2005.

5. U.S. Environmental Protection Agency, Compilation of Air Pollutant Emission Factors,

AP ­42, Fifth Edition, Volume I: Stationary Point and Area Sources

. 19 98< http://www.epa.gov/ttn/chief/ap42/ >

6. U.S. Federal Register, S tandards of Performance for New and Existing S tationary

So urces: Electric Utility Steam G enerating Units, Final Rule, M ay 18, 2005, 2005.

Re port No. 70 FR 28606.

EA­4