Evaluating Ozone Control Programs


in the Eastern United States:


Focus on the NOx Budget Trading Program, 2004

United States Environmental Protection Agency 

Office of Air and Radiation 

Office of Air Quality Planning and Standards 

Office of Atmospheric Programs 

(6204J) 

1200 Pennsylvania Ave, NW 

Washington, DC 20460 

www.epa.gov/airtrends 

www.epa.gov/airmarkets 

EPA454-K-05-001 

August 2005 
Contents 

EXECUTIVE SUMMARY...................................................................................................ii 

INTRODUCTION .............................................................................................................iv


CHAPTER 1: Ozone and Major Control Programs..........................................................1


• Ozone Formation and Effects.................................................................................................................................1


• Reducing Ozone Pollution: Major Control Programs for NOx and VOCs ....................................................................2


– Mobile Sources..............................................................................................................................................3


– Industrial Processes .......................................................................................................................................3


– The Power Industry ........................................................................................................................................4


CHAPTER 2: Control Program Effectiveness: Changes in Emissions.............................7


• Annual NOx and VOC Emissions in the Eastern United States ..................................................................................7


• Ozone Season NOx Emissions: Largest Reductions Occurred after 2002 ................................................................7


• Focus on the NOx SIP Call: Emissions under the NOx Budget Trading Program .......................................................8


– Ozone Season Emission Reductions Across the Region ....................................................................................8


– Reductions in the OTC and Non-OTC States ....................................................................................................9


– Reductions from Industrial Sources ..............................................................................................................10


– Reductions at the State Level .......................................................................................................................10


– Daily Emission Trends .................................................................................................................................11


• Ozone Season Emission Reductions from All Sources ...........................................................................................12


• Location of Largest Emission Reductions .............................................................................................................12


CHAPTER 3: Control Program Effectiveness: Changes in Ozone.................................15


• General Trends: Changes in Ozone Concentrations since 1997 .............................................................................15


• Role of Meteorology............................................................................................................................................16


• Focus on the NOx SIP Call: Changes in Ozone......................................................................................................16


– Comparison of Power Industry NOx Emission Reductions and Ozone Changes ...............................................19


– Trends in Ambient NOx Concentrations..........................................................................................................19


– Comparison of NOx SIP Call Results to Program Design .................................................................................21


CHAPTER 4: NOx Budget Trading Program Compliance,


Market Activity, and Banking .......................................................................................23


• 2004 Compliance Results ...................................................................................................................................23


• NOx Allowance Trading in 2004...........................................................................................................................24


• Banking in 2004 and Flow Control Next Season ...................................................................................................25


• Continuous Emissions Monitoring System (CEMS) Results.....................................................................................26


• Compliance Options ...........................................................................................................................................27


• Emission Reductions from Coal-fired Units since 2003 .........................................................................................28


CHAPTER 5: Future NOx Reductions and Ozone Improvements..................................31


i 
Evaluating Ozone Control Programs 

in the Eastern United States: 

Evaluating Ozone Control Programs

in the Eastern United States:

Focus on the NOx Budget Trading Program, 2004 

Executive Summary 

Emission Reductions 

•	 EPA has developed more than a dozen programs since 1990 to limit ozone formation by reducing emissions of its 

key precursors: nitrogen oxides (NOx) and volatile organic compounds (VOCs). These programs complement 

state and local efforts to attain the National Ambient Air Quality Standards for ozone. 

• 	 Emission trends reflect implementation of these control programs, which began in the mid-1990s. In the eastern 

United States, NOx emissions decreased by 25 percent, and VOC emissions dropped by 21 percent, from 1997 to 

2004. 

• 	 Control programs successfully reduced NOx emissions during the warm summer months, generally referred to as 

the ozone season. The most recent of those programs was the NOx SIP Call, EPA’s regulation to reduce the 

regional transport of NOx and ground-level ozone in the eastern United States. 

– 	 All affected states chose to comply with the NOx SIP Call by participating in the EPA-administered NOx 

Budget Trading Program (NBP). 

– 	 In response to the NOx SIP Call, emissions of NOx from the power industry (one of the largest NOx sources 

in the country) dropped significantly after 2002. Other sources did not show this significant drop in emissions. 

– 	 After implementation of the NOx SIP Call in 2004, ozone season power industry NOx emissions were about: 

›	 30 percent lower than in 2003, when a limited number of states were subject to NOx SIP Call requirements; 

›	 50 percent lower than in 2000, before the NOx SIP Call was implemented; and 

›	 70 percent lower than in 1990, before implementation of the Clean Air Act Amendments. 

– 	 These reductions occurred despite a shorter-than-normal control period for states participating in the NBP for 

the first time in 2004 and despite the use of compliance supplement pool allowances—additional allowances 

issued to help states phase in compliance during the first two years of the NBP. 

Changes in Ozone 

•	 In most of the eastern United States, reductions in ozone concentrations (adjusted for weather) more than doubled after the NOx SIP Call was implemented, beginning in 2003. 

•	 Ozone concentrations declined where EPA expected they would. Areas with the greatest decline in ozone concentrations are near, and downwind of, areas with greatest reductions in NOx emissions. 

•	 Because weather conditions can vary from year to year, ozone levels could be higher in years when weather is conducive to ozone formation-even when current emission control programs are working as expected. To get a truer 

picture of ozone from year to year, EPA adjusts ozone levels to account for the influence of weather. 

ii 
Compliance with the NOx Budget Trading Program (NBP) 

•	 Sources choose from a variety of compliance options to meet the emission reduction targets of the NBP, including 

reducing generation from certain units, modifying or optimizing the combustion process to reduce NOx formation, using add-on controls, or purchasing additional emission allowances from sources reducing below their 

allocations. 

•	 In 2004, there was close to 100 percent compliance. Of the more than 2,500 units covered by the NBP in 2004, 

nearly all held sufficient allowances to cover their emissions. Just two units at one facility were out of compliance 

and subject to an automatic penalty deduction (three allowances for each excess ton of emissions). 

•	 Overall trading activity remained robust in 2004, and allowance prices were lower and more stable than in 2003. 

•	 The level of “banked” (i.e., saved) allowances increased significantly in 2004 as a result of additional sources participating in the NBP and the addition of compliance supplement pool allowances to states’ budgets. 

•	 Sources in the NBP are required to use consistent rigorous monitoring procedures to measure their emissions. In 

2004, both electric generating units and industrial boilers passed more than 98 percent of their required quality 

assurance tests. 

New Regulations, Additional Improvements 

•	 While ozone remains a significant problem in many areas of the United States, EPA anticipates additional 

improvements, including emission reductions from: 

– 	 Continued implementation of the NOx SIP Call; 

– 	 Mobile source regulations (new passenger vehicles, heavy-duty diesel engines, and other mobile sources); 

– 	 EPA's Clean Air Interstate Rule (CAIR), which will build on the ozone season emission reductions from the 

NOx SIP Call. In 2015, CAIR, the NOx SIP Call, and other programs in the CAIR region will reduce power 

industry ozone season NOx emissions by about 50 percent and annual NOx emissions by about 60 percent 

from 2003 levels. CAIR will ensure that Americans continue to breathe cleaner air by dramatically reducing 

air pollution that moves across state boundaries in 28 eastern states and Washington, D.C. 

– 	 State Implementation Plans to address ozone nonattainment. 

iii 
Introduction 

For more than three decades, the U.S. Environmental Protection Agency (EPA) has worked with state, local, and 

tribal agencies to reduce emissions that contribute to the formation of ground-level ozone. This pervasive pollutant is 

responsible for a number of serious health and ecological effects in many areas of the United States. 

Early ozone management policies focused on reducing ozone by reducing emissions of one of its key precursors, 

volatile organic compounds (VOCs). VOCs contribute to ground-level ozone formation by reacting with nitrogen 

oxides (NOx) in the presence of sunlight. 

While ozone levels have decreased substantially since 1980, the downward trend began to slow in the early 1990s. 

About that time, emerging science indicated that NOx controls, in addition to VOC controls, would reduce ozone 

levels more effectively across large regions of the United States. 

EPA responded by developing programs to reduce NOx emissions, including the NOx State Implementation Plan 

(SIP) Call, designed to reduce the regional transport of ozone and ozone-forming pollutants in the eastern half of the 

United States. All states chose to meet mandatory NOx SIP Call reductions through participation in the NOx 

Budget Trading Program (NBP), a market-based cap and trade program for electric generating and large industrial 

units. 

For this report, EPA analyzed the effectiveness of NOx and VOC control programs designed to reduce precursor 

emissions and improve ozone air quality. This report focuses specifically on progress made in reducing emissions in 

the eastern United States under the NOx SIP Call. Analyses of emissions in this report do not include emissions 

from natural sources. 

This report: 

•	 Briefly describes ozone formation and its health and environmental effects, and provides an overview of the major 

programs designed to reduce ozone since 1990. 

•	 Evaluates the effectiveness of the major control programs by reviewing emission reductions and comparing 

changes in emissions to changes in ozone concentrations. 

•	 Compares actual changes in NOx emissions and ozone concentrations to those predicted to occur under the NOx 

SIP Call. 

•	 Examines progress and compliance under the NOx Budget Trading Program, including market activity, allowance 

banking in 2004, and progressive flow control in 2005. 

•	 Looks at future NOx emission reductions under programs such as mobile source controls and the Clean Air 

Interstate Rule (CAIR). 

iv 
Chapter 1: Ozone and Major Control 

Programs 

Ozone Formation and Effects 

Ground-level ozone pollution is common in many parts 

of the United States. While ozone levels in urban areas 

can be high because of concentrated local sources of 

ozone-forming pollutants, ozone levels in both urban and 

rural areas are affected by regional transport—the movement of ozone and/or its precursors by the wind. Because 

of transport, ozone levels can also be elevated in rural 

areas with few local emission sources. 

EPA revised its national air quality standards for ozone 

in 1997, establishing an 8-hour standard to better protect 

public health. The 8-hour standard is 0.08 parts per million (ppm). An area meets the standard if the 3-year 

average of the annual fourth highest daily maximum 8­

hour average concentration is less than or equal to 0.08 

ppm. 

