CHAPTER 16. ENVIRONMEN TAL IMPACT ANALYSIS

TABLE OF CONTENTS

16.1 INTRODUCTION

............................................................................................................ 16-1 16.2 AIR QUALITY ANALYSIS

............................................................................................ 16-1 16.2.1 Air Pollutant Descriptions

.................................................................................. 16-1 16.2.2 Air Quality Regulation

....................................................................................... 16-3 16.2.3 Global Climate Change

...................................................................................... 16-5 16.2.4 Analytical Methods for Air Quality

................................................................... 16-9 16.2.5 Effects on Power Plant Emissions

................................................................... 16-11 16.2.6 Effects on Upstream Fuel-Cycle Emissions

.................................................... 16-12 16.2.7 Economic Valuation of Emissions Reductions

................................................ 16-13 16.3 WETLAND, ENDANGERED AND THRE ATENED SPECIES, AND CULTURAL RESOURCES

................................................................................................................. 16- 19 16.4 SOCIOECONOMIC IMPACTS

..................................................................................... 16-20 16.5 ENVIRONMENTAL JUSTICE IMPACTS

................................................................... 16-20 16.6 NOISE AND AESTHETICS

.......................................................................................... 16-20 16.7 SUMMARY OF ENVIRONMENTAL IMPACTS

........................................................ 16-21

LIST OF TABLES

Table 16.2.1 Impact of the CRE Efficiency Standard on Cumulative Energy-Related Emissions Reductions of CO 2 between 2012 and 2042 by Trial Standard Level (TSL)

.................................................................................................................. 16-8 Table 16.2.2 Estimates of Savings from CO 2 Emissions Reductions under CRE Trial Standard Levels at 7% Discount Rate and 3% Discount Rate

......................... 16-15 Table 16.2.3 Estimates of Savings from Reductions of NO x and Hg under CRE Trial Standard Levels at a 7% Discount Rate

........................................................... 16-17 Table 16.2.4 Preliminary Estimates of Savings from Reductions of NO x and Hg under CRE Trial Standard Levels at a 3% Discount Rate

.................................................. 16-17 Table 16.4.1 Mean Life-Cycle Cost Sa vings for All Customers and Sub-Group, Independent Convenience Stores and Sm all Grocery, VCT.RC.L Example

... 16-20 Table 16.7.1 Environmental Impact Analysis Results Summary

......................................... 16-22

16-i16-iiCHAPTER 16. ENVIRONMENTAL IMPACT ANALYSIS

16.1 INTRODUCTION

This chapter describes potential environmen tal effects that may result from amended energy conservation standards for commercial refrigeration equipment (CRE). The U.S. Department of Energy (DOE) proposed energy cons ervation 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 affect 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 from imposing CRE standard s. Estimates of source energy 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, mu ch 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 QUALITY ANALYSIS

The primary focus of the environmental analys is is the impact on air quality of amended energy conservation standards for Commercial Refrigeration Equi pment. The outcomes of the environmental analysis are driven by changes in power plant types and qu antities of electricity generated under each of the alternatives. Cha nges in generation are described in the utility impact analysis in Chapter 14.

16.2.1 Air Pollutant Descriptions

For each of the TSLs, DOE calculated total power-sector emissions based on output from the NEMS-BT model (see Chapter 14). This analys is considers four pollutants: nitrogen oxides (NO x ), mercury (Hg), sulfur dioxide (SO 2 ), and carbon dioxide (CO 2 ). An air pollutant is any substance in the air that can cause harm to hu mans or the environment. Pollutants may be natural or man-made (i.e., anth ropogenic) and may take the fo rm of solid particles (i.e., particulates or particulate ma tter), liquid droplets, or gases. a

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 use of emissions allowances and tradable permits. This SO 2 trading process (sometimes called

a More information on air pollution characteristics and regulations is available on the U.S. Environmental Protection Agency (EPA) website at www.epa.gov

.

16-1“cap and trade”) implies that the standard will have no affect on total physical emissions because emissions will always be at, or near, the allo wed 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 en forcement of the emissions ceiling. But to the extent reduced power generation demand decreas es the demand for and price of emissions allowance permits, there may be an environmenta lly related economic benefit from the proposed energy conservation standards reducing SO 2 emissions allowance demand. Furthermore, over time, if emissions decline, there is greater fl exibility in reducing the ceiling amount. However, since DOE does not anticipate a change in SO 2 emissions, SO 2 emission results are not reported in this Chapter.

Nitrogen Oxides (NO x )

Nitrogen oxides , or NO x , are the generic term for a group of highly reactive gases, all of which contain nitrogen and oxygen in varying amounts. Many of the nitrogen oxides are colorless and odorless. However, one common pollutant, nitrogen dioxide (NO 2 ), along with particles in the air, can often be seen as a reddish-brown layer ove r many urban areas. NO 2 is the specific form of NO x reported in this document. NO x is one of the main ingredients involved in the formation of ground-level ozone, which can tr igger serious respiratory problems. It can contribute to the formation of acid rain, and can impair visibility in areas such as national parks. NO x also contributes to the fo rmation of fine particles that can impair human health.

Nitrogen oxides form when fossil fuel is bur ned at high temperatures, as in a combustion process. The primary man-made sources of NO x are motor vehicles, electric utilities, and other industrial, commercial, and residentia l sources that burn fossil fuels. NO x can also be formed naturally. Electric utilities acc ount for about 22 percent of NO x emissions in the United States.

