The Acid Rain Program and 

Environmental Justice: 

Staff Analysis 

U.S. Environmental Protection Agency 

Office of Air and Radiation 

Clean Air Markets Division 

September 2005 

1
Executive Summary 

This staff paper analyzes the impacts of the Acid Rain Program (ARP) on people of different races, 

ethnicities, and income levels. Federal agencies are directed by Executive Order 12898 (issued in 

February 1994) to identify and address, as appropriate, disproportionately high and adverse human health 

or environmental effects of their programs, policies, and activities on minorities and low income 

populations. 

Congress passed the ARP in 1990 as part of a major overhaul of the entire Clean Air Act. Since then, the 

program has reduced sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions 32% and 37% respectively

from the power industry nationwide, reduced acid deposition, and improved air quality in broad swaths of 

the country. In addition, some acidified lakes and streams in the East are beginning to show signs of 

recovery. This staff analysis examines how trading of SO2 emissions under the ARP has affected 

emissions at various geographical scales (e.g., national, regional, and local) and uses emissions, air 

quality, and health exposure modeling to estimate the benefits of full implementation of the ARP in 2010 

on minority and low income communities. 

Analyses of SO2 emissions trading under the ARP show areas with the highest emissions prior to the 

program had the largest emission reductions. This occurred at both regional and individual plant-level 

scales; the largest emission reductions occurred in the Midwest (where emissions were highest) and the 

sources with the largest emissions before the program tended to reduce emissions the most. Perhaps more

importantly, even in areas where emissions increased at some plants, monitoring data suggests that air 

quality in those areas still improved due to a large overall reduction in regionally-transported air pollution 

as a result of the ARP. There have been no violations of the SO2 health-based national ambient air quality

standard since at least 2000. 

Although the ARP was enacted to reduce acid deposition, it has also benefited public health due to 

reductions in fine particle concentrations. This is because SO2 and NOx emissions react in the atmosphere, 

often far from their sources, to form fine particle pollution (PM2.5). Exposure to PM2.5 is known to be 

associated with many heart and lung illnesses, as well as premature death. It is important that any analysis 

of the human health impacts of the Acid Rain Program include an analysis of air quality as impacted by

sources at both local and regional scales. This report contains air quality modeling analyses using two 

different methodologies to estimate the changes in exposure of minority and low-income populations to 

ambient concentrations of PM2.5 as a result of the ARP. Both analyses show that, in 2010, each racial, 

ethnic, and income-level group studied received similar average improvement in PM2.5 in the eastern U.S. 

(where the vast majority of the emission reductions took place) as a result of the ARP. No 

disproportionately high and adverse human health or environmental effects of the Acid Rain Program

were found for any minority, low-income, or other population. 

Finally, since air pollution comes from many diverse sources and affects people both close to and far from

its sources, EPA uses a number of programs and provisions to protect and improve air quality. The Clean 

Air Act directs EPA and the States to operate a suite of programs, of which the ARP is only one, to ensure 

that air quality in all areas protects everyone’s health and welfare. The National Ambient Air Quality

Standards are in place for all areas of the country to ensure that everyone’s air is safe to breathe. In 

addition, EPA recently promulgated the Clean Air Interstate Rule (CAIR) to further reduce SO2 and NOx

emissions from ARP sources in the East and the Clean Air Visibility Rule (CAVR) to reduce SO2 and 

NOx emissions in the West. These new programs, several recent mobile source rules, and State actions to 

bring areas into attainment with the NAAQS, will continue to improve air quality for all people in the 

future. 

2
The Acid Rain Program and Environmental Justice: 

Staff Analysis 

President Bill Clinton issued Executive Order 12898 in February 1994, directing federal agencies 

to begin: 

“...identifying and addressing, as appropriate, disproportionately high and adverse human 

health or environmental effects of its programs, policies, and activities on minority populations 

and low-income populations...”1

 

Executive Order 12898 gives federal agencies discretion as to how to conduct environmental 

justice analyses. EPA’s guidance, while defining environmental justice as “fair treatment and 

meaningful involvement of all people regardless of race, color, national origin, or income with 

respect to the development, implementation, and enforcement of environmental laws, 

regulations, and policies,”2

 also leaves analytical discretion to individual offices and programs. 

This paper explores environmental justice issues related to the Acid Rain Program (ARP), a 

national program to decrease acid deposition by reducing emissions of sulfur dioxide (SO2) and 

nitrogen oxides (NOx) from power plants. The analysis focuses on the SO2 portion of the ARP 

because it is implemented through a cap and trade mechanism that does not require specific 

emission reductions at any particular source. Instead, it enforces a national cap on emissions 

(which is significantly lower than emissions at the time) and allows sources to trade amongst 

themselves as long as aggregate emissions do not exceed the cap. The ARP is analyzed regularly,

and all evidence indicates it has been providing widespread air quality improvements to the 

public at large. Emissions have gone down, acid deposition has been reduced in the most 

sensitive areas of the country, and there have been no violations of the SO2 health-based national 

ambient air quality standard since at least 20003

. This indicates that the ARP works in 

conjunction with other programs and provisions to provide clean air for all people to breathe. 

While there is no evidence that this cap and trade mechanism has led to increased human 

exposure to air pollution, the Clean Air Markets Division (CAMD) has never investigated 

whether the ARP could cause or contribute to environmental injustices. It is important, therefore, 

that we assess 1) how trading of SO2 emissions under the ARP might affect the minority and 

low-income communities described in Executive Order 12898 and 2) how trading of SO2

emissions has impacted emissions at both a regional and a local scale. These issues will be 

especially important as EPA and the states continue to implement new programs that will extend 

the use of cap and trade to address new problems and to reduce additional pollutants. 

