OAR Box 1132 

Prepped by Candice Davis 

Document Number: 

2) ll-A-19 

Docket Number: 

A-86-03 

Printed 4/18/2008 2:24:46 PM Sheet 2 of 122 

P.1 
P.2 

/?-<3>cV-o3 

MEMORANDU M 

E 

TO: Will Smith 

FROM: Jeff Kolb/Steve Sobotka 

-9 

SUBJECT: Evaluation of the Cost Savings from a Banking andj Trfic^hg-!R 

System for Diesel Fuel Sulfur 

&gAJR POCCETJ 

DATE: August 1, 1988 

A system of banking and trading of sulfur reduction credits potentially 

could be used to supplement conventional regulations that restrict the sulfur 

content of on-highway diesel fuel.-'- This memorandum evaluates: (1) the cost 

savings to the refining industry that could result from banking and trading; 

and (2) whether banking and trading could facilitate earlier compliance with 

restrictions on the sulfur content of diesel fuel. The enforcement aspects of 

a banking and trading system for diesel fuel sulfur will be discussed in a 

subsequent memorandum. 

OVERVIEW OF THE ANALYSIS 

We evaluated the potential cost savings to the petroleum refining industry 

under a number of alternative banking and trading systems. In all cases we 

assume that the industry would have three years to comply after the regulations 

to control the sulfur content of on-highway diesel fuel are promulgated (e.g., 

if the regulations are promulgated in late 1990, the industry would be required 

to comply as of 1994) and that there would be no restrictions on the aromatics 

content of on-highway diesel fuel. We evaluated a number of alternative 

designs for banking and trading systems because of uncertainties about the 

value of sulfur reductions with current versus future diesel engine emission 

control systems and about the ability of future engine emission control systems 

to operate with diesel fuel sulfur content levels in excess of 0.05 percent. 

If, in fact, sulfur reductions during the pre-regulatory period (e.g., 1991-

1993) are worth much less than in the post-regulatory period, or if diesel 

engine emission controls required in the future are compatible only with sulfur 

1 Banking and trading is an innovative "non-regulatory" approach that 

potentially can reduce industry's costs (and retail prices) of complying with 

or the time needed to comply with environmental requirements. Such a system 

allows firms to "bank" emission reduction credits that are generated at 

relatively low costs by "over-controlling" in an earlier time period and to use 

them later to assist in complying with higher cost regulatory requirements. 

Firms that have relatively lower costs of reducing emissions can "trade" (sell) 

emission reduction credits to firms that have higher control costs. Banking 

and trading provides industry with the flexibility needed to meet regulatory 

requirements at the lowest cost. EPA has used banking and trading in the lead 

phase down program. 
P.3 

content levels very close to 0.05 percent, banking and trading systems designed 

to reduce industry's compliance costs would be neither cost-effective nor 

environmentally sound. 

The cases we evaluate are as follows: (^\tl assume. 0.0<f s+i. in [Wl) 

o Case 1: A banking and trading system in which credits could be generated 

in 1991 through 1993 and used to comply with regulatory requirements in 

1994 and 1995. 

o Case 2: A banking and trading system with exchanges at a 1:1 ratio as in 

case 1, but with a maximum physical sulfur content limit of 0.10 percent 

imposed on on-highway diesel fuel in 1994 and 1995 (a physical maximum 

would be appropriate if the emission control systems on diesel engines 

would be compromised at higher sulfur content levels). 

o Case 3: A similar system, but one in which sulfur emission credits could 

be exchanged at a 2:1 ratio in 1994 and 1995 (such an exchange ratio would 

be appropriate if sulfur reductions in earlier years were not as 

environmentally beneficial those'in later years). 

o Case 4: A combination of Cases 2 and 3. 

We also evaluated the potential for a banking and trading system to hasten 

industry compliance with the 0.05 percent sulfur content standard. In this 

analysis we assumed that the refining industry could accumulate credits over a 

two year period and use them to help comply with regulatory requirements 

imposed in the third year. This approach is similar to setting interim 

standards (such as is being contemplated for RVP in gasoline), in the sense 

that the reductions in the sulfur content of diesel fuel would be accelerated, 

but would allow the industry much more flexibility in making the reductions. 

We used the DOE refinery model to estimate the incremental cost of sulfur 

removal in each PAD District. The assumptions used in the model for product 

outputs, prices, and production capacity are similar to those used in a 

previous analysis by SCI of the aggregate costs of the sulfur standards. The 

information developed on incremental control costs is used to determine: the 

extent to which credits would be generated and used under the various 

configurations of a banking and trading system; the control costs that would be 

incurred by refiners; and the direction of trades, on net, between PADs (trades 

among refineries within PADs also would occur but are not estimated by the 

* If sulfur reductions in earlier years were as environmentally beneficial 

as those in later years, designing a banking and trading system with a 2:1 

exchange ratio would result in both improved environmental benefits (greater 

sulfur removal) and reduced compliance costs. 