Mercury

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 emit mercury in three di fferent forms: oxidized mercury (likely to deposit within the United States); elemental mercury, which can travel thousands of miles before depositi ng to land and water; and mercury that is in particulate form. Atmospheric mercury is deposited on land, lakes, rivers, and estuaries through rain, snow, and dry deposition. Once there, it can transform in to methylmercury and accumulate in fish tissue through bioaccumulation.

Americans are exposed to methylmercury prim arily by eating contaminated fish. Because the developing fetus is the most sensitive to the toxic effects of methylmercury, women of childbearing age are regarded as the population of greatest concern. Children exposed to methylmercury before birth may be at increased risk of poor performa nce on neurobehavioral tasks, such as those measuring attention, fine motor function, language skills, visual-spatial abilities, and verbal memory.

16-2Carbon 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) and its impact on global climate change. GHGs trap the sun’s radi ation inside the Earth’s atmosphe re and either occur naturally in the atmosphere or result from human activ ities. 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 natu rally occurring gases. For example, CO 2 is emitted to the atmosphere when solid waste, fossil fuels (oil , natural gas, and coal), wood, and wood products are burned. During the past 20 years, about th ree-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 m ovement of carbon between the atmosphere and the land and oceans is dominated by natural processe s, 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 a dded to the atmosphere annually. The Earth’s imbalance between emissions and absorption results in the continui ng growth of GHGs in the atmosphere, causing surface air temperatures and sub-surface ocean temp eratures to rise. In the United States, CO 2 emissions from both energy generation and industr ial processes account for 84.6 percent of total U.S. GHG emissions. 7

16.2.2 Air Quality Regulation

In 1990, EPA amended its regulations implemen ting Title VI of the Clean Air Act to phase out in 2010 chlorofluorocarbons (CFC s) and hydrochlorofluorocarbons (HCFC) refrigerants. As a result, the refrigeration i ndustry is transitioning to hydrofluorocarbon-based (HFC-based) refrigerants in its equipment. Fo r the commercial refrigeration equipment covered in this rulemaking, DOE understands that much of the industry has already been using HFCbased refrigerants for both remote condensing an d self-contained equipment. Therefore, DOE considered the effects of HFC-based refrigerants from the outset by using HFC refrigerants in its analyses. For remote condensing equipment, the compressor efficiency values used in its analysis are based on ARI 1200, which uses an HFC-based compressor rack with R-404a refrigerant. Likewise for se lf-contained equipment, DOE’s an alysis uses R-134a and R-404a, both HFC-based refrigerants. The anticipated use of these refrigerants is not an impact of this rulemaking. Therefore, the effects of this conver sion are outside the scope of this environmental analysis.

The Clean Air Act Amendments of 1990 list 188 toxic air pollutants that EPA is required to control. EPA has set nationa l air quality standards for six co mmon pollutants (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 cap-and-trade program for SO 2 that is intended to help cont rol acid rain. This cap-and-trade program serves as a model for more recent programs with similar features.

16-3In 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). CAIR would permanently cap emissions of SO 2 and NO x in the eastern United States. CAIR would achieve large reductions of SO 2 and/or NO x emissions across 28 eastern states and the District of Columbia. Under CAIR, states must achieve the required emission reductions using one of two compliance op tions: (1) meet an emission budget for each regulated state by requiri ng power plants to participate in an EPAadministered interstate cap-and-trade system that caps emissions in two stages, or (2) meet an individual state emissions budget through measures of the state’s choosing. Phase 1 caps for NO x are to be in place in 2009. Phase 1 caps for SO 2 are to be in place in 2010. The Phase 2 caps for both pollutants are due in 2015.

Also 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) . This rule, also called the Clean Air Mercury Rule, is closely related to the CAIR and establishes standard s of performance for mercury emissions from new and existing coal-fir ed electric utility steam generating units. The Clean Air Mercury Rule regulates mercury emissions from coal-f ired power plants. The rule creates a market-based cap-and-trade program that will permanently cap utility mercury emissions in two phases. The first phase of the rule sets a cap of 38 tons per year and, due to incentives created by the cap-and-trade program, EP A projects that emissions will decrease from 48 tons to 31 tons beginning in 2010. Emissions will continue to decline thereafter until they are reduced to the second phase cap of 15 tons when the program is fully implemented, beginning in 2015.

In 2007, the U.S. Supreme Court ruled that the EPA had authority to regulate CO 2 emissions. EPA is currently formulating thes e regulations (Massachus etts v. Environmental Protection Agency, No. 05-1120, (549 U.S. 2007)).

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

, b in which the court vacated the CAIR rule. Even though the D. C. Circuit vacated CAIR, DOE notes that the D.C. Circuit left intact EPA's 1998 NO x SIP Call rule, which capped seasonal (summer) NO x emissions from electric generating units and othe r sources in 23 jurisdic tions, and gave those jurisdictions the option to participate in a cap and trade program. 63 FR 57356, 57359 (Oct. 27, 1998). c The SIP Call rule may provide a similar, although less extensive, regional cap and may

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

c In the NOx SIP Call rule, EPA found that sources in the District of Columbia and 22 “upwind” states were emitting NOx (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 NOx 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 NOx SIP Call Rule’s cap only constrains seasonal (summertime) emissions. To comply with the NOx SIP Call Rule, states could elect to participate in the NOx 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. Emi ssion sources are allowed to buy, sell, and bank NOx allowances as appropriate. On April 16, 2008, EPA determined that Georgia is no longer subject to the NOx SIP Call rule. 73 FR 21528 (April 22, 2008).

16-4limit actual reduction in NO x emissions from revised standards occurring in states participating in the SIP Call rule. However, the possibility th at the SIP Call rule would have the same effect as CAIR is highly uncertain.