In April 2004, EPA designated 126 areas in the United 

States as nonattainment for the 8-hour ozone standard, 

About Ground-Level Ozone 

Location & Formation: Beneficial ozone occurs naturally in Earth’s upper atmosphere (the stratosphere), where it shields 

the planet from the sun’s harmful ultraviolet rays. At ground level, harmful ozone pollution forms when emissions of NOx 

and VOCs react in sunlight. Because ground-level ozone is highest when sunlight is most intense, the warm summer 

months (May 1 to September 30) are generally referred to as the “ozone season.” 

Health Effects: Ozone can aggravate respiratory diseases, such as asthma, emphysema, and bronchitis, and can reduce 

the respiratory system’s ability to fight off bacterial infections. Even healthy people can have symptoms related to ozone 

exposure. Over time, ozone reduces lung function. And recent research suggests that acute exposure to ozone likely contributes to premature death. 

Transport: Wind can affect both the location and concentration of ozone pollution. NOx and VOC emissions can travel 

hundreds of miles on air currents, forming ozone far from the original emission sources. Ozone also can travel long distances, affecting areas far downwind. High winds tend to disperse pollutants and can dilute ozone concentrations. Light 

winds, on the other hand, allow pollution levels to build up and become more concentrated. 

Ecological Impacts: Ground-level ozone damages vegetation and ecosystems, leading to reduced agricultural crop and 

commercial forest yields, and increased plant susceptibility to diseases, pests, and other stresses, such as harsh weather. Ozone also 

damages the foliage of trees and other plants, adversely affecting the 

landscape of cities and national parks, forests, and recreation areas. 

To learn more about ozone and its health impacts, please visit the 

AIRNow Web site at <www.airnow.gov>. For information on the health 

and ecological effects of ozone, go to <http://cfpub.epa.gov/ncea/cfm/ 

recordisplay.cfm?deid=114523>. For more about the relationship 

between emissions and ozone formation, visit 

<www.epa.gov/airtrends>. 

1

Figure 1:


8-hour Ozone Nonattainment Areas


based on ozone levels from 2001-2003 (see Figure 1). 

The vast majority of these are in the East (404 counties 

or partial counties) and are home to more than onethird of all Americans. 

Reducing Ozone Pollution: Major 

Control Programs for NOx and VOCs 

The majority of NOx and VOC emissions in the eastern 

United States come from three types of sources: mobile 

sources, industrial processes, and the electric power 

industry. Mobile sources and the electric power industry 

were responsible for 78 percent of annual NOx emissions in 2004 (see Figure 2). That same year, 99 percent 

of VOC emissions came from industrial processes 

(including solvents) and mobile sources. Emissions from 

natural sources, such as trees, may comprise a significant 

portion of total VOC emissions, especially during the 

ozone season. Figure 2 does not include these emissions. 

EPA has developed more than a dozen control programs 

since 1990 to reduce ozone by decreasing emissions of 

NOx and VOCs (see Table 1). These programs complement state and local efforts to improve ozone air quality 

and meet national standards. 

Nonattainment areas 

Source: EPA 

Notes: 

• Map includes partial counties. 

• Nonattainment areas as of of April 2004 

Figure 2:


Sources of NOx and VOC Annual Emissions 


in the Eastern United States, 2004


NOx VOCs 

Source: EPA 

Notes: 

• Emissions are from the following states: Minnesota, Iowa, Missouri, Arkansas, Louisiana, Wisconsin, Illinois, 

Tennessee, Mississippi, Michigan, Indiana, Kentucky, Alabama, Florida, Georgia, South Carolina, North 

Carolina, Virginia, West Virginia, Ohio, Pennsylvania, Delaware, Maryland, District of Columbia, New Jersey, 

Connecticut, Rhode Island, Massachusetts, New Hampshire, New York, Vermont, and Maine. 

• The Other category for NOx emissions includes some industrial boilers and smaller sources such as residential fuel combustion. 

• Emissions are projected from EPA’s preliminary 2002 National Emissions Inventory (NEI). 

2 
Table 1: 

Major EPA NOx and VOC Emission Control Programs since 1990 

Source: EPA 

Notes: 

• Years highlighted indicate implementation or compliance dates. 

• Early reductions occur prior to compliance date. 

• In many cases, engine standards are phased in over multiple model years. In some cases the time periods overlap. 

• For fuel standards, year indicates when the fuel was made available. 

Mobile Sources 

Emission control programs established for mobile 

sources in the 1990s include regulations for new vehicles and for fuels. Benefits from vehicle engine standards 

increase modestly each year as older, more-polluting 

vehicles are replaced with newer, cleaner models. In 

time, these programs yield substantial emission reductions. Benefits from fuel programs generally begin as 

soon as a new fuel is available. 

As Table 1 shows, many of the mobile source controls 

required since the mid-1990s apply to onroad vehicles, 

such as cars and trucks. EPA also has established programs to reduce emissions from nonroad mobile sources, 

including the Clean Air Nonroad Diesel Rule of 2004. 

This rule includes new engine standards that will reduce 

NOx emissions and particle pollution by 90 percent 

from nonroad diesel engines used to power equipment 

such as backhoes, tractors, material heavy forklifts, and 

airport service vehicles. The rule’s particle pollution 

controls will also yield VOC reductions. 

Industrial Processes 

Large VOC reductions from industrial processes during 

the 1990s primarily resulted from solvent controls. 

These emission reductions typically occur where and 

when the solvent is used, such as during commercial 

and residential painting. In some cases, states are 

required to adopt Reasonably Available Control 

Technology (RACT) for major industrial sources of 

NOx and VOCs. Implemented in the late 1990s, RACT 

is expected to achieve an average of 30 to 50 percent 

3 
NOx reduction per major NOx emission source. EPA’s 

New Source Review Program (not shown in Table 1) 

requires new industrial facilities or existing facilities 

making major modifications to install Best Available 

Control Technology to limit emissions. 

In addition, EPA’s rule that controls hazardous air pollutants (commonly referred to as the “HON”) is expected 

to reduce emissions of VOCs generated by the synthetic 

organic chemical manufacturing industry and several 

other processes by 1 million tons per year from 1999 

levels. 

The Power Industry 

The power industry is one of the largest emitters of NOx 

in the United States. Power industry emission sources 

include large electric generating units and some large 

industrial boilers and turbines. There are three major 

control programs that affect the power industry: EPA’s 

Acid Rain Program, the Ozone Transport Commission’s 

NOx Budget Program, and EPA’s NOx SIP Call. 

The Acid Rain NOx Reduction Program 

Congress established the Acid Rain Program as part of 

the Clean Air Act Amendments of 1990. This national 

program reduces sulfur dioxide (SO2) and NOx emissions from coal-fired electric generating units greater 

than 25 megawatts (MW). The Acid Rain Program’s 

NOx Reduction Program is not a cap and trade program. Instead, affected sources must meet certain NOx 

emission rates established for different coal-fired boiler 

types (emission rates are the amount of NOx emitted 

per unit of heat input). Companies can develop emissions averaging plans that provide compliance 

flexibility. The program began in 1996 for the largest 

NOx emitters among coal-fired electric generating 

units; a second phase to reduce NOx emissions from the 

remaining coal-fired generating units began in 2000. 

The OTC NOx Reduction Programs 

The Ozone Transport Commission (OTC) was established under the Clean Air Act to help reduce 

summertime ground-level ozone in the Northeast and 

mid-Atlantic regions. In 1995, the OTC required existing 

stationary sources to reduce NOx emissions to meet 

RACT limits. From 1999 to 2002, most of the states in 

the OTC region implemented the OTC NOx Budget 

Program. This program achieved reductions in NOx from 

fossil fuel-fired electric generating units and large industrial boilers and turbines through an ozone season (May 1 

through September 30) cap and trade program. The second phase of the OTC NOx Budget Program was slated 

to begin on May 1, 2003, but was superseded by EPA’s 

NOx SIP Call. The OTC states include: Connecticut, 

Delaware, Maine, Maryland, Massachusetts, New 

Hampshire, New Jersey, New York, Pennsylvania, Rhode 

Island, Vermont, Virginia, and Washington, D.C.1 

The NOx SIP Call 

In 1995, EPA and the Environmental Council of the 

States formed the Ozone Transport Assessment Group to 

begin addressing the problem of ozone transport in the 

eastern United States. In 1998, based on the group’s 

What Is Cap and Trade? 

Cap and trade is a policy tool for reducing emissions 

from a group of sources over a broad geographic region. 

This approach first sets an overall cap, or maximum 

amount of emissions per compliance period, for all 

sources under the program. Authorizations to emit, 

known as emission allowances, are then allocated to 

affected sources. The total number of allowances allocated cannot exceed the cap. 

Under an emissions cap and trade program, sources 

have flexibility to choose how to meet the emission 

reduction requirements. A source may either limit emissions to meet the number of allowances it receives 

each compliance period, or it may purchase additional 

allowances. Sources with emissions below their limits 

may sell excess allowances or save (“bank”) them for 

future use. 

Sources must accurately measure and routinely report 

all emissions to guarantee that the overall emissions 

cap is achieved. Rigorous emissions monitoring 

ensures credibility of trading programs. For more on 

emissions cap and trade programs, visit 

<www.epa.gov/airmarkets>. 

1 Maine, Vermont, and Virginia did not join the OTC trading program. New Hampshire is not subject to requirements of the NOx SIP Call. 

4 
Figure 3: 

NOx SIP Call Region, 

Program Implementation 

Compliance Deadline 

May 2003 

May 2004 

May 2007 

Source: EPA 

findings and other technical analyses, EPA issued a regulation to reduce the regional transport of ground-level 

ozone. This rule, commonly called the NOx SIP Call, 

requires states to reduce ozone season NOx emissions 

that contribute to ozone nonattainment in other states. 

Compliance with the NOx SIP Call was scheduled to 

begin in 2003. The OTC states adopted the original 

compliance date of May 1, 2003, in transitioning to the 

NOx SIP Call. In states outside the OTC region, however, litigation delayed the initial deadline until May 

31, 2004. For those states, the first compliance period 

(2004) was for a shorter-than-normal ozone season (see 

Figure 3). In addition, litigation delayed the start date 

for portions of Georgia and Missouri until 2007. EPA 

has proposed to stay the NOx SIP Call requirements for 

Georgia while it responds to a petition to reconsider 

Georgia’s inclusion in the NOx SIP Call. 