-^ See, Cost and Feasibility of Lowering Diesel Fuel Sulfur and Aromatic 

Content, prepared for EPA by SCI, November 2, 1987. 
P.4 

model).^ A more detailed description of the analytical approach is provided in 

the attached Appendix. 

RESULTS OF THE ANALYSIS 

The results of our analyses under two alternative assumptions regarding 

the extent to which refiners and the distribution system are able to segregate 

on-highway diesel fuels from other distillate products, primarily home heating 

oil, are shown in the table below. The baseline costs of the 0.05 percent 

restriction on sulfur content, incurred annually, are shown for comparison. 

The cost saving from banking and trading is the present value of the control 

costs that would otherwise be incurred in 1994 and 1995 (about $235 and $700 

million in each year for the segregated and non-segregated cases, respectively) 

minus the costs incurred under the banking and trading systems. The estimates 

provide a general indication of the size of the potential savings possible from 

banking and trading relative to compliance costs. 

Baseline Industry Costs and Estimated Cost 

Savings from Banking and Trading 

Segregation of Diesel Fuel 

Segregated Unsegregated 

($ million) 

Baseline Annual Costs $235 $699 

Total Cost Savings: 

Case 1: Full banking & trading 

Case 2: 0.1 % sulfur limit 

Case 3: 2:1 exchange ratio 

Case 4: combination of case 2 & 3 

In the scenario in which diesel fuel is segregated from other distillate, 

the analysis indicates that banking and trading potentially could result in 

cost savings of about $168 million if credits could be traded at a 1:1 ratio 

and no physical limits on sulfur content were imposed in 1994 and 1995. The 

cost savings from banking and trading would decline, but still remain 

significant, as physical limits are imposed on the sulfur content of diesel 

fuel in 1994 and thereafter and as restrictions are imposed on the exchange 

ratio. The cost savings occur because refiners would be able to delay the 

capital expenditures required to physically meet the 0.05 percent sulfur 

content standard. 

$168 

128 

85 

77 

$580 

434 

321 

306 

Our analysis focuses on differences in control costs between the 

baseline 0.05 percent standard and an interim banking and trading system. Thus, 

the fact that the model "over-optimizes" production within PADs is not of great 

importance because such "over-optimization" would be reflected in both cases. 

The results of the analyses are not highly sensitive to the specific 

assumptions made regarding prices, output, and capacity for similar reasons. 
P.5 

In the scenario in which diesel fuel is not segregated from other 

distillate beyond current levels, the analysis indicates that banking and 

trading potentially could result in cost savings of about $580 million if 

credits could be traded at a 1:1 ratio and no physical limits on sulfur content 

were imposed in 1994 and 1995. The cost savings from banking and trading would 

be large even if physical limits are imposed on the sulfur content of diesel 

fuel in 1994 and thereafter or if restrictions are imposed on the exchange 

ratio. In the unsegregated case, much of the benefit from reducing the sulfur 

content of distillate would be from other than the on-highway diesel fuel 

portion. Presumably such sulfur reductions in both the pre- and postregulatory period would generate similar benefits, regardless of the tradeoffs 

in benefits for the on-highway portion, and it is beneficial to attain such 

benefits earlier, rather than later. 

Our analysis also indicates that refiners could meet the 0.05 percent 

standard in 1993 using a banking and trading system in which credits would be 

generated in 1991 and 1992 and used for compliance in 1993. Refiners would 

incur costs of about $90 million (in present value over the three year period) 

in the case where on-highway diesel fuel could be segregated from all other 

distillate and about $220 million in the case where it could not be segregated 

beyond current levels. This is about 40 percent of the cost of obtaining one 

year's worth of sulfur reductions under the 0.05 percent standard for the 

segregated case and about 30 percent for the non-segregated case. 

We understand that the refining industry does not favor banking and 

trading. If future diesel engine emission controls require a sulfur content 

for diesel fuel very close to 0.05 percent, a banking and trading system 

designed to help industry meet that target would not be cost-effective. 

However, banking and trading still could be used to obtain environmental 

benefits by encouraging earlier sulfur reductions and would effectively 

substitute for interim standards. Industry would incur additional costs, but 

the cost per unit of sulfur reduction would be about 30 to 40 percent of that 

of the 0.05 standard and, thus, cost-effective." If banking and trading is 

fully or partially compatible with future diesel engine emission controls, our 

analysis indicates that it could result in significant cost savings to the 

refining industry. These cost saving would essentially all be passed through 

to consumers in the form of lower prices of highway diesel fuel in the 

segregated case and in the form of lower diesel and number two fuel oil prices 

in the non-segregated case. 

