# ATTACHMENT 1 TO DECLARATION OF SAM NAPOLITANO



# Ohio Valley Electric Corporation Kyger Creek Station

Amended New Stack and FGD System Notification

# ATTACHMENT 2 TO DECLARATION OF SAM NAPOLITANO



# Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] You are here: EPA Home Air & Radiation Clean Air Markets Progress Reports Clean Air Interstate Rule, Acid Rain Program, and Former NO x Budget Trading Program 2010 Progress Report SO 2and NO x Emissions, Compliance, and Market Analyses Report 

# Clean Air Markets
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# Clean Air Interstate Rule, Acid Rain Program, and Former NO x 

# Budget Trading Program 2010 Progress Report SO 2 

# and NO x 

# Emissions, Compliance, and Market Analyses Report CAIR Litigation and the Cross-State Air Pollution Rule | CAIR, ARP, and NBP Affected States and Units| Emission Reductions| CAIR and ARP Program Compliance | Controls and Monitoring | Market Activity The Clean Air Interstate Rule (CAIR) and the Acid Rain Program (ARP) are both cap and trade programs designed to reduce emissions of sulfur dioxide (SO 2 

### ) and nitrogen oxides (NO x 

### ) from power plants. On July 6, 2011, EPA finalized the Cross-State Air Pollution Rule (CSAPR) , which will replace CAIR starting in 2012. The CSAPR will require 27 states in the eastern half of the U.S. to improve significantly air quality by reducing power plant emissions of SO 2 

### and NO x

### that cross state lines and contribute to smog (ground-level ozone) and soot (fine particle pollution) in other states. The first phase of compliance begins January 1, 2012 for SO 2 

### and annual NO x 

### reductions and May 1, 2012 for ozone season NO x

### reductions. Additional SO 2 

### reductions are required by sixteen Group 1 states in 2014 to eliminate their contribution to downwind air quality problems. CAIR, which will be implemented through 2011, also addresses regional interstate transport of ozone and fine particle (PM2.5 

### ) pollution. CAIR requires certain eastern states to limit annual emissions of NO x

### and SO 2 

### , which contribute to the formation of ozone and PM 2.5 

### . It also requires certain states to limit ozone season NO x 

### emissions, which contribute to the formation of smog during the summer ozone season (May to September). CAIR includes three separate cap and trade programs to achieve the required reductions: the CAIR NO x

### ozone season trading program, the CAIR NO x

### annual trading program, and the CAIR SO 2 

### annual trading program. The CAIR NO x

### ozone season and annual programs began in 2009, while the CAIR SO 2 

### annual program began in 2010. All three programs will be implemented through the 2011 compliance periods. The CSAPR will replace CAIR starting in 2012. The reduction in ozone and PM 2.5 

### formation resulting from implementation of CAIR provides health benefits as well as improved visibility in national parks and improvements in freshwater aquatic ecosystems in the eastern U.S. The ARP, established under Title IV of the 1990 Clean Air Act (CAA) Amendments, requires major emission reductions of SO 2 

### and NO x 

### , the primary precursors of acid rain, from the power sector. The SO 2 

### program sets a permanent cap on the total amount of SO 2 

### that may be emitted by electric generating units (EGUs) in the contiguous United States. The program is phased in, with the final 2010 SO 2 

### cap set at 8.95 million tons, a level of about one-half of the emissions from the power sector in 1980. NO x

### reductions under the ARP are achieved through a program that applies to a subset of coal-fired EGUs and is closer to a traditional, rate-based regulatory system. Since the program began in 1995, the ARP has achieved significant emission reductions. The NO x

### Budget Trading Program (NBP) operated from 2003 to 2008. The NBP was a cap and trade program that required NO x

### emission reductions from power plants and industrial units in the eastern U.S. during the summer months. Figure 1 contains important milestones for CAIR, ARP, CSAPR, and the former NBP. 

## Figure 1: History of CAIR, ARP, CSAPR, and Former NBP

Source: EPA, 2011 

### For the first time, EPA is combining emissions and compliance data for both CAIR and the ARP into one report to more holistically show Air & Radiation Home Clean Air Markets Home Basic Information Where You Live About Acid Rain Doing Business With Us Programs and Regulations Progress and Results Cap and Trade Allowance Trading Emissions Monitoring Data and Maps Environmental Issues Resource Center Meetings and Workshops Related Links Share

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] reductions in power sector emissions of SO 2 

### and NO x

### and the collective effect of these regional programs on human health and the environment. Over the next several months, EPA will release a series of reports summarizing progress in 2010 under both CAIR and the ARP. This first report presents 2010 data on combined emission reductions and compliance results for CAIR and the ARP. This report also presents some historic NBP emissions data and evaluates shared progress under these programs in 2010 by analyzing emission reductions and market activity. A forthcoming report will compare changes in emissions to changes in a variety of human health and environmental indicators. For more information on the CSAPR, please visit the CSAPR website . For more information on CAIR, please visit the CAIR website . For more information on the ARP, please visit the ARP website . For more information on the NBP, please visit the NO x 

### Budget Trading Program/NO x

### SIP Call website

.

Top of page 

# CAIR Litigation and the Cross-State Air Pollution Rule CAIR was finalized in 2005. However, in July 2008, the U.S. Court of Appeals for the D.C. Circuit granted several petitions for review of CAIR, finding significant flaws in the rule. Subsequently, in December 2008, the court issued a ruling to keep CAIR and the CAIR Federal Implementation Plans (FIPs) — including the CAIR trading programs — in place temporarily until EPA issues new rules to replace the CAIR and the CAIR FIPs. On July 6, 2011, EPA finalized the Cross-State Air Pollution Rule (CSAPR) to replace CAIR. This rule responds to the court’s concerns and fulfills the “good neighbor” provision of the Clean Air Act by addressing the problem of air pollution that is transported across state boundaries. In a separate but related regulatory action, EPA also issued a supplemental notice of proposed rulemaking (SNPR) to require six states — Iowa, Kansas, Michigan, Missouri, Oklahoma, and Wisconsin — to make summertime NO x 

### reductions under the CSAPR ozone-season control program. Finalizing this supplemental proposal would bring the total number of covered states under the CSAPR to 28. Visit the CSAPR website for more information.