This paper concludes that the large emissions reductions required by the emission cap, coupled 

with the regional nature of fine particle pollution from power plants, have produced large air 

quality improvements for all people living in the eastern U.S. This conclusion is based on two 

analyses investigating the change in average air quality for members of racial, ethnic, and 

income groups as well as a local-scale analysis of the air quality implications of emission 

increases in one area. 

3
The Acid Rain Program 

In the 1990 Clean Air Act Amendments (CAA), Congress required the ARP SO2 program to 

reduce emissions to half of 1980 levels, capping them at 8.95 million tons per year by 2010. In 

2003, emissions were 10.6 million tons, a 32% reduction in annual emissions from 1990 levels 

and a 38% reduction from 1980 levels.4

 Emissions in 2003 were higher than the cap, because 

sources reduced more than required in the early years of the program and built up a bank of

available emission allowances. A more detailed explanation of cap and trade and the ARP is 

below. 

Congress did not cap emissions of NOx from power plants; rather, the NOx portion of the ARP 

requires coal-fired power plants to limit their NOx emissions to specific rates (expressed as 

pounds of NOx per million British thermal units (Btu) of heat input). It seeks to achieve a 2 

million ton annual reduction in NOx emissions from what emissions would have been without the 

program in 2000, a goal it has achieved every year since 2000. Emissions of NOx were 4.1 

million tons in 2003, a 37% reduction from 1990 levels.4

 

These emission reductions of SO2 and NOx have led to improved air quality (especially lower 

concentrations of fine particles) and reduced acid deposition. In addition, some acidified lakes 

and streams in the East are beginning to show signs of recovery. Although the program affects 

power plants throughout the U.S., most of the emission reductions, and therefore most of the 

environmental improvements, have taken place in the eastern half of the U.S. where most of the 

largest (and highest-emitting) coal-fired power plants are located. 4 

As both the structure of the ARP SO2 program and how this program fits with other provisions of 

the Clean Air Act are key to this analysis, it is important to discuss several elements of the ARP 

and its relationship to the rest of the Clean Air Act before describing the results of the 

environmental justice analyses. 

Cap and Trade under the ARP 

The ARP has a permanent annual emission cap on the total amount of SO2 power plants can 

emit. Each source is allocated SO2 “allowances,” and each allowance authorizes the source to 

emit one ton of SO2. While aggregate national emissions cannot exceed the total number of 

allocated allowances (the cap), sources can meet their legal obligation under the program by 

either reducing emissions or purchasing allowances from other sources that reduce emissions 

below their allocations. At the end of the year, sources with unused allowances may sell them or 

bank them for future use, while sources needing extra allowances can purchase them through the 

market. Trading in the ARP is used to increase flexibility and achieve emission reductions at 

lower cost, but it is the cap, in concert with the National Ambient Air Quality Standards (see 

below), that ensures the environmental goals of clean air and less acid deposition are met. 

Accountability 

Access to information about pollution is considered critical to environmental justice and to 

meeting the requirements of Executive Order 12898. The ARP has also considered it crucial to 

its programs from the very beginning and has collected and reported emissions data from 

affected sources since the program’s inception. In order to know whether any cap and trade 

4
emission reduction program is successful, emissions must be measured accurately and credibly. 

In the cap and trade program, SO2 emission allowances are a commodity that can be bought and 

sold, making accurate and credible emissions measurement an important foundation for the 

allowance market. Emissions are measured hourly by each source and reported quarterly to EPA, 

where they can be accessed on the EPA website at www.epa.gov/airmarkets. The penalties for 

not monitoring emissions accurately are both automatic and stringent, providing a strong 

incentive for sources to comply while protecting the integrity of the cap. In addition to the raw 

data available on the web, EPA reports emission levels, air quality, and environmental changes 

related to the ARP and reports progress to the public regularly.4

 This information collection and 

dissemination reflects the important environmental justice value of making reliable information 

about environmental matters more readily available. 

Part of the Clean Air Act 

The CAA is a suite of programs designed to ensure that all areas meet health-based air quality 

goals by regulating emissions from multiple sources using a variety of mechanisms. These 

include such programs as: 

• National Ambient Air Quality Standards (NAAQS), which set standards for six criteria 

pollutants, including SO2 and PM2.5

• State Implementation Programs (SIPs), which describe how a state will meet the NAAQS 

• New Source Review and New Source Performance Standards, which ensure that new or 

significantly modified power plants and other stationary sources or air pollution will be 

cleaner than older, retiring sources and will not impede progress toward attaining the 

NAAQS 

• Mobile source controls 

The ARP works closely with other aspects of the CAA, particularly the NAAQS program that 

sets the ambient air quality standards to protect everyone’s health. State compliance with the 

NAAQS will guarantee that no minority, low-income, or any other population will experience 

disproportionate and adverse human health or environmental effects as a result of programs

aimed at lowering criteria pollutant emissions. Although the ARP was not designed to help attain 

the NAAQS, it has resulted in large reductions in fine particle concentrations throughout the 

eastern U.S., including in non-attainment areas. Therefore, public health is protected through 

federal efforts to reduce long-range transport of pollution (such as through the ARP) and state 

and local efforts to achieve the NAAQS by reducing local sources of pollution (such as through 

siting and operating permits for sources). Sources covered by the ARP are also subject to the 

other applicable CAA requirements; for example, the ability of a source to buy allowances under 

the ARP does not alter the requirement that every area must meet the NAAQS or alter any 

emission limits set under a SIP. 

Analysis of Effects of the ARP on Minority and Lowincome Population Exposure to PM2.5 

By reducing SO2 and NOx emissions, the ARP has also reduced the formation and long-range 

transport of fine particle pollution (PM2.5) throughout the East. SO2 and NOx react in the 

atmosphere to form sulfates and nitrates, which are significant components of PM2.5. PM2.5 is 

5
known to cause many different kinds of heart and lung problems, including chronic bronchitis 

and heart attacks, and can cause premature death. The broad regional reduction in PM2.5 is the 

most important health benefit achieved from implementation of the ARP. 