-> Because essentially all of the cost savings due to banking and trading 

would be passed through to consumers, there is no reason for industry as a 

whole to favor such systems. 

Banking and trading systems commonly are criticized because they are 

thought to create enforcement problems and possibly result in emissions greater 

than under a conventional regulatory standard. However, a banking and trading 

system designed to obtain earlier sulfur reductions can only benefit the 

environment, even if enforcement is lax, as the sulfur content of diesel fuel 

could only be lower under such a system than it otherwise would be. 
P.6 

APPENDIX 

Banking and trading allows refiners to accumulate credits through "overcontrolling" during an earlier time period and to trade (sell) or use those 

"banked" credits to comply with environmental standards in later periods. The 

economic theory underlying banking and trading is that petroleum refiners will 

attempt to minimize their costs of complying with environmental requirements. 

They can do so by generating credits through reductions in sulfur content where 

the marginal cost of such reductions is relatively low. The credits generated 

then would be used to help comply with environmental standards and to delay 

making high marginal cost reductions in sulfur content. Generally, the 

marginal costs of sulfur removal increase as the percent sulfur content of 

diesel fuel declines, e.g., the incremental cost of a 0.01 percent point 

reduction in sulfur content is greater when the percent sulfur content of 

diesel fuel is 0.05 than when it is 0.25. Likewise, refiners that have 

relatively low marginal costs of sulfur reduction can profit by generating more 

credits than they can use and selling such credits to high marginal cost 

refiners. With banking and trading, the petroleum refining industry could 

optimize sulfur reductions such that the aggregate cost of sulfur control would 

be minimized. 

ANALYTICAL APPROACH 

To estimate the cost savings from banking and trading we simulated the 

pattern of sulfur reductions and the generation and use of permits that the 

petroleum refining industry is likely to make. Our analysis proceeded along 

the following lines: 

o Short and long run incremental cost curves for sulfur removal were 

developed for each PAD District based on the DOE refinery model. ^ The 

short run cost curves are estimated under the assumption that no new 

refining capacity is constructed, whereas the long run cost curves are 

estimated under the assumption that refineries add refining capacity if 

that is the least costly approach. These cost curves form the basis for 

all subsequent analysis. 

o The time adjusted incremental costs of sulfur reductions were calculated 

for each year using a discount rate of 10 percent (this accounts for the 

cost of holding permits). The short run cost curve is used for 1991 and 

1992 and the long run cost curve is used for 1993 through 1995. 

I The assumptions regarding prices, output, and current capacity that 

serve as inputs to the DOE refinery model were similar to those used for the 

1992 scenario in the earlier SCI analysis. However, the baseline sulfur 

content levels in distillate and diesel fuel were revised based on the 

calculations shown in Table 6. 
P.7 

The petroleum refining industry would minimize control costs when the 

incremental cost of sulfur removal is the same across time and across 

PADs, subject to the condition that the amount of sulfur reduction credits 

generated is equal to the amount used. We selected alternative values 

for the incremental cost of sulfur reduction until the sulfur reduction 

credits that would be generated (by controlling up to the point that 

incremental control costs equaled the selected value) and used (again, by 

controlling up to the point where incremental costs equalled the selected 

value during the post-regulatory period) were in rough balance among all 

PADs. This is an approximation of the equilibrium point that a fully 

competitive industry with full information would reach through banking and 

trading. 

Constraints in the form of limits on the percent sulfur content of highway 

diesel fuel and exchange ratios were added to the model. Limits on the 

sulfur content of highway diesel fuel in the post-regulatory period (1994-

95) reduce the extent to which sulfur credits can be used to meet 

regulatory standards. Exchange ratios greater than 1:1 raise the cost of 

generating permits at any control level relative to costs incurred in the 

post-regulatory period. 

The present value of the control costs incurred at the "equilibrium 

points" are then calculated and subtracted from the present value of costs 

that would be incurred under conventional regulation. This is the 

"modelled" cost saving. To estimate the total potential cost savings from 

banking and trading the value of any excess permits generated at the 

equilibrium point selected using the model must be added to the modelled 

cost savings. (Assuming full information, the industry would not generate 

excess permits and, therefore, would not incur control costs to generate 

them.) The value of any excess permits is given by the incremental 

control cost times the amount of excess permits, discounted at 10 percent 

over two years. 