Top of page 

# CAIR, ARP, and NBP Affected States and Units
Affected States The ARP is a nationwide program affecting large fossil fuel-fired power plants across the country. CAIR covers 27 eastern states and the District of Columbia (D.C.) and requires reductions in annual emissions of SO 2 

### and NO x 

### from 24 states and D.C. (to achieve improvements in fine particle pollution in downwind areas) and emission reductions of NO x

### during the ozone season from 25 states and D.C. (to achieve improvements in ozone pollution in downwind areas). The former NBP affected 20 eastern states and D.C. State coverage for CAIR, ARP, and NBP is shown in Figure 2. 

## Figure 2: CAIR, ARP, and NBP States

Note: In November 2009, EPA finalized a rule staying the requirements of CAIR for Minnesota. Minnesota is therefore not currently included in the CAIR annual SO 2and NO x programs. Source: EPA, 2011 

# Affected Units
The CAIR SO 2 

### and NO x

### annual programs generally apply to large EGUs — boilers, turbines, and combined cycle units that primarily burn

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] fossil fuels to generate electricity for sale. The CAIR NO x

### ozone season program includes EGUs as well as, in some states, large industrial units that produce electricity or steam primarily for internal use and that have been carried over from the NBP. 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 include steam plants at institutional settings, such as large universities or hospitals. In 2010, there were 3,349 affected EGUs at 955 facilities in the CAIR SO 2 

### and NO x

### annual programs and 3,309 EGUs and industrial facility units at 953 facilities in the CAIR NO x

### ozone season program (see Table 1 , below). The variation in the number of units covered under the programs is due to the difference in states that are included in each program (see Figure 2, above ). The CAIR programs cover a range of unit types, including units that operate year round to provide baseload power to the electric grid as well as units that provide power on peak demand days only and may not operate at all during some years. The SO 2 

### requirements under the ARP apply to the 3,613 large (greater than 25 megawatts) fossil fuel-fired combustion units that serve a generator that provides electricity for sale at 1,241 facilities across the country. The vast majority of ARP SO 2 

### emissions result from coalfired EGUs, although the program also applies to oil and gas units. Of the 3,349 units in the CAIR SO 2 

### program, 2,626 (78 percent) were also covered by the ARP in 2010. The other units are largely fossil fuel generation units that entered SO 2 

### control under the broader applicability requirements of CAIR. The ARP also requires NO x 

### emission reductions for older, large coal-fired EGUs by limiting their NO x

### emission rate (expressed in lb/mmBtu). The goal of the NO x 

### program is to limit NO x

### emission levels from the affected coal-fired boilers so that their emissions are at least two million tons less than the projected level for the year 2000 without implementation of Title IV. In 2010, 956 units at 379 facilities were subject to the ARP NO x

### program. 

## Table 1: Affected Units in CAIR and ARP, 2010

Fuel ARP SO 2 Program ARP NO x Program CAIR NO x Ozone Season Program CAIR NO x and SO 2 Annual Programs Coal EGUs 1,055 944 875 922 Gas EGUs 2,333 10 1,657 1,945 Oil EGUs 200 0 555 463 Industrial Units 0 0 203 0 Unclassified EGUs 9 0 1 4 Other Fuel EGUs 16 2 18 15

Total Units 3,613 956 3,309 3,349

Notes:

“Unclassified” units have not submitted a fuel type in their monitoring plan and did not report emissions. “Other” fuel refers to units that burn waste, wood, petroleum coke, tire-derived fuel, etc. Source: EPA, 2011 Top of page 

# Emission Reductions
Milestone Years for Measuring Progress under CAIR and ARP 1980: The Clean Air Act specified that annual SO 2

### emissions be cut to 10 million tons below the 1980 level 1990: Baseline emission levels for the ARP 1995: First year of the ARP (Phase 1) 2000: Phase 2 of the ARP 2005: Baseline emission levels for CAIR 2008: “Training year” for CAIR NO x 

### monitoring. Units participating in the two CAIR NO x 

### trading programs were required to monitor and report their emissions, but were not required to hold allowances for compliance 2009: First year of CAIR NO x 

### annual and CAIR NO x 

### ozone season programs (Phase 1). “Training year” for CAIR SO 2

### monitoring 2010: First year of CAIR SO 2

### annual program (Phase 1)



# Overall Trends
Table 2 , below, shows a large reduction in annual SO 2 

### and NO x

### emissions from CAIR and ARP sources between 2005 and 2010. Tons of SO 2 

### emitted fell 49 percent from the 2005 level, and annual NO x 

### emissions dropped 42 percent. During this same period, ozone season NO x

### emissions from CAIR sources alone decreased by approximately 27 percent. These reductions occurred while electricity demand (measured as heat input) remained relatively stable, indicating that the reduction in emissions was not driven by decreased electric generation. Instead, there was a significant drop in emission rate for sources in all three programs: 49 percent for SO 2 

### sources, 42 percent for annual NO x

### sources, and 25 percent for ozone season NO x

### sources. A drop in emission rate represents an overall increase in the environmental efficiency of these sources as power generators installed controls, ran their NO x 

### controls year round, switched to different fuels, or otherwise cut their SO 2 

### and NO x

### emissions while meeting relatively steady demand for power. Most of the reductions since 2005 are from early reduction incentives and stricter emission limits under CAIR. Between 2009 and 2010, CAIR and ARP sources continued to reduce their SO 2 

### emissions and emission rate. These reductions occurred despite an 8 percent increase in demand for electricity. Annual NO x 

### emissions from CAIR and ARP sources, however, rose slightly (4 percent) and in line with a similar increase in heat input (6 percent) during this time. Finally, CAIR sources’ ozone season NO emissions

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] x 

### increased considerably (20 percent) as demand for electricity at these facilities rose substantially (more than 16 percent). Despite these increases in NO x 

### emissions as sources ran their controls less often, facilities were still below both the CAIR NO x

### ozone season and CAIR NO x

### annual budgets for the year.
Visit EPA’s Quarterly Emissions Tracking site for the most up-to-date emissions and control data for sources in the ARP. 