The initial step of this analysis was to develop scenarios of emissions and air quality for two 

scenarios: with the ARP and without the ARP. We had developed these scenarios for an analysis 

of the health benefits of the ARP, and we used the emissions and air quality data from that 

analysis to consider the influence each scenario would have on various population groups.5

 

Emissions of NOx and SO2 and PM2.5 concentrations in 2010 for the following two scenarios 

were modeled. The 2002 Integrated Planning Model (IPM)a

 was used for SO2 and NOx emissions 

and the Regulatory Modeling System for Aerosols and Deposition (REMSAD) was used for 

PM2.5 concentrations:b

1) Without the ARP – This scenario includes all existing and new source emission control 

standards for SO2 and NOx set before 1990. This scenario takes into consideration the 

retirement of old facilities and NSR requirements for new facilities, a growing demand 

for electricity in the future, and a less efficient NOx control technology option for future 

compliance with the NAAQS. It does not consider the ARP SO2 emissions cap or NOx

standards. Emissions of both pollutants would be expected to increase between 1990 and 

2010 in the absence of the ARP. 

2) With the ARP – This scenario includes the ARP SO2 emissions cap with trading and 

banking and limits on NOx emissions, as prescribed by the ARP legislation. It also 

includes several available fuel switching and emission control options, as well as 

combustion control options available for the ARP NOx compliance. This scenario is 

expected to decrease annual SO2 emissions by 50% and annual NOx emissions by 30% 

from what they would have been without the ARP. 

Modeling of emissions and air quality enable us to isolate the specific effect of the ARP on 

atmospheric concentrations of PM2.5. Modeling also enables us to look at the projected impact of 

the ARP in the future (e.g., when it is fully implemented in 2010). EPA, therefore, conducted 

detailed modeling of the impact of the ARP on minority and low income populations and 

compared the improvements in PM2.5 concentrations that these groups are expected to receive as 

a result of the ARP to improvements that other groups are expected to receive. These analyses 

 

a

 IPM is a multi-regional model of the U.S. power sector that projects emissions and costs. The model has been used 

extensively to support major rules affecting the power industry and other assessment activities. The model and the 

assumptions were reviewed by the EPA Science Advisory Board during their review of the Section 812 CAAA

Prospective Study. The model also received detailed review in conjunction with the Energy Information Agency’s

National Energy Modeling System in 2003 by the President’s Council of Economic Advisors and was further 

improved as a result. More information on IPM can be found at http://www.epa.gov/airmarkets/epa-ipm/ b

 REMSAD is an air quality model that estimates the transport and transformation of emissions into ambient PM2.5

concentrations. The model uses a 36 by 36 kilometer grid covering the continental United States as well as some

areas offshore. This model has been reviewed and used extensively to support major rules affecting the power

industry as well as for Total Maximum Daily Load (TMDL) analyses. More information on REMSAD can be found

at http://resmad.saintl.com. 

6
showed that the ARP did not degrade air quality for any population group and that all groups 

received similar improvements. 

Figure 1 displays the change in PM2.5 concentrations due to the ARP (“With the ARP” compared 

to “Without the ARP”). This gives an estimated change in exposure to PM2.5, indicating where 

the main PM2.5 improvements occurred. All areas experienced improvements in PM2.5 due to the 

ARP. This map shows that the greatest improvements occurred in the Midwest and radiated out 

from there across the eastern U.S., with much lower levels of improvement in the West. These 

modeling results are consistent with the location and magnitude of emission reductions from

power plants under the ARP. 

Figure 1: Projected Reduction in Annual PM2.5 Concentrations in 2010: 

“With the ARP” Compared to “Without the ARP”

Source: EPA REMSAD Modeling, 2002

Methods for Estimating the Impact on Minority and Low Income Populations 

Using the geographic changes in PM2.5 concentrations across the U.S. resulting from the ARP in 

2010, EPA took two slightly different approaches to analyze the potential impact of the program

on PM2.5 concentrations for minority and low-income populations in 2010.6,7

 The main 

differences between the analyses are summarized in Table 1. 

7
Table 1. Methodology Comparison between Environmental Justice Analyses A and B 

Analysis A Analysis B 

1. Scope: Divided into eastern and 

western by longitude -98.5

1. Scope: 31 eastern states 

2. Census data: Block data (race), 

County data (income), 2010 

projections (Woods and Poole) 

2. Census data: Census tract data, 2000 

data

 

3. Race Variables: Number of African 

American, Asian, Caucasian, Native 

American, and “Other” at the blocklevel; Number of Hispanic and NonHispanic at the block-level 

3. Race Variables: Percent of the 

population that is white and percent 

non-white calculated for each tract and 

compared to the state average

4. Income Variables: Number of people 

above and below the poverty line at the 

county level 

4. Income Variables: Percent above and 

below the poverty level calculated for 

each tract and compared to average 

poverty rate in the eastern states 

studied 

5. Analytical Methods: Estimated 

average change in exposure to PM2.5

for each group

5. Analytical Methods: Conducted 

regression analysis with change in 

PM2.5 as the dependent variable 

Scope

Because emissions from power plants in the West are quite low relative to emissions in the East, 

both analyses isolated the impact in the East. In Analysis A, EPA produced nationwide results 

and results for the East and West separately.c

 This showed that there was a large difference in air 

quality improvements between states in the East and West. Analysis B was limited to 31 eastern 

states, where most of the change took place.d

 

Census Data

The two analyses used census data from different years. Analysis A used 2010 population 

projections (based on 2000 census data) developed by Woods and Poole, while Analysis B used 

data from the 2000 census. 