16.2.3 Global Climate Change

Climate change has evolved into a matter of gl obal concern 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 GHGs, such as carbon dioxide (CO 2 ), as major contributors to climate 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 the variabil ity 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 climat e change. According to the IPCC Fourth Assessment Report (IPCC Report), published in 2007, climate change is consistent with observed changes to the world’s na tural 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 per cent per decade, changes in wind patterns that affect extr a-tropical storm tracks and temperature patterns, increases in intense precipitation in some part s of the world as well as increas ed drought and 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 carbon dioxide (CO 2 ), other GHGs, and aerosols. After that period, the rate of increase is less certain. The IPCC Report describes increases in av erage global temperatures of a bout 1.1°C to 6.4°C at the end of the century relative to today. These increas es 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 increasing degree of impacts (e.g., coral reef bleaching, loss of wildlife ha bitat, loss to specific ecosyst ems, and negative yield impacts for major cereal crops in the tropics), but also projects with likely be neficial impacts on crop yields in temperate regions.

16-5Causes 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 GHGs (e.g., methane and nitrous oxide in the atmosphe re) rather than from natural causes.

Increasing 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 CO 2 currently makes up about 77 percent of the total CO 2 -equivalent d 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. Fo r the future, the IPCC Report describes a wide range of GHG emissions scenario s. However, under each scenario, CO 2 would continue to comprise above 70 percent of the total global warming potential.

d 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. These 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.

16-6Stabilization 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) GHGs are emitted every year. Of this annual total, fossil fu els contribute about 29 billion metric tons of CO 2
. e

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 partic ular 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 temperatur es projected to increa se 2.0°C to 2.4°C above pre-industrial levels f (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 GHGs to levels that are 50 percent 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 reduc tions in GHG emissions intensity (emissions per unit of output) of more than 90 percent. Howeve r, 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.

The 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 with energy consum ption in buildings. In the United States, the U.S. Energy Information Administration (EIA) reports in its 2008 A nnual Energy Outlook (AEO 2008) g that U.S. annual energy-related emissions of CO 2 in 2005 were about 5.98 billion metric tons (about 20 percent of the world energy-related CO 2 emissions and about 12 percent of total global GHG emissions), of which 2.32 billion tons we re attributed to resi dential and commercial buildings sector (including rela ted energy–using equipment, such as CRE). Most of the GHG emissions attributed to residential and commerc ial buildings are emitted from fossil fuel-fired power plants that generate elect ricity used in this sector. In the AEO2008 reference case, EIA projected that annua l energy-related CO 2 emissions would grow from 6.0 billion metric tons in 2005 to 6.85 billion metric tons in 2030, an in crease of 14.5 percent (see Table 16.2., based on AEO 2008), while emissions attributable to bu ildings would grow to 2.92 billion tons, an increase of 26.1 percent.

e 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.
f IPCC Working Group 3 Table TS 2

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

16-7As computed for the AEO 2008 reference case, the cumulative U.S. energy-related CO 2 emissions between 2012 and 2042 are described at a bout 209 billion metric tons. The estimated cumulative CO 2 emission reductions from a CRE Efficien cy Standard (shown as a range of alternative Trial Standard Leve ls) during this same 30-year pe riod are indicated in Table 16.2.1. The estimated CO 2 emission reductions in Table 16.2.1 are calculated using NEMS-BT model. As noted in Chapter 14, NEMS-BT model forecasts end in year 2030. Energy and emissions impacts beyond 2030 were extrapolated for this rulemaking.

Table 16.2.1 Impact of the CRE Efficiency Standard on Cumulative Energy-Related Emissions Reductions of CO 2 between 2012 and 2042 by Trial Standard Level (TSL)

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 CO 2 (Million metric tons) 8.5 32.8 50.7 52.6 66.0

The estimated savings shown in Table 16.2.1, which are at most 0.01 percent of U.S. energy-related emissions of CO 2 (for TSL 5), comprise an even smaller fraction of U.S. emissions of GHGs and of world emissions of GHGs. 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 CRE.

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 weathe r 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 desc ribes its estimated numeric value as about 3°C, but the likely range of that value is 2°C to 4.5°C, with cl oud feedbacks the largest source of uncertainty. Further, as illustrated ab ove, 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 glob al warming. However, as Table 16.2.1 indicates, the Rule will likely reduce CO 2 emissions rates from the fossil fuel sector.

16-816.2.4 Analytical Methods for Air Quality

NEMS-BT incorporates capabilitie s to assess compliance with SO 2 and NO x restrictions specified in the Clean Air Act and its amendments . Clean air act provis ions include New Source Performance Standards and Revised New Sour ce Performance Standards. NEMS-BT also includes provisions for the Clean Air Interstate Rule, which imposes stricter restrictions on SO 2 and NO x for some states, and the Clean Air Merc ury Rule, which imposes a national mercury constraint.

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 emissions produced, the model includes a detailed representation of coal suppl y. The model considers the rank of the coal as well as the sulfur and mercury contents of the fu el used when determining optimal dispatch.

The CAIR and mercury rules allow for emissions banking for NO x and mercury, which is simulated in the NEMS-BT model. Emissions ba nking refers to regulated power plant operators releasing fewer emissions than what they have al lowances for in an earlier year in order to release more emissions than permitted by their a llowances in a later year. If a power plant produces fewer emissions than they are allotted in one year, the regul ations (and the NEMS-BT model) allow the operator to over-emit in a later y ear by this same amount. This banking activity can mean that outer years end up with levels of em issions that may be great er than anticipated or targeted. However, the bank tends to encourag e greater short-term emissions reductions.

