CHAPTER 16. ENVIRONMENTAL IMPACT ANALYSIS

TABLE OF CONTENTS

16.1 INTRODUCTION ............................................................................................................ 16 -1 16.2 AIR EMISSIONS ANALYSIS ......................................................................................... 16-1 16.2.1 Air Emissions Descriptions................................................................................ 16-1 16.2.2 Air Quality Regulation....................................................................................... 16-3 16.2.3 Global Climate Change...................................................................................... 16-4 16.2.4 Analytical Methods for Air Emissions .............................................................. 16-8 16.2.5 Effects on Power Pl ant Emissi ons ................................................................... 16-10 16.2.6 Effects on Upstream Fuel-Cycle Emissions .................................................... 16-10 16.2.7 Economic Valuation of Emissions Reductions................................................ 16-11 16.3 WETLAND, ENDANGERED AND THREATENED SPECIES, AND CULTURAL RESOURCES ........................................................................................... 16-18 16.4 SOCIOECONOMIC IMPACTS..................................................................................... 16-18 16.5 ENVIRONMENTAL JUSTICE IMPACTS................................................................... 16-19 16.6 NOISE AND AESTHETICS .......................................................................................... 16-19 16.7 SUMMARY OF ENVIRONMENTAL IMPACTS........................................................ 16-19 REFERENCES ..................................................................................................................... ... 16-22

LIST OF TABLES

Table 16.2.1 Summary of Emissions Reductions for Beverage Vending Machines (cumulative reductions, 2012–2042) ................................................................. 16-7

Table 16.2.2 Emissions Forecast for AEO 2009 Reference Case

......................................... 16-10

Table 16.2.3 Estimated Upstream Emissions of Air Pollutants as a Percentage of Direct Power Plant Combustion Em issions ................................................................ 16-11

Table 16.2.4 Estimates of Savings from CO 2 Emissions Reductions at All TSLs at a 7- Percent Discount Rate and 3-Per cent Discount Rate for Class A Equipment ........................................................................................................ 16-12

Table 16.2.5 Estimates of Savings from CO 2 Emissions Reductions at All TSLs at a 7- Percent Discount Rate and 3-Per cent Discount Rate for Class B Equipment ........................................................................................................ 16-12

Table 16.2.6 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 7-Percent Discount Ra te for Class A Equipment ...................................... 16-15

Table 16.2.7 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 7-Percent Discount Ra te for Class B Equipment ...................................... 16-16

16-i bvm_nopr_tsd_chapter16.doc16-ii bvm_nopr_tsd_chapter16.doc Table 16.2.8 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 3-Percent Discount Ra te for Class A Equipment ...................................... 16-16

Table 16.2.9 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 3-Percent Discount Ra te for Class B Equipment ...................................... 16-16

Table 16.4.1 Mean Life-Cycle Cost Savings fo r All Customers and Sub-Group, BVM (2008$) ............................................................................................................. 16-19

Table 16.7.1 Environm ental Impact Analysis Results Summary, Class A BVM Equipment ........................................................................................................ 16-20

Table 16.7.2 Environm ental Impact Analysis Results Summary, Class B BVM Equipment ........................................................................................................ 16-20CHAPTER 16. ENVIRONMENTAL IMPACT ANALYSIS

16.1 INTRODUCTION

This chapter describes potential env ironmen tal effects that may result from amended energy conservation standards for refrigerated be verage vending machines (BVMs) The U.S. Department of Energy (DOE)’s proposed energy c onservation standards are not site-specific, and would apply to all 50 states and U.S. territories. Therefore, none of the proposed standards would impact land uses, cause any direct disturbance to the land, or directly aff ect biological resources in any one area.

All of the potential trial standard leve ls (TSLs) are expected to reduce energy consumption in comparison to a baseline efficiency level. These changes in the demand for electricity and the costs of achieving these savings are the primary drivers in analyzing environmental effects. Estimates of source ener gy savings can be found in the utility impact analysis in chapter 14 of this technical support document (TSD ). Detailed discussion on TSLs can be found in chapter 9 of this TSD.

The primary impact of the TSLs is in air quality resulting from changes in power plant operations and capacity additions. Therefore, much of this chapter describes the air quality analysis. The latter part of the chapter desc ribes potential impacts to other environmental

resources.

16.2 AIR EMISSIONS ANALYSIS

The primary focus of the environmental analys is is the impact on air quality of a mended energy conservation standards for BVM equipment. The outcomes of the environmental analysis are driven by changes in power plant types and qu antities of electricity ge nerated under each of the alternatives. Changes in generation are describe d in the utility impact analysis in chapter 14.

16.2.1 Air Emissions Descriptions

For each of the TSLs, DOE calculated total power-sector emissions based on output from NEMS-BT model (see chapter 14 ). This analysis considers two pollutants: nitrogen oxides (NO x ) and mercury (Hg). An air pollutant is any substan ce in the air that can cau se harm to humans or the environment. Pollutants may be natural or man-made ( i.e. , anthropogenic) and may take the form of solid particles ( i.e. , particulates or particulate ma tter), liquid droplets, or gases. a DOE does not report sulfur dioxide (SO 2 ) emissions reduction from power plants because reductions from an energy conservation standard w ould not affect the overall level of SO 2 emissions in the United States due to emissions caps for SO 2 . This analysis also c onsiders carbon dioxide (CO 2 ).

Sulfur Dioxide (SO 2 )

In addressing SO 2 emissions, the Clean Air Act Amendments of 1990 set an SO 2 emissions cap on all power generation, but pe rmitted flexibility among generators through the

a More information on air pollution characteristics and regul ations is available on the U.S. Environment Protection Agent (EPA)’s website at www.epa.gov.

16-1 bvm_nopr_tsd_chapter16.docuse of emissions allowances and tradable permits. This SO 2 trading process (sometimes called “cap and trade”) implies that the standard wi ll have virtually no a ffect on total physical emissions because emissions will always be at, or near, the allowed emissions ceiling. Consequently, there is no direct SO 2 environmental benefit from a reduction in electricity use due to the proposed energy conservation standards, as long as there is enforcement of the emissions ceiling. But to the extent redu ced power generation demand decr eases the demand for and price of emissions allowance permits, there is an en vironmentally related economic benefit from the proposed energy conservation standards reducing SO 2 emissions allowance demand. Furthermore, over time, if emissions decline, ther e is greater flexibility in reducing the ceiling
amount.
Nitrogen Oxides (NO x )

NO x is the generic term for a group of highly r eactive gases, all of wh ich contain nitrogen and oxygen in varying amounts. Many of these gase s are colorless and odorless. However, one common pollutant, nitrogen dioxide (NO 2 ), along with particles in th e air can often be seen as a reddish-brown layer over many urban areas. NO 2 is the specific form of NO x reported in this document. NO x is one of the main ingredients involve d in the formation of ground-level ozone, which can trigger serious respiratory problems. It can contribute to the formation of acid rain, and can impair visibility in ar eas such as national parks. NO x also contributes to the formation of fine particles that can impair human health.

NO x form when fossil fuel is burned at high temperatures, as in a combustion process. The primary manmade sources of NO x are motor vehicles, electric ut ilities, and ot her industrial, commercial, and residential sour ces that burn fossil fuels. NO x can also be formed naturally. Electric utilities account fo r about 22 percent of NO x emissions in the United States.

Mercury (Hg)

Coal-fired power plants emit mercury found in coal during the burning process. While coal-fired power plants are the largest remain ing source of human-generated mercury emissions in the United States, they contri bute very little to th e global mercury pool or to contamination of U.S. waters. U.S. coal-fired power plants em it mercury in three different forms: oxidized mercury (likely to deposit within the United States); elemental mercury, which can travel thousands of miles before deposi ting to land and water; and mercur y that is in particulate form. Atmospheric mercury is deposited on land and in lakes, rivers, and estuaries through rain, snow, and dry deposition; once there, it can transform into methyl mercury and accumulate in fish tissue through bioaccumulation.