The REMSAD air quality grid does not directly match up with the geographical units of census 

data, so each analysis also had to assign air quality concentrations to census units. For the 

 

c

 In Analysis A, the eastern U.S. is defined as those areas East of -98.5 longitude (a line that runs from roughly

central North Dakota south through the Great Plains states to west Texas). d

 Alabama, Arkansas, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, 

Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New 

Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, 

Vermont, Virginia, West Virginia, Wisconsin

8
analysis on race, Analysis A used projected 2010 data for census blocks, the smallest 

geographical area, bounded by visible borders, for which census data are collected.e

 For the 

analysis on income, Analysis A used county-level data. Analysis B used 2000 data for census 

tracts, small statistical subdivisions of a county originally designed to have between 2,500 and 

8,000 people and to be homogeneous with respect to population characteristics, economic status, 

and living conditions.f

 

Race Variables

For Analysis A, racial categories included African Americans, Asians, Caucasians, Native 

Americans and Others (group that encompasses all other races). Hispanics and non-Hispanics 

were also considered. 

For Analysis B, the percentage of the census tract population that is nonwhite was calculated. In 

addition, the tract was identified as “minority” if the resulting percentage was higher than the 

average percentage minority for a respective state. This was used to compare areas with higher 

numbers of minorities to areas with lower numbers of minorities. 

Income Variables

For Analysis A, the number of people above and below the poverty line at the county level was 

used to define low and high income categories, respectively.g

 

For Analysis B, the percentage of each census tract population below the poverty threshold was 

calculated. In addition, the tract was identified as “poor” if the resulting percentage was higher 

than the average percentage of population under the poverty threshold for the eastern U.S. 

Analytical Methods

Analysis A tallied average change in each population group’s exposure to PM2.5 due to the ARP. 

Analysis B ran statistical regressions relating the change in PM2.5 concentrations with the 

demographic variables to evaluate whether poverty or race was associated with changes in air

quality. The poor and minority variables were used in separate regressions because they were 

highly correlated. State dummy variables were added to account for between-state variation. 

Statistical significance was calculated at the 99% level. Regressions were run and coefficients 

calculated for the following: 

• Tract below poverty percentage (eastern average) 

• Tract below nonwhite percentage (state average) 

 

e

 There are 5,127 square grid cells in the REMSAD modeling domain. f

 Census tracts that straddle more than one REMSAD grid cell were assigned weighted averages based on the

proportion of the tract in each cell. This assumes population is distributed evenly throughout the census tract. g

 Note that since the grid cell and county boundaries are not nested, two rules were developed to calculate the 

poverty data for each grid cell: (1) If a grid cell falls completely with a county, the poverty data for that county were 

used, and (2) For those grid cells falling in multiple counties, a population-weighted average of the percentage of 

people below and above poverty line in the counties were used. 

9
Results 

Despite variations in methods used, both analyses had similar results. First, both analyses show 

that the aggregate improvement in PM2.5 is similar for all groups studied. The projected annual 

average reduction in PM2.5 concentration for the eastern U.S. in 2010 under the ARP is 

approximately 1.5 μg/m3 for Analysis A and 1.6 μg/m3 for Analysis B.h As we will describe 

later, any small differences in exposure to PM2.5 that occurred between the population groups 

appear to be very small compared to the overall improvements for everybody. 

Overall, the results of both Analysis A and Analysis B indicate that the ARP has been effective 

in achieving its intended results – broad regional reductions in air pollution for all Americans. 

• The ARP improved air quality substantially overall. 

• The ARP improved air quality substantially for each population group. 

• No disproportionately high and adverse human health or environmental effects were found 

for minority or low-income groups. 

Analysis A

Table 2 shows the population-weighted average exposure change for PM2.5 for the many

population groups studied in Analysis A. It also presents the population-weighted average 

percentage change in PM2.5 exposure. In general, PM2.5 improvements were much more 

significant in the East compared to the West, mainly because there are more power plants in the 

East. 

When interpreting the results in Table 2 for the entire country, one should note that the largest 

numbers of Hispanic and Native American census tracts are in the West. These groups tend to 

live in areas where pollution from ARP sources is low and, thus, tend to have lower exposure to 

PM2.5 from ARP sources with or without the ARP. They do, however, seem to receive the 

greatest benefit from the ARP in the West compared to the other groups analyzed. 

 

h

 The differences between the change in exposure for the two analyses is due to different methods of assigning air 

quality to the population using census data identified in Table 1. 

10
Table 2: Absolute and Percentage Decrease in PM2.5 Levels in 2010 by Race, Ethnic and 

Income Group 

 Population Weighted Average

Absolute Change (ug/m3

)

Population Weighted Average

Percentage Change (%)

Category Group All US Eastern US Western US All US Eastern US Western US

All All 1.1 1.5 0.04 7.9 10.2 0.9

African American 1.4 1.6 0.03 8.9 9.8 0.6

Asian 0.8 1.4 0.01 4.7 8.3 0.3

Race Caucasian 1.1 1.5 0.05 8.2 10.4 1.1

Native American 0.7 1.3 0.06 5.8 9.8 1.5

Other 0.6 1.2 0.03 4.2 7.7 0.8

Ethnicity Hispanic 0.6 1.2 0.04 4.7 7.8 1.03

Non-Hispanic 1.2 1.5 0.04 8.4 10.4 0.9

Income Below Poverty 1.1 1.5 0.04 7.7 10.1 1.1

Above Poverty 1.1 1.5 0.04 7.9 10.2 0.9

Source: McCubbin et al., 2005. 

The rest of this discussion focuses on results for the eastern U.S., where PM2.5 pollution from

power plants was higher prior to the program and where improvement was both needed and 

achieved. 

Analysis A found that of the various racial groups all received significant, yet slightly different, 

improvements in PM2.5 concentrations that were of similar magnitude. Improvements ranged 

from 1.2 to 1.6 μg/m3

, including: 

• African Americans (1.6 μg/m3

) 

• Caucasians (1.5 μg/m3

) 

• Asians (1.4 μg/m3

) 

• Native Americans (1.3 μg/m3

) 

• Hispanics (1.2 μg/m3

) 

Figures 2 and 3 show the cumulative distribution of the change in PM2.5 by race and by

Hispanic/Non-Hispanic, respectively. These figures show that all members of all groups received 

at least some benefit from the Acid Rain Program and that large portions of each group received 

large improvements in air quality due to the ARP. 