DESCRIPTION OF LOTUS MODEL 

Tables IA through IE show the long run and short run incremental cost 

curves ("inc. cost. sul. red.") estimated for each PAD and the amount of sulfur 

credits that would be generated or used at each percent sulfur content level 

(one credit equals a 0.01 percent point reduction in sulfur content per 

barrel). We assumed that the percent sulfur content level from which credits 

could be generated ("credit base") was the lowest average percent sulfur 

content for distillate currently observed in the PAD Districts, which we 

2 This is the basic optimization algorithm. If incremental costs are not 

uniform across time and PADs, costs could always be reduced by increasing the 

level of control where incremental costs are low and reducing, correspondingly, 

the level of control where incremental costs are high. The total amount of 

sulfur reduction, however, must equal regulatory requirements. Any less sulfur 

reduction and regulatory requirements would be violated and any more reduction 

would result in excess control costs. 

ii 
P.8 

estimate to be about 0.23 percent (as shown in Table 6). Thus, in some PADs, 

such as PAD 4, sulfur reductions from the current average to the "credit base" 

would not count towards generating credits. The model accounts for this by 

allowing sulfur reductions within each PAD only if the price of a credit is 

greater than the average cost of generating credits. Also shown are the 

incremental cost curves adjusted for the cost of holding permits ("marginal 

cost adj. for disc. rate"). 

Tables 2A through 2E show the model's solutions in each case analyzed for 

banking and trading, assuming that on-highway diesel fuel can be segregated 

from other distillate. The solutions are generated as follows: 

o We specify a marginal cost (price) for generating (using) a sulfur removal 

credit. The model examines the time adjusted incremental cost curves for 

each year and PAD and identifies the amount of sulfur reduction that would 

be made consistent with this marginal cost (price). For example, in Case 

1, with a marginal cost of $0,022 sulfur reductions would not be made in 

year 1, but would be about 0.11 in year 2 (corresponding to a sulfur 

content level of 0.12 percent). 

o The amount of credits that would be generated and used by each PAD and the 

sum of the PADs is then estimated. 

o Iterations were made with various values for the marginal cost (price) of 

a sulfur removal credit until an "equilibrium point" was reached. This is 

the point where the net generation or use of permits is closest to zero. 

o Based on the model's equilibrium point, the control costs are estimated in 

each year for each PAD and the net cost savings of banking and trading are 

estimated. 

Tables 3A through 3E and Tables 4A through 4E provide corresponding 

information for the case where diesel fuel cannot be segregated from distillate 

beyond current levels. Table 5 summarizes the total cost savings from banking 

and trading based on the assumption that any excess (shortfall) in credits 

would not (would) be generated at the marginal cost specified in the model. 

m 
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CO 
SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

TABLE IB 

P.10 

CASE: 

CAPITAL: 

PAD: 

CASE: 

CAPITAL: 

MARGINAL 

ADJ. FOR 

SEGREGATED 

UNCONSTRAINED 

BASE 

CREDIT BASE 

* 

PAD2 

SEGREGATED 

CONSTRAINED 

BASE 

CREDIT BASE 

COST 

DISC. RATE 

BASE 

CREDIT BASE 

295 

SULFUR 

CONTENT 

0.25 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

295 

SULFUR 

CONTENT 

0.25 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

.0.08 

0.06 

0.05 

SULFUR 

CONTENT 

0.25 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SUL. 

FOR 

SUL 

FOR 

SUL 

FOR 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

107.675 

MARGIN 

9,195.35 

9,187.56 

9,183.18 

9,178.20 

9,173.10 

9,163.75 

9,150.79 

9,136.66 

9,120.31 

9,108.48 

107.675 

MARGIN 

9,195.35 

9,187.56 

9,183.03 

9,177.22 

9,170.80 

9,158.86 

9,000.00 

YEAR 1 

0.000 

0.035 

0.031 

0.040 

0.044 

0.081 

1.080 

0.000 

0.000 

0.000 

MMBY 

TOTAL 

COST 

7.79 

12.17 

17.15 

22.25 

31.60 

44.56 

58.69 

75.04 

86.87 

MMBY 

TOTAL 

COST 

7.79 

12.32 . 

18.13 

24.55 

36.49 

195.35 

YEAR 2 

0.000 

0.032 

0.028 

0.036 

0.040 

0.074 

0.982 

0.000 

0.000 

0.000 

CHANGE IN 

MARGIN 

4.38 

4.98 

5.10 

9.35 

12.96 

14.13 

16.35 

11.83 

CHANGE IN 

MARGIN 

4.53 

5.81 

6.42 

11.94 

158.86 

YEAR 3 

0.000 

0.028 

0.025 

0.028 

0.029 

0.053 

0.073 

0.079 

0.092 

0.133 

INC. COST 

SUL. REDUCT. 

S 

0.000 

0.023 

0.020 

0.023 

0.024 

0.043 

0.060 

0.066 

0.076 

0.110 

INC. COST 

SUL. REDUCT. 