The value of an emission allowance within the NEMS-BT model is assumed to be the market-clearing price, which is based on the re venue requirements for the capital and operating expenses associated with compliance. Banking would lower the overall cost of compliance if the discounted, present value of the compliance costs in a given year is less than the corresponding cost in a later year. Similarly, banking merc ury allowances may redu ce the overall cost of complying with the mercury emissions limits specified in the Clean Air Mercury Rule.

Within 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 pl ants with low emission rates. These methods for reducing emission are compared to dispatching options, su ch as fuel switching and allowance trading. Environmental regulations also a ffect capacity expansion decisions. For instance, new plants are not allocated 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 involve pur chasing 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 assu mption is consistent with previous DOE environmental assessment documents. 1

16-9As with SO 2 emissions, caps on NO x and mercury emissions will possibly result in no physical emissions effects resulting from equipm ent energy conservation standards, but reduced power generation demand will have the benefit of generating net emissions allowance credits relative to a base case of no en ergy conservation standard. It was not possible to remove the modeling of emission caps for NO x and mercury emissions from the NEMS-BT model to simulate the impact on emissions under an uncappe d scenario. Therefore, DOE did not use the NEMS-BT model output to estimate the NO x and mercury emissions reduc tions in this analysis. DOE instead established a range of possible NO x reductions for each TSL considered. h

DOE’s low estimate for NO x emission reductions was based on the emission rate of the cleanest new natural gas combined-cycle power plant available for electricity generated, under an assumption that energy conservation standa rds would displace the generation of only the cleanest available fossil fuels. DOE used the emission rate, specified as 0.0341 kilo-tons of NO x emitted per TWh of electricity generated, associat ed with an advanced natural gas combinedcycle power plant, as specified by NEMS -BT. To estimate the reduction in NO x emissions, DOE multiplied this emission rate by the reduction in electricity generation due to the new energy conservation standards considered. DOE’s high estimate for an emissions rate was 0.843 kilotons of NO x per TWh based on a nationwide NO x emission rate for all electrical generation plants today. Use of such an emission rate a ssumes that displaced future generation from CRE standards comes from power plan ts no cleaner, in terms of NO x, emission than the plants that are being used currently to generate electricity. DOE based this emission rates on AEO2008 data for 2006, when no regulatory or non-regulatory me asures were in effect to limit NO x emissions. DOE multiplied this emission rate by the reduction in electricity generation for each TSL considered.

Similar to the NO x emission reduction analysis, DOE es tablished a range of Hg emission rates from existing electrical gene ration technologies to estimate the Hg emissions that could be reduced through standards. DOE’s low estimate a ssumed that future standards would displace electrical generation from natura l gas-fired power plants, resulting in an effective emission rate of zero. The low-end emission rate is zero becaus e natural gas-fired power plants have virtually zero Hg emissions associated with their operation.

DOE’s high estimate was based on a nationwid e mercury emission ra te 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, DOE believes the most reasonable estimate is ba sed on the assumption that all displaced coal generation would have been emitting at the average emission rate for coal generation as specified by AEO2008. As noted previousl y, virtually all mercury emitted from electricity generation is from coal-fired power plants. DOE based the hi gh end emission rate on the tons of mercury emitted per TWh of coal-generated electric ity. Based on the emission rate for 2006, DOE

h On December 23, 2008, the D.C. Circuit decided to allow CAIR to remain in effect until it is replaced by a rule consistent with the court's earlier opinion. North Carolina v. EPA, No. 05-1244, 2008 WL 5335481 (D.C. Cir. Dec. 23, 2008). Given the uncertain nature of NOx emissi on regulation during the time that the CRE standards will be in effect, and DOE continued to report a range of potential NOx emission reductions using the methodology discussed in this chapter.

16-10derived a high-end emission rate of 0.0255 tons per TWh. To estimate the reduction in mercury emissions, DOE multiplied the emission rate by the re duction in coal-generated electricity due to the standards considered in the utility impact analysis as determined through the NEMS-BT modeling.

16.2.5 Effects on Power Plant Emissions

Table 16.2. shows reference power plant emissi ons in selected years. The AEO 2008 Reference case emissions are the emissions show n by the NEMS-BT model to result if none of the TSLs are promulgated. Table 16.2.3 shows es timated changes in power plant emissions in selected years for all commercial refrigerati on equipment analyzed for TSL 1 through TSL 5. Changes in NO 2 and mercury emissions from power plants are shown in these tables. Changes in CO 2 emissions from all sources are also shown in this table.

Table 16.2.2 Power Sector Emissions Impa cts Forecast for AEO2008 Reference Case

NEMS-BT Results:* 2005 2010 2015 2020 2025 2030 CO 2 (Million metric tons/year)** 5,982 6,012 6,225 6,390 6,575 6,843

NO x (Thousand tons/year)† 3,639 2,338 2,112 2,112 2,142 2,169 Hg (tons/year)† 51.72 37. 24 24.19 18.48 16.69 15.41
* NOx and Hg reported in short tons, CO 2 reported in metric tons ** Comparable to Table A18 of AEO2008: Electric Generators † Comparable to Table A8 of AEO2008: Emissions
Table 16.2.3 Power Sector Emissions Impact Forecasts for Commercial Refrigeration Equipment

NEMS-BT Results: Difference from Reference Case Extrapolation

2015 2020 2025 2030 2035 2040 2042
Trial Standard Levels 1
CO 2 (Million metric tons/year) -0.164 -0.334 -0.374 -0.285 -0.285 -0.285 -0.285
NOx (Thousand tons/year) High -0.1518 -0.3636 -0 .5238 -0.6324 -0.6324 -0.6324 -0.6324