11
Figure 2: Cumulative Distribution of the Decrease in PM2.5 (ug/m3

) by Race in the 

 Eastern U.S. 

Source: McCubbin et al., 2005

Figure 3: Cumulative Distribution of the Decrease in PM2.5 (ug/m3

) for Hispanics and NonHispanics in the Eastern U.S. 

Source: McCubbin et al., 2005

12
The analyses of the impacts of the ARP on people below the poverty line in Analysis A show 

that both poor and nonpoor groups received significant – and equal – improvements. Both poor 

and nonpoor received improvements of 1.5 μg/m3 each. Figure 4 shows the cumulative 

distribution of the change in PM2.5 for people above and below the poverty line in the Eastern 

U.S. This graph shows that improvements were nearly identical for people above and below the 

poverty line. 

Figure 4: Cumulative Distribution of the Decrease in PM2.5 (ug/m3

) for Individuals Below

and Above the Poverty Line in the Eastern U.S. 

Source: McCubbin et al., 2005

Analysis B

Analysis B compared census tracts that were above the average state-level percent minority 

population to tracts that were below the average. It also compared census tracts that were above 

the eastern average for percentage in poverty to those below the eastern average. The analysis 

found that tracts with a higher percentage of minorities or poor people have received slightly 

greater reductions in PM2.5. The differences were very small compared to the overall average 

improvement that all groups received. However, they were statistically significant. This indicated 

that, if anything, minorities and poor people received greater benefits from the program. 

When Analysis B accounted for the fact that there are similarities within a state with respect to 

air quality improvements, there appeared to be a high correlation between percent of minority 

population in a tract and PM2.5 improvements. 

13
Limitations to the Analysis of 2010 ARP Projections 

This analysis is based on modeled forecasts of changes in power plant emissions in 2010 as a 

result of the ARP compared to the hypothetical of emissions that would have occurred if the 

program had not been implemented. The accuracy of these analyses is dependent on the accuracy 

of the various models and the assumptions built into the models. 

Overview Analysis of the Acid Rain Program 

To supplement modeled projections of the impact of the ARP in 2010, we also include in this 

report analyses of how emissions have already changed since the ARP was passed by Congress 

in 1990.i

 We focus here on the SO2 component of the program to understand, specifically, the 

impact of emissions trading on local communities. 

In the past, most of EPA’s assessments of the ARP have focused on national and regional level 

results because the ARP’s goals were national in scale. However, because local increases in 

emissions could have implications for various population groups, we examine the regional, state, 

and local level. Emissions analyses are best used as an initial screening assessment to identify 

plants and regions that might require further study. Because SO2 emissions are transported 

regionally, the location of emission increases is not a good indicator of the location of the air 

quality and health impacts of those emissions. 

National Emissions Have Been Reduced 32% from 1990 Levels 

The ARP successfully reduced emissions at the national level. In 2003, annual national SO2

emissions were 38% lower than 1980 levels and 32% lower than 1990 levels (see Figure 5).

These reductions occurred despite a substantial nationwide increase in power generation at these 

sources. 

 

i

In this report, 1990 is used as a baseline for analyses of emissions because that is the year the ARP was signed into

law. The Acid Rain Program was implemented beginning in 1995. Using a year prior to 1995 as a baseline is

important because many plants reduced emissions beyond expectations prior to 1995 in anticipation of the program.

14
Figure 5: National SO2 Emissions under the ARP 

Source: EPA, 2004

Regions and States with Highest Emissions Prior to the ARP Reduced the Most 

Before the ARP began, some were concerned that the large coal plants of the Midwest would 

purchase allowances and increase emissions under the program, adding to poor air quality and 

acid rain throughout the Midwest and Northeast. Researchers at the Environmental Law Institute, 

Massachusetts Institute of Technology, and Environmental Defense have found that, generally, 

the opposite has occurred. Most of the SO2 reductions have occurred at large units – particularly 

those burning high sulfur coal in the Midwest – because that is where the cheapest reductions 

were available.8,9

 Also, most allowances in the early years of the program (Phase I) were used in 

the state where they were issued, indicating that there were not large shifts in emissions across 

the regions.10 

EPA analyses comparing 1990 emissions to an average of Phase II (average of 2000-2003) 

emissions also found that states with high emissions prior to the program were most likely to 

achieve deep reductions. Figure 6 shows that most of these states with high emissions prior to the 

ARP are located upwind of the areas the ARP was designed to protect. Reductions in these states 

resulted in important environmental and health benefits over a large regional scale. In addition, 

the states that reduced emissions had large annual reductions, while the states that had increased

emissions – largely attributable to growth and not increases in emissions rates – had much 

smaller annual increases. The states with the greatest reductions were in the Midwest and 

included Ohio, Illinois, Indiana, and Missouri. 

15
Figure 6: State-level SO2 Emissions 

Source: EPA, 2004 

Plants with the Highest Emissions Prior to the Program Generally Achieved Greatest 

Reductions

It is not surprising that some of the plants under the ARP increased emissions while others 

decreased emissions because there is no requirement under a cap and trade program for any one 

power plant to reduce emissions as long as emissions from all sources are reduced. If the lowest 

emitting sources increase emissions by a small amount, it is unlikely that such increases would 

cause significant impacts on the local air quality. This is because the program has resulted in 

large regional reductions in emissions. However, if some sources increase emissions 

substantially, there is greater potential that local impacts could occur. 