$ 

0.000 

0.024 

0.021 

0.027 

0.030 

0.055 

0.738 

YEAR 4 

0.000 

0.025 

0.022 

0.025 

0.026 

0.048 

0.066 

0.072 

0.084 

0.121 

AVG. COST 

CREDIT 

$ 

0.024 

0.023 

0.023 

0.023 

0.027 

0.032 

0.036 

0.041 

0.045 

AVG. COST 

CREDIT 

S 

0.024 

0.023 

0.024 

0.025 

0.031 

0.140 

YEAR 5 

0.000 

0.023 

0.020 

0.023 

0.024 

0.043 

0.060 

0.066 

0.076 

0.110 

CREDITS 

GENERATED 

•ail. 

323.03 

538.38 

753.73 

969.08 

1,184.43 

1,399.78 

1,615.13 

1,830.48 

1,938.15 

CREDITS 

GENERATED 

mil. 

323.03 

538.38 

753.73 

969.08 

1,184.43 

1,399.78 

1,615.13 

1,830.48 

1,938.15 

SUL. RED. 

FOR CRED. 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

CREDITS 

NEEDED 

mil 

(1,938.15) 

(1,615.13) 

(1,399.78) 

(1,184.43) 

(969.08) 

(753.73) 

(538.38) 

(323.03) 

(107.67) 

0.00 

CREDITS 

NEEDED 

rail 

(1,938.15) 

(1,615.13) 

(1,399.78) 

(1,184.43) 

(969.08) 

(753.73) 

(538.38) 

(323.03) 

(107.67) 

0.00 
SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

TABLE IC 

p.11 

CASE: 

CAPITAL: 

PAD: 

CASE: 

CAPITAL: 

MARGINAL 

ADJ. FOR 

SEGREGATED 

UNCONSTRAINED 

BASE 

CREDIT BASE 

1r 

PAD3 

SEGREGATED 

CONSTRAINED 

BASE 

CREDIT BASE 

COST 

DISC. RATE 

BASE 

CREDIT BASE 

488 

SULFUR 

CONTENT 

0.24 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

488 

SULFUR 

CONTENT 

0.24 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SULFUR 

CONTENT 

0.24 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SUL 

FOR 

SUL 

FOR 

SUL 

FOR 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

178.12 

MARGIN 

17,983.43 

17,974.37 

17,969.23 

17,964.46 

17,959.76 

17,954.86 

17,939.55 

17,918.09 

17,893.77 

17,879.85 

178.12 

MARGIN 

17,983.43 

17,974.37 

17,969.23 

17,964.46 

17,959.76 

17,954.86 

17,939.55 

17,000.00 

YEAR 1 

0.000 

0.022 

0.021 

0.020 

0.019 

0.020 

0.063 

3.861 

0.000 

0.000 

MMBY 

TOTAL 

COST 

9.06 

14.20 

18.97 

23.67 

28.57 

43.88 

65.34 

89.66 

103.58 

MMBY 

TOTAL 

COST 

9.06 

14.20 

18.97 

23.67 

28.57 

43.88 

983.43 

YEAR 2 

0.000 

0.020 

0.019 

0.018 

0.018 

0.018 

0.057 

3.510 

0.000 

0.000 

CHANGE IN 

MARGIN 

5.14 

4.77 

4.70 

4.90 

15.31 

21.46 

24.32 

13.92 

CHANGE IN 

MARGIN 

5.14 

4.77 

4.70 

4.90 

15.31 

939.55 

YEAR 3 

0.000 

0.018 

0.017 

0.016 

0.016 

0.017 

0.052 

0.073 

0.083 

0.095 

INC. COST 

SUL. REDUCT. 

$ 

0.000 

0.015 

0.014 

0.013 

0.013 

0.014 

0.043 

0.060 

0.068 

0.078 

INC. COST 

SUL. REDUCT. 

S 

0.000 

0.015 

0.014 

0.013 

0.013 

0.014 

0.043 

2.637 

YEAR 4 

0.000 

0.017 

0.016 

0.015 

0.015 

0.015 

0.047 

0.066 

0.075 

0.086 

AVG. COST 

CREDIT 

$ 

0.017 

0.016 

0.015 

0.015 

0.015 

.0.019 

0.024 

0.030 

0.032 

AVG. COST 

CREDIT 

$ 

0.017 

0.016 

0.015 

0.015 

0.015 

0.019 

0.368 

YEAR 5 

0.000 

0.015 

0.014 

0.013 

0.013 

0.014 

0.043 

0.060 

0.068 

0.078 

CREDITS 

GENERATED 

mil. 

534.36 

890.60 

1,246.84 

1,603.08 

1,959.32 

2,315.56 

2,671.80 

3,028.04 

3,206.16 

CREDITS 

GENERATED 

mil. 

534.36 

890.60 

1,246.84 

1,603.08 

1,959.32 

2,315.56 

2,671.80 

3,028.04 

3,206.16 

SUL. RED. 