The NOx SIP Call did not mandate which sources must 

reduce emissions; rather, it required states to meet an 

overall emissions budget and gave them flexibility to 

develop control strategies to meet that budget. All 

affected states chose to meet their NOx SIP Call 

requirements by participating in the NOx Budget 

Trading Program (NBP). 

The NOx Budget Trading Program 

More than 2,500 units were affected under the NBP in 

2004. These include electric generating units, which are 

large boilers, turbines, and combined cycle units used to 

generate electricity for sale. As shown in Figure 4, electric generating units constitute more than 85 percent of 

all regulated units. The program also applies to large 

industrial units that produce electricity and/or steam, 

primarily for internal use. Examples of these units are 

boilers and turbines at heavy manufacturing facilities, 

such as paper mills, petroleum refineries, and iron and 

steel production facilities. These units also can include 

steam plants at institutional settings, such as large uniKey Components of the NOx Budget 

Trading Program 

• The NBP is a cap and trade program for electric generating units and large industrial boilers and turbines. 

• The emissions budget sets a cap on emissions at a level 

chosen to help states meet their air quality goals. 

• The NOx emissions market allows sources to trade (buy 

and sell) allowances throughout the year. 

• At the end of every ozone season, each source must surrender sufficient allowances (each allowance represents 

one ton of emissions) to cover its ozone season NOx 

emissions. This process is called annual reconciliation. 

• If a source does not have enough allowances to cover its 

emissions, EPA will automatically deduct allowances 

from the following year’s allocation at a 3:1 ratio. 

• If a source has excess allowances because it reduced 

emissions beyond required levels, it can sell the unused 

allowances or “bank” (i.e., save) them for use in a future 

ozone season. 

• To accurately monitor emissions, sources use continuous emissions monitoring systems (CEMS) or other 

approved monitoring methods under EPA’s stringent 

monitoring requirements (40 CFR Part 75). 

5 
versities. Some states have included other types of units, 

such as petroleum refinery process heaters and cement 

kilns. 

Two criteria are part of determining whether a unit is 

affected under the NBP: the unit must be fossil fuel-fired 

and must meet specific size thresholds. For electric generating units, the program generally applies to any unit 

connected to a generator with a nameplate capacity (the 

power output in MW that the machine is designed to 

produce) greater than 25 MW. Some OTC states, however, include units connected to generators with at least 

15 MW capacity. For industrial units, the NBP applies to 

units with a maximum design heat input capacity greater 

than 250 million British thermal units per hour (mmBtu 

per hr). 

Figure 4: 

Number of Units in the NOx Budget 

Trading Program by Type, 2004 

Source: EPA 

Note: Total affected units in 2004 = 2,570 

State Trading Budgets, Allowance Allocations, and Compliance Supplement Pool (CSP) 

Allowances 

EPA provided broad discretion to states as to how they could allocate allowances from their trading budget to affected 

sources. One option was to allocate allowances based on each source’s share of statewide ozone season heat input (i.e., 

fuel use). Another option was based on each source’s share of ozone season output (e.g., generation) to reward sources 

that generate more energy with less fuel input. States could also set-aside allowances for new sources or as incentives 

for energy efficiency and renewable energy programs. 

In addition to their NOx budgets, states received additional allowances to distribute from the Compliance Supplement Pool 

(CSP). EPA created the CSP allowances to address concerns that initial efforts to comply with the NOx emissions cap 

could have too many primary electric generating units out of operation at the same time to install pollution control retrofits, which could have adversely affected electricity supply reliability. The CSP allowances help states to phase-in 

compliance during the first two years of the trading program and allow sources to limit units out of service at critical times 

during the year. States were allowed to distribute their CSP allowances based on early reductions in NOx emissions, on 

the basis of demonstrated need, or on some combination of the two methods. 

The CSP allocation was a one-time, up-front allocation. For the states that began to comply with the NOx SIP Call in 2003 

(states that had been a part of the OTC trading program), all CSP allowances were distributed as vintage year 2003 

allowances and replaced existing banked OTC allowances. The non-OTC states distributed CSP allowances as vintage year 

2004 allowances. The vintage is the first year an allowance can be used for compliance (i.e., deducted to cover emissions). 

For example, almost all 2004 vintage allowances may be used for compliance beginning in 2004, or for any year thereafter. 

The only exception is the 2004 CSP allowances, which may only be used for compliance through the 2005 ozone season. 

6 
Chapter 2: Control Program 

Effectiveness: Changes in Emissions 

Figure 5: 

Annual Emissions in the Eastern United 

States, 1990-1995 and 1997-2004 

Source: EPA 

Notes: 

• Emissions are from Minnesota, Iowa, Missouri, Arkansas, Louisiana, 

and states east. 

• The emissions data used in this report are measured or estimated values from EPA’s National Emissions Inventory (NEI). Starting in 1997, 

the NEI incorporated power industry data measured by the Continuous 

Emissions Monitoring System (CEMS). For 2002, the preliminary version of the NEI was used, which includes the 2002 CEMS data, but 

does not include 2002 data for other sources submitted by state, local, 

and tribal air agencies. For this analysis, EPA used CEMS data for the 

power industry for 2003 and 2004. Emissions for other sources for that 

period were estimated by interpolating between the 2002 preliminary 

NEI data and a projected 2010 emission inventory developed to support the Clean Air Interstate Rule. 

• 1996 is not represented in the graphs because there was a change in 

the method used to collect and estimate emissions, particularly for 

NOx emissions from stationary sources such as the power industry. 

pared annual and ozone season emission trends for all 

NOx and VOC sources from 1997 through 2004. For all 

emission categories, except power industry NOx, the 

ozone season trend is similar to the annual trend. Figure 

6 shows a comparison of annual and ozone season NOx 

emissions from the power industry. From 1997 to 2002, 

the trend in ozone season emissions is similar to the 

annual trend. However, in 2003 and 2004, ozone season 

NOx emissions show a greater reduction. These larger 

EPA and state, local, and tribal agencies have implemented several programs that reduce NOx and VOC 

emissions. In order to assess the effectiveness of major 

control programs, EPA examined trends in NOx and 

VOC emissions since 1990, looked at when and where 

the reductions occurred, and then focused on progress 

made under the NOx SIP Call in 2004. 

Annual NOx and VOC Emissions in the 

Eastern United States 

Figure 5 shows trends in annual NOx and VOC emissions for two time periods: 1990 to 1995 and 1997 to 

2004. In the first period, control programs for mobile 

sources and industrial processes gradually reduced both 

NOx and VOC emissions, with NOx emissions decreasing by 9 percent and VOC emissions decreasing by 7 

percent. 

The second period reflects implementation of many 

control programs mandated by the 1990 Clean Air Act 

Amendments. The results of these programs are evident 

in emission trends from 1997 to 2004: NOx emissions 

decreased by 25 percent and VOC emissions decreased 

by 21 percent. 

It is important to note that a significant portion of total 

VOC emissions can come from natural sources, such as 

trees, especially during the ozone season. For example, 

EPA estimates that nearly 60 percent of total ozone season VOC emissions in 2001 were from natural sources. 

These emissions are not shown in Figure 5. 

Ozone Season NOx Reductions, 

2003 and 2004 

Because ozone levels are highest during the summer 

months, it is important to evaluate NOx and VOC 

emission reductions during that time period. EPA com7 
Figure 6: 

Power Industry NOx Emissions in the 

Eastern United States, Annual 

and Ozone Season, 1997–2004 

Source: EPA 

Note: Emissions are from Minnesota, Iowa, Missouri, Arkansas, 

Louisiana, and states east. 

reductions are attributable to NOx SIP Call controls 

which were applied in the summers of 2003 and 2004. 

(For details about the types of controls used, see 

Chapter 4, Compliance and Market Activity, page 23.) 

Focus on the NOx SIP Call: Emissions 

under the NOx Budget Trading Program 

This section assesses progress under the NOx Budget 

Trading Program (NBP) by comparing NOx emission 

levels in 2004 (the second year of the NBP) to levels in 

1990, 2000 (baseline years), and 2003. Therefore, these 

results include emissions from affected sources in states 

included in the NOx SIP Call in 2004 (see figure 3).2 

In 2003, all affected sources in the NBP region conducted 

ozone season emissions monitoring, but only the states 

previously in the OTC NOx Budget Program were subject 

to the emission reduction requirements of the program.3 

All sources subject to the NOx SIP Call in 2004 were 

required to have enough allowances to cover emissions 

during the 2004 ozone season. Sources in the OTC states 

were required to comply for the full ozone season (May 1 

to September 30) in 2004. The compliance period did not 

begin until May 31 in the non-OTC states. 

Ozone Season Emission Reductions 

Across the Region 

Figure 7 shows the total ozone season NOx emissions for 

the NBP region in 2004 compared to 1990, 2000, and 

2003. In 2004, NBP sources emitted about 593,000 tons 

of NOx, reducing emissions by nearly 30 percent from 

2003, 50 percent from 2000, and nearly 70 percent from 

1990. Many of the NOx reductions since 1990 are a 

result of programs implemented under the Clean Air Act 

such as the Acid Rain NOx Reduction Program, and 

other state, local, and federal programs. The significant 

decrease in NOx emissions after 2000 reflects additional 

reductions that show the impacts of the NOx SIP Call. 

Figure 7: 

Ozone Season Emissions under the 

NOx Budget Trading Program 

Source: EPA 

2 For further information on estimating baseline emissions, refer to the NOx Budget Trading Program 2003 Progress Report at 

www.epa.gov/airmarkets/fednox 

3 In 2003, North Carolina sources were not required to monitor, although many sources did so voluntarily. The lack of 2003 data for certain North 

Carolina sources has a negligible effect on the results in this report. 

8 
Emission Reductions in the OTC and 

Non-OTC States 

In light of the different control periods in 2004, it is 

useful to look at total NBP emissions as well as a breakdown of emissions by the two groups of states (OTC and 

non-OTC states). States that began compliance for the 

first time in 2004 (non-OTC states) received compliance supplement pool (CSP) allowances. Figure 8 

presents the sum of the 2004 trading budgets (OTC 

states) and the trading budget with CSP allowances 

(non-OTC states). The budgets also reflect some 

allowances provided to opt-in4 units in New York, Ohio, 

and West Virginia. For a more thorough description of 

trading budgets and allowance allocations, see page 6. 