## Table 2: Comparison of Emissions, Emission Rates, and Heat Input for CAIR, ARP, and NBP Sources, 2000– 2010

CAIR and ARP Annual SO 2 

### Trends

SO 2 Emissions (thousand tons) SO 2 Rate (lb/mmBtu) Heat Input (billion mmBtu) Primary Fuel 2000 2005 2008 2009 2010 2000 2005 2008 2009 2010 2000 2005 2008 2009 2010 Coal 10,707 9,835 7,514 5,653 5,089 1.04 0.95 0.74 0.63 0.53 20.67 20.77 20.25 18.02 19.29 Gas 28 36 10 6 7 0.02 0.01 0.00 0.00 0.00 3.71 5.35 6.22 6.50 7.19 Oil 464 347 83 54 44 0.76 0.71 0.35 0.29 0.21 1.22 0.98 0.47 0.37 0.41 Other 1 4 9 8 26 0.23 0.27 0.28 0.27 0.53 0.01 0.03 0.06 0.06 0.10 Total 11,201 10,223 7,616 5,722 5,166 0.88 0.75 0.56 0.46 0.38 25.61 27.13 27.00 24.95 26.99



### CAIR and ARP Annual NO x 

### Trends

NO x Emissions (thousand tons) NO x Rate (lb/mmBtu) Heat Input (billion mmBtu) Primary Fuel 2000 2005 2008 2009 2010 2000 2005 2008 2009 2010 2000 2005 2008 2009 2010 Coal 4,586 3,356 2,816 1,847 1,922 0.44 0.32 0.28 0.20 0.20 20.67 20.77 20.25 18.27 19.29 Gas 321 142 130 133 139 0.17 0.05 0.04 0.04 0.04 3.71 5.35 6.22 6.71 7.19 Oil 195 129 46 34 34 0.32 0.26 0.19 0.18 0.17 1.22 0.98 0.47 0.38 0.41 Other 2 6 5 5 7 0.26 0.42 0.16 0.12 0.13 0.01 0.03 0.06 0.09 0.10 Total 5,104 3,633 2,996 2,020 2,102 0.40 0.27 0.22 0.16 0.16 25.61 27.13 27.00 25.45 26.99



### NBP Ozone Season NO x 

### Trends

NO x Emissions (thousand tons) NO x Rate (lb/mmBtu) Heat Input (billion mmBtu) Primary Fuel 2000 2005 2008 2000 2005 2008 2000 2005 2008 Coal 1,111 494 456 0.46 0.19 0.19 4.85 5.10 4.93 Gas 15 23 17 0.08 0.05 0.04 0.37 0.85 0.85 Oil 34 32 9 0.21 0.21 0.14 0.32 0.31 0.13 Other 0 0 0 0.74 0.50 0.13 0.00 0.00 0.01 Total 1,160 549 482 0.42 0.18 0.16 5.54 6.27 5.91



### CAIR Ozone Season NO x 

### Trends

NO x Emissions (thousand tons) NO x Rate (lb/mmBtu) Heat Input (billion mmBtu) Primary Fuel 2000 2005 2008 2009 2010 2000 2005 2008 2009 2010 2000 2005 2008 2009 2010 Coal 1,398 695 625 442 527 0.45 0.22 0.20 0.17 0.18 6.19 6.31 6.14 5.21 5.85 Gas 62 43 34 33 42 0.15 0.06 0.05 0.04 0.04 0.84 1.47 1.40 1.53 1.96 Oil 83 72 28 19 22 0.29 0.27 0.20 0.18 0.16 0.57 0.53 0.28 0.21 0.27 Other 1 2 2 2 2 0.15 0.17 0.14 0.14 0.12 0.02 0.02 0.03 0.02 0.04 Total 1,545 812 689 495 594 0.41 0.20 0.18 0.14 0.15 7.62 8.33 7.85 6.97 8.12

Notes:

The data shown here for the annual programs and the NBP reflect totals for those facilities required to comply with each program in each respective year. This means that CAIR NO x annual program facilities are not included in the annual NO x data for 2005 or 2008, and CAIR SO 2annual program facilities are not included in the annual SO 2data for 2005, 2008, or 2009. The CAIR NO x ozone season table includes emissions and heat input data for 2005 that were reported under other programs. For facilities that were not covered by another program and did not report 2005 emissions, their reported emissions for 2008 were substituted. 2008 was a “training year” for facilities covered by the CAIR NO x annual and ozone season programs. 2009 was a monitoring and reporting “training year” for facilities covered by the CAIR SO 2annual program. Fuel type represents primary fuel type; units might combust more than one fuel. Totals may not reflect the sum of individual rows due to rounding. Each year’s total emission rate does not equal the arithmetic mean of the four fuel-specific rates, as each facility influences the annual emission rate in proportion to its heat input, and heat input is unevenly distributed across the fuel categories. EPA data in these tables and used elsewhere in this report are current as of July 2011, and may differ from past or future reports as a result of resubmissions by sources and ongoing data quality assurance activities. Source: EPA, 2011 

# SO 2 

# Emission Reductions

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] Figure 3 , below, shows that the CAIR SO 2 