Americans are exposed to methyl mercur y primarily by eating contaminated fish. Because the developing fetus is the most sensitive to the toxic effects of methyl mercury, women of childbearing age are regarded as the populat ion of greatest concer n. Children exposed to methyl mercury before birth may be at increas ed risk of poor perfor mance on neurobehavioral tasks, such as those measuring attention, fine motor function, language skills, visual-spatial abilities, and verbal memory.

16-2 bvm_nopr_tsd_chapter16.docCarbon Dioxide (CO 2 )

Carbon dioxide (CO 2 ) is not a regulated or criteria po llutant (see below), but it is of interest because of its classi fication as a greenhouse gas (GHG) . GHGs trap the sun’s radiation inside the Earth’s atmosphere and either occur naturally in the atmosphere or result from human activities. Naturally occurring GHGs include water vapor, CO 2 , methane (CH 4 ), nitrous oxide (N 2 O), and ozone (O 3 ). Human activities, however, add to the levels of most of these naturally occurring gases. For example, CO 2 is emitted to the atmosphere when solid waste, fossil fuels (oil, natural gas, and coal), wood, and wood produc ts are burned. During the past 20 years, about three-quarters of anthropogenic ( i.e. , human-made) CO 2 emissions resulted from burning fossil fuels.

Concentrations of CO 2 in the atmosphere are naturally regulated by numerous processes, collectively known as the “carbon cycle.” The move ment of carbon between the atmosphere and the land and oceans is dominated by natural proce sses, such as plant photosynthesis. While these natural processes can absorb some of the anthropogenic CO 2 emissions produced each year, billions of metric tons are added to the atmosphere annually. In the U. S., CO 2 emissions from both energy generation and industr ial processes account for 8 4.6 percent of total U.S. GHG emissions. 7

16.2.2 Air Quality Regulation

In 1990, EPA amended its regulations implem en ting Title VI of the Clean Air Act to phase out in 2010 hydrochlorofluor ocarbons (HCFC) refrigerants, which are commonly used in refrigeration systems.

The Clean Air Act Amendments of 1990 list 188 toxic air pollutants that EPA is required to control. EPA has set national air quality stan dards for six common pollu tants (also referred to as “criteria” pollutants), two of which are SO 2 and NO x . Also, the Clean Air Act Amendments of 1990 gave EPA the authority to cont rol acidification and to require operators of electric power plants to reduce emissions of SO 2 and NO x . Title IV of the 1990 amendments established a capand-trade program for SO 2 intended to help control acid rain. This cap-and-trade program serves as a model for more recent programs with similar features.

In 2005, EPA issued the Clean Air Interstate Rule (CAIR) under sections 110 and 111 of the Clean Air Act (40 CFR Parts 51, 96, and 97). b CAIR would have permanently capped emissions of SO 2 and NO x in eastern states of the United States. CAIR was intended to achieve additional large re ductions of SO 2 and NO x emissions across 28 eastern st ates and the District of Columbia. States were to achie ve the required emission reducti ons using one of two compliance options: 1) meet an emission budget for each re gulated state by requiring power plants to participate in an EPA-administered interstate cap-and-trade system that caps emissions in two stages, or 2) meet an individua l state emissions budget through me asures of the state’s choosing. Phase 1 caps for NO x were to be in place in 2009. Phase 1 caps for SO 2 were to be in place in 2010. The Phase 2 caps for both pollutants were due in 2015.

b See http://www.epa.gov/cleanairinterstaterule/.

16-3 bvm_nopr_tsd_chapter16.docAlso in 2005, EPA issued the final rule enti tled “Standards of Performance for New and Existing Stationary Sources: Electric Steam Ge nerating Units,” under sections 110 and 111 of the Clean Air Act (40 CFR Parts 60, 63, 72, and 75). Th is rule, also called the Clean Air Mercury Rule, was closely related to the CAIR and esta blished standards of pe rformance for mercury emissions from new and existing coal-fired electr ic utility steam generating units. The Clean Air Mercury Rule regulated mercury emissions from coal-fired power plants. On February 8, 2008, the U.S. Court of Appeals for the District of Co lumbia Circuit (D.C. Circuit) issued its decision in State of New Jersey, et al. v. Environmental Protection Agency

, c in which the Court, among other actions, vacated the Clean Air Mercury Rule. With CAMR vacated, new or amended energy conservation standards would reduce Hg emissions.

On July 11, 2008, the U.S. Court of Appeals fo r the District of Columbia Circuit (D.C. Circuit) issued its decision in North Carolina v. Environmental Protection Agency

, d which vacated the Clean Air Interstate Rule (CAIR) issued by the U.S. Environmental Protection Agency on March 10, 2005. e On December 23, 2008, the D.C. Circuit decided to allow CAIR to remain in effect until it is replaced by a ru le consistent with th e court’s earlier opinion f . If left in place, or replaced by an equivalent program, CAIR would have permanently capped emissions of NO x in 28 eastern states and the Dist rict of Columbia. As with the SO 2 emissions cap, a cap on NO x emissions would have meant that energy co nservation standards would not likely have a physical effect on NO x emissions in states covered by the CAIR caps. While the caps would have meant physical emissions reductions in those St ates would not have resulted from the energy conservation standards that DOE is establishing, the standa rds might have produced an environmental-related economic impact in the fo rm of lower prices for emissions allowance credits, if large enough. DOE notes that the estimated total reduction in NO x emissions, including projected emissions or corresponding allowance credits in States covered by the CAIR cap, was insignificant and too small to affect allowance prices for NO x under CAIR. In contrast, new or amended energy conser vation standards would reduce NO x emissions in those 22 States that are not affected by CAIR.

16.2.3 Global Climate Change

Climate change has evolved into a matter of gl obal conce rn because it is expected to have widespread, adverse effects on natural resour ces and systems. A growing body of evidence points to anthropogenic sources of greenhouse gases, such as CO 2 , as major contributors to

c New Jersey v. EPA , 517 F.3d 574 (D.C. Cir. 2008), Case No. 05-1097, 2008 WL 341338, at *1 (D.C. Cir. Feb. 8, 2008).
d North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008), Case No. 05-1244, 2008, WL 2698180 at *1 (D.C. Cir. July 11, 2008).

e See http://www.epa.gov/cleanairinterstaterule/.
f North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008). The court noted in part that environmental equivalence of the CAIR rule is sought: “...This court has further noted that it is appropriate to remand w ithout vacatur in particular occasions where vacatur “would at leas t temporarily defeat...the enhanced pr otection of the environmental values covered by [the EPA rule at issue].” Envtl. Def. Fund, Inc. v. Adr’r of the United States EPA , 898 F.2d 183, 190 (D.C. Cir. 1990). Here, we are convinced that, notwithstanding the relative flaws of CAIR, allowing CAIR to remain in effect until it is replaced by a rule consistent with our opinion would at least temporarily preserve the environmental values covered by CAIR. Accordingly, a remand without vacatur is appropriate in this case...”

16-4 bvm_nopr_tsd_chapter16.docclimate change. Because this Rule, if finalized, will likely decrease CO 2 emission rates from the fossil fuel sector in the United States, the Depa rtment here examines the impacts and causes of climate change and then the potential impact of the Rule on CO 2 emissions and global warming. Impacts of Climate Chan ge on the Environment

Climate is usually defined as the average we ather, over a period ranging from months to many years. Climate change refers to a change in the state of the climate, which is identifiable through changes in the mean and/or th e variability of its properties ( e.g. , temperature or precipitation) over an extended perio d, typically decades or longer.

The World Meteorological Or ganization and United Natio ns Environment Programme (UNEP) established the Intergovernmental Pa nel on Climate Change (IPCC) to provide an objective source of information about climate change. According to the IPCC Fourth Assessment Report (IPCC 2007), climate change is consistent with observed changes to the world’s natural systems; the IPCC expects these changes to continue.