As Figure 8 shows, the CSP allowances increase the 

trading budget significantly in the non-OTC states. The 

trading budget levels for the OTC states show no difference, because the OTC states received all of their CSP 

allowances in 2003. Figure 8 also presents the 2004 

ozone season results both for the full ozone season 

(OTC states) and the shortened control period for the 

non-OTC states. 

Baseline Years for Measuring Progress 

Under the NOx Budget Trading Program 

One measure of progress under the NBP is whether 

emissions under the program meet the emission budgets established for the states. Also, it is helpful to 

understand how emissions under the program compare 

to emissions prior to the program. EPA has chosen two 

baseline years for measuring progress under the NBP: 

•	 1990, which represents emission levels before the 

implementation of the 1990 Clean Air Act 

Amendments. 

•	 2000, because most of the reductions required 

under the 1990 Clean Air Act Amendments had 

already occurred by this time, but sources were not 

yet implementing the NBP. 

During the OTC NOx 

Budget Program, emissions 

were less than allocated 

allowances in every year of 

the program (1999 to 2002). 

That trend has continued 

under the NBP in both 2003 

and 2004. In 2004, ozone season NOx emissions in the 

OTC states were approximately 132,000 tons, about 

10 percent less than the sum 

of the 2004 trading budget 

for those states, and more 

than 30 percent less than 

their 2002 emissions. 

Figure 8: 

NOx Budget Trading Program: 1990, 2000, 2003, and 2004 

Ozone Season Emissions, and the 2004 Trading Budgets 

Source: EPA 

Note: 2004 allowances include 2004 Trading Budgets and 2004 Compliance Supplement Pool (CSP) allowances. 

4 An opt-in unit is a unit not covered by the applicability provisions of a program that requests to voluntarily enter the program and, because it meets specific program requirements (e.g., continuous emission monitoring capability), is approved to participate. 

9 
Figure 9: 

Comparison of Average Monthly NOx 

Emission Rates, OTC and Non-OTC 

States, 2004 

Source: EPA 

Note: Average monthly emission rates are based on total reported NOx 

mass emissions and heat input for each applicable month for all participating units. 

EPA anticipated that the states outside the OTC region 

would achieve only modest reductions in 2004, because 

of the shorter control period and the CSP allowances 

distributed that year. However, the sum of emissions in 

these states for the full ozone season were more than 30 

percent below 2003 levels. In addition, emissions for the 

2004 control period (May 31 to September 30) were 

below the sum of their 2004 trading budgets (the budgets 

without CSP allowances). 

Figure 9 shows that, on average, the non-OTC states 

reduced their NOx emission rates to nearly the same 

level as the OTC states. Their average emissions rate in 

May (prior to the control period) was considerably higher. These results indicate that the non-OTC states made 

significant progress toward installing adequate controls 

to meet their trading budget levels in 2005. 

Emission Reductions from Industrial Sources 

Collectively, affected NBP industrial units reduced emissions approximately 25 percent from 2003 to 2004, 

despite the shorter 2004 control period. Emissions from 

these sources in the full 2004 ozone season were about 

40,000 tons, compared to 53,000 tons for the same period in 2003. 

Although industrial units have achieved reductions, 

they are much less likely than electric generating units 

to use add-on control devices, such as selective catalytic 

reduction (SCR). As a result, these units tended to have 

higher ozone season NOx emission rates in 2004 than 

the full population of affected units (about 0.25 lb per 

mmBtu compared to 0.21 lb per mmBtu). However, the 

2004 average ozone season NOx emissions rate (0.25 lb 

per mmBtu) among industrial units decreased from the 

2003 rate of approximately 0.38 lb per mmBtu. 

Emission Reductions at the State Level 

Two non-OTC states—Alabama and Michigan—had 

control period emissions that exceeded their trading 

budgets in 2004. However, all non-OTC states had 2004 

control period emissions below their 2004 trading budgets when CSP allowances were included (see Figure 10). 

Although the ozone season emissions in most of the individual OTC states were below their trading budgets in 

2004 (see Figure 10), emissions in Pennsylvania and 

Maryland were higher. For Pennsylvania (emissions 

exceeded allocations by 1,300 tons), the amount reflects 

about 3 percent of the state’s total budget. This type of 

variability can be expected in a regional trading program 

and can reflect a number of different factors, including 

company-specific compliance decisions. 

Emissions in Maryland exceeded allocations by 4,500 

tons (about 30 percent greater than budget levels) and 

increased slightly from 2003 to 2004. These results indicate a clear decision to purchase a significant number of 

allowances in 2004 as opposed to controlling emissions 

close to budget levels. In future years, the situation in 

Maryland likely will change as the result of a federal 

consent decree.5 

5 By 2008, under a federal consent decree, one of the companies with affected units in Maryland will be required to cap emissions from three Maryland 

plants and one Virginia plant to 6,000 tons per ozone season. The three Maryland plants alone emitted more than 13,000 tons in the 2004 ozone season. 

The emissions cap in this consent decree should reduce emissions from existing plants in Maryland well below budget levels. 

10 
Figure 10:


Ozone Season NOx Emissions: 1990, 2000, and 2004 Emissions 


and Trading Budgets


Source: EPA 

Notes: 

• The Non-OTC states are shaded. 

• In 2004, the control period for non-OTC States was from May 31 through September 30. 

Daily Emission Trends 

Studies indicate that many of the health effects associat- Figure 11: 

ed with ozone are linked to daily exposures. The 8-hour Daily Emissions Under the NOx Budget 

ozone standard was developed to protect against such Trading Program, 2003 and 2004 

exposures. Although the NBP ensures significant 

regional NOx reductions throughout the course of the 

ozone season, there have been concerns that a seasonal 

cap would not sufficiently reduce short-term, peak NOx 

emissions that can occur on hot, high electricity 

demand days when ozone formation is often a concern. 

Figure 11 compares daily NOx emissions for 2003 versus 

2004 for the NBP region. The results show that the 

NBP significantly reduced both the average and highest 

daily emission levels. Average emissions during the control period in 2004 (May 31 to September 30), 

decreased nearly 35 percent from the same period in Source: EPA 

2003. The highest daily emissions in the 2004 control 

11 
period were more than 30 percent lower than the highest daily emissions during the same period in 2003. 

The NBP has had a significant impact on daily emissions (see Figure 11). The highest total daily emissions 

in 2004 rarely exceeded the lowest total daily emissions 

in 2003 except from May 1 to May 30, when the 2004 

control period was not in effect for non-OTC states. 

These results show that, while reducing total emissions 

in 2004, the trading program also reduced peak daily 

emission levels. 

Ozone Season Emission Reductions 

from All Sources 

In response to the NOx SIP Call, the power industry 

dramatically reduced ozone season NOx emissions after 

2002. Other major NOx and VOC source categories do 

not show this significant drop in emissions. 

As Figure 12 shows, ozone season NOx emissions from 

the power industry dropped 6 percent per ozone season, 

on average, from 1997 to 2002. Reductions were much 

greater after 2002—an average of 19 percent per ozone 

season from 2002 to 2004. Onroad mobile and other 

categories show continuing NOx emission reductions; 

however, those reductions are not as dramatic after 2002 

as the reductions from power industry sources. 

Similarly, VOC emissions dropped somewhat between 

1997 and 2002, but there were few additional reductions 

after 2002 (Figure 13). VOC emissions from onroad 

mobile sources, for example, dropped an average of 5 

percent per ozone season for both time periods. 

Location of Largest Emission 

Reductions 

Knowing the location of NOx and VOC emission 

reductions also helps EPA understand the effectiveness 

of emission control programs. Figure 14 shows ozone 

season NOx emission reductions between 1997 and 

2004. The largest reductions occurred in the central 

portion of the eastern United States. 

Within this region, Illinois, Kentucky, North Carolina, 

Ohio, Pennsylvania, and Tennessee each experienced 

NOx emission reductions greater than 110,000 tons. 

Following close behind were Alabama, Indiana, 

Michigan, New York, and West Virginia—all of which 

had reductions greater than 73,000 tons. 

Figure 13: 

Ozone Season VOC Emissions in the 

Eastern United States by Category, 

1997, 2002, 2004 

Source: EPA 

Figure 12: 

Ozone Season NOx Emissions in the 

Eastern United States by Category, 

1997, 2002, 2004 

Source: EPA 

Note: Other includes emissions from nonroad, industrial processes, and small 

power industry sources. 

Note: Other includes emissions from nonroad, power industry, and nonsolvent 

industrial processes. 

12 
Figure 15 shows the location of ozone season NOx


reductions for the power industry and onroad mobile Figure 14:


sources. Overall, power industry sources accounted for Ozone Season NOx Emissions Reduced,


larger NOx emission reductions than did onroad mobile 1997 vs. 2004


sources. Note the following:


•	 States along the Ohio River Valley from Pennsylvania 

to Tennessee generally experienced the largest reductions in power industry NOx emissions. Emissions 

dropped the most in Ohio (153,000 tons), Illinois 

(111,000 tons), and Kentucky (104,000 tons). 

Pennsylvania achieved similar reductions by implementing control measures prior to 1997. 

•	 Emission reductions from onroad mobile sources 

were smaller than from the power industry and 

occurred primarily in states with large urban areas. 

•	 No state realized reductions greater than 42,000 tons 

from onroad mobile sources. Source: EPA 

Note: Darker states show larger NOx reductions. 

Figure 15:


Ozone Season NOx Emissions Reduced, Power Industry 


and Mobile Sources, 1997 vs. 2004


Source: EPA 

Notes: 

• Due to earlier reductions prior to 1997, Pennsylvania reduced its emissions by the same magnitude as Ohio. 

• Darker states show larger NOx reductions. 

• Vermont showed an increase of about 45 tons of NOx from power industry sources. 