### program continues and complements the ARP’s history of SO 2 

### emission reductions. In 2010, the first year of operation of the CAIR SO 2 

### trading program, sources in both the CAIR SO 2 

### annual program and the ARP together reduced SO 2 

### emissions by over 10 million tons (67 percent) from 1990 levels (before implementation of the ARP), 6 million tons (54 percent) from 2000 levels (ARP Phase 2), and 5 million tons (49 percent) from 2005 levels (before implementation of CAIR). All ARP and CAIR sources together emitted a total of 5.2 million tons of SO 2 

### in 2010, well below the ARP’s statutory annual cap of 8.95 million tons.
Annual SO 2 

### emissions from sources in the CAIR SO 2 

### program alone fell from 9 million tons in 2005 to 4.4 million tons in 2010, a 51 percent reduction. Between 2009 and 2010, SO 2 

### emissions fell 123,000 tons, or 6 percent. However, the 2010 emissions total is higher than the CAIR SO 2 

### program’s state budget total of 3.6 million tons, indicating that affected sources used banked allowances carried over from the ARP for compliance with CAIR (see Table 3 , below).
ARP units alone emitted 5.1 million tons of SO 2 

### in 2010, meaning that ARP sources reduced emissions by 10.6 million tons (67 percent) from 1990 levels and 12.1 milllion tons (70 percent) from 1980 levels. 

## Figure 3: SO 2 

## Emissions from CAIR SO 2 

## Annual Program and ARP Sources, 1980–2010

Note: For CAIR units not in the ARP, the 2009 annual SO 2emissions were applied retroactively for each pre-CAIR year following the year in which the unit began operating. Source: EPA, 2011 

### The states with the highest emitting sources in 1990 have generally seen the greatest SO 2 

### reductions under the ARP, and this trend continues under CAIR (see Figure 4 , below). Most of these states are upwind of the areas the ARP and CAIR were designed to protect, and reductions have resulted in important environmental and health benefits over a large region. From 1990 to 2010, annual SO 2 

### emissions in the nationwide ARP dropped in 40 states and D.C. by a total of approximately 10.5 million tons. In contrast, annual SO 2 

### emissions increased by a total of only 30,700 tons in eight states (Idaho, Louisiana, Montana, North Dakota, Nebraska, Oregon, Rhode Island, and Vermont) from 1990 to 2010. Between 2005 and 2010, annual SO 2 

### emissions fell in all 27 states in the CAIR region with the exception of Arkansas and D.C., which increased emissions by a total of only 933 tons. Sixteen states and D.C. exceeded their state SO 2 

### emission budgets. 

## Figure 4: State-by-State Annual SO 2 

## Emission Levels for CAIR and ARP Sources, 1990–2010

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] Note: State-level data shown in this map are available for download. Source: EPA, 2011 

### Thirty-five ARP units installed SO 2 

### controls in 2010, reducing their collective SO 2 

### emission rate from 1.15 lb/mmBtu in January to 0.10 lb/mmBtu in December. The remaining sources in the ARP reported a steady annual SO 2 

### rate of about 0.41 lb/mmBtu (see Figure 5 , below). Had these newly-controlled units maintained their collective annual 2009 emission rate of 1.20 lb/mmBtu through 2010, their estimated emissions would have remained around a half million tons. In actuality, the 35 units emitted 64 percent less SO 2 

### in 2010 than in 2009 by adding scrubbers, contributing about half of the total program-wide reduction of 600,000 tons between 2009 and 2010. Because the new controls were installed at different times throughout 2010, the annual reduction reflects only partial operation, and the overall benefits of the new systems will be even greater in 2011. 

## Figure 5: Monthly SO 2 

## Emission Rates, 2010

Source: EPA, 2011 

# NO x 

# Emission Reductions

Ozone Season NO x 

## Reductions Figure 6 , below, shows ozone season NO x

### emissions from 1990 to the present for CAIR and NBP sources. In 2010, the second year of the CAIR NO x 

### ozone season program, sources from both CAIR and the former NBP, together with a small number of sources that were previously in the NBP but did not enter CAIR, reduced their overall NO x

### emissions from 816,000 tons in 2005 (before implementation of CAIR) to 599,000 tons in 2010, a decrease of 27 percent. NO x

### emissions were nearly 1.5 million tons lower (71 percent) than in 1990 and 860,000 tons lower (59 percent) than in 2000 (before implementation of the NBP).

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] Between 2005 and 2010, ozone season NO x

### emissions from sources in the CAIR program alone have fallen 211,000 tons, a decrease of 22 percent. From 2009 to 2010, however, ozone season NO x

### emissions from sources in the CAIR NO x

### ozone season program increased by 99,000 tons (20 percent) as sources operated controls less often and electricity demand rose. Despite the year-over-year increase, ozone season NO x

### emissions totaled 594,000 tons in 2010, 5 percent below the 2010 regional emission budget of 624,698 tons. 

## Figure 6: Ozone Season NO x 

## Emissions from CAIR and NBP Sources, 1990–2010

Note: For CAIR units not in the NBP, the 2008 NO x emissions were applied retroactively to 1990 and 2000 if the unit operated in the previous year’s ozone season. Source: EPA, 2011 

### The average NO x

### emission rate is a key measure of program effectiveness. While emissions may vary year to year due to changes in electricity demand the average ozone season NO x

### emission rate has fallen every year since 2004 — except 2010. The driver of the increase in rate was coal-fired units with add-on controls. The NO x

### emission rate at these units, which are historically responsible for the deepest reductions, increased as a group over 14 percent from 2009 to 2010. Ozone season NO x

### mass emissions rose about 99,000 tons between 2009 and 2010. Nearly a third of the increase (28,192 tons) resulted from fifty coal-fired units with add-on controls that posted significantly poorer performance in 2010. These fifty units “dialed back” control removal efficiency or even turned installed controls off. At 24 units, the 2010 NO x 