FOR CRED. 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

CREDITS 

NEEDED 

mil 

(3,206.16) 

(2,671.80) 

(2,315.56) 

(1,959.32) 

(1,603.08) 

(1,246.84) 

(890.60) 

(534.36) 

(178.12) 

0.00 

CREDITS 

NEEDED 

mil 

(3,206.16) 

(2,671.80) 

(2,315.56) 

(1,959.32) 

(1,603.08) 

(1,246.84) 

(890.60) 

(534.36) 

(178.12) 

0.00 
P.12 

TABLE ID 

SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

PAD: 

CASE: 

CAPITAL: 

PAD: 

CASE: 

CAPITAL: 

MARGINAL 

ADJ. FOR 

PAD4 

SEGREGATED 

UNCONSTRAINED 

BASE 

CREDIT BASE 

* 

PAD4 

SEGREGATED 

CONSTRAINED 

BASE 

CREDIT BASE 

COST 

DISC. RATE 

BASE 

CREDIT BASE 

42 

SULFUR 

CONTENT 

0.32 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

42 

SULFUR 

CONTENT 

0.32 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SULFUR 

CONTENT 

0.32 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SUL. 

FOR 

SUL. 

FOR 

SUL 

FOR 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

15.33 

MARGIN 

1,376.98 

1,375.96 

1,375.79 

1,375.62 

1,375.45 

1,374.79 

1,373.86 

1,372.93 

1,371.98 

1,371.42 

15.33 

MARGIN 

1,376.53 

1,375.26 

1,375.05 

1,374.84 

1,374.63 

1,373.92 

1,372.99 

1,372.06 

1,371.12 

1,300.00 

YEAR 1 

0.000 

0.020 

0.010 

0.010 

0.010 

0.034 

0.044 

0.044 

0.045 

6.792 

MMBY 

TOTAL 

COST 

1.02 

1.19 

1.36 

1.53 

2.19 

3.12 

4.05 

5.00 

5.56 

MMBY 

TOTAL 

COST 

1.27 

1.48 

1.69 

1.90 

2.61 

3.54 

4.47 

5.41 

76.53 

YEAR 2 

0.000 

0.019 

0.009 

0.009 

0.009 

0.031 

0.040 

0.040 

0.041 

6.175 

CHANGE IN 

MARGIN 

0.17 

0.17 

0.17 

0.66 

0.93 

0.93 

0.95 

0.56 

CHANCE IN 

MARGIN 

0.21 

0.21 

0.21 

0.71 

0.93 

0.93 

0.94 

71.12 

YEAR 3 

0.000 

0.013 

0.007 

0.007 

0.007 

0.026 

0.037 

0.037 

0.037 

0.044 

INC 

SUL. 

INC 

SUL. 

. COST 

REDUCT. 

$ 

0.000 

0.011 

0.006 

0.006 

0.006 

0.022 

0.030 

0.030 

0.031 

0.037 

. COST 

REDUCT. 

S 

0.000 

0.014 

0.007 

0.007 

0.007 

0.023 

0.030 

0.030 

0.031 

4.639 

YEAR 4 

0.000 

0.012 

0.006 

0.006 

0.006 

0.024 

0.033 

0.033 

0.034 

0.040 

AVG. COST 

CREDIT 

S 

0.022 

0.016 

0.013 

0.011 

0.013 

0.016 

0.018 

0.019 

0.020 

AVG. COST 

CREDIT 

$ 

0.028 

0.019 

0.016 

0.014 

0.015 

0.018 

0.019 

0.021 

0.277 

YEAR 5 

0.000 

0.011 

0.006 

0.006 

0.006 

0.022 

0.030 

0.030 

0.031 

0.037 

CREDITS 

GENERATED 

mil. 

45.99 

76.65 

107.31 

137.97 

168.63 

199.29 

229.95 

260.61 

275.94 

CREDITS 

GENERATED 

mil. 

45.99 

76.65 

107.31 

137.97 

168.63 

199.29 

229.95 

260.61 

275.94 

SUL. RED. 

FOR CRED. 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

CREDITS 

NEEDED 

mil 

(275.94) 

(229.95) 

(199.29) 

(168.63) 

(137.97) 

(107.31) 

(76.65) 

(45.99) 

(15.33) 

0.00 

CREDITS 

NEEDED 

mil 

(275.94) 

(229.95) 

(199.29) 

(168.63) 

(137.97) 

(107.31) 

(76.65) 

(45.99) 

(15.33) 

0.00 
SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

•i" CITABLE IE 

CASE: 

CAPITAL: 

PAD: 

CASE: 

CAPITAL: 

MARGINAL 

ADJ. FOR 

SEGREGATED 

UNCONSTRAINED 

BASE 

CREDIT BASE 

* 

PAD5 

SEGREGATED 

CONSTRAINED 

BASE 

CREDIT BASE 

COST 

DISC. RATE 

BASE 

CREDIT BASE 

154 

SULFUR 

CONTENT 

0.23 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

154 

SULFUR 

CONTENT 

0.23 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SULFUR 

CONTENT 

0.23 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SUL. 