Low -0.0061 -0.0147 -0 .0212 -0.0256 -0.0256 -0.0256 -0.0256
H g ( t o n s / y e a r ) High -0.0038 -0.0079 -0 .0094 -0.0081 -0.0081 -0.0081 -0.0081
Low 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Trial Standard Level 2
CO 2 (Million metric tons/year) -0.631 -1.284 -1.439 -1.095 -1.095 -1.095 -1.095

NO x (Thousand tons/year)
High -0.5837 -1.3980 -2 .0140 -2.4317 -2.4317 -2.4317 -2.4317
Low -0.0236 -0.0565 -0 .0815 -0.0984 -0.0984 -0.0984 -0.0984 Hg (tons/year) High -0.0146 -0.0306 -0 .0360 -0.0310 -0.0310 -0.0310 -0.0310
Low 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

16-11Table 16.2.3 Power Sector Emissions Impact Forecasts for Commercial Refrigeration Equipment - Continued
Trial Standard Level 3
CO 2 (Million metric tons/year) -0.977 -1.988 -2.228 -1.696 -1.696 -1.696 -1.696
NO x (Thousand tons/year) High -0.904 -2.164 -3 .118 -3.765 -3.765 -3.765 -3.765
Low -0.0366 -0.0876 -0 .1261 -0.1523 -0.1523 -0.1523 -0.1523
H g ( t o n s / y e a r ) High -0.0226 -0.0473 -0 .0558 -0.0480 -0.0480 -0.0480 -0.0480
Low 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Trial Standard Level 4
CO 2 (Million metric tons/year) -1.013 -2.061 -2.310 -1.758 -1.758 -1.758 -1.758
NO x (Thousand tons/year) High -0.9371 -2.2443 -3 .2332 -3.9037 -3.9037 -3.9037 -3.9037
Low -0.0379 -0.0908 -0 .1308 -0.1579 -0.1579 -0.1579 -0.1579
H g ( t o n s / y e a r ) High -0.0234 -0.0491 -0 .0578 -0.0497 -0.0497 -0.0497 -0.0497
Low 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Trial Standard Level 5
CO 2 (Million metric tons/year) -1.271 -2.585 -2.897 -2.205 -2.205 -2.205 -2.205
NO x (Thousand tons/year) High -1.1753 -2.8147 -4 .0549 -4.8959 -4.8959 -4.8959 -4.8959
Low -0.0475 -0.1139 -0 .1640 -0.1980 -0.1980 -0.1980 -0.1980
H g ( t o n s / y e a r ) High -0.0294 -0.0615 -0 .0725 -0.0624 -0.0624 -0.0624 -0.0624
Low 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

* All results in metric tons, equivalent to 1.1 short tons and negative values refer to a reduction compared with the base case ** Comparable to Table A17 of AEO2008: Electric Generators † Comparable to Table A8 of AEO2008: Emissions
Table 16.2.3 shows the range in NO x emission changes calculated using the low and high estimate scenarios for specific years by TSL. Cumulative NO x emission reductions over the period from 2012-2042 range from 0.59 to 112.84 k ilotons for the TSLs considered. These changes in NO x emissions are extremely small, ranging from 0.001 to 0.168 percent of the national base case emissions forecast by NEMS-BT, depending on the TSL.

Table 16.2.3 also shows the estimated changes in Hg emissions calculated using the low and high estimate scenarios for specific years by TSL. Cumulative Hg emission reduction over the period from 2012 to 2042 range from from 0 to 1.732 tons for the TSLs considered. These changes in Hg emissions are extremely small, ranging from 0 to 0.003 pe rcent of the national base case emissions forecast by NEMS-BT, depending on the TSL.

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 th e mining of coal or extr action of natural gas,

16-12physical preparatory and cleaning processes, and transportation to the power plant. The NEMS-BT 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 production). Thus, this analysis reports only power plant emissions.

However, previous DOE environmental assessment documents have developed qualitative estimates of effects on upstream fuel -cycle emissions. These emissions factors provide the reader with a sense of the possible ma gnitude of upstream effects. These upstream emissions would be in addition to emissions from direct combustion. Relativ e 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 8 percent, by mass, of emissions (including SO 2 ) from coal production are due to mining, preparation that includes cleaning the coal, and transporta tion from the mine to the power plant. 1,2 Transportation emissions include emissions from the fuel used by the mode of transportati on that moves the coal from the mine to the power plant.

In addition, based on Dr. DeLu chi’s work, DOE estimated th at approximately 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, relative to power plan t emissions, are shown in Table 16.2.4 for CO 2 and NO x . The percentages are relative to power pl ant emissions and provide a means to estimate upstream emission savings based on changes in em issions from power plants. The percentage effects presented in Table 16.2.4 provide a qualitativ e approach to viewing effects on fuel cycle emissions. The previous section indicat es slight overall reductions in CO 2 , and NO x . Thus, very small reductions in upstream emissions of air pollu tant could be expected. This approach does not address mercury emissions.

Table 16.2.4 Estimated Upstream Emissions of Ai r Pollutants as a Percentage of Direct Power Plant Combustion Emissions

Percent of Coal Percent of Natural Gas Pollutant Combustion Emissions Combustion Emissions CO 2 2.7 11.9 NOx 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 with these reductions.