To identify the size of the plants that reduced emissions between 1990 and the 2001-03 average, 

Figure 7 plots annual SO2 emissions for each plant in 1990 versus the change in emissions at that 

plant during the ARP (between 1990 and 2001-03).11 The red line indicates emissions reductions 

that would have occurred if all sources had reduced the same amount (approximately one-third 

from 1990 levels). Dots above the line represent the plants with less than average emission 

reductions, while dots below the line represent the plants with greater than average reductions. 

The results of this analysis include: 

• The plants with the highest emissions in 1990 tended to reduce their pollution the most. 

• Some plants (those plotted in the yellow area of the figure) increased emissions. These 

plants tended to have lower emissions in 1990 (under 100,000 tons). 

16
• Plants that had high emissions in 1990 were also more likely to reduce beyond what 

they would have reduced if all plants reduced emissions the same percentage 

(approximately one-third). 

In conclusion, trading under the ARP has generally reduced emissions most at the highestemitting power plants, while emissions at some smaller power plants have experienced small 

increases. Plants with the highest emissions in 1990 tended to achieve the greatest tons of 

reduction and percentage of reduction. This confirms results of studies by external 

researchers.8,9,10,1213

Figure 7: Plant-Level 1990 SO2 Emissions Compared to Changes in SO2 Emissions between 

1990 and the 2000-03 Average 

-350,000

-300,000

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000

1990 SO2 Emissions (tons)

Change in SO2 (tons) from 1990 to 2001-03

Change in Em is s ions if All Plants

Reduce Sam e Am ount

Actual Change in Em iss ions

The red line represents the expected change in SO2 from 1990 levels if each plant achieved the same 

percent reduction as the entire universe of affected sources did in aggregate (approximately one-third). 

This analysis does not include plants that were not in operation in 1990. 

Source: EPA, 2004 

17
Case Study: Local Emission Increases in the Study Area Are Balanced Out by 

Nearby Emission Decreases 

For a cap and trade program to achieve positive environmental and health outcomes in all 

locations, emissions increases in one area must be offset by reductions of at least the same

magnitude in a location close enough in proximity to ensure that air quality improves 

everywhere. The radius within which such “off-setting” reductions must occur differs depending 

on the pollutant in question and other factors, such as meteorological conditions. To further 

explore local impacts of trading emissions, EPA also conducted a case study analysis on a 

particular cluster of Midwestern power plants that increased emissions and could have resulted in 

elevated local levels of air pollution. 

For this case study examining local impacts of the ARP, EPA chose plants that fit the following 

criteria that could indicate a potential local problem: 

1) Had emissions in the top 50 plants for current emissions 

2) Increased their emissions between 1990 and the 2001-03 average 

3) Did not improve their rates of SO2 emissions per unit of heat input (SO2 rates) 

 between 1990 and the 2001-03 average 

4) Were clustered with at least one other plant (within 50 kilometers) 

While several plants fit one or two criteria, only one pair of plants fit all of these criteria. The 

two plants are Keystone and Homer City, both located in Pennsylvania. 

Using Geographic Information System (GIS) software, buffers were drawn around the Keystone 

and Homer City plants at various distances (50 km, 100 km, 200 km). We chose 50 km (30 

miles) and 200 km (125 miles) using a study by Levy et al.14, which showed that a significant 

portion of total population exposure (around half) occurred beyond 200 km of a power plant, 

while approximately 20% of the exposure occurs within 50 km of the plant.j Another study by 

the same authors found similar results for sulfate and nitrate particles at power plants in the 

Washington, DC, area.15 These findings suggest that, while pollution from an individual power 

plant remains important, reducing total, aggregate emissions within both a 50 and 200 kilometer 

buffer from a plant is also important for reducing the population’s exposure. In comparison, 

some other pollutants, such as tiny particles emitted directly from diesel engine vehicles, deposit 

closer to the sources and affect pollution levels closer to the sources than NOx and SO2, which 

come out of the stack in gaseous form and settle further away from their source. 

Together, the Homer City and Keystone plants increased emissions by 45,000 tons between 1990 

and the 2001-03 average (a 19% increase). Figure 8 shows, however, that this increase occurred 

in an area where there were many power plants that both increased and decreased emissions 

 

j

This study used the CALPUFF atmospheric dispersion model to look at the health benefits of installing controls at 

individual power plants in Illinois to populations living at various distances from power plants. For sulfates, 

approximately 20% of the total exposure to sulfates (range 1% - 45%) is located within 50 kilometers of the plant. 

Half of the total population exposure to a plant’s pollution was found to occur beyond 200 kilometers of the plant. 

While these results are specific to Illinois, they do indicate that the vast majority of the exposure from a given power 

plant occurs beyond 50 kilometers from the plant and a substantial portion of the exposure occurs even beyond 200

kilometers from the plant. 

18
during this period. For example, the total emissions within a 50 km buffer zone around Homer 

City and Keystone (including these two plants) were 30% lower on average over 2001-03 than 

they had been in 1990. This decrease occurred mainly because the Conemaugh plant (located 

within 50 kilometers of these plants) installed control technology for SO2 on its two coal-fired 

units in the mid-1990s. The emission decreases at Conemaugh more than compensated for the 

increases at Homer City and Keystone. In addition, emissions within a 200 kilometers buffer 

zone decreased by 41% during the same time period due to reductions at many other plants, most 

notably Rivesville (WV), Mount Storm (WV), Cardinal (OH), and Ashtabula (OH). In this 

region of the country, the cap and trade component of the program was extremely effective in 

reducing emissions, despite some increases at certain plants. As a result, one would expect 

improvements in air quality and environmental benefits throughout the area. 

The Homer City/Keystone case study illustrates the importance of looking broadly when 

assessing the impacts of emissions from individual power plants. This case study is a “perfect 

storm” situation where all of the factors that could cause potential problems line up. In addition, 

it is located in an area of potential concern due to the number of large coal-fired power plants, 

high concentrations of air pollution, and large population centers. Yet, our analysis indicates that 

people living in this area had substantially less SO2 emissions coming from the set of power 

plants around them after 2000 than occurred in 1990. In addition, the results of comparable 

analyses in other areas are expected to be similar. Support for this comes from looking at Figure 

1 earlier that shows forecasted air quality improvements nationwide although not all power 

plants in the trading program are lowering emissions. 