### emission rate was double that of 2009. In an emissions trading program, operators of plants are assumed to optimize operations by balancing the costs of fuel, allowances, and running controls. For example, the relatively low cost of gas drove the 35 percent increase in gas-fired generation in 2010. Similarly, the drop in allowance prices could lead to a higher NO x

### emission rate. EPA expects the average NO x

### emission rate to continue to improve in future years under the regulatory certainty provided by CSAPR. The higher NO x

### allowance prices that should exist in 2012 under CSAPR would provide incentive for sources to improve the effectiveness of existing pollution controls. Between 2005 and 2010, ozone season NO x

### emissions from CAIR and former NBP sources fell in every state participating in the CAIR NO x 

### ozone season program except Pennsylvania, Arkansas, Kentucky, and D.C. (see Figure 7 , below), where emissions increased by a total of 15,000 tons. In the 2010 ozone season, the total emissions from participating sources were about 31,000 tons below the regional emission budget. Sixteen states had emissions below their allowance budgets, collectively by about 80,000 tons. Another ten states exceeded their 2010 budgets by a total of about 49,000 tons, indicating that, on an aggregate basis, sources within those states covered a portion of their emissions with allowances banked from earlier years, transferred from an out-of-state account, or purchased from the market. 

## Figure 7: State-by-State Ozone Season NO x 

## Emission Levels from CAIR Sources, 2000–2010

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] Notes:

State-level data shown in this map is available for download. The 2000 and 2005 ozone season values reflect data that were reported under other programs (ARP and NBP). For facilities that were not covered by another program and did not report 2000 or 2005 emissions, their reported emissions for the earliest subsequent year (usually the 2008 training year) were substituted. Source: EPA, 2011


### In addition to the CAIR NO x 

### ozone season program and the former NBP, prior programs such as the Ozone Transport Commission’s (OTC) NO x

### Budget Program and current regional and state NO x

### emission control programs have also contributed significantly to the ozone season NO x

### reductions achieved by sources in 2010. 

## High Electric Demand Days Ozone season demand for electricity is driven by economic conditions and weather. Figure 8 , below, compares 2009 and 2010 ozone season daily NO x

### emissions and generation (as measured by gross megawatt hours), and highlights the ten days of each year's peak generation. Comparing the ten peak generation days in 2009 to 2010, generation increased 14 percent, NO x 

### emissions grew proportionately (17 percent), while the NO x

### emission rate increased by less than two percent. The fact that the NO x

### rate during the ten days of highest electric demand remained below the ozone season average implies that the increased demand did not result in less efficient, higher-emitting units being called into service, as had historically been the case. 

## Figure 8: Ozone Season Daily NO x 

## Emissions and Generation

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] Source: EPA, 2011


## Annual NO x 

## Reductions Figure 9 , below, shows that from 1990 to 2010, annual NO x

### emissions from CAIR and ARP units together dropped by about 4.3 million tons to 2.1 million tons, a decrease of 67 percent. In 2010, the second year of the CAIR NO x 

### annual program, NO x 

### emissions from all ARP and CAIR units were 1.5 million tons lower (42 percent) than in 2005 and 3 million tons lower (59 percent) than in 2000.
Emissions from CAIR NO x

### annual program sources alone were 1.43 million tons in 2010, 73,000 tons (5 percent) below the 2010 CAIR NO x 

### annual program’s regional budget of 1.5 million tons. Annual NO x

### emissions were 1.2 million tons lower (47 percent) than in 2005, but

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] were 115,000 tons (9 percent) higher than in 2009. This recent increase was largely a result of sources not operating NO x 

### controls as often and increased demand for electricity. ARP sources emitted 2.1 million tons of NO x

### in 2010. This level is 6 million tons less than the projected level in 2000 without the ARP, and triple the Title IV NO x

### emission reduction objective. Although the ARP and CAIR NO x 

### programs were responsible for a large portion of these annual NO x

### reductions, other programs — such as the NBP, the OTC NO x

### Budget Program, and other regional and state NO x 

### emission control programs — also contributed significantly to the annual NO x

### reductions achieved by sources in 2010. 

## Figure 9: Annual NO x 

## Emissions from CAIR and ARP Sources, 1990–2010

Note: For CAIR units not in the ARP in 1990, 2000, and 2005, the 2008 annual NO x emissions were applied retroactively for each pre-CAIR year following the year in which the unit began operating. Source: EPA, 2011 

### Figure 10 , below, shows that, compared with 2005, before implementation of CAIR, sources in the CAIR NO x 

### annual program continued to reduce year-round emissions in 2010 as program participants operated NO x

### control devices on EGUs outside the summer months. From 2005 to 2010, NO x

### emissions from units in the CAIR NO x 

### annual program and ARP fell 42 percent, while heat input remained stable, falling less than one percent. 

## Figure 10: Monthly Emissions and Heat Input from CAIR NO x 

## Annual Program Sources, 2005 vs. 2010

Note: The CAIR NO x annual program had not begun in 2005, so the set of participating units from 2008 was used as the 2005 baseline in this figure. Facilities that were not covered by the ARP did not report emissions in 2005. For these facilities, the earliest subsequent reported values, usually from the 2008 CAIR training year, were substituted. Source: EPA, 2011 

### From 1990 to 2010, all states participating in the CAIR NO x

### annual program decreased their emissions, as indicated in Figure 11 , below. Comparing 2005 to 2010, all states in the CAIR region emitted less NO x

### except Delaware and D.C., which increased their NO x 

### emissions by 855 tons. The total NO x

### emissions from participating sources in 2010 were about 55,000 tons below the regional emission budget of 1,490,264 tons. Ten states and D.C. exceeded their 2010 budgets by a total of about 109,000 tons, indicating that, on an aggregate basis,sources within those states covered a portion of their emissions with allowances banked from earlier years, transferred from an out-ofstate account, or purchased from the market. 