13 
Figure 16 shows where reductions in ozone season VOC 

emissions occurred between 1997 and 2004. Reductions 

in VOC emissions were neither as large (in tons) as 

reductions in NOx emissions between the two years, nor 

were they concentrated in the same states (see Figure 

14). The largest reductions occurred in New York 

(99,000 tons), Illinois (97,000 tons), and Ohio (88,000 

tons). 

Figure 16:


Ozone Season VOC Emissions Reduced,


1997 vs. 2004


Natural Sources of VOCs 

Emissions generated by human activity account for 

only a portion of total VOC emissions. VOCs also come 

from trees and other vegetation. 

In many parts of the world, VOC emissions from natural sources are larger than manmade VOC emissions. 

In the eastern United States, for example, nearly 60 

percent of the total 2001 ozone season VOC emissions came from natural sources. 

VOC emissions from natural sources are higher on 

warm sunny days, which also provide the best conditions for ozone formation. While VOCs from natural 

sources do contribute to ground-level ozone formation, it is difficult to assess the impact changes these 

emissions have on ozone concentrations. 

EPA did not analyze VOC emissions from natural 

sources for this report, as the amount of data available was too limited. As more data become available 

in the future, EPA will analyze the effects of natural 

VOC emissions on ozone formation. 

Source: EPA 

Notes: 

• Rhode Island showed an increase of about 872 tons. 

• Figure does not include emissions from natural sources. 

• Darker states show larger VOC reductions. 

14 
Chapter 3: Control Program 

Effectiveness: Changes in Ozone 

Ozone Monitoring Networks 

For this report, EPA assembled data for 29 urban areas 

from the Air Quality System (AQS) and 34 rural sites from 

the Clean Air Status and Trends Network (CASTNET) to provide a more complete picture of the nation’s air quality than 

would be otherwise possible. Sufficient ambient and meteorological data for these sites were available to perform 

detailed analyses of air quality changes over time. 

Air Quality System (AQS) 

AQS is EPA’s repository for state and local data from monitoring networks specifically designed to assess air quality 

trends and to support regulatory programs, such as nonattainment area designations and development of State 

Implementation Plans. These networks include the State 

and Local Air Monitoring Stations (SLAMS) and National Air 

Monitoring Stations (NAMS). There are more than 700 

SLAMS/NAMS monitoring sites in the eastern United 

States. For more information, see 

<www.epa.gov/ttn/airs/airsaqs>. 

Clean Air Status and Trends Network (CASTNET) 

CASTNET is a national network of rural monitoring sites, 

with more than 50 sites in the eastern United States. EPA 

established the network primarily to provide data needed 

to track and evaluate national and regional air pollution 

control programs. These data provide information necessary to study and investigate the effects of atmospheric 

pollution on sensitive ecosystems, particularly those effects 

caused by long-range transport of emissions from regional 

sources. Data gathered from the network are compiled in a 

central database and made available on EPA’s CASTNET 

Web site at <www.epa.gov/castnet>. 

Urban and Rural Locations 

Source: EPA 

Urban area (AQS) 

Rural site (CASTNET) 

Note: Urban areas represent multiple monitoring sites. Rural areas 

represent single monitoring sites. 

To better understand how major control programs affect 

ozone, EPA looked at overall changes since 1997, and 

then focused on ozone improvements after 2002 (after 

implementation of the NOx SIP Call). These analyses 

also consider the impact of weather, because variations 

in weather conditions play an important role in determining ozone levels. This chapter examines the results 

of these analyses in relation to the original NOx SIP 

Call program design by comparing the anticipated 

changes in emissions and ozone to actual changes. 

General Trends: Changes in Ozone 

Concentrations since 1997 

Like NOx and VOC emissions, ozone concentrations in 

urban and rural areas have decreased between 1997 and 

2004 in response to control programs. Figure 18 shows 

the percent reductions (adjusted for weather conditions) 

in seasonal ozone. Seasonal ozone was calculated as the 

average of daily maximum 8-hour ozone concentrations 

from May 1 through September 30. Ozone reductions 

15 
were greater than 10 percent across a broad geographic 

region; the average reduction was 14 percent. 

Role of Meteorology 

Variations in weather conditions play an important role 

in determining ozone levels. Daily temperature, relative 

humidity, and wind speed can affect ozone levels. In general, warm dry weather is more conducive to ozone 

formation than cool wet weather. EPA uses a statistical 

model to account for the impact of weather on ozone 

concentrations. Because weather varies over space and 

time, this adjustment provides a better estimate of the 

underlying ozone trend and the impact of emission 

changes (see “Meteorology Matters” on page 17). 

To illustrate the overall impact of weather on ozone levels in outdoor air, EPA compared changes in ozone 

before and after adjusting for weather, as Figures 17 and 

18 show. Adjusting for weather made only a small difference (1 percent) in overall ozone change in the eastern 

United States—an average reduction of 13 percent 

before adjustment, compared to 14 percent after adjustFigure 17: 

Percent Reduction in Seasonal 

8-Hour Ozone, 1997 vs. 2004 

(Not Adjusted for Meteorology) 

Source: EPA 

ment. Some states showed notable differences. For 

example, adjusting for weather at sites in North 

Carolina, Virginia, and eastern Tennessee resulted in 

significantly smaller reductions, while adjustments in 

Ohio, Pennsylvania, and West Virginia showed larger 

ozone reductions. 

Focus on the NOx SIP Call: Changes in 

Ozone 

EPA examined geographic patterns and ozone behavior 

before and after the NOx SIP Call, and then compared 

EPA’s projections to what actually occurred. 

To analyze ozone changes, EPA selected two baseline 

years—1997 and 2002. These two years were selected to 

coincide with the period of NOx reductions attributable 

to the Acid Rain Program and the OTC NOx Budget 

Program (1997 through 2002) and the implementation of 

the NOx SIP Call (2002 through 2004). 

Ozone improvements were larger after implementation 

of the NOx SIP Call. The average reduction in ozone 

Figure 18: 

Percent Reduction in Seasonal 

8-Hour Ozone, 1997 vs. 2004 

(Adjusted for Meteorology) 

Source: EPA 

Note: Margin of error is ± 5 percent. Note: Margin of error is ± 5 percent. 

16 
Meteorology Matters 

Meteorology plays a major role in both the formation and transport of ozone. For example, the photochemical reactions 

that transform emissions of NOx and VOCs into ozone are complex and require warm temperatures and dry conditions. 

These graphics illustrate how the summers of 1997, 2002, and 2004 compare with historical records ( a 30-year average 

using data from 1971 to 2000) for temperature and precipitation in the eastern United States. 

Note: Meteorology can vary significantly from one site to the next. 

Sources: National Oceanic and Atmospheric Administration (NOAA), EPA 

17 
Figure 19: 

Percent Reduction in Seasonal 8-Hour 

Ozone Per Year, 1997-2002 

(Adjusted for Meteorology) 

Source: EPA 

Figure 20: 

Percent Reduction in Seasonal 8-Hour 

Ozone Per Year, 2002-2004 

(Adjusted for Meteorology) 

Source: EPA 

Notes: 

• Margin of error is ± 2 percent. 

Note: Margin of error is ± 1 percent. 

between 1997 and 2002 was about 4 percent (adjusted 

for weather), compared with more than 10 percent 

between 2002 and 2004. Meteorological adjustment was 

especially important for this analysis because of the significant difference in the ozone-forming potential 

between 2002 and 2004. The difference in ozone levels 

between 2002 and 2004 was about 17 percent before 

adjusting for weather, compared with about 10 percent 

after adjustment. 

Figures 19 and 20 illustrate how reductions in ozone levels changed before and after the NOx SIP Call (after 

adjusting for weather). These figures show average percent changes per ozone season between two time 

periods: 1997 through 2002 (the five-year period before 

the NOx SIP Call) and 2002 through 2004 (the twoyear period after the NOx SIP Call). This analysis of 

emissions and ozone shows that the NOx SIP Call 

achieved an additional 4 percent reduction per ozone 

season. Before the NOx SIP Call was in place, ozone 

declined about 1 percent per ozone season in most areas 

• Locations with ozone changes greater than 3 percent per ozone 


season are highlighted in red.


in the East, although some states (Kentucky and 

Florida) realized average reductions as large as 3 percent 

per ozone season (see Figure 19). After implementation 

of the NOx SIP Call (see Figure 20), the ozone reduction was larger—5 percent per ozone season on 

average—with many areas exceeding 5 percent. 

EPA expects that NOx and VOC emissions will continue to decrease in 2005. Despite these improvements, 

ozone levels in 2005 could be higher than in 2004, 

depending on weather conditions. (Weather conditions 

in 2004 were not conducive to ozone formation.) To 

accurately estimate trends in ozone air quality, meteorological effects must be taken into account. 

18 
Figure 21:


Reductions in Ozone Season Power Industry NOx Emissions and 8-Hour Ozone,


2002 vs. 2004


Margin of error is + 5 percent. 

Source: EPA 

Notes: 

• Darker states show larger NOx reductions. 

• Arkansas (268 tons), New Hampshire (611 tons), and Vermont (16 tons) show small increases in ozone season emissions from 2002 to 2004. 

Comparison of Power Industry NOx Emission 

Reductions and Ozone Changes 

Figure 21 shows the relationship between reductions in 

power industry NOx emissions and reductions in ozone 

after implementation of the NOx SIP Call. Generally, 

there is a strong association between areas with the 

greatest NOx emission reductions (such as the Midwest) 

and downwind sites exhibiting the greatest improvement in ozone. This suggests that the effect of NOx 

transport has been reduced in the eastern United States. 

While this report does not attribute all ozone reductions 

after 2002 to the NOx SIP Call, it does show that the 

NOx SIP Call played a major role in reducing ozone 

concentrations. 

Trends in Ambient NOx Concentrations 

Ambient concentrations of NOx gases have fallen as 

NOx emissions have declined. EPA examined data from 

both urban and rural monitoring sites, looking at NOx 

from air quality monitors in the AQS network and total 

nitrate measurements from CASTNET sites. The results 

indicate that ambient concentrations of ozone-forming 

gases and total particulate nitrates have decreased over 

the past seven years, further evidence that NOx emissions have been reduced. 

19 
Ozone Reduction in Rural Areas Shows Regional Improvements 

The primary goal of the NOx SIP Call is to reduce regional transport of ozone across state boundaries by reducing NOx. 