Figure 8: Homer City and Keystone Case Study: Local Emissions within Various 

Distances from Power Plants 

L eg e nd

D P A _plant s E v e n ts

P lan t_ d a ta 1.tx t E ve n ts

C H ANG E _S O 2

!( -336 5 0 6 .600 0 00 - - 270 0 0 0 .0 0 0 0 0

!( -269 9 9 9 .999 9 99 - - 180 0 0 0 .0 0 0 0 0

!( -179 9 9 9 .999 9 99 - - 900 0 0 .0 0 0 0 0 0

!( -899 9 9 .9999 9 9 - -1 000 0 .000 0 0 0

!( -999 9 .9 9999 9 - -1 0 00.0 0000 0

-999 .9 9 9999 - 1 000.0 000 0 0

") 1000 .000 0 01 - 10 0 0 0 .0 0 0 0 0 0

") 1000 0 .0 0 0 001 - 9 0 0 00.0 0 0 0 0 0

") 9000 0 .0 0 0 001 - 1 8 0 000 .0 0 0 0 0 0

") 1800 0 0 .0 0 0001 - 2 7 000 0 .0 0 0 0 0 0

") 2700 0 0 0 0 0001 3 6 000 0 0 000 0 0

1,001 to 10,000 ton decrease

10,001 to 90,000 ton increase

1,000 ton decrease to 1,000 ton increase

1,001 to 10,000 ton increase

10,001 to 90,000 ton decrease

90,001 to 180,000 ton decrease

180,001 to 270,000 ton decrease

> 270,001 ton decrease

Change in SO2: 1990 to 2001-03

Homer City

Keystone

50 km

100 km

200 km

 Source: EPA, 2004 

19
Regional-Scale Air Quality Improved Significantly 

While identifying plants and regions that have increased or decreased emissions is important, 

EPA is most interested in whether air quality actually improved. EPA found that, even in areas 

where some plants increased emissions, emission reductions throughout the eastern U.S. appear 

to have resulted in overall improvements in air quality. Data from EPA’s Clean Air Status and 

Trends Network (CASTNET) indicate that SO2 and sulfate improvements occurred throughout 

the U.S., even in areas where individual plants increased emissions. 

During the late 1990s, following implementation of the ARP, dramatic regional improvements in 

SO2 and sulfate concentrations were observed at long-term monitoring sites throughout the 

eastern U.S. This was not surprising, as reductions in SO2 emissions can reduce ambient 

concentrations of both SO2 and sulfates (as explained earlier, sulfates are a component of PM2.5). 

This is due to the large reductions in SO2 emissions from Acid Rain sources. Analyses of 

regional monitoring data from CASTNET show the geographic pattern of SO2 and airborne 

sulfate in the eastern U.S. 

From 1989 through 1991, prior to implementation of the ARP, the highest ambient 

concentrations of SO2 in the East were observed in western Pennsylvania and along the Ohio 

River Valley. Ambient SO2 concentrations have decreased significantly since 1991, with average 

concentrations in the eastern U.S. decreasing 57% in the Northeast and 38% in the Mid-Atlantic 

region. 

Before the program, in 1989 through 1991 (see Figure 9), the highest ambient sulfate concentrations were observed in western Pennsylvania, along the Ohio River Valley, and in northern 

Alabama. Like SO2 concentrations, related sulfate concentrations in ambient air have decreased 

since the program was implemented, with average concentrations decreasing approximately 30% 

in all regions of the eastern U.S. Both the magnitude of the highest concentrations and the size of 

the region where they occur were dramatically reduced following implementation of the ARP. 

The largest decreases were observed along the Ohio River Valley (see Figure 9). Similar results 

have been shown for wet sulfate concentrations in precipitation. 

Because of these improvements in air quality and reductions in sulfur deposition, acidified lakes 

and streams have recovered in many areas and very substantial human health benefits occurred 

as people throughout the East were exposed to much lower levels of PM2.5. 

20
Figure 9. Mean Ambient Sulfate Concentrations in 1989-1991 and 2001-2003 in the Eastern 

United States 

1989-1991 2001-2003 

Source: EPA, 2004 

Limitations of these Analyses 

EPA has employed well-accepted analytical methods and models in these analyses. However, in 

any complex analyses using estimated parameters and inputs from numerous models, there are 

likely to be limitations and sources of uncertainty. These analyses are no exception. As outlined 

in this report, these analyses used many inputs and tools, including projected emission 

inventories, air quality models (with their associated parameters and inputs), and population and 

income estimates. Each of these inputs includes uncertainties but reflect the best available 

information at the time the analysis was conducted. Each tool has limitations and reflects the 

uncertainty of its data inputs, but all are well-respected and frequently used in scientific analyses. 

The Clean Air Markets Division also recognizes that there may be additional approaches and 

methods used to address this issue. 

A potential limitation of these analyses involves the spatial relationship between analytical tools 

and some aspects of environmental justice impacts. Local scale and environmental justice 

impacts of the emissions controlled by the Acid Rain Program are a combined consequence of 

both long-range transport of emissions and those emitted from nearby sources. The two models 

used in these analyses (IPM to project power plant emissions; the REMSAD air quality model to 

estimate fine particle concentrations) are well-respected models that have been used for 

21
numerous EPA analyses of emissions and air quality impacts from power generation sources. 

They are best when used to characterize the long-range transport aspects of regional air pollution 

problems. The 36 km2

 grid size in REMSAD and averaging of values to aggregate up for 

regional analyses create limitations in capturing smaller-scale gradations in concentration of fine 

particles and in estimating exposure to pollutants. 