## Figure 11: State-by-State Annual NO x 

## Emission Levels for CAIR and ARP Sources, 1990–2010

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] Note: State-level data shown in this map is available for download. Source: EPA, 2011 Top of page 

# CAIR and ARP Program Compliance
SO 2 

# Programs

Because SO 2 

### allowances from the ARP are used by sources to comply with the CAIR SO 2 

### annual program, compliance results for both programs are displayed together in this report. Table 3 , below, shows how ARP and CAIR allowances were used. All ARP and CAIR SO 2 

### facilities were in compliance with both programs and held enough allowances to cover their SO 2 

### emissions.



## Table 3: CAIR and ARP SO 2 

## Allowance Reconciliation Summary, 2010 Total Allowances Held (1995–2010 Vintage) 21,505,185 Affected Facility Accounts: 14,599,394 Other (General and Non-Affected Facility Accounts): 6,905,791 Allowances Deducted for Acid Rain Compliance* 5,081,366 Penalty Allowance Deductions (2011 Vintage) 0 Banked Allowances (prior to CAIRSO 2deductions) 16,423,819 Affected Facility Accounts: 9,518,028 Other (General and Non-Affected Facility Accounts): 6,905,791 Acid Rain Program Allowances Deducted for CAIR SO 2Compliance 1,188,678 Banked Allowances 15,235,141 Affected Facility Accounts: 8,329,350 Other (General and Non-Affected Facility Accounts): 6,905,791 *Includes 6,111 allowances deducted from opt-ins for reduced utilization.


## Compliance Results As of July 2, 2011, the reported 2010 SO 2

### emissions by CAIR and ARP sources totaled 5,166,487 tons. Because of variation in rounding conventions, changes due to resubmissions by sources, and allowance compliance issues at certain units, this number is lower than the sums of emissions used for reconciliation purposes shown in Table 3 , above. Therefore, the allowance totals deducted for actual emissions in Table 3 differ from the number of emissions shown elsewhere in this report. CAIR and ARP SO 2 

### Programs Reported emissions (tons): 5,166,487 Compliance issues, rounding, and report resubmission adjustments (tons): –45,912 Emissions not covered by allowances (tons): 0

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] Additional vintage 2010 allowances deducted for CAIR: +1,143,358 Total allowances deducted for emissions (includes some 2 for 1 CAIR deductions: 6,263,933


### 2010 was the first year for compliance with the CAIR SO 2 

### program. Under this program, allowances are used to cover emissions based on the vintage year of the allowances, with pre–2010 vintage allowances used at 1 allowance for 1 ton of SO 2 

### emissions, and 2010 vintage allowances used at 2 allowances for 1 ton. For facilities covered by both CAIR and the ARP, reconciliation is a two-step process. First, ARP deductions are made. Then, any additional deductions to comply with the CAIR SO 2 

### program are made. The additional deductions under CAIR could be to cover the 2 for 1 use of 2010 allowances or to cover emissions for units that are subject to CAIR, but not the ARP. In 2010, almost 22 million SO 2 

### allowances were available for compliance under both programs (9 million vintage 2010 and almost 13 million banked from prior years). Just over 5 million allowances were deducted for ARP compliance and an additional 1.2 million allowances were deducted to complete reconciliation for CAIR. After reconciliation for both programs, over 15.2 million ARP SO 2 

### allowances were banked and carried forward to the 2011 compliance year.

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# NO x 

# Programs

CAIR NO x 

## Compliance Results
Tables 4and 5 , below, show how NO x

### allowances were used in 2010. All covered facilities were in compliance with the CAIR NO x 

### annual and ozone season programs and held enough allowances to cover their NO x

### emissions.



## Table 4: CAIR NO x 

## Ozone Season Allowance Reconciliation Summary, 2010 Total Allowances Held (2003–2010 Vintage) 1,002,016 Affected Facility Accounts: 873,775 Other (General, State Holding and Non-Affected Facility Accounts): 128,241 Allowances Deducted for CAIR NO x Ozone Season Trading Program 587,127 Penalty Allowance Deductions (2011 Vintage) 0 Banked Allowances 414,889 Affected Facility Accounts: 286,648 Other (General, State Holding and Non-Affected Facility Accounts): 128,241


## Table 5: CAIR NO x 

## Annual Allowance Reconciliation Summary, 2010 Total Allowances Held (2009–2010 Vintage) 1,823,717 Affected Facility Accounts: 1,723,440 Other (General, State Holding and Non-Affected Facility Accounts): 100,277 Allowances Deducted for CAIR NO x Annual Trading Program 1,420,621 Penalty Allowance Deductions (2011 Vintage) 0 Banked Allowances 403,096 Affected Facility Accounts: 302,819 Other (General, State Holding and Non-Affected Facility Accounts): 100,277



## Compliance Results As of July 3, 2011, the reported 2010 ozone season NO x 

### emissions by CAIR sources totaled 593,669 tons, and annual emissions totaled 1,427,301 tons. Because of variation in rounding conventions, changes due to resubmissions by sources, and allowance compliance issues at certain units, these numbers are different from the sums of emissions used for reconciliation purposes shown in Table 4 (ozone season reconciliation) and Table 5 (annual reconciliation). Therefore, the allowance totals deducted for actual emissions in Tables 4 and 5 differ from the number of emissions shown elsewhere in this report. CAIR NO x 

### Ozone Season Reported emissions (tons): 593,669 Compliance issues, rounding, and report resubmission adjustments (tons): –6,542 Emissions not covered by allowances (tons): 0 Total allowances deducted for emissions: 587,127 CAIR NO x 

### Annual Program Reported emissions (tons): 1,427,301 Compliance issues, rounding, and report resubmission adjustments (tons): -6,680 Emissions not covered by allowances (tons): 0 Total allowances deducted for emissions: 1,420,621

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] On May 1, 2009, the NBP transitioned to the CAIR NO x

### ozone season program and transferred a total of 275,367 allowances from the NBP to the CAIR NO x

### ozone season program. By the end of the 2009 ozone season, 392,799 allowances were banked and available for program compliance in 2010. Because NO x

### emissions in the 2010 ozone season were below the CAIR budget, sources were able to bank additional allowances, leaving 414,889 allowances available for use in 2011. Under the CAIR NO x 

### annual program, 342,975 allowances were carried over from 2009. Because annual NO x 

### emissions in 2010 were also below the CAIR budget, after reconciliation, 403,096 allowances remained in the bank to be carried over into 2011.