Changes that are consistent with warming include warming of the world’s oceans to a depth of 3000 meters; global average sea level rise at an average rate of 1.8 mm per year from 1961 to 2003; loss of annual average Arctic sea ice at a rate of 2.7 percent per decade, changes in wind patterns that affect extra-tropical storm tracks and temperature patterns, increases in intense precipitation in some parts of the world, as well as increased drought a nd more frequent heat waves in many locations worldwide, and numerous ecological changes.

Looking forward, the IPCC describes contin ued global warming of about 0.2 °C per decade for the next two decades under a wide range of emission scenarios for CO 2 , other greenhouse gases (GHG)s, and aerosols. After that period, the rate of increase is less certain. The IPCC Report describes increases in average global temperatures of about 1.1 °C to 6.4 °C at the end of the century relative to today. These in creases vary depending on the model and emissions scenarios.

The IPCC Report describes incremental impacts a ssociated with the rise in temperature. At ranges of incremental increases to the global average temperature, IPCC reports, with either high or very high confidence, that there is likely to be an increas ing degree of impacts such as coral reef bleaching, loss of wild life habitat, loss to specific ecosystems, and negative yield impacts for major cereal crops in the tropics, but al so projects that there likely will be some beneficial impacts on crop yiel ds in temperate regions.

Causes of Climate Change

The IPCC Report states that the world has warm ed by about 0.74 °C in the last 100 years. The IPCC Report finds that most of the temperat ure increase since the mi d-20th century is very likely due to the increase in anth ropogenic concentrations of CO 2 and other long-lived greenhouse gases (GHGs) such as methane and nitrous oxide in the atmosphere, rather than from natural causes.

16-5 bvm_nopr_tsd_chapter16.docIncreasing the CO 2 concentration partially blocks the earth’s re-radiation of captured solar energy in the infrared band, inhibits the radiant cooling of the earth, and ther eby alters the energy balance of the planet, which gradually increases its average temperature. The IPCC Report estimates that currently, CO 2 makes up about 77 percent of the total CO 2 -equivalent g global warming potential in GHGs emitted from hu man activities, with th e vast majority (74 percent) of the CO 2 attributable to fossil fuel use. For the future, the IPCC Report describes a wide range of GHG emissions scenarios, but under each scenario CO 2 would continue to comprise above 70 percent of the total global warming potential.

Stabilization of CO 2 Concentrations

Unlike many traditional air pollutants, CO 2 mixes thoroughly in the entire atmosphere and is long-lived. Th e residence time of CO 2 in the atmosphere is long compared to the emission processes. Therefore, the global cumulative emissions of CO 2 over long periods determine CO 2 concentrations because it takes hundreds of y ears for natural processes to remove the CO 2
. Globally, 49 billion metric tons of CO 2 –equivalent of anthropogenic (man-made) greenhouse gases are emitted every year. Of this annual total, fossil fuels c ontribute about 29 billion metric tons of CO 2
. h

Researchers have focused on considering atmospheric CO 2 concentrations that likely will result in some level of globa l climate stabilization, and the emission rates associated with achieving the “stabilizing” concentrations by part icular dates. They associate these stabilized CO 2 concentrations with temperature increases that plateau in a defined range. For example, at the low end, the IPCC Report scenarios target CO 2 stabilized concentrations range between 350 ppm and 400 ppm (essentially today’s value)—because of climate inertia, concentrations in this low end range would still result in temperatures projected to increase 2.0 °C to 2.4 °C above preindustrial levels i (about 1.3 o C to 1.7 o C above today’s levels). To achieve concentrations between 350 ppm to 400 ppm, the IPCC scenarios pr esent that there would have to be a rapid downward trend in total annual gl obal emissions of greenhouse gase s to levels that are 50 to 85 percent below today’s annual emission rates by no later than 2050. Since it is assumed that there would continue to be growth in global populations and substantial increases in economic production, the scenarios identify required re ductions in greenhouse gas emissions intensity (emissions per unit of output) of more than 90 pe rcent. However, even at these rates, the scenarios describe some warming and some climate change is projected due to already accumulated CO 2 and GHGs in the atmosphere.

g GHGs differ in their warming influence (radiative forci ng) on a global climate syst em due to their different radiative properties and lifetimes in the atmosphere. Thes e warming influences may be expressed through a common metric based on the radiative forcing of CO 2 ( i.e. , CO 2 -equivalent). CO 2 equivalent emission is the amount of CO 2 emission that would cause the same- time integrated radiative forcing, over a given time horizon, as an emitted amount of other long- lived GHG or mixture of GHGs.
h Other non-fossil fuel contributors include CO 2 emissions from deforest ation and decay from agriculture biomass; agricultural and industrial emissions of methane; and emissions of nitrous oxide and fluorocarbons.
i IPCC Working Group 3 Table TS 2

16-6 bvm_nopr_tsd_chapter16.docThe Beneficial Impact of the Rule on CO 2 Emissions

If finalized, it is anticipated that the Rule will reduce energy-related CO 2 emissions, particularly those associated w ith energy consumption in buildings . In the United States, the U.S. Energy Information Administration reports in its 2008 Annual Energy Outlook (DOE/EIA 2008) j that U.S. annual energy-related emissions of CO 2 in 2006 were about 5.9 billion metric tons (about 20 percent of the world energy-related CO 2 emissions and about 12 pe rcent of total global greenhouse gas emissions), of which 2.32 billion tons were attributed to residential and commercial buildings sector (inc luding related energy-using equipm ent such as BVM). Most of the greenhouse gas emissions attributed to resi dential and commercial buildings are emitted from fossil fuel-fired power plants that generate el ectricity used in this sector. In the AEO 2008 reference case, EIA projected that annual energy-related CO 2 emissions would grow from 5.9 billion metric tons in 2006 to 6.4 billion metric tons in 2030, an incr ease of 8.5 percent (see Table 16.2.1 , which is based on AEO 2008), while emi ssions attributable to electricity consumption by the commercial sector would grow from 0.8 to 1.1 billion tons, an increase of 26.1 percent.

Table 16.2.1 Summary of Emissions Reducti ons for Beverage Vending Machines (cumulative reductions, 2012–2042)

TSLs for Class A TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 Emissions Reductions CO 2 (Mt*) 0.23 1.01 2.27 3.56 4.19 4.61 5.59 NO x (kt**) 0.03 0.14 0.31 0.48 0.57 0.62 0.75

0 0 0 0 0 0 0 Hg (t†) Low High 0.004 0.017 0.038 0.059 0.069 0.076 0.093 Trial Standard Levels for Class B TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 N/A Emissions Reductions CO 2 (Mt) 0.07 0.11 0.53 0.61 1.64 1.83 - NO x (kt) 0.01 0.01 0.07 0.08 0.22 0.25 -

0 0 0 0 0 0 - Hg (t) Low High 0.001 0.002 0.009 0.010 0.027 0.030 - * Mt = million metric tons ** kt = thousand tons † t = tons Negative values indicate emission increases. Detail may not sum to total due to rounding.
As computed for the AEO 2008 reference case and extrapolated to 2042, the cumulative U.S. energy-related CO 2 emissions between 2012 and 2042 are described at about 209 billion metric tons. The estimated cumulative CO 2 emission reductions from a BVM Efficiency Standard (shown as a range of alternative Trial Standard Levels) during this same 30-year period are indicated in Table 16.2.1 . The estimated CO 2 emission reductions in Table 16.2.1 are calculated using NEMS-BT model.

j www.eia.doe.gov/oiaf/archive/aeo08/index.html

16-7 bvm_nopr_tsd_chapter16.docThe estimated savings, which are at most 0.001 percent of U.S. energy-related emissions of CO 2 (TSL 6 for BVMs), comprise an even sma ller fraction of U.S. emissions of greenhouse gases and of world emissions of greenhouse gase s. However, the savings would likely reduce overall U.S. CO 2 emissions, as compared to U.S. CO 2 emissions absent an increase in the required efficiency of BVMs.