16-13i Carbon Dioxide (CO 2 )

During the preparation of its most recent review of the st ate of climate science, the Intergovernmental Panel on Climate Change (IPCC) identified various estimates of the present value of reducing CO 2 emissions by 1 ton over the life that these emissions would remain in the atmosphere. The estimates reviewed by the IPCC sp anned a range of values. In the absence of a consensus on any single estimate of the monetary value of CO 2 emissions, DOE used an estimate identified by the study cited in Summary for Po licymakers prepared by Working Group II of the IPCC’s Fourth Assessment Report to calculate the potential monetary value of the CO 2 reductions likely to result from the standa rds under considerati on 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 monetary values. The resu lting annual values were then discounted over the lif e of the affected appliances to the present using both 3 percent and 7 percent discount rates. DOE applied an annu al growth rate of 2.4 pe rcent to the value of the social cost of carbon (SCC), as suggest ed by the IPCC Working Group II (2007, p. 822), based on estimated increases in damages from futu re emissions reported 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 averag e benefit value reported by the IPCC as the SCC. i The resulting estimates of the pot ential range of the present value of benefits associated w ith the reduction of CO 2 emissions are refl ected in Table 16.2.8.

The IPCC estimate used as the upper bound valu e 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 appropriate to use U.S. benefit values, where available and not world benefit values, in its analysis. j

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. A ccording 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 unders tand this estimate was denominated in 1995 dollars. Updating that estimate 1995 estimate to 2007 dollars yields a SCC of $15 per ton of carbon dioxide. j In contrast, most of the estimates of costs and benefits of increasing the efficiency of CRE include only economic values of impacts that would be experienced in the U.S. For example, in determining impacts on manufacturers, DOE generally does not consider impacts that occur solely outside of the United States.

16-14Table 16.2.2 Estimates of Savings from CO 2 Emissions Reductions under CRE Trial Standard Levels at 7% Discount Rate and 3% Discount Rate

Trial Standard Level Estimated Cumulative CO 2 (Million metric tons) Emission Reductions Value of Estimated CO 2 Emission Reductions Based on IPCC Range (Million 2007$) at 7% Discount Rate Value of Estimated CO 2 Emission Reductions Based on IPCC Range (Million 2007$) at 3% Discount Rate

TSL 1 8.52 $0 to $76.01 $0 to $154.73

TSL 2 32.76 $0 to $292.26 $0 to $594.94

TSL 3 50.71 $0 to $452.49 $0 to $921.10

TSL 4 52.59 $0 to $469.19 $0 to $955.10

TSL 5 65.95 $0 to $588.44 $0 to $1197.85

Given the uncertainty surrounding estimates of the SCC, relying on any single study may be inadvisable since its estimate of the SCC will depend on many assumptions made by its authors. The Working Group II’s contribution to the Fourth Assessment Report of the IPCC notes that:

The large ranges of SCC are due in the large part to differences in assumptions regarding climate sensitivity, response lags, the treatment of risk and equity, economic and non-economic impacts, the inclusion of potentially catastro phic losses, and discount rates.k

DOE believes that the most appropriate m onetary values for consideration in the development of efficiency standards are those dr awn from studies that attempt to estimate the present value of the marginal economic benef its likely to result from reducing GHG emissions, rather than estimates that are based on the ma rket value of emission allowances under existing cap-and-trade programs or estimates that are based on the cost of reducing emissions—both of which are largely determined by policy decisions that set the timing and extent of emission reductions and do not necessarily re flect the benefit of reductions. DOE also believes that the studies it relies upon generally shoul d be studies that were the s ubject of a peer-review process and were published in reputable journals.

The upper bound of the range used by DOE is based on Tol (2005), which reviewed 103 estimates of the SCC from 28 published studies, and concluded that when only peer-reviewed studies published in recognized journals are considered, “that climate change impacts may be very uncertain but [it] is unlikely that the ma rginal 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 w ith a 2.4 percent growth rate.]”

k Climate Change 2007 – Impacts, Adaptation and Vulnerability Contribution of Working Group II to the Fourth Assessment Report of the IPCC, 17. Available athttp://www.ipccwg2.org (last accessed Aug. 7, 2008).

16-15In setting a lower bound of $0, DOE agrees with the IPCC Working Group II (2007) report that “significant warming across the globe and th e locations of significant observed changes in many systems consistent with warming is very unlik ely to be due solely to natural variability of temperatures or natural variability of the systems” (pp. 9), and thus tentatively concludes that a global value of zero for reducing emissions cannot be justified. However, DOE also believes it is reasonable to allow for the possibility that the U.S. portion of the global cost of CO 2 emissions may be quite low. In fact, some of the studies looked at in Tol (2005) reported negative values for the SCC. As stated in the NOPR, DOE is using U.S. benefit values, and not world benefit values, in its analysis and, further, DOE believes that U.S. domestic values will be lower than the global values. Additionally, the statutory criteria in EPCA do not require consideration of global effects. Therefore, DOE is us ing a lower bound of $0 per ton of CO 2 emissions in estimating the potential benefits.

Nitrogen Oxides (NO x ) and Mercury

DOE also investigated the monetary impact of efficiency standards on NO x , mercury (Hg), and SO 2 . National SO 2 emissions are currently subject to a national cap-and-trade system by regulation, while NO x and Hg are not. For the range of NO x reduction estimates (and Hg reduction estimates), DOE estimated the national monetized benefits of emissions reductions based on environmental damage estimates from the literature. The effect of the SO 2 caps is that equipment efficiency standards will have almost no effect on physical emissions of SO 2 , but if large enough, could cause increm ental changes in the prices of emissions allowances in cap-and-trade emissions markets.

Because of the court ruling discu ssed in Section 16.2.2, emissions of NO x from electricity generation are not controlled by the regulatory caps. For these emissions, DOE estimated the national monetized benefits of emissions reductions 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 ton to $3800 per ton of NO x from stationary sources, measured in 2001 dollars l or a range of $432 per ton to $4441 per ton in 2007 dollars.