## ARP NO x 

## Compliance Results
The ARP NO x

### Program does not impose a cap on NO x 

### emissions and does not rely on allowance trading. The program allows affected sources to comply either by meeting a unit-specific emission rate or by including two or more units in an emission rate averaging plan. These options provide affected sources with the flexibility to meet the NO x

### emission reduction requirements in a cost-effective manner. In 2010, all 956 units that were subject to the ARP NO x 

### Program achieved compliance.

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# Controls and Monitoring To meet the ARP and CAIR emission reduction targets, some sources opt to install control technologies. A wide set of controls are available to help reduce emissions. The following is an analysis of controls on ARP and CAIR program coal-fired units and CAIR NO x

### program combined cycle units in 2010. 

# SO 2 

# Controls in 2010 The wide variety of SO 2 

### control options available to sources includes switching to low sulfur coal or employing various types of flue gas desulfurization units (FGDs), such as fluidized bed limestone units. FGDs on coal-fired generators are the principal means of controlling SO 2 

### . As discussed in detail above, 35 units in the ARP added new SO 2 

### controls in 2010. Sources added FGDs at 34 of the units in the CAIR SO 2 

### annual program. Across both programs the share of generation, measured in megawatt hours (MWh), at controlled units was 60 percent of coal-fired generation in 2010 (see Table 6 , below).


## Table 6: SO 2 

## Controls in 2010 on Coal-Fired Units in the ARP and CAIR Annual SO 2 

## Program

SO 2 Control Type Number of Units Share of Units Share of MWh Generation FGD 427 38% 59% Other 44 4% 1% Uncontrolled 643 58% 39% Note: Due to rounding, percentages shown may not add up to 100%. Source: EPA, 2011 

# NO x 

# Controls in 2010 Sources have a variety of options by which to reduce NO x

### emissions. New selective catalytic reduction units (SCRs), the most efficient NO x 

### controls, were installed at five generation units under the CAIR NO x

### ozone season program in 2010. Units with add-on controls — SCR or selective non-catalytic reduction (SNCR) — accounted for nearly two-thirds of coal-fired generation (59 percent) and 80 percent of generation at combined cycle units (gas- or oil-fired). Although 124 coal-fired units and 15 combined cycle units remain uncontrolled, they represent only two percent of coal-fired generation and one percent of combined cycle generation under the CAIR NO x

### ozone season program (see Table 7 , below).


## Table 7: NO x 

## Controls in 2010 CAIR NO x 

## Ozone Season Program

NO x Control Type Number of Coal-Fired Units Share of Coal-Fired MWh Generation Number of Combined Cycle Units (Gas- or Oil-Fired) Share of Combined Cycle (Gas- or Oil-Fired) MWh Generation Combustion 446 37% 66 13% Non-Controlled 124 2% 15 1% Other Control 38 1% 91 6% SCR 207 51% 317 80% SNCR 127 8% 0 0% Note: Due to rounding, percentages shown may not add up to 100%. Source: EPA, 2011


### Seven sources in the CAIR NO x

### annual program installed add-on controls in 2010. The 347 coal-fired units with add-on controls (either SCRs or SNCRs) generated 57 percent of annual generation, and the 379 combined cycle units with SCRs generated 75 percent of annual generation (see Table 8 , below). Similar to the CAIR NO x 

### ozone season program, uncontrolled units represent two percent of coal-fired generation and one percent of combined cycle generation under the CAIR NO x

### annual program.



## Table 8: NO x 

## Controls in 2010 CAIR NO x 

## Annual Program Share of Combined Cycle

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] NO x Control Type Number of Coal-Fired Units Share of Coal-Fired MWh Generation Number of Combined Cycle Units (Gas- or Oil-Fired) (Gas- or Oil-Fired) MWh Generation Combustion 436 38% 120 20% Non-Controlled 99 2% 19 1% Other Control 40 2% 88 4% SCR 222 49% 379 75% SNCR 125 8% 0 0% Note: Due to rounding, percentages shown may not add up to 100%. Source: EPA, 2011 

# Continuous Emission Monitoring Systems Accurate and consistent emissions monitoring is the foundation of a cap and trade system. 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. Sources use continuous emission monitoring systems (CEMS) or other approved methods. Part 75 requires sources to conduct stringent quality assurance tests of their monitoring systems, such as daily and quarterly calibration tests and a semiannual or annual relative accuracy test audit. These tests ensure that sources report accurate data and provide assurance to market participants that a ton of emissions measured at one facility is equivalent to a ton measured at a different facility. While many CAIR units with low levels of emissions did not have to use CEMS, the vast majority of NO x

### emissions — over 99 percent — were measured by CEMS. Similarly, CEMS monitored over 99 percent of SO 2 

### emissions including 100 percent from coal-fired units and 18 percent from oil-fired units. Coal-fired units were required to use CEMS for NO x

### concentration and stack gas flow rate to calculate and record their NO x

### mass emissions. Oil-fired and gas-fired units could use a NO x

### CEMS in conjunction with a fuel flow meter to determine NO x

### mass emissions. Alternatively, for oil-fired and gas-fired units that either operated infrequently or had very low NO x 

### emissions, Part 75 provided low-cost alternatives to conservatively estimate NO x 

### mass emissions. The relatively low percentage for oil-fired units with CEMS is consistent with the decline in oil-fired heat input, as most of these units were used infrequently and qualified for reduced monitoring.