The Incremental Impact of th e Rule on Climate Change

It is difficult to correlate specific emission rates with atmospheric concentrations of CO 2 and specific atmospheric concentrations with future temperatures because the IPCC Report describes a clear lag in the climate syst em between any given concentration of CO 2 (even if maintained for long periods) and the subsequent average worldwide and regional temperature, precipitation, and extreme weat her regimes. For example, a major determinant of climate response is “equilibrium climate sensitivity”, a measure of the climate system response to sustained radioactive forcing. It is defined as the global average surface warming following a doubling of CO 2 concentrations. The IPCC Report descri bes its estimated, numeric value as about 3 °C, but the likely range of that value is 2 °C to 4.5 °C, with cloud feedbacks the largest source of uncertainty. Further, as illustrated above, the IPCC Report scenarios for stabilization rates are presented in terms of a range of concen trations, which then corr elates to a range of temperature changes. Thus, climate se nsitivity is a key uncertainty for CO 2 mitigation scenarios that aim to meet specific temperature levels.

Because of how complex global climate systems ar e, it is difficult to know to what extent and when particular CO 2 emissions rates will impact global warming. However, as Table 16.2.1 indicates, the Rule will likely reduce CO 2 emissions rates from the fossil fuel sector.

16.2.4 Analytical Methods for Air Emissions

NEMS-BT incorporates capabilitie s to assess compliance with SO 2 restrictions specified in the Clean Air Act and its amendments. Clean air act provisions include New Source Performance Standards, and Re vised New Source Performance Standards. The version of NEMS-BT in 2008 also included provisions for th e Clean Air Interstate Rule (CAIR), which imposes stricter restrictions on SO 2 and NO x for some states, and the Clean Air Mercury Rule (CAMR), which imposed a national mercury (Hg) constraint. On July 11, 2008, the U.S. Court of Appeals for the District of Columbia Ci rcuit (D.C. Circuit) i ssued its decision in North Carolina v. Environmental Protection Agency , remanded the CAIR (531 F.3d 896 [D.C. Cir. 2008]). On December 23, 2008, the D.C. Circuit decide d to allow CAIR to remain in effect until it is replaced by a rule consistent with the court's earlier opinion. k If left in place, or replaced by an equivalent program, in addi tion, DOE notes that the D.C. Ci rcuit left intact EPA’s 1998 NO x

k North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008). The court noted in part that environmental equivalence of the CAIR rule is sought: “...This court has further noted that it is appropriate to remand without vacatur in particular occasions where vacatur “would at least temporarily defeat . . . the enhanced protection of the environmental values covered by [the EPA rule at issue].” Envtl. Def. Fund, Inc. v. Adm’r of the United States EPA

, 898 F.2d 183, 190 (D.C. Cir.1990). Here, we are convinced that, notwithstanding the relative flaws of CAIR, allowing CAIR to remain in effect until it is replaced by a rule consiste nt with our opinion would at least temporarily preserve the environmental values covered by CAIR. Accordingly, a re mand without vacatur is appropriate in this case.”

16-8 bvm_nopr_tsd_chapter16.docSIP Call rule, which capped seasonal (summer) NO x emissions from electric generating units and other sources in 23 jurisdictions, and gave those jurisdictions the option to participate in a cap and trade program. 63 FR 57356, 57359 (Oct. 27, 1998). l The SIP Call rule may provide a similar, although less extens ive, regional cap and may limit actual reduction in NO x emissions from revised standards occurring in stat es participating in the SIP Call rule.

Therefore, DOE established NO x emissions specified by NEMS-BT as the basis to estimate the reduction in NO x emissions. These are the national emissions of NO x emissions remaining with the CAIR rule in place, and would be the amount that could be reduced by the reduction of energy consumption in the non-CAIR states. Table 16.2.1 shows the NO x emission reductions calculated by TSL.

DOE also is able to report an estimate of the physical quantity changes in mercury (Hg) emissions associated with an energy conser vation standard. Because the CAMR was not temporarily left in place by the court (as CAIR was) and has no backup rule like the SIP, DOE did not use the NEMS-BT model to estimate merc ury emissions. DOE established a range of mercury rates to estimate the mercury emissions that could be reduced through standards. DOE’s low estimate assumed that future standards woul d displace electrical gene ration from natural gasfired power plants, resulting in an effective emission rate re duction of zero. The low-end emission rate reduction is zero because natural gas-fired power plants have virtually zero mercury emissions associat ed with their operation.

DOE’s high estimate was based on a nationw ide mercury emission rate from AEO2008. Because power plant emission rates are a function of local regulation, scrubbers, and the mercury content of coal, it is extremely difficult to iden tify a precise high-end emission rate. Therefore, the most reasonable estimate is based on the assu mption that all displaced coal generation would have been emitting at the average emission rate for coal generation as specified by AEO2008. As noted previously, because virtually all mercury em itted from electricity generation is from coalfired power plants, DOE based the emission rate on the tons of mercury emitted per TWh of coal-generated electricity due to the standard s considered in the utility impact analysis. Table 16.2.1 shows the estimated reduction in mercury emissions from 2012 to 2042.

Coal-fired electric generation is the single largest source of electricity in the United States. Because the mix of coals used signifi cantly affects the em issions produced, the model includes a detailed representation of coal suppl y. The model considers the rank of the coal as well as the sulfur contents of the fuel used when determining optimal dispatch.

l In the NO x SIP Call rule, EPA found that sources in the District of Columbia and 22 “upwind” states were emitting NO x (an ozone precursor) at levels that significantly contributed to “downwind” states not attaining the ozone NAAQS or at levels that interfered with states in a ttainment maintaining the ozone NAAQS. To ensure that downwind states attain or continue to attain the ozone NAAQS, EPA established a region-wide cap for NO x emissions from certain large combustion sources and set a NO x emissions budget for each state. Unlike the cap that CAIR would have established, the NO x SIP Call rules cap only constrains seasonal (summertime) emissions. To comply with the NO x SIP Call rules, states could elect to participate in the NO x Budget Trading Program. Under this program, each emission source is required to have one allowance for each ton of NO x emitted during the ozone season. States have flexibility in how they allocate allowances through their State Implementation Plans, but states must remain within the EPA-established budget. Em ission sources are allowed to buy, sell, and bank NO x allowances as appropriate. On April 16, 2008, EPA determined that Georgia is no longer subject to the NO x SIP Call rule. 73 FR 21528 (April 22, 2008).

16-9 bvm_nopr_tsd_chapter16.docWithin the NEMS-BT model, planning options fo r achieving emissions restrictions in the Clean Air Act Amendments include installing pollution control equipment on existing power plants and building new power plants with lo w emission rates. These methods for reducing emission are compared to dispatching options such as fuel switching and allowance trading. Environmental regulations also a ffect capacity expansion decisions . For instance, new plants are not allocated SO 2 emissions allowances according to the Clean Air Act Amendments. Consequently, the decision to build a particular capacity type must consider the cost (if any) of obtaining sufficient allowances. This could involv e purchasing allowances or over complying at an existing unit.

Modeling of SO 2 trading tends to imply that the phys ical emissions effects will be zero, as long as emissions are at the allowed ceiling. Because SO 2 has been regulated with emissions caps for more than a decade, and no emissions reductions are reported from the NEMS-BT forecast model, DOE does not report SO 2 results here. This assumption is consistent with previous DOE environmental assessment documents. 1

16.2.5 Effects on Power Plant Emissions

Table 16.2.2 shows reference power plant emi ssions in selected years. The Annual Energy Outlook 2009 (AEO 2009) Reference case emissions are the emissions shown by the NEMS-BT model to result if none of the TSLs are promulgated.

