Presentation for

National Association of Regulatory Utility Com

U.S. Environmental Protection Agency

Office of Air and Radiation

February 18, 2007

Air Emissions

Cap and Trade Pro

An Update
Overview

Status of:• Acid Rain Program (ARP)• NOx Budget Trading Program (N

• Clean Air:

– Interstate Rule (CAIR)– Mercury Rule (CAMR)– Visibility Rule (CAVR)

Power Sector Reductions of SO2 NOx 
ARP covers fossil generation annual SO2

emissions and NOx emissions of coal-fired 

generators in contiguous U.S.. Largest SO2 and 

NOx emitters faced control in 1995 and 1996, 

respectively, all others in program in 2000.

sea

em

East

g

s

E

pr

large

pro

Coverage of ARP and NBP
C

Annual SO2 

(2010)Annual NOx (2009)Seasonal NOx 

(2009)

*For the affec

States controlled for fine particles (annual SO2 and NOx)States not covered by CAIR

States controlled for ozone (ozone season NOx)

States controlled for both fine particles (annual SO2 and NOx) and ozone (ozone season NOx)

CAM

(t

Mercury 

C

Outside of 

BART (best 

tech

CAIR Sets Stage for CAMR and C
SO2 Emissions with 

ARP and CAIR/CAMR/CA

SO2 Emissions (Million t/yr)
NOx Emissions with 

NBP and CAIR/CAMR/CAV
Acid Rain Environmental Progress: 
Ozone Air Quality Improvements from 

2003 200

Note: Included in the maps, but excluded from the analysis, are four areas with incomplete data for 2003 to 2005 (Cass Essex Co (Whiteface Mtn), NY; LaPorte, IN).Nearly 70 percent of the areas out of attainment in 2003 are now below in 2005. Power plant NOx reductions is the major contributor to this im

8-Hour Ozone Nonattainment Areas,

April 2004 (2001-2003 Air Quality Data)

Areas Remaining A

(2003-2005 Air Q
Benefits of Acid Rain and CAIR Progr

NOx Budget Program Tradin

CAIR, CAMR, CAVR

• Benefits are driven by:

– Reduced premature deaths– Lowering aggravation and incid

and lung ailments

– There also some benefits estima

increased worker productivity, absences from school and workimprovement in some parks

• Many benefits are not included in est

– CAIR’s Canadian Health Benef– Acid rain environmental benefi– Mercury benefits– Remaining visibility benefits fr

urban areas

– Others

• Found that the benefits are far outwe

for these programs: 

– ARP has a benefit to cost ratio – CAIR has B/C ratio of more tha

• For context, from the Energy Informa

Administration’s latest forecast (AEO can estimate electricity sales of abouand $360 billion in 2010 and 2020, re($2005).

Annual Benefits

-Qualified Assessment050 100 150 200 250 300 350 400

Billion 2006 $ Acid Rain - Canada Acid Rain -

USCAIR/CAMR- US

Note: All estimates used a 3% discount rate. Use of 7% discount rate would lower estimates about 15 percent. CPI-U used to convert 1999$ and 2000$ to 2006$. Sources: Used Chestnut & Mills Analysis, "A fresh look at the benefits and costs of the US acid rain program" (Oct. 1, 2004) for 2010 Acid Rain Benefits and EPA's Multi-pollutant Regulatory Analysis: CAIR, CAVR, CAMR (Oct. 2005) for 2010 and 2020 estimates for these programs. Acid Rain 2020 benefits extrapolated from 2010 estimates. 

2010 2020
CAIR, CAMR, and CAVR Implem

• Main rules are done – programs are 

into place.

• State plan development is advancin• EPA is providing Federal backstop 

– CAIR Federal Implementation Plan – CAMR Federal plan proposed

• Litigation is in progress, there was 

CAVR decision recently.

• Power industry is actively installing 

controls and making other complianpreparations.
Advanced Pollution Controls for SO

2 and NO

x that A

Committed to, and Projected for Coal-fired Gen

Installed by 2006 Installed by 2006Projected 2010

Projected 2010 Committed 2007-2009*

Committed 2007-2009*

Projected 2020

Projected 2020

Scrubbers SCRs

• EPA has estim

“Committed 2capital costs foon existing plabillion.

• EPA has estim

capital costs foadditional pollretrofits to be 2010, $6 billiothan $3 billion control expendfired units that built are close and over $9 bi

• Roughly two-t

coal-fired capacost-of-service 

• Many units wi

and FGD insta320 existing can additional 1units that are p

Gigawatts

300

250200

150

100

50

0

Source: EPA 2006 Base Case for CAIR, CAMR, and CAVR results from IPM and 2004 and 2006 NEEDS data sets for IPM.*Committed 2007-2009 based on reports from selected major companies. It is an understatement of controls going into place now.

Note: All dollar figures are Source: EPA’s use of the In
Visit the Clean Air Markets web site for

• Emissions data• Allowance transfers• Program rules and guidelines• Program studies and progress reports

Clean Air Markets

www.epa.gov/airmarkets