EPA’s Clean Air Status and Trends Network (CASTNET) provides long-term data on ozone air quality at more than 50 monitoring sites in rural areas across the eastern United States. The monitoring information collected at rural sites is a good 

indicator of background ozone concentrations, because rural areas are not as influenced by local emissions sources. The 

rural network is particularly relevant to assessing progress under the NOx SIP Call, because it represents levels of ozone 

and precursor gases that are being transported from one area to another. 

Due to changing weather conditions, air quality trends often show high year to year variability over time. Some of this variability can be overcome through the use of consistent and continuous long-term monitoring data. The results presented 

here show the variability over time in actual observed ozone concentrations at rural sites on a regional level. 

The figure below shows a gradual decline in seasonal average 8-hour daily maximum ozone levels from 1997 to 2004 for 

all four eastern regions. The largest improvements occurred after 1998 and again after 2002. The downward trend is 

especially evident in the Southeast, which has experienced a steady decline in ozone in rural areas since 1998. These 

results have not been adjusted for weather; however, the overall downward trend is consistent with trends that have been 

adjusted for the influences of weather. 

Rural Seasonal Average 8-hour Daily Maximum Ozone by Region, 

1997-2004 

Source: EPA 

Note: Ozone concentrations are in parts per billion (ppb) 

20

Figure 22:


Ozone Season Power Industry NOx Emissions Reduced, Anticipated and Actual


Source: EPA 

Notes: 

• Darker states show larger NOx reductions. 

• Percent of total NOx emissions reduced is an individual state’s emissions reduced, divided by total reductions across all states (in tons). 

• Anticipated results are the estimated difference in power industry emissions between the 2007 base case and 2007 with the NOx SIP Call for the days modeled, which represent the ozone season. 

• Actual results are the difference in state total ozone season power industry emissions between 2002 and 2004, as reported to EPA. 

Comparison of NOx SIP Call Results to Program 

Design 

EPA uses air quality models to help predict the impacts 

of new or proposed programs (see “Estimating the 

Impact of Proposed Control Programs” on page 22). For 

the NOx SIP Call, EPA used models to estimate 

changes in NOx emissions and their effects on ozone 

levels. Figure 22 shows the state-by-state percentage of 

total NOx emission reductions anticipated from the 

NOx SIP Call and the actual reductions achieved by 

the power industry between 2002 and 2004. Because the 

majority of the states subject to the NOx SIP Call were 

required to meet their emission caps by 2004, EPA 

expects few additional reductions after 2004 as the compliance supplement pool is used up, and in response to 

growth in fossil fuel generation to meet increasing electric demand. 

Figure 22 shows that actual NOx emission reductions 

occurred where anticipated. The largest reductions took 

place in states along the Ohio River Valley. States are 

color-coded based on the percent of total emissions 

reduced, which is calculated as an individual state’s 

emission reductions, divided by total reductions across 

all states (in tons). Anticipated reductions are based on 

tons reduced across days modeled, which represent the 

ozone season. Actual reductions are based on tons 

reduced across ozone season days. 

21 
Figure 23: 

Percent Reductions in Seasonal 8-Hour Ozone, Anticipated and Actual 

Source: EPA 

<5 

5 - 9.9 

10 - 14.9 

> 15 

Notes: 

• EPA used projections of 2007 emissions—both with and without the NOx SIP Call—to evaluate the rule’s impact on ozone concentrations. Although 

EPA’s modeling used 2007 as a base year, the regulation required the majority of these reductions to be implemented prior to May 31, 2004 (in all 

affected states, except portions of Missouri and Georgia). 

• For this report, EPA compared model-predicted changes in seasonal average 8-hour ozone to actual ambient changes, before and after the NOx SIP Call. 

Similarly, Figure 23 illustrates where ozone reductions the ozone season. As with NOx emissions, the anticiwere anticipated and where actual ozone reductions pated and actual changes in ozone generally are similar 

were achieved. Both maps use average daily maximum (e.g., both show largest reductions along the Ohio River 

8-hour ozone concentrations. Anticipated improve- Valley), indicating that the NOx SIP Call appears to 

ments are based on model predictions, and actual have achieved its goal of reducing ozone in the eastern 

improvements are based on measurements taken during United States. 

Estimating the Impact of Proposed Control 

Programs 

EPA uses air quality models to predict how emissions from a 

specific source or combination of sources will contribute to 

ozone concentrations at downwind sites. Using estimates of 

hourly emissions and meteorology, these models simulate 

the physical and chemical processes that contribute to ozone 

formation and transport. These models allow EPA to test 

hypotheses about how ozone levels will respond to reductions in VOC and NOx emissions resulting from an individual 

control program or combination of control programs. 

Photochemical grid models simulate atmospheric 

chemistry and transport throughout the geographic area 

of interest. 

22 
Chapter 4: NOx Budget Trading 

Program Compliance, Market Activity, 

window after the end of the control period to move 

allowances between accounts (and to buy or sell additional allowances) to ensure their emissions do not 

exceed allowances held. After the two-month period, 

allowances may not be transferred into or out of these 

accounts while EPA reconciles emissions with allowance 

holdings for program compliance. 

Nearly all of the NBP sources that participated in 

2004—both electric generating units and industrial 

units—held sufficient allowances to cover their emissions at the time. 

EPA performed reconciliation and identified a single 

facility with two units that had an allowance deficiency 

of nine allowances. In cases where the source does not 

hold enough allowances to cover its emissions, the program requires an automatic penalty deduction (three 

allowances for each excess ton of emissions) from the 

and Banking 

A review of the second year of cap and trade under the 

NOx Budget Trading Program (NBP) shows that the 

market continues to mature. In 2004, for the first time, 

a substantial number of sources in 11 states began to 

comply with the emission reduction requirements under 

the program. Many of these sources had to make significant reductions to achieve compliance, and the market 

appears to have played a significant role as participants 

determined what control strategies to pursue and on 

what timetable. At the same time, a number of units 

added controls to meet emission reduction requirements 

in the non-OTC states between the end of the 2003 

and the beginning of the 2004 ozone season. 

This chapter examines compliance under the NBP in 

2004 and examines trends in this maturing market, 

including those in allowance pricing and transactions. It 

also addresses how the high level of banking in 2004 

will affect future restrictions on the use of banked 

allowances for compliance. In addition, this chapter 

reviews the monitoring and control methods employed 

by sources to meet program requirements. 

2004 Compliance Results 

Under the NBP, sources must hold sufficient allowances 

to cover their ozone season emissions each year. Sources 

can maintain the allowances in compliance accounts 

(established for each unit) or in an overdraft account 

(established for each facility with more than one unit). 

The overdraft account allows greater flexibility in “bubbling” between units, managing banked allowances from 

previous years, managing transferred allowances from 

other sites, and managing allowances purchased from 

other NBP participants. The sources have a two-month 

23 
source’s allocations for the next control period. Table 2 

summarizes the allowance reconciliation process for 

2004. 

NOx Allowance Trading in 2004 

Allowance trading generally comprises three main types 

of transfers: 

1. Transfers within a company or between related entities (e.g., holding company transfers to a small 

operating subsidiary). 

2. Transfers between separate economic entities. These 

transfers are categorized broadly as “economically 

significant trades.” 

3. Transfers from or to the state as allowance allocations or allowance surrenders. 

In 2004, economically significant trades represented 

approximately 40 percent of the total transfers between 

entities other than a state. The economically significant 

trades provide the strongest indicator of true market 

activity, because they represent an actual exchange of 

assets between unaffiliated participants. 

There were more than 230,000 allowances involved in 

economically significant trades in 2004, slightly lower 

than in 2003. However, overall trading activity 

remained robust. As in the earlier OTC trading program, industrial sources have actively traded allowances. 

These sources traded more than in 2003 and participated in approximately 13 percent of the economically 

significant trade volume. 

Table 2:


NOx Allowance Reconciliation Summary—2004


Total Allowances Held for Reconciliation 676,574

Allowances Held in Compliance and Overdraft Accounts 

Allowances Held in Other Accounts* 

609,249 

67,325 

Allowances Deducted for 2004 Emissions 

Termination of 2003 Early Reduction Credit (or Compliance 

Supplement Pool) Allowances** 

468,824 

125 

Banked Allowances

Allowances Held in Compliance and Overdraft Accounts 

Allowances Held in Other Accounts*** 

207,625

133,857 

73,768 

Penalty Allowances Deducted**** (from future year allowances) 27

Source: EPA 

* 	 Other Accounts refers to general accounts in the NOx Allowance Tracking System (NATS) that can be held by any 

source, individual, or other organization, as well as state accounts. 

** Compliance Supplement Pool (CSP) allowances can only be used for two years. In the OTC states, CSP allowances 

not used for reconciliation in 2003 or 2004 have been retired permanently. 

*** Total includes 6,477 new unit allowances returned to state holding accounts.


**** These penalty deductions are made from future vintage year allowances, not 2004 allowances.


24 
During certain periods, the price for NOx 

allowances can reflect market uncertainties as 

companies evaluate ongoing trends in control 

installations, energy demand, and other external factors that affect the overall costs of 

control. In addition, program elements such as 

progressive flow control and the retirement of 

compliance supplement pool allowances enter 

into transfer decisions, as do questions about 

the integration of the NBP with the recently 

finalized (March 2005) Clean Air Interstate 

Rule (CAIR). Despite these uncertainties, 

allowance prices stabilized in 2004 and are 

down appreciably from early 2003 (see Figure 

25), which is one indication that the cap and 

trade market has matured. 

Banking in 2004 and Flow 

Control Next Season 

Under the NBP, banking provisions allow companies to 

decrease emissions more than what was required early in 

the program, and then save unused allowances for future 

use. Banking results in environmental and health benefits earlier than required by the NBP and provides a 

pool of allowances available to address unexpected 

events or smooth the transition into deeper emission 

reductions. 