Table 16.2.2 Emissions Forecast fo r AEO 2009 Reference Case

NEMS-BT Results: 2006 2010 2015 2020 2025 2030 CO 2 (Million metric tons/year) *

, ** 2,364 2,388 2,437 2,495 2,568 2,720 NO x (Thousand tons/year)† 3,412 2,370 2,087 2,097 2,096 2,115 Hg (tons/year)† 49.04 45.18 29.65 29.46 29.74 30.09 * Metric tons, equivalent to 1.1 short tons ** Emissions from all energy-related sources † Emissions from electric generation

16.2.6 Effects on Upstream Fuel-Cycle Emissions

Fuel-cycle emissions refer to the emissions as sociated with the amount of energy used in the upstream production and downstream consumpti on of electricity, including energy used at the power plant. Upstream processes include the mining of coal or extraction of natural gas, physical preparatory and cleaning processes, and transportation to the power plant. The NEMSBT does a thorough accounting of emissions at the power plant due to downstream energy consumption, but does not account for upstream emissions ( i.e. , emissions from energy losses during coal and natural gas produc tion). Thus, this analysis repor ts only power plant emissions.

However, previous DOE environmental assessment documents have developed qualitative estimates of affects on upstream fu el-cycle emissions. These emissions factors provide the reader with a sense of the possible magnitude of upstream effects. These upstream emissions would be in addition to emissions from direct combustion. Relative to the entire fuel cycle, estimates based on the work of Dr. Mark DeLuchi, and reported in earlier DOE environmental assessment documents, find that an amount approximately equal to eight percent, by mass, of emissions (including SO 2 ) from coal production are due to mining, preparation that

16-10 bvm_nopr_tsd_chapter16.docincludes cleaning the coal, and transporta tion from the mine to the power plant. 1, 2 Transportation emissions include emissions from th e fuel used by the mode of transportation that moves the coal from the mine to the power plant.

In addition, based on Dr. DeLuchi’s work, DOE estimated that approx imately an amount equal to 14 percent of emissions from natural gas production result from upstream processes. Emission factor estimates and corresponding percen tages of contributions of upstream emissions from coal and natural gas production, relativ e to power plant emissions, are shown in Table 16.2.3 for CO 2 , and NO x . The percentages are relative to power plant emissions and provide a means to estimate upstream emission savings based on changes in emissions from power plants. The previous section i ndicates slight overa ll reductions in CO 2 , and NO x . Thus, very small reductions in upstream emissions of ai r pollutant could be expected. This approach does not address mercury emissions.
Table 16.2.3 Estimated Upstream Emissions of Ai r Pollutants as a Percentage of Direct Power Plant Combustion Emissions

Pollutant Percent of Coal Combustion Emissions Percent of Natural Gas Combustion Emissions CO 2 2.7 11.9 NO x 5.8 40

16.2.7 Economic Valuation of Emissions Reductions

In addition to the estimation of reductions in physical emissions from an energy conservation standard, the analysis also considered the monetary benefits associated w ith these reductions.

Carbon Dioxide (CO 2 )

During the preparation of its most recent revi ew of the state of climate science, the Intergovernmental Panel on Climate Change (IPCC) identified various estimates of the present value of reducing CO 2 emissions by one ton over the life th at these emissions would remain in the atmosphere. The estimates reviewed by the IP CC spanned a range of values. In the absence of a consensus on any single estimat e of the monetary value of CO 2 emissions, DOE used an estimate identified by the study cited in Summary for Policymakers prepared by Working Group II of the IPCC’s Fourth Assessment Report to calculate the potentia l monetary value of the CO 2 reductions likely to result from the standa rds under consideration in this rulemaking.

To put the potential monetary benefits from reduced CO 2 emissions into a form that is likely to be most useful to decision makers and interested parties, the estimated year-by-year reductions in CO 2 emissions were converted into moneta ry values and these resulting annual values were then discounted over the life of the affected applian ces to the present using both 3 percent and 7 percent discount ra tes. DOE applied an annual grow th rate of 2.4 percent to the value of SCC, as suggested by the IPCC Wo rking Group II (2007, p. 822), based on estimated increases in damages from future emissions re ported in published studies . As a result, DOE is assigned a range for the SCC of $0 to $20 (2007$) per ton of CO 2 emissions. These estimates were based on an assumption of no benefit to an average benefit value reported by the IPCC as

16-11 bvm_nopr_tsd_chapter16.docthe Social Cost of Carbon (SCC). m The resulting estimates of th e potential range of the present value of benefits associat ed with the reduction of CO 2 emissions are reflected in Table 16.2.4 and Table 16.2.5 for Class A and Class B equipment, respectively.

Table 16.2.4 Estimates of Savings from CO 2 Emissions Reductions at All TSLs at a 7-Percent Discount Rate and 3-Percent Di scount Rate for Class A Equipment

TSL Estimated Cumulative CO 2 (Mt) Emission Reductions Value of Estimated CO 2 Emission Reductions (Million 2007$) at 7% Discount Rate Value of Estimated CO 2 Emission Reductions (Million 2007$) at 3% Discount Rate 1 0.23 0 – 2.2 0 – 4.3 2 1.01 0 – 9.7 0 – 18.9 3 2.27 0 – 21.9 0 – 42.5 4 3.56 0 – 34.3 0 – 66.6 5 4.19 0 – 40.4 0 – 78.5 6 4.61 0 – 44.5 0 – 86.4 7 5.59 0 – 53.9 0 – 104.7
Table 16.2.5 Estimates of Savings from CO 2 Emissions Reductions at All TSLs at a 7-Percent Discount Rate and 3-Percent Di scount Rate for Class B Equipment

TSL Estimated Cumulative CO 2 (Mt) Emission Reductions Value of Estimated CO 2 Emission Reductions (Million

2007) at 7% Discount Rate Value of Estimated CO 2 Emission Reductions (Million 2007$) at 3% Discount Rate 1 0.07 0 – 0.7 0 – 1.3 2 0.11 0 – 1.0 0 – 2 3 0.53 0 – 5.1 0 – 10 4 0.61 0 – 5.9 0 – 11.4 5 1.64 0 – 15.8 0 – 30.8 6 1.83 0 – 17.6 0 – 34.2
The IPCC estimate used as the upper bound value was derived from an estimate of the mean value of worldwide impacts from potential climate impacts caused by CO 2 emissions, and not just the effects likely to occur within the Un ited States. DOE considers that in estimating a monetary value for CO 2 emission reductions, the values should be restricted to a representation of those costs/benefits likely to be experienced in the United Stat es and expects that such values would be lower than comparable global values. There currently are no consensus estimates for the U.S. benefits likely to result from CO 2 emission reductions. However, DOE believes it is

m

During the preparation of its most recent review of the state of climate sc ience, the Intergovernmental Panel on Climate Change (IPCC) identified various estimates of th e present value of reducing carbon-dioxide emissions by one ton over the life that these emissions would remain in the atmosphere. The estimates reviewed by the IPCC spanned a range of values. In the absence of a consensus on any single estimate of the monetary value of CO 2 emissions, DOE used the estimates identified by the study cited in Summary for Policymakers prepared by Working Group II of the IPCC’s Fourth Assessment Report to estimate the potential monetary value of CO 2 reductions likely to result from standards finalized in this rulemaking. Ac cording to IPCC, the mean so cial cost of carbon (SCC) reported in studies published in peer-reviewed journals was $43 per ton of carbon. This translates into about $12 per ton of carbon dioxide. The literature review (Tol 2005) from which this mean was derived did not report the year in which these dollars were denominated. However, we understand this estimate was denominated in 1995 dollars.