FOR 

SUL 

FOR 

SUL 

FOR 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

56.21 

MARGIN 

5,088.90 

5,088.90 

5,086.65 

5,085.16 

5,083.66 

5,081.47 

5,078.43 

5,075.38 

5,071.67 

5,067.36 

5,064.36 

56.21 

MARGIN 

5,088.90 

5,088.90 

5,086.65 

5,085.16 

5,083.66 

5,081.47 

5,078.37 

5,075.30 

5,071.33 

5,065.68 

5,000.00 

YEAR 1 

0.000 

0.020 

0.019 

0.020 

0.029 

0.040 

0.040 

0.052 

0.074 

1.711 

MMBY 

TOTAL 

COST 

0.00 

2.25 

3.74 

5.24 

7.43 

10.47 

13.52 

17.23 

21.54 

24.54 

MMBY 

TOTAL 

COST 

0.00 

2.25 

3.74 

5.24 

7.43 

10.53 

13.60 

17.57 

23.22 

88.90 

YEAR 2 

0.000 

0.018 

0.018 

0.018 

0.026 

0.037 

0.036 

0.047 

0.067 

1.555 

CHANGE IN 

MARGIN 

2.25 

1.49 

1.50 

2.19 

3.04 

3.05 

3.71 

4.31 

3.00 

CHANGE IN 

MARGIN 

0.00 

2.25 

1.49 

1.50 

2.19 

3.10 

3.07 

3.97 

5.65 

65.68 

YEAR 3 

0.000 

0.016 

0.016 

0.016 

0.024 

0.033 

0.033 

0.040 

0.046 

0.065 

INC. COST 

SUL. REDUCT. 

S 

0.000 

0.013 

0.013 

0.013 

0.019 

0.027 

0.027 

0.033 

0.038 

0.053 

INC. COST 

SUL. REDUCT. 

S 

0.000 

0.013 

0.013 

0.013 

0.019 

0.028 

0.027 

0.035 

0.050 

1.168 

YEAR 4 

0.000 

0.015 

0.015 

0.015 

0.021 

0.030 

0.030 

0.036 

0.042 

0.059 

AVG. COST 

CREDIT 

S 

0.013 

0.013 

0.013 

0.015 

0.017 

0.019 

0.020 

0.023 

0.024 

AVG. COST 

CREDIT 

S 

0.013 

0.013 

0.013 

0.015 

0.017 

0.019 

0.021 

0.024 

0.088 

YEAR 5 

0.000 

0.013 

0.013 

0.013 

0.019 

0.027 

0.027 

0.033 

0.038 

0.053 

CREDITS 

GENERATED 

mil. 

168.63 

281.05 

393.47 

505.89 

618.31 

730.73 

843.15 

955.57 

1,011.78 

CREDITS 

GENERATED 

oil. 

168.63 

281.05 

393.47 

505.89 

618.31 

730.73 

843.15 

955.57 

1,011.78 

SUL. RED. 

FOR CRED. 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

CREDITS 

NEEDED 

mil 

(1,011.78) 

(843.15) 

(730.73) 

(618.31) 

(505.89) 

(393.47) 

(281.05) 

(168.63) 

(56.21) 

0.00 

CREDITS 

NEEDED 

mil 

(1,011.78) 

(843.15) 

(730.73) 

(618.31) 

(505.89) 

(393.47) 

(281.05) 

(168.63) 

(56.21) 

0.00 
TABLE 2A 

P.14 

CASE 1: FULL BANKING AND TRADING 

DIESEL FUEL SEGREGATED 

SULFUR REDUCTION 

MARG COST: 0.022 

GENERATION AND USE OF CREDITS 

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 

ANNUAL COSTS IN S MILLION/YEAR 

PAD1 

PAD2 

PAD3 

PAD 4 

PAD5 

PAD1 

PAD2 

PAD 3 

PAD 4 

PAD5 

PAD1 

PAD2 

PAD 3 

PAD 4 

PADS 

0.00 

0.00 

0.11 

0.09 

0.07 

0.11 

0.00 

0.11 

0.09 

0.07 

0.11 

0.00 

0.11 

0.09 

0.07 

0.11 

0.00 

0.11 

0.09 

0.09 

0.11 

0.00 

0.11 

0.11 

0.09 

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 SUM 

0.00 

0.00 

1,959.32 

137.97 

393.47 

YEAR 1 

SO. 00 

SO. 00 

$28.57 

S1.90 

$5.24 

369.38 

0.00 

1,959.32 

137.97 

393.47 

YEAR 2 

S5.85 

$0.00 . 