In general, analyses relying on the location of power plant emissions as an indicator of their 

potential health effects may overemphasize the contribution of specific local sources to localscale health effects, while inadequately accounting for the contribution of long-range transport. 

This limitation applies to the emissions case study portion of these analyses. The location of 

power plant emissions is not always a good indicator of the health effects of those emissions. 

Health effects of power plant emissions depend on factors such as meteorology, wind speed and 

direction, and stack height of plants, as well as the frequency and duration of human exposure. 

As already noted, many of the health effects of power plants occur in communities hundreds of 

miles downwind from specific sources. 

Air quality data from the CASTNET monitoring network is provided in these analyses to 

demonstrate that regional air quality has improved substantially since implementation of the 

Acid Rain Program. As fine particle pollution is a regional problem, often occurring hundreds of 

miles from the emissions that caused it, this monitoring network provides an appropriate 

perspective to characterize the regional impact of emissions changes from power plants. 

However, the analyses do not include urban air quality monitoring sites and do not fully depict 

small-scale changes in air quality at locations between monitoring sites, such as those that could 

occur due to changes in emissions from power plants. 

Conclusions 

This staff paper shows that the ARP is expected to improve air quality for all population groups 

in 2010 when it is fully implemented and that improvements for each population group will be 

similar. It shows that the ARP will not have disproportionately high and adverse human health or

environmental effects on minority, low-income, or other populations. Moreover, analyses of 

emission changes from each source demonstrate that cap and trade has been an effective policy 

tool to achieve the greatest emission reductions at power plants that had the highest emissions of 

SO2 in 1990. This has led to large, regional improvements in air quality. 

Any discussion of the ARP, however, must consider that it is part of the Clean Air Act, a suite of

provisions and programs designed to ensure that all areas meet air quality goals. These include 

the NAAQS, SIPs, New Source Review, New Source Performance Standards, mobile source 

controls, and toxic emission control programs, as well as the ARP. If certain plants in the ARP 

either fail to contribute to air quality improvement in polluted areas or even cause air quality to 

worsen, these other Clean Air Act provisions and programs are available to ensure that all areas 

will meet air quality goals. Taken separately, each provision is unlikely to ensure full protection, 

but together they improve air quality for all Americans. 

22
As an example of this, EPA recently recognized that further reductions in SO2 and NOx from

power plants are necessary to ensure that the PM2.5 NAAQS are met. The goal was not to get rid 

of the cap and trade mechanism but to reassess the cap and set it at a level that would result in 

additional emission reductions from plants contributing to lingering air quality problems. 

Building on the success of the ARP, EPA promulgated a new cap and trade program, the Clean 

Air Interstate Rule (CAIR), in March 2005 to achieve additional large reductions in emissions of 

SO2 and NOx from power sources located in the eastern U.S. Another recent rule, the Clean Air 

Visibility Rule, will further reduce emissions of SO2 and NOx in the western U.S. 

As CAMD continues to implement programs like CAIR to help bring all areas into attainment 

with the NAAQS, the Division is committed to continuing to evaluate its cap and trade 

programs. This is essential for both EPA and the public to learn about the successes, challenges, 

and appropriate uses of such policy tools. 

 

1

 59 Federal Register 7629; February 16, 1994. 2

 U.S. Environmental Protection Agency. (2005). Environmental justice. Accessed 14 May 2005

http://www.epa.gov/compliance/environmentaljustice/index.html. 3

 personal communication, EPA Office of Air Quality Planning and Standards, September 27, 2005. 4

 U.S. Environmental Protection Agency. (2004). Acid Rain Program 2003 progress report. Washington, D.C.:

GPO. EPA 430-R-04-009 5

 National Acid Precipitation Assessment Program. (2005). NAPAP report to Congress: an integrated assessment. 

Washington, DC U.S. GPO. 6 (Analysis A) McCubbin D., Parry D., and Post E. (2005). Environmental justice & 2010 analysis of Title IV. Abt 

Associates Inc., memorandum to Ann Watkins of U.S. EPA, 17 March 2005. 7

 (Analysis B) Chestnut, L. et al. (2005). Associations of Title IV changes in PM2.5 with poverty and minority

populations. Stratus Consulting Inc., memorandum to Ann Watkins of U.S. EPA, 17 February 2005 8

 Ellerman, D. (2003). Lessons from Phase 2 compliance with the U.S. Acid Rain Program., Cambridge, MA: 

Massachusetts Institute of Technology Center for Energy and Environmental Policy Research working paper 2003-

009. Accessed 20 July 2005 http://web.mit.edu/ceepr/www/2003-009.pdf 9

 Environmental Defense. (2000). From obstacle to opportunity: how acid rain emissions trading is delivering

cleaner air. http://www.environmentaldefense.org/documents/645_SO2.pdf 10 Swift, B. (2000). Allowance trading and potential hot spots - good news from the Acid Rain Program. . Bureau of

National Affairs, Inc. Environment Reporter, pp. 954-959 11 U.S. Environmental Protection Agency. (2004). The Acid Rain Program experience: should we be concerned 

about SO2 emissions hotspots? Presented at the Emissions Marketing Association Spring Meeting. New Orleans,

LA. May 4, 2004 12 Burtraw D., and Mansur E. (1999). Environmental effects of SO2 trading and banking. Environmental Science and

Technology 33(20): 3489-3494 13 Coburn, J. (2001). Emissions trading and environmental justice: distributive fairness and the USA’s Acid Rain

Program. Environmental Conservation 28(4): 323-332 14 Levy, J.I., Spengler J.D., Hlinka D., Sullivan D., and Moon D. (2002). Using CALPUFF to evaluate the impacts 

of power plant emissions in Illinois: model sensitivity and implications. Atmospheric Environment. 36: 1063-1075. 15 Levy J.I., Greco S.L., Spengler, J.D. (2002) The importance of population susceptibility for air pollution risk

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