Figure 24: 

Economically Significant Trades 

Source: EPA 

If sources use a large number of banked allowances in 

one year, the elevated emissions could potentially 

reduce the environmental effectiveness of the NBP. The 

NBP’s progressive flow control provisions were designed 

to discourage extensive use of banked allowances in a 

particular ozone season. Flow control is triggered when 

the total number of allowances banked for all sources 

exceeds 10 percent of the total regional budget for the 

next year. When this occurs, EPA calculates the flow 

Figure 25: 

Vintage Year NOx Allowance Prices by Month of Sale 

Source: Evolution Markets, LLC and Cantor Environmental Brokerage 

25 
control ratio by dividing 10 percent of the total trading 

budget by the number of banked allowances (a larger 

bank will result in a smaller flow control ratio). The 

resulting flow control ratio indicates the percentage of 

banked allowances that can be deducted from a source’s 

account in a ratio of one allowance per ton of emissions. 

The remaining percentage of banked allowances, if used, 

must be deducted at a rate of two allowances per one 

ton of emissions. 

With a large number of additional sources in 2004 and 

the addition of Compliance Supplement Pool (CSP) 

allowances to states’ budgets, the level of banked 

allowances in the NBP increased to nearly 208,000, well 

beyond the previous year’s total of more than 28,000. 

These banked allowances represent 40 percent of the 

total allocations for the 2005 ozone season. Because this 

ratio exceeds 10 percent, flow control will be triggered 

in 2005. 

Continuous Emissions Monitoring 

System Results 

In order for NOx allowances to be accurately tracked 

and traded, NBP sources must use consistent monitoring 

procedures to determine their emissions. Accurate and 

consistent monitoring ensures that all allowances in the 

NBP have the same value (i.e., a ton of NOx emissions 

from one NBP source is equal to a ton of NOx emissions 

from any other source in the program). Analysis of the 

continuous emissions monitoring data reported by NBP 

sources in 2004 convincingly demonstrates the high 

quality of the data (see Figure 26). 

Industrial sources, many of which have been monitoring 

under EPA’s detailed monitoring procedures (40 CFR 

Part 75) only since 2003, were able to perform at nearly 

the same level as electric generating units, most of 

which have been monitoring under Part 75 for about a 

decade. In 2004, both the electric generating units and 

industrial units passed more than 98 percent of the quality assurance tests required of their monitoring systems. 

These tests included: 

•	 Daily calibration error tests, which use reference 

gases of known concentrations, or (for flow monitors) reference signals with known values, to test a 

monitor at a zero point and an upscale point. 

•	 Quarterly linearity checks (for gas monitors, only), 

which are similar to the daily calibration procedure 

but performed at three intermediate gas concentrations across the range of the analyzer. 

Flow Control Will Apply in 2005—How Will It Affect Sources?


• 	2005 Regional Budget: 516,245 allowances 

• 	Banked Allowances after 2004: 207,625 allowances 

• 	Flow Control Trigger: 207,625/516,245 > 10 percent, triggering flow control for 2005 

•	 The flow control ratio will be 0.25 (determined by dividing 10 percent of the total trading program budget by the total 

number of banked allowances, or 51,625/207,625). 

•	 The flow control ratio is applied to banked allowances in each source’s compliance and overdraft allowance accounts 

at the time of compliance reconciliation. 

–	 For example, if a source holds 1,000 banked allowances at the end of 2005, it will be able to use 250 of them on 

a 1-for-1 basis, but will have to use the remaining 750, if necessary, on a 2-for-1 basis for compliance. 

•	 If the source used all of its 1,000 banked allowances for 2005 compliance, the banked allowances could be used to 

cover only 625 tons of NOx emissions (250 + 750/2). 

26 
•	 Semiannual or annual relative accuracy test audits 

which compare data from the monitoring system to 

concurrent measurements of the stack emissions with 

an EPA reference test method. 

NBP sources also reported quality-assured emissions data 

for more than 99 percent of their operating hours in 

2004 (see Figure 26). Part 75 requires conservatively 

high substitute data values to be reported for missing 

data periods, but substitute data were used less than 1 

percent of the time in 2004 and therefore had little 

impact on the cumulative NOx mass emissions reported 

by the NBP sources. 

Compliance Options under the NOx 

Budget Trading Program 

In a way that best fits their own circumstances, sources 

can choose from a variety of compliance options to 

meet the emissions reduction targets of the NBP. These 

include decreasing generation from certain units (such 

as units with high NOx emissions), modifying or optimizing the basic combustion process to control the 

formation of NOx, using add-on controls, or purchasing 

additional allowances from other market participants. 

Many electric generating units installed combustion 

controls to meet the NOx emission limits of the Acid 

Rain Program. In addition, some industrial units added 

combustion controls to meet state NOx emission limits. 

For boilers, furnaces, and heaters, these controls include 

low NOx burner and overfire air technologies, which 

modify the combustion process to reduce formation of 

NOx from nitrogen present in the combustion air and 

fuel. Advances in combustion control technologies continue to provide cost-effective options to reduce 

emissions even further for some units. 

Add-on control technologies, such as selective catalytic 

reduction (SCR) or selective non-catalytic reduction 

(SNCR), are frequently applied for NOx control. SNCR 

and SCR are control technologies that achieve NOx 

reductions by injecting ammonia, urea, or another NOx 

reducing chemical into the flue gas within or downstream of the combustion unit to react with NOx, 

forming nitrogen and water. SCR adds a catalyst to 

allow this reaction to occur in a lower temperature 

Figure 26: 

2004 NOx Budget Trading Program 

Quality Assurance Performance of 

Continuous Emissions Monitors, Electric 

Generating and Industrial Units 

Source: EPA 

Note: These results include approximately 1,300 electric generating and 

275 industrial units that reported under the NBP using CEMS in 2004. 

What Monitoring Options Can Sources Use? 

EPA has developed detailed procedures (40 CFR Part 

75) to ensure that sources monitor and report emissions 

with a high degree of precision, accuracy, reliability, and 

consistency. Coal-fired units are required to use continuous emission monitoring systems (CEMS) for NOx and 

stack gas flow rate (and if needed, CO2 or O2 and moisture), to measure and record their NOx mass emissions. 

Oil and gas-fired units may alternatively use a NOx 

CEMS in conjunction with a fuel flowmeter to determine 

NOx mass emissions. For oil and gas-fired units that are 

either operated infrequently to provide power during 

periods of peak demand or that have very low NOx 

emissions, Part 75 provides low-cost alternatives to 

estimate NOx mass emissions. Figure 26 presents only 

the results for units that use CEMS. 

27 
range. While SNCR is mainly applicable to boilers, furnaces, heaters, and kilns, SCR can be used for a wider 

range of electric generating and industrial units. Sources 

report pollution control information, including installation dates, in monitoring plans submitted to EPA. 

Figure 27 shows the breakdown of how electric generating sources have employed emission controls as of the 

2004 ozone season, by both number of units and the 

percent of total ozone season generation. In the 2004 

ozone season, there were about 2,200 electric generating 

units affected under the NBP. Coal-fired electric generating units with combustion controls (about 400 units) 

represented 43 percent of total generation during the 

ozone season. Coal-fired electric generating units with 

SCR (122 units) constituted about 5 percent of electric 

generating units, but represented more than 30 percent 

of the total ozone season generation. In contrast, oiland gas-fired electric generating units (over 1,500 units) 

constituted nearly 70 percent of all electric generating 

units but accounted for less than 15 percent of total 

ozone season generation. 

Figure 28 shows similar information for industrial units, 

but based on steam output rather than electric generation. In the 2004 ozone season, there were 340 

industrial units affected under the NBP. Most industrial 

units either identify combustion controls in their monitoring plans or do not identify any type of add-on 

controls. There are only a few exceptions where SCR 

or SNCR is employed. There are no cases where coalfired industrial units employ SCR. Except for turbines 

that can use a relatively simple form of SCR, the use of 

SCR is typically limited to larger coal-fired electric generating units that can achieve significant emission 

reductions in a highly cost effective way. 

In addition to adding controls, decreasing generation 

from certain units (e.g., those with high NOx emissions) 

and making operational or fuel changes are other methods sources can use to achieve emission reductions. Table 

3 shows that the total heat input for all NBP sources 

increased slightly (less than 2 percent) from 2003 to 

Figure 27: 

Percent of Total 2004 Ozone Season 

Electric Generation by Fuel 

and Control Type 

Source: EPA 

* In 2004, only 14 oil/gas units had SNCR, making up less than 1 percent of ozone season generation. 

2004. The heat input from coal-fired units decreased a 

small amount, while the heat input from gas-fired units 

increased. Although there were small differences 

between fuel types, the overall heat input change suggests that there was no substantial shift from coal-fired 

units to lower emitting oil- or gas-fired units in 2004. 

Coal-fired Units Account for Nearly All 

Emission Reductions since 2003 

Table 3 indicates that coal-fired units accounted for 

nearly all of the 226,000 tons of emission reductions 

achieved by NBP units from 2003 to 2004. This analysis 

first examines emission reductions from units that added 

new controls in 2004 and then focuses on those units 

that achieved emission reductions with no reported 

change in controls. 

By the end of the 2004 ozone season, 122 coal-fired 

units reported using SCR controls to meet the NBP 

requirements, an increase of more than 30 units since 

the end of the 2003 ozone season. Seven units reported 

28 
adding SNCR systems during this period, and 17 units 

reported the installation of new or upgraded combustion 

controls. Overall, units that installed new controls 

(since the end of the 2003 ozone season) reduced emissions by about 91,000 tons from 2003 levels. Additional 

reductions were achieved by units that installed add-on 

controls in the 2003 ozone season or earlier but operated those controls more in the 2004 ozone season. These 

units (primarily units with SCR controls) reduced emissions by about 28,000 tons in the 2004 ozone season. 

Coal-fired units with no add-on controls and no reported change in their control status after the 2003 ozone 

season were nonetheless able to reduce mass emissions 

by more than 100,000 tons from 2003 ozone season levels. To assess how those reductions may have occurred, 

EPA analyzed these units based on 2003 NOx rates, 

ordered by highest to lowest emitters. This analysis 

excludes coal-fired units in OTC states because those 

units already had to meet trading program budget 

requirements in 2003 and did not reduce emissions significantly from 2003 to 2004. In 2004, units with the 

highest 2003 NOx emission rates (the top 25 percent) 

decreased total ozone season heat input by about 15 percent from 2003 levels. The remaining units had only a 

moderate decrease in heat input (generation), approximately 2 percent. Mass emission reductions were also 

attributable to emission rate reductions. For example, 

the units with the highest 2003 emission rates (the top 

25 percent) experienced a median emission rate reduction of about 0.12 lb/mmBtu. The remaining units 

realized a more moderate NOx rate reduction (the 

median reduction was about 0.05 lb/mmBtu). While discrepancies in the reported information on types of NOx 

controls installed likely explain rate reductions for some 

of these units, these types of rate reductions also can 

occur as a result of operational changes or fine-tuning of 

the existing combustion controls, which sources do not 

report to EPA. 