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# Market Activity
SO 2 

# Allowance Market in 2010 Over the first decade of the ARP, allowance prices were stable and significantly lower than projected. When CAIR was proposed in late 2003, allowance prices were influenced by the more stringent CAIR SO 2 

### budget and the new compliance deadlines. With the start of the CAIR SO 2 

### program in 2010, the Acid Rain SO 2 

### market essentially has become the CAIR SO 2 

### market. See Table 9 , below, for a summary of the 2010 SO 2 

### allowance market.



## Table 9: SO 2 

## Allowance Market in Brief (close of 2010)

Total Value of the SO 2Allowance Market: $290 million Average Nominal Price: $19 per ton Total Allowance Volume (Allowable Emissions): 15,233,537 Note: Total value of allowance market is a snapshot based on the average nominal price as of December 2010 ($19/ton) and total allowance volume available for 2010 compliance. Source: EPA, 2011 and CantorCO2e Market Price Index, 2011 

# NO x 

# Allowance Markets in 2010

The 2010 CAIR NO x 

### ozone season allowance market continued its price decline from the previous year closing at the end of December at $30 per ton (see Figure 12 ). The annual NO x 

### allowance price, as reported by the CantorCO2e Market Price Index, climbed briefly to $716 early in 2010 and then declined to $325 per ton by the end of the year. 

## Figure 12: NO x 

## Annual and Ozone Season Allowance Spot Price (Prompt Vintage), January — December 2010

Note: Prompt vintage is the vintage for the current compliance year. Source: EPA, 2011 and CantorCO2e Market Price Index, 2011

### Clean Air Interstate Rule, Acid Rain Program, and Former NOx Budget Trading Program 2010 Progress Report | Progress Reports | Clean Air Markets | Air & Radiation | US EPA

http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html [10/6/2011 11:36:32 AM] EPA Home Privacy and Security Notice Contact Us http://www.epa.gov/airmarkets/progress/ARPCAIR10_01.html Print As-Is Last updated on Thursday, October 06, 2011 

### In 2010, the second year of the CAIR ozone season and annual NO x

### programs, CAIR sources emitted about 594,000 tons of NO x 

### during the ozone season (May through September), a 20 percent increase from 2009 levels, but still below the overall budget. CAIR sources emitted about 31,000 tons less than their overall ozone season budget, resulting in about 415,000 banked allowances. Not surprisingly, the downward tendency of ozone season allowance prices continued through most of 2010. Emissions of CAIR annual NO x

### were 1.4 million tons, about 82,000 tons less than the overall budget. The CAIR annual NO x 

### bank grew to more than 400,000 allowances. Generally, sources in a cap and trade program may consider several emission reduction alternatives and are allowed to trade allowances as part of their compliance strategies. By allowing trades, the overall market can achieve emission targets at a lower cost than through a command and control program because abatement costs are not the same for all sources. A market for emission allowances will emerge, and the allowance price will reflect the marginal cost of emission reductions. Emission control decisions will be made based on the cost of control options relative to the market price of allowances. The allowance price motivates those who have relatively low cost opportunities for emission reductions to make those investments and then sell their surplus allowances to those with higher marginal abatement costs. Looking at the CAIR NO x 

### ozone season allowance market, it has been EPA’s expectation that the CAIR annual NO x

### cap would be the binding constraint and absorb most of the capital costs of controls (i.e., SCRs), while the NO x

### ozone season allowance prices would primarily be driven by operating costs. As expected, the current CAIR NO x

### allowance prices are below the total expected control cost. However, in the middle of 2010, CAIR annual NO x

### allowance prices dipped below $500 per ton — the variable SCR cost and theoretical floor price — and remained there through the rest of the year. 

# Transaction Types and Volumes Allowance transfer activity includes two types of transfers: EPA transfers to accounts and private transactions. EPA transfers to accounts include the initial allocation of allowances by states or EPA, as well as transfers into accounts related to special set-asides. This category does not include transfers due to allowance retirements. Private transactions include all transfers initiated by authorized account representatives for any compliance or general account purposes. To help better understand the trends in market performance and transfer history, EPA classifies private transfers of allowance transactions into two categories: Transfers between separate and distinct economic entities, which may include companies with contractual relationships such as power purchase agreements, but excludes parent-subsidiary types of relationships. These transfers are categorized broadly as “economically significant trades.” Transfers within a company or between related entities (e.g., holding company transfers between a unit compliance account and any account held by a company with an ownership interest in the unit). While all transactions are important to proper market operation, EPA follows trends in the economically significant transaction category with particular interest because these transactions represent an actual exchange of assets between unaffiliated participants. In 2010, about a third of each program’s traded allowances were exchanged between unrelated parties, often with a broker facilitating the trade (see Table 10 , below).


## Table 10: 2010 Allowance Transfers under CAIR and ARP
Program Transfer Type Number of Allowances Transferred Share of Program Allowances Transferred

CAIR NO x Ozone Season Distinct Organizations 132,854 36% Related Organizations 237,151 64%

CAIR NO x Annual Distinct Organizations 344,758 39% Related Organizations 540,267 61%

ARP and CAIR SO 2 Annual Distinct Organizations 3,009,858 33% Related Organizations 6,056,910 66% Note: Due to rounding, percentages shown may not add up to 100%. Source: EPA, 2011 

### Brokers play an important role in the emissions allowance markets. They primarily facilitate and conduct trades between willing buyers and sellers, undertaking the direct costs of identifying trading partners and transacting sales at a price acceptable to both parties. In the allowance trading market, the fees charged by brokerage firms are often considered to be transaction costs. These costs associated with buying and selling allowances are generally low.

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