16-12 bvm_nopr_tsd_chapter16.docappropriate to use U.S. benefit values, where available, and not world benefit values, in its analysis. n

Given the uncertainty surrounding estimates of the social cost of carbon, DOE previously concluded that relying on any single estimate may be inadvisable because that estimate will depend on many assumptions. Working Group II’s contribution to the “Fourth Assessment Report” of the IPCC notes the following:

The large ranges of SCC are due in the large part to differenc es in assumptions regarding climate sensitivity, response lags, the treatm ent of risk and equity, economic and noneconomic impacts, the inclusion of potential ly catastrophic losses, and discount rates. o

Because of this uncertainty, DOE previously used the SCC value from Tol (2005), which was presented in the IPCC’s “Fourth Assessmen t Report” and provided a comprehensive metaanalysis of estimates for the value of SCC. Tol released an update of his 2005 meta-analysis in September 2007 that reported an increase in th e mean estimate of SCC from $43 to $71 per ton carbon. Although the Tol study was updated in 2007, the IPCC has not adopted the update. As a result, DOE previously decided to continue to rely on the st udy cited by the IPCC. DOE notes that the conclusions of Tol in 2007 are simila r to the conclusions of Tol in 2005. In 2007, Tol continues to indicate that th ere is no consensus regarding th e monetary value of reducing CO 2 emissions by 1 ton. The broad range of values in both Tol studies are the result of significant differences in the methodologies used in the stud ies Tol summarized. According to Tol, all of the studies have shortcomings, largely because the s ubject is inherently complex and uncertain and requires broad multidisciplinary knowledge. Thus, it was not certain that the values reported in Tol in 2007 are more accurate or representativ e than the values re ported in Tol in 2005.

DOE uses the range of values based on the values presented in Tol (2005). Additionally, DOE applied an annual growth rate of 2.4 percent to the value of SCC, as suggested by the IPCC Working Group II (2007, p. 822). This growth rate is based on estimated increases in damage from future emissions that published studies ha ve reported. Because the values in Tol (2005) were presented in 1995 dollars, DOE calculated more current values, assigning a range for SCC of $0 to $20 (2007$) per ton of CO 2 emissions.

The upper bound of the range DOE used is based on Tol (2005), which reviewed 103 estimates of SCC from 28 published studies. Tol concluded that when onl y peer-reviewed studies published in recognized journals are considered, “climate change impacts may be very uncertain but [it] is unlikely that the marginal damage costs of carbon dioxide emissions exceed $50 per ton carbon [comparable to a 2007 value of $20 per ton carbon dioxide when expressed in 2007 U.S. dollars with a 2.4 percent growth rate].”
In setting a lower bound of $0, DOE agrees with the IPCC Working Group II (2007) report that “significant warming across the glob e and the locations of significant observed

n In contrast, most of the estimates of costs and benefits of increasing the efficiency of BVMs include only economic values of impacts that would be experienced in the U.S. DOE generally does not consider impacts on manufacturers that occur solely outside of the United States.

o “Climate Change 2007—Impacts, Adaptation and Vulnerability.” Contribution of Working Group II to the “Fourth Assessment Report” of the IPCC, Available at www.ipcc. ch/ipccreports/ar4-wg2.htm (last accessed April, 2009).

16-13 bvm_nopr_tsd_chapter16.docchanges in many systems consistent with warming is very unlikely to be due solely to natural variability of temperatures or natural variability of the system s” (p. 9), and thus tentatively concludes that a global value of zero for reducing emissions ca nnot be justified. However, DOE concludes that it is reasonable to allow for the possibility that the SCC for the United States may be quite low. In fact, some of the studies looked at in Tol (2005) reported ne gative values for the SCC. DOE assumes that it is most appropriate to use U.S. benefit values rather than world benefit values in its analysis, and U.S. values will likely be lower than the global values. As indicated above, DOE, together with other Fede ral agencies, is now reviewing whether this previous analysis should be modified. However, it is very unlikely that possible changes in this methodology would affect the conclusi ons reached in this rulemaking.

Nitrogen Oxides ( NO x ) and Mercury

DOE also investigated the potential monetary benef it of reduced SO 2 , NO x , and Hg emissions from the TSLs it considered. As previ ously stated, DOE’s initial analysis assumed the presence of nationwide emission caps on SO 2 and Hg, and caps on NO x emissions in the 28 States covered by CAIR. In the presence of these caps, DOE concluded that no physical reductions in power sector emissions would occur, but that the lower generation requirements associated with energy conservation standards could put downward pressure on the prices of emissions allowances in cap and trade markets. Es timating this effect is very difficult because of factors such as credit banking, which can change the trajectory of prices. DOE has further concluded that the effect from energy conservation standards on SO 2 allowance prices is likely to be negligible, based on runs of the NEMS-BT model.

Because the courts have decided to allow the CAIR rule to remain in effect, projected annual NO x allowances from NEMS-BT are sti ll relevant. In DOE’s analysis, NO x emissions are controlled by the CAIR regional regulatory sy stem, where the reduction of energy consumption through this rulemaking is too small to have any net effect on either the physical emissions of NO x or the price of emissions in the cap-and- trade system covering the 28 CAIR states. For Class A Equipment, NO x emission reductions range from 0.03 to 0.75 kt for the TSLs considered. These changes in NO x emissions (from the non-CAIR states) are extremely small, ranging from approximately 0.000045 to 0.001 per cent of the national base case emissions forecast by NEMS-BT, depending on the TSL. For Class B Equipment, NO x emission reductions range from nearly 0.01 to 0.25 kt for the TSLs considered. These changes in NO x emissions are extremely small, ranging from 0.00014 to 0.00037 percent of the national base case emissions forecast by NEMS-BT, depending on the TSL. Even if the CAIR-state savings were significantly larger than this, they would be too small to have any noticeable impact on price or total emissions.

DOE estimated the national monetized benefits of NO x in the non-CAIR states and national Hg emissions reductions from the proposed standards based on environmental damage estimates from the literature. Available estimates suggest a very wide range of monetary values for NO x emissions, ranging from $370 per metric ton to $3,80 0 per metric ton of NO x from

16-14 bvm_nopr_tsd_chapter16.docstationary sources, measured in 2001$, p or a range of $432 per ton to $4,441 per metric ton in 2008$.

DOE conducted research and determined that the basic science linking mercury emissions from power plants to impacts on human s is considered highly uncertain. However, DOE identified two estimates of the environmen tal damage of mercury based on two estimates of the adverse impact of childhood exposure to methyl mercury on IQ for American children, and subsequent loss of lifetime economic productiv ity resulting from these IQ losses. The highend estimate is based on an estimate of the current aggregate cost of the loss of IQ that results from exposure of American children of U.S. powe r plant origin of $1.3 billion per year in year 2000$, which is $32.6 million per metric ton emitted per year (2007$). q The low-end estimate is $664,000 per metric ton emitted in 2004$ or $739,000 per metric ton in 2007$), which DOE derived from a published evaluation of mercury c ontrol using different methods and assumptions from the first study, but also based on the pres ent value of the lifetime earnings of children exposed. r The resulting estimates of the potential range of the presen t value benefits associated with the national reduction of NO x and Hg emissions are reflected in Table 16.2.6 through Table 16.2.9 for Class A and B Equipment.