Figure 28: 

Percent of Total 2004 Ozone Season 

Steam Output for Industrial Units 

by Fuel and Control Type 

Source: EPA 

Note: Industrial units generally provide generation data as steam output 

load. Some industrial units provide electrical output data because they 

provide electrical energy for on-site use. That electrical load data was 

converted to a steam equivalent (1,000 pounds per hour) to allow consistent comparison of data. 

Heat input is the heat derived from the combustion of 

fuel in a unit. It is a simple way to track utilization of 

affected units. The overall heat input levels from affected sources in the NBP states increased slightly 

between 2003 and 2004 without the addition of a significant number of sources. This indicates that, on a 

systemwide basis, sources in the region were able to 

maintain their preexisting generation levels while still 

complying with the NBP. 

29 
Table 3:


Comparison of 2003 and 2004 Ozone Season NOx Mass Emissions, Heat Input,


and NOx Emission Rates in the NOx Budget Trading Program


Units by 

Fuel Type 

Ozone Season NOx Mass 

Emissions (tons) Ozone Season Heat Input (mmBtu) 

Ozone Season NOx 

Emissions Rate 

(lb/mmBtu) 

2003 2004 2003 2004 2003 2004 

Coal 770,000 (94%) 548,000 (93%) 4.7 billion (84%) 4.7 billion (83%) 0.33 0.23 

Oil 25,000 (3%) 25,000 (4%) 260 million (5%) 260 million (5%) 0.19 0.19 

Gas 24,000 (3%) 20,000 (3%) 590 million (11%) 690 million (12%) 0.08 0.06 

Total 819,000 593,000 5.57 billion 5.65 billion 0.29 0.21 

Source: EPA 

Notes: 

• 	Tons rounded to the nearest 1,000 tons. Totals may not equal the sum of the values for each fuel type due to rounding. The data presented here are for the 

ozone season May 1-September 30. 

• 	The Average emission rate is based on dividing total reported ozone season NOx mass emissions for each fuel category by the total ozone season heat input 

reported for that category. The average emission rate expressed for the “Total” is the heat input weighted average for the three fuel categories. 

30 
Despite improvements in ozone air quality in many 

areas of the country, ozone continues to be a pervasive 

air pollution problem. More than 100 million people in 

the eastern United States are still living in nonattainment areas that do not meet the 8-hour ozone standard. 

Continued reductions anticipated under the NOx SIP 

Call will help reduce emissions of NOx and improve air 

quality. Recent national mobile source regulations will 

help reduce ozone by reducing NOx and VOCs from 

new passenger vehicles, heavy-duty diesel engines, and 

other mobile sources. 

In addition, EPA’s Clean Air Interstate Rule (CAIR) 

will help further reduce ozone in the East. This landmark rule, issued March 10, 2005, will permanently cap 

power industry emissions of sulfur dioxide (SO2) and 

NOx in the eastern United States, achieving large 

reductions of these pollutants. CAIR will build on the 

ozone season emission reductions from the NOx SIP 

Call. In 2015, CAIR, the NOx SIP Call, and other programs in the CAIR region will reduce power industry 

ozone season NOx emissions by about 50 percent and 

Chapter 5: Future NOx Reductions 

and Ozone Improvements 

How Does the Clean Air Interstate Rule (CAIR) Affect NOx Budget Trading Program States? 

The NOx SIP Call requirements will remain in place, but in 2009, EPA will stop administering the existing regional ozone 

season NOx trading programs. States can meet their NOx SIP Call obligations using the CAIR’s ozone season NOx trading 

program. CAIR allows states to include all of their NOx SIP Call trading sources in the CAIR ozone season trading program. 

If a state includes industrial units, the trading budget for those units remains the same as the NOx SIP Call. The 2009 

CAIR ozone season NOx electric generating unit budgets are at least as stringent as the NOx SIP Call budgets, and in 

some states are tighter. In 2015, the ozone season emission cap will be further reduced. In addition, because CAIR allows 

sources to use pre-2009 NOx SIP Call allowances for compliance on a 1:1 basis with the CAIR ozone season NOx program (i.e., the allowances can be banked and carried into the CAIR), NOx Budget Trading Program (NBP) sources have an 

incentive to begin reducing their emissions now. Also, as with the NOx SIP Call, the CAIR annual NOx program includes a 

compliance supplement pool to provide incentives for sources to reduce non-ozone season NOx emissions prior to CAIR. 

For more information, visit <www.epa.gov/cair>. 

31 
Figure 29: States Covered by the Clean Air Interstate Rule (CAIR) 

particles only 

ozone only 

ozone and particles 

Source: EPA 

Note: EPA proposed in March 2005 to add Delaware and New Jersey to the states in CAIR covered for fine particles. 

annual NOx emissions by about 60 percent from 2003 

levels. In addition by 2015, CAIR and other existing air 

programs will reduce the number of 8-hour ozone nonattainment areas, and will bring remaining areas closer to 

attainment. 

In 2015, EPA predicts that with CAIR and existing federal and state programs, only six ozone nonattainment 

areas will remain in the East: Chicago; Houston; 

Philadelphia, New York City; Baltimore and 

Washington, D.C. States are working to identify and 

implement local controls to move these remaining six 

areas toward attainment. 

CAIR is similar to the NOx SIP Call in that it requires 

states to submit SIPs and meet a budget to reduce emissions. CAIR reduces NOx through two budgets: ozone 

season NOx budgets in 25 states and Washington, D.C., 

and annual budgets to reduce fine particle pollution 

(PM 2.5) in 23 states and Washington, D.C. In March 

2005, EPA proposed to add Delaware and New Jersey to 

the states in CAIR covered for fine particles. Many 

states are affected by CAIR for both ozone season NOx 

and annual NOx and SO2 (see Figure 29). Like the 

NOx SIP Call, CAIR establishes EPA-administered, 

interstate cap and trade programs that states can choose 

to use to obtain the required emission reductions. EPA 

anticipates that most, if not all, affected states will join 

these trading programs. 

32 
Ozone and Particle Pollution in the Future 

The Clean Air Interstate Rule (CAIR), Together With Other Clean Air Programs, Will Bring Cleaner Air to Areas in the East. 

On March 10, 2005, EPA issued CAIR. This rule will achieve the greatest air quality improvement, and the deepest cut in 

emissions of SO2 and NOx in more than a decade. Key compliance dates are 2009 (Phase I cap on NOx), 2010 (Phase I 

cap on SO2) and 2015 (Phase II cap on NOx and SO2). 

Ozone and Fine Particle Nonattainment Projected Nonattainment Areas in 2010 Projected Nonattainment Areas in 2015 

Areas (April 2005) after Reductions from CAIR and after Reductions from CAIR and 

Existing Clean Air Act Programs Existing Clean Air Act Programs 

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

Nonattainment areas for fine particle pollution only 

Nonattainment areas for 8-hour ozone only 

Source: EPA 

Note: Projections concerning future levels of air pollution in specific geographic locations were estimated using the best scientific models available. They are 

estimations, however. Actual results may vary significantly if any of the factors that influence air quality differ from the assumed values used in the projections 

shown here. 

33 
Online Resources 

General Information: 

• Office of Air and Radiation: www.epa.gov/oar 

– Office of Air Quality Planning and Standards: www.epa.gov/oar/oaqps 

– Office of Atmospheric Programs: www.epa.gov/air/oap.html 

• National Academies: www4.nationalacademies.org/nas/nashome.nsf 

• Mobile Sources: www.epa.gov/otaq 

• Cap and Trade and Related Programs: www.epa.gov/airmarkt/index.html 

NOx Control Programs: 

• Acid Rain Program: www.epa.gov/airmarkets/arp/index.html 

• Ozone Transport Commission (OTC) NOx Budget Program: www.epa.gov/airmarkets/otc/index.html 

• NOx Budget Trading Program: www.epa.gov/airmarkets/fednox/index.html 

• Clean Air Interstate Rule (CAIR): www.epa.gov/cair/index.html 

Ozone Information: 

• Formation of Ozone: www.epa.gov/air/urbanair/ozone/what.html 

• Health and Ecological Effects: www.epa.gov/air/urbanair/ozone/hlth.html 

• Ozone Depletion: www.epa.gov/ozone 

• 8-hour and 1-hour Ozone Trends and Factbook: www.epa.gov/airtrends 

Emissions Data and Monitoring Information: 

• National Emissions Inventory (NEI): www.epa.gov/ttn/chief/net/ 

• Emissions Data for the Power Industry: http://cfpub.epa.gov/gdm 

• Emissions Development: www.epa.gov/ttn/chief/trends/procedures/neiproc_99.pdf 

• NOx and VOC Limitation: www.cgenv.com/Narsto/american.chem.council.html 

Ozone Monitoring Networks and Data: 

• Clean Air Status and Trends Network (CASTNET): www.epa.gov/castnet 

• Air Quality System (AQS): www.epa.gov/ttn/airs/airsaqs 

Other Emissions and Air Quality Resources: 

• General Information on EPA Air Quality Monitoring Networks: www.epa.gov/ttn/amtic 

• Clean Air Mapping and Analysis Program (C-MAP): www.epa.gov/airmarkets/cmap/index.html 

• The Emissions and Generation Resource Integrated Database (eGRID): www.epa.gov/cleanenergy/egrid/index.html 

• AIRNow: www.epa.gov/airnow 

34 
United States 

Environmental Protection Agency 

Office of Air and Radiation 

Office of Air Quality Planning and Standards 

Office of Atmospheric Programs 

(6204J) 

1200 Pennsylvania Ave, NW 

Washington, DC 20460 

www.epa.gov/airtrends 

www.epa.gov/airmarkets 

EPA454-K-05-001 

August 2005 

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