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 located two estimates of the environmental damages of mercury based on two estimates of the adverse impact of childhood exposure to methylmercury on IQ for American children, and subsequent loss of lifetime econo mic productivity resulting from these IQ losses. The high-end estimate is based on an estimate of the current aggr egate cost of the loss of IQ that results from exposure of American children of U.S. power plant origin of $1.3 billi on per year in year 2000$, which works out to $32.6 million per ton emitted per year (2007$). m The low-end estimate is

l 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities. Office of Management and Budget Office of Information and Regulatory Affairs, Washington, D.C.

m

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

16-16$664,000 per ton emitted in 2004$ or $729,000 per ton in 2007$), which DOE derived from a published evaluation of mercury control using diffe rent methods and assumptions from the first study, but also based on the present value of the lifetime earnings of children exposed. n The resulting estimates of the potential range of th e present value benefits associated with the national reduction of NO x and Hg emissions are reflected in Table 16.2.9 and Table 16.2.10.

Table 16.2.3 Estimates of Savings from Reductions of NO x and Hg under CRE Trial Standard Levels at a 7% Discount Rate

Trial Standard

Level 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$)

TSL 1 0.59-14.58 $64-$1,578 0-0.224 $0-$46 TSL 2 2.27-56.04 $245-$6,067 0-0.86 $0-$177 TSL 3 3.51-86.77 $380-$9,394 0-1.332 $0-$274
TSL 4 3.64-89.97 $394- $9,741 0-1.381 $0-$284 TSL 5 4.56-112.84 $494-$12,216 0-1.732 $0-$356

Table 16.2.4 Preliminary Estimates of Savings from Reductions of NO x and Hg under CRE Trial Standard Levels at a 3% Discount Rate

Trial Standard

Level 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$)

TSL 1 0.59-14.58 $135-$3,329 0-0.224 $0-$91 TSL 2 2.27-56.04 $518-$12,799 0-0.86 $0-$349 TSL 3 3.51-86.77 $802-$19,815 0-1.332 $0-$540
TSL 4 3.64-89.97 $831- $20,547 0-1.381 $0-$560 TSL 5 4.56-112.84 $1,042-$25,769 0-1.732 $0-$702

n 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, Washington, 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.

16-17Sulfur 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 with these instruments has alr eady been accumulated. It has been argued that imposition of any standard that lowers U.S. national electricity consumption creates beneficial downward pressu re on the prices of these allo wances, and this cost reduction benefit should be considered in any analysis of a proposed sta ndard. 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 as listed below.

1. Only any net lowering of the total allowance bi ll 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 allocated in dive rse ways, e.g. as rewards to generators installing control equipment. In other word s, the entitled genera tors 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 manifest ation 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 pert urbs the allowance market. The issuance of the proposed and final CAIR rules were likely contribu ting factors to allowance price increases, leading to a dramatic 2005 allowance price sp ike. 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

16-18$1600/short ton, with the 2005 spike being particularly dramatic o . 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 balance might suggest. Also, note that any qua ntification 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 $1000 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 represen t current conditions. Given the timing of the CAIR ruling relative to the progres s of this analysis, attaining pr ojections without CAIR has not been possible. Nonetheless, as an indicative bounding case, the net changes in the average price were computed for the period 2012 to 2030 for st andard size equipment at TSL 5 (the most stringent energy conservation standa rd considered in this analysis). The estimates represent an average of the various model simulations with different impact multipliers (see Appendix J for explanation of multipliers used) p

. For CRE equipment, the specific results indi cated about a -0.01 pe rcent change in the allowance price in the East region defined w ithin the Electricity Ma rket Module (EMM) of NEMS-BT. The Department considers this eff ect to be inconsequential relative to other elements in the benefits analysis, and given th e significant effort that 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 both significant and estimable using NEMS-BT, it may be added to supporting material.

16.3 WETLAND, ENDANGERED AND THREATENED SPECIES, AND CULTURAL RESOURCES

DOE’s proposed action is not site-specific. The efficiency of commercial refrigeration equipment being installed in commercial buildings is not expected to aff ect land disturbance or use. Therefore, none of the proposed TSLs is expected to affect the quality of wetlands, or threatened or endangered species. Further, th is action is not expect ed to impact cultural resources, such as historical or archaeological sites.

o sources of the historic SO 2 allowance prices are http://www.epa.gov/airmarkets/progress/alprices.html

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

p 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 al lowance price in the reference case over the same period. After scaling to take into account the specific values of the impact multipliers across simulations (“100X”, “200X”, and “300X” values discussed in Appendix J), the resulting percentage changes were subsequently averaged over the simulations. The percentage change in the allowance price for the 200X case for CRE equipment was slightly positive; this case was not used in the averaging in or der to better reflect a boundin g case for this equipment.

16-1916.4 SOCIOECONOMIC IMPACTS

DOE's analysis has shown that the increase in the first cost of purchasing more-efficient Commercial Refrigeration Equipmen t at the proposed standard level is completely or nearly offset by a reduction in the life-cy cle cost (LCC) of owning a more efficient piece of equipment. In other words, the customer will pay fewer operating costs over the life of the equipment even through the first cost increases. The complete analysis and its conclusions are presented in Chapter 8 of the TSD.

For the sub-group of customers that reflect small businesses, defined by independent convenience stores and small gro cery without access to national accounts, DOE determined that the average LCC impact is similar to that for the full sample of customers. Therefore, DOE concludes that the proposed action would have negligible socioec onomic impact. For a complete discussion on the LCC impacts on independe nt hotels, see Chapter 12 of the TSD.