Table 16.2.6 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 7-Percent Discount Rate for Class A Equipment

TSL Estimated Cumulative NO x

(kt) Emission

Reductions Value of Estimated NO x Emission

Reductions (Thousand 2007$) Estimated Cumulative

Hg (tons) Emission Reductions Value of Estimated Hg Emission Reductions

(Thousand 2007$) 1 0.03 5 – 50 0 – 0.004 0 – 44 2 0.14 21 – 221 0 – 0.017 0 – 196 3 0.31 48 – 497 0 – 0.038 0 – 441 4 0.48 76 – 778 0 – 0.059 0 – 690 5 0.57 89 – 918 0 – 0.069 0 – 814 6 0.62 98 – 1010 0 – 0.076 0 – 896 7 0.75 119 – 1224 0 – 0.093 0 – 1086

p 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities. OMB Office of Informa tion and Regulatory Affairs, Washington, D.C.

q Trasande, L., et al., “Applying Cost Analyses to Drive Policy that Prot ects Children” 1076 ANN. N.Y. ACAD. SCI. 911 (2006).

r Ted Gayer and Robert Hahn, Designing Environmental Policy: Lessons from the Regulation of Mercury Emissions, Regulatory Analysis 05-01. AEI-Brookings Joint Center for Regulatory Studies, Wa shington, D.C., 31 pp., 2004. A version of this paper was published in the Journal of Regulatory Economics in 2006. The estimate was derived by back-calculating the annual benefits per ton from the ne t present value of benefits reported in the study.

16-15 bvm_nopr_tsd_chapter16.docTable 16.2.7 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 7-Percent Discount Rate for Class B Equipment

TSL Estimated Cumulative NO x

(kt) Emission

Reductions Value of Estimated NO x Emission

Reductions (Thousand 2007$) Estimated Cumulative

Hg (tons) Emission Reductions Value of Estimated Hg Emission Reductions

(Thousand 2007$) 1 0.01 2 – 16 0-0.001 0 – 14 2 0.01 2 – 23 0-0.002 0 – 21 3 0.07 11 – 116 0-0.009 0 – 103 4 0.08 13 – 133 0-0.010 0 – 118 5 0.22 35 – 359 0-0.027 0 – 319 6 0.25 39 – 400 0-0.030 0 – 355
Table 16.2.8 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 3-Percent Discount Rate for Class A Equipment

TSL Estimated Cumulative NO x

(kt) Emission

Reductions Value of Estimated NO x Emission

Reductions (Thousand 2007) Estimated Cumulative

Hg (tons) Emission Reductions Value of Estimated Hg Emission Reductions

(Thousand 2007$) 1 0.03 8 – 85 0 – 0.004 0 – 76 2 0.14 37 – 377 0 – 0.017 0 – 338 3 0.31 83 – 849 0 – 0.038 0 – 761 4 0.48 129 – 1330 0 – 0.059 0 – 1192 5 0.57 153 – 1568 0 – 0.069 0 – 1405 6 0.62 168 – 1726 0 – 0.076 0 – 1547 7 0.75 203 – 2092 0 – 0.093 0 – 1874
Table 16.2.9 Estimates of Savings from Reducing NO x and Hg Emissions at All TSLs at a 3-Percent Discount Rate for Class B Equipment

TSL Estimated Cumulative NO x

(kt) Emission

Reductions Value of Estimated NO x Emission

Reductions (Thousand 2007$) Estimated Cumulative

Hg (tons) Emission Reductions Value of Estimated Hg Emission Reductions

(Thousand 2007$) 1 0.01 3 – 27 0-0.001 0 – 24 2 0.01 4 – 40 0-0.002 0 – 36 3 0.07 19 – 199 0-0.009 0 – 178 4 0.08 22 – 227 0-0.010 0 – 204 5 0.22 60 – 614 0-0.027 0 – 550 6 0.25 67 – 684 0-0.030 0 – 613

Sulfur Dioxide (SO 2) Unlike the other pollutants considered in this TSD, SO 2 emissions have for some time been subject to a national cap with correspondin g annual allowances openly traded; therefore, considerable market experience w ith these instruments has already been accumulated. It has been argued that imposition of any standa rd that lowers U.S. national electricity consumption creates beneficial downward pressure on the prices of these allowances, and this cost reduction benefit

16-16 bvm_nopr_tsd_chapter16.docshould be considered in any analysis of a proposed standa rd. While this assertion is fundamentally sound ( i.e. , reduced electricity demand should ceteris paribus bring about lower SO 2 allowance prices), there are a myriad of complications impeding any meaningful quantification of any associated benefit. While complexity of analysis alone clearly cannot justify disregarding a potential consequence of a standard, the Departme nt additionally believes these benefits to be both volatile and de minimis when compared to th e direct effects of a standard as estimated in this TSD.

Some of the problems to be confronted in an allowance price effect forecast are:

1. Only any net lowering of the total allowance bill to generators free of transfers is the potential source of a benefit. Any such compliance cost saving would need to be accurately estimated, and this effect is no diffe rent from the benefit derived from a cost reduction for other inputs, such as fuel. When the SO 2 allowance market that was created in 1995 under the Clean Air Act Amendments (C A3) began, initial allowance allocations were directly granted to large affected units based on their historic (1985-87) use of fuel. For 30 years, allowances for the following year are issued every spring at a declining rate to these entitled parties, and thereafter can be freely used, traded, or banked. Some additional allowances are a llocated in diverse ways ( e.g. , as rewards to generators installing control equipment). In other word s, the entitled generators holding emission rights are losers when the valu e of allowances declines, wh ile the buyers of allowances are gainers. Before they are used, allowa nces may be traded many times at prices reflecting the marginal not average cost of compliance.

2. The trading system allows for allowance banki ng. Consequently, any observed change in a forecast year could represent the manife station of market fundamentals but could similarly just indicate deposit or withdrawal of allowances. In general, used allowances have fallen short of the cap so emissions may exceed the specified cap for future years.

3. Control efforts could further reduce the SO 2 cap for some jurisdictions, creating regulatory uncertainty that pe rturbs the allowance market. The issuance of the proposed and final CAIR rules were likely contributing factors to allowance price increases leading to a dramatic 2005 allowance price spike. While prices had already fallen far below their historic highs by the time CAIR was vacated in the summer of 2008, spot allowance prices nonetheless made a further precipitous drop following the D.C. Circuit Court ruling.

4. Because allowances can be traded freely by generators, brokers, and investors, they can serve as financial instruments, and, especi ally since 2003, allowance prices have been volatile. Between 2000, when a tightened CA3 cap came into force, and 2007, allowances traded between a low of about 120 $/ short ton in 2002 and a high of about 1600 $/short ton, with the 2005 spike being particularly dramatic s . Since there is no reason to believe that these conditions will a lter over the life of a proposed standard, the challenge of forecasting prices is much more complex than a simple supply-demand

s sources of the historic SO2 allowance prices are http://www.epa.gov/airmarkets/progress/alprices.html

, http://camddataandmaps.epa.gov/gdm/

16-17 bvm_nopr_tsd_chapter16.docbalance might suggest. Also, note that any quan tification of the bene fit likely depends on the level of prices as well as their net change. To believe that a simple delta in the prices could be used to estimate the benefit is to believe that the same numerical reduction in price would result from the standard whet her the prevailing trad ing price were $100 or $1,000 per short ton.

The forecasting tool used for this TSD is the AEO2008 version of NEMS-BT and generates forecasts of both SO 2 emissions and allowance prices. Unfortunately, this model was released before CAIR was overturned so its fo recast enforces the tighter CAIR cap in the affected east of country, and does not represent current conditions. Given the timing of the CAIR ruling relative to the progress of this analysis, attaining projections without CAIR has not been possible. Nonetheless, as an indicative bounding case, the net cha nges in the average price were computed for the period 2012 to 2030 for standard equipment at TSL 6 (the most stringent energy conservation standard consid ered in this analysis). The estimates represent an average of the various model simulations with different im pact multipliers (see Appendix J for explanation of multipliers used) t

. For both classes of BVM equipment, the speci fic results indicated about a -0.01 percent change in the allowance price in the East region defined within the Electricity Market Module (EMM) of NEMS-BT. The Department considers th is effect to be inconsequential relative to other elements in the benefits analysis, and given the significant effort th at would be required to develop a refined estimate, the SO 2 allowance price effect is not considered in this TSD. If future analysis suggests that the SO 2 allowance price effect is bot h significant and estimable using NEMS-BT, it may be added to supporting material.

16.3 WETLAND, ENDANGERED AND THREATENED SPECIES, AND CULT URAL RESOURCES

DOE’s proposed action is not site-specific, nor would it affect land disturbance or use due to BVM being installed in commercial buildi ngs. Therefore, none of the proposed TSLs is expected to affect the quality of wetlands, or threatened or endangered species. Further, this action is not expected to impact cultural resources such as hist orical or archaeological sites.

16.4 SOCIOECONOMIC IMPACTS

DOE's analysis has shown that the increase in the first cost of purch asing a more efficient BVM at the proposed standard level is completely or nearly offset by a reduction in the life-cycle cost (LCC) of owning a more efficient piece of e quipment. In other words, the customer will pay less operating costs over the life of the equipmen t even through the first cost increases. The complete analysis and its conclusions ar e presented in chapter 8 of the TSD.

t To be specific with regard to the method, for each simu lation the arithmetic change in the allowance price between the standards case and the reference was first computed ove r the period 2012 to 2030. The percentage change was computed as this average change divided by the average allowance price in the reference case over the same period. After scaling to take into account the specific values of the impact multipliers across simulations (“20X”, “30X”, and “40X” values discussed in Appendix J), the resulting pe rcentage changes were subs equently averaged over the simulations. The percentage change in the allowance pr ice for the 30X case for BVM equipment has a somewhat smaller response. However, the regression-based average takes all three cases into account.

16-18 bvm_nopr_tsd_chapter16.docFor the sub-group of customers that are manuf acturing facilities, DOE determined that the average LCC impact is similar to that for the full sample of customers. Therefore, DOE concludes that the proposed act ion would have no significant socioeconomic impact on a subgroup of customers. For a complete discussion on the LCC impacts on manufacturing facilities sub-group, see chapter 12 of the TSD.

Table 16.4.1 shows the mean LCC savings for both the full sample of customers and manufacturing facilities as the sub-group for BVM.

Table 16.4.1 Mean Life-Cycle Cost Savings for All Customers and Sub-Group, BVM (2008$)

Trial Standard Level TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 All Customers- Class A $154 $204 $245 $307 $322 $316 ($1,194) Manufacturing sub-group-Class A $103 $136 $150 $184 $186 $171 ($1,326) All Customers- Class B $47 $56 $49 $39 ($525) ($2,216) NA Manufacturing sub-group-Class B $28 $28 $10 ($1) ($576) ($2,227) NA

16.5 ENVIRONMENTAL JUSTICE IMPACTS

According to Executive Order 12898 of Febr uary 11, 1994, “Federal Actions to Address Environmental Justice in Minorit y Populations and Low-Income Populations,” DOE is required
to exam ine the effect of more stringent energy -efficiency standards on (1 ) small businesses that either manufacture or use BVMs, (2) manufactur ers of niche products related to BVMs, and (3) small businesses operated by disadva ntaged or minority populations.

DOE identified manufacturing facilities as a sub-group that possibly could be disproportionately affected by BV M energy conservation standards. As described in the LifeCycle Cost Sub-group Analysis, chapter 12 of the TSD, DOE found that there was no disproportionately high and adve rse human health or environm ental effects on manufacturing facilities that would resu lt from the proposed energy conservation standards.

16.6 NOISE AND AESTHETICS

Improvements in efficiency of BVM equipm ent is expected to result from changes in the choice of components and other desi gn features. These changes are de scribed in chapter 5 of this TSD. Efficiency improvements result from impr oved heat exchanger designs using increased levels of copper, and more efficient compresso rs. These design changes are not expected to change noise levels in comparison to equipment in today’s market. Equipment that is currently manufactured in the existing market that would meet the proposed standa rds is no louder than less efficient equipment. Changes to the desi gn to improve the efficiency levels are not anticipated to affect th e equipment’s aesthetics.

16.7 SUMMARY OF ENVIRONMENTAL IMPACTS

Table 16.7.1 and Table 16.7.2 summarize anticipated environmental impacts for each of the TSLs across all equipment types. Air qual ity impacts were modeled for each of the TSLs.

16-19 bvm_nopr_tsd_chapter16.docThe summary table shows cumulativ e changes in emissions for CO 2 , NO x , and mercury over the period 2012 to 2042. Cumulative CO 2 , NO x and Hg emissions show a decrease compared to the reference case.

Upstream fuel cycle emission of CO 2 and NO x are described but not quantified in section 16.2.6 . The text describes potential re ductions in fuel cycle emissions as percentage of decreases in power plant emissions. This qualitative approa ch suggests that upstrea m fuel cycle emissions would decrease and provides a sense for the m a gnitude of effects, however, DOE does not report actual estimates of the effects. This approach does not address mercury emissions.

Socioeconomic impacts are presented as changes in life cycle costs. No impacts are anticipated in the area of envi ronmental justice; wetlands, endangered and threatened species, and cultural resources; or noise and aesthetics.

Table 16.7.1 Environmental Impact Analysis Results Summary, Class A BVM Equipment

TSL Environmental Effects Reference Case* TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 Cumulative Emission Reductions**

CO 2 (Million metric tons) 208,728 0.23 1.01 2.27 3.56 4.19 4.61 5.59 NO x (Thousand tons) 67,178 0.03 0.14 0.31 0.48 0.57 0.62 0.75 Hg (tons) 547.9 0 to 0.004 0 to 0.017 0 to 0.038 0 to 0.059 0 to 0.069 0 to 0.076 0 to 0.093 Fuel-Cycle (Upstream) Emissions NA *** *** *** *** *** *** ***

Wetlands, Endangered and Threatened Species, Cultural Resources NA None None None None None None None

Socioeconomic Impacts – Weighted Mean LCC Savings† NA

All Customers NA $154 $204 $245 $307 $322 $316 ($1194) Manufacturing Facilities NA $103 $136 $150 $184 $186 $171 ($1326) Environmental Justice NA None None None None None None None Noise and Aesthetics NA None None None None None None None
* The reference case values reflect total cumulative emissions and life cycle cost s in the abse nce of an energy conservation standard. ** Cumulative total is over a time period from 2012 to 2042. Negative values are in parenthesis. *** DOE does not report actual estimates of the effects of sta ndards on upstream emissions, but section 16.2.5 provides a sense for the possible magnitude of effects. † Values refer to life-cycle cost savings over the equipment lifetime.
Table 16.7.2 Environmental Impact Analysis Results Summary, Class B BVM Equipment

TSL Environmental Effects Reference Case* TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 Cumulative Emission Reductions**

CO 2 (Million metric tons) 208,728 0.07 0.11 0.53 0.61 1.64 1.83 NO x (Thousand tons) 67,178 0.01 0.01 0.07 0.08 0.22 0.25 Hg (tons) 547.9 0 to 0.001 0 to 0.002 0 to 0.009 0 to 0.010 0 to 0.027 0 to 0.030 Fuel-Cycle (Upstream) Emissions NA *** *** *** *** *** ***

16-20 bvm_nopr_tsd_chapter16.docWetland s, E ndangered and Threatened Species, Cultural Resources NA None None None None None None

Mean LCC Savings† NA All Customers NA $47 $56 $49 $39 ($525) ($2216) Manufacturing Facilities NA $28 $28 $10 ($1) ($576) ($2227) Environmental Justice NA None None None None None None Noise and Aesthetics NA None None None None None None
* The reference case values reflect total cumulative emissions and life cycle cost s in the abse nce of an energy conservation standard. ** Cumulative total is over a time period from 2012 to 2042. Negative values are in parenthesis.. *** DOE does not report actual estimates of the effects of sta ndards on upstream emissions, but section 16.2.5 provides a sense for the possible magnitude of effects. † Values refer to life-cycle cost savings over the equipment lifetime.

16-21 bvm_nopr_tsd_chapter16.doc16-22 bvm_nopr_tsd_chapter16.doc REFERENCES

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