Table 16.4.1 shows the mean LCC savings fo r VCT.RC.L for both the full sample of customers and for the small business subgroup as an example.

Table 16.4.1 Mean Life-Cycle Cost Saving s for All Customers and Sub-Group, Independent Convenience Stores a nd Small Grocery, VCT.RC.L Example

TSL 1 TSL 2 Trial Standard Level* TSL 3 TSL 4 TSL 5 All Customers Independent Convenience Stores and Small Grocery $762 $1,001 $4,137 $5,639 $5,450 $5,419 $7,454 $7,447 $5,419 $7,447

*Values refer to life-cycle cost savings over the equipmen t lifetime compared with purchase of baseline equipment

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 examine the effect of more-stringent energy -efficiency standards on (1 ) small businesses that either manufacture or use commercial refrigeration equipment, (2) manufacturers of niche products related to commercial refrigeration equipment, and (3) small businesses operated by disadvantaged or minority populations.

DOE identified small businesses as a sub-group that possibly could be disproportionately affected by commercial refrigeration equipment en ergy conservation standard s. As described in the Life-Cycle Cost Subgroup Analysis, Chapter 11 of the TSD, DOE found that there were no disproportionately high and advers e human health or environmental effects on small businesses that would result from the proposed energy cons ervation standards. Because there were no disproportionately high and advers e impacts on small businesses in general, DOE believes this same conclusion also applie s to minority populations.

16.6 NOISE AND AESTHETICS

Improvements in efficiency of commercial refr igeration equipment ar e expected to result from changes in the choice of components a nd other design features. These changes are described in Chapter 5 of this TSD. Effici ency improvements result from improved heat

16-20exchanger designs using increased levels of c opper, higher efficiency evaporator fans, higher efficiency lighting, and more efficient compressors and condenser fans applied to self-contained equipment. These design changes are not expected to change noise levels in comparison to equipment in today’s market. In addition, changes to th e design to improve the efficiency levels are not anticipated to affect the equipment’s aesth etics. None of the design options considered by DOE is believed to result in visual changes perceptible to the store customer, with the exception of lighting. To achieve the equipmen t efficiencies provide d at TSL 4, and 5, for equipment for which case lighting was present in the baseline model and for which the engineering design assumed LED lighting, DOE modeled only the energy consumption and direct cost impacts of the equipment with solid- state lighting. Solid-state lighting provides a functionally equivalent lighting of the product being merchandis ed. DOE notes that current implementations of solid-state lighting in display cases use lig ht from many discrete point sources directed at the merchandised product rather than the more diffuse lighting obtained using fluorescent bulbs. This may provide a somewhat different presentation of the product; however, not one that would result in a negative aesthetic impact.

16.7 SUMMARY OF ENVIRONMENTAL IMPACTS

16-21Table 16.7.1 summarizes anticipated environmental impacts for e ach of the TSLs across all equipment types. Air quality impacts were modeled for each of the TSLs. The summary table shows cumulative changes in emissions for CO 2 , NO x , and mercury over the period 2012 to 2042. The resulting changes in emission quantities are very small, much less than 1 percent in comparison to the reference case. Cumulative CO 2 and NO x emissions show a decrease compared to the reference case. Mercury emissions show a very small increase in cumulative emissions. This increase may result from the co mbined effects of emissions banking, a shift in how power plants are dispatched or the timing within the model of when power plants are replaced.

Upstream fuel cycle emission of CO 2 and NO x are described but not quantified in section 16.2.6. The text describes potential reductions 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 ma gnitude of effects; how ever, DOE does not report actual estimates of the effects.

Socioeconomic impacts are presented as changes in life cycle costs. No impacts are anticipated in the area of envir onmental justice, wetlands endange red and threatened species, and cultural resources, or noise and aesthetics.

16-22Table 16.7.1 Environmental Impact Analysis Results Summary

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

CO 2 (Million metric tons) NO x (Kilo tons)

Hg (tons) Fuel-Cycle (Upstream) Emissions Wetlands, Endangered and Threatened Species, Cultural Resources Socioeconomic Impacts - VCT.RC.L, Mean LCC Savings ($) ‡ All Customers Convenience Stores and Independent Small Grocery Environmental Justice Noise and Aesthetics 238, 078
69,049

568.4 NA

NA

NA

NA

NA NA 8.5 0.59 to 14.58 0 to 0.224 †

None

$762 $1,001

N one N one 32.8 2.27 to 56.04 0 to 0.86 †

None

$4,137 $5,639

None None 50.7 3.51 to 86.77 0 to 1.332 †

None

$5,450 $7,454

None None 52.6 3.64 to 89.97 0 to 1.381 †

None

$5,419 $7,447

None None 66.0 4.56 to 112.84 0 to 1.732 †

None

$5,419 $7,447

None None * The reference case values reflect total cumulative emissions a nd life-cycle costs in the absen ce of an energy conservation st andard. ** Cumulative total is over a time period from 2012 to 2042. † DOE does not report actual estimates of the effects of standa rds on upstream emissions, but section 16.2.5 provides a sense f or the possible magnitude of effects. ‡ Values refer to life-cycle cost savings over the equipmen t lifetime compared with purchase of baseline equipment.

16-23REFERENCES

1 . DOE. 2006. Environmental Assessment for Proposed Energy Conservation Standards for Distribution Transformers . DOE/EA-1565. Washington, D.C.

2. DeLuchi, M. A. Emissions of Greenhouse Gases from the Use of Transportation Fuels and Electricity , Volume 2: Appendixes A-S. November, 1993. Argonne National Laboratory. Argonne, IL. Repor t No. ANL/ESD/TM-22-Vol.2.

16-24