$28.57 

$1.90 

$5.24 

369.38 

0.00 

1,959.32 

137.97 

393.47 

YEAR 3 

$5.85 

$0.00 

$28.57 

$1.53 

$5.24 

(235.06) 

(1.938.15) 

(1,246.84) 

(137.97) 

(505.89) 

GRAND TOTAL: 

YEAR 4 

$5.85 

$0.00 

$28.57 

$1.53 

$7.43 

(235.06) 

(1,938.15) 

(1,246.84) 

(107.31) 

(505.89) 

YEAR 5 

$5.85 

$0.00 

$28.57 

$2.19 

$7.43 

268.64 

(3,876.30) 

3, 384.28 

168.63 

168.63 

113.88 

DISC SUM 

$18.54 

$0.00 

$119.13 

$7.54 

$24.99 

$35.71 $41.56 $41.19 $43.38 $44.04 $170.21 

COST SAVINGS — $ MILLION $166.41 

COST SAVING ADJUSTED FOR EXCESS CREDITS $168.13 
TABLE 2B 

CASE 2: MAXIMUM SULFUR CONTENT OF 0.10 PERCENT IN 1994-95 

DIESEL FUEL SEGREGATED 

SULFUR REDUCTION 

MARG COST: 0.0195 

GENERATION AND USE OF CREDITS 

ANNUAL COSTS IN $ MILLION/YEAR 

PAD1 

PAD2 

PAD3 

PAD4 

PAD5 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

PAD1 

PAD2 

PAD3 

PAD 4 

PAD5 

1 

0.00 

0.00 

0.00 

0.00 

0.00 

YEAR 2 

0.00 

0.00 

0.00 

0.09 

0.07 

YEAR 3 

0.09 

0.00 

0.11 

0.09 

0.07 

YEAR 4 

0.13 

0.13 

0.13 

0.13 

0.13 

YEAR 5 

0.13 

0.13 

0.13 

0.13 

0.13 

YEAR 1 

YEAR 1 

YEAR 2 YEAR 3 YEAR 4 YEAR 5 SUM 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

137.97 

393.47 

302.22 

0.00 

1,959.32 

137.97 

393.47 

(167.90) 

(538.38) 

(890.60) 

(76.65) 

(281.05) 

(167.90) 

(538.38) 

(890.60) 

(76.65) 

(281.05) 

(33.58) 

(1,076.75) 

178.12 

122.64 

224.84 

YEAR 2 

GRAND TOTAL: (584.73) 

YEAR 3 YEAR 4 YEAR 5 DISC SUM 

$0.00 

$0.00 

$0.00 

$0.00 

$0.00 

$0.00 

$0.00 

$0.00 

$0.00 

$1.90 

$5.24 

$7.14 

$4.74 

$0.00 

$28.57 

$1.53 

$5.24 

$40.08 

$7.57 

$44.56 

$43.88 

$3.12 

$13.52 

$112.65 

$7.57 

$44.56 

$43.88 

$3.12 

$13.52 

$112.65 

$14.78 

$63.91 

$86.55 

$7.47 

$28.49 

$201.19 

COST SAVINGS — $ MILLION $135.43 

COST SAVINGS ADJUSTED FOR EXCESS CREDITS $127.64 
TABLE 2C 

CASE 3: EXCHANGES IN 1994-95 AT A RATIO OF 2:1 

DIESEL FUEL SEGREGATED 

SULFUR REDUCTION 

1994-95 

MARG COST: 0.045 

1991-93 

MARG COST: 0.0225 

GENERATION AND USE OF CREDITS 

ANNUAL COSTS IN $ MILLION/YEAR 

/ 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

YEAR 1 

0.00 

0.00 

0.11 

0.09 

0.07 

YEAR 1 

0.00 

0.00 

979.66 

68.99 

196.74 

YEAR 2 

0.11 

0.00 

0.11 

0.09 

0.07 

YEAR 2 

184.69 

0.00 

979.66 

68.99 

196.74 

YEAR 3 

0.11 

0.00 

0.11 

0.09 

0.07 

YEAR 3 

184.69 

0.00 

979.66 

68.99 

196.74 

YEAR 4 

0.15 

0.09 

0.11 

0.18 

0.17 

YEAR 4 

(100.74) 

(969.08) 

(1,246.84) 

0.00 

(56.21) 

YEAR 5 

0.17 

0.11 

0.13 

0.18 

0.17 

YEAR 5 

(33.58) 

(753.73) 

(890.60) 

0.00 

(56.21) 

SUM 

235 

(1,722 

801 

206 

477 

06 

80) 

54 

96 

79 

PAD1 

PAD2 

PAD3 

PAD 4 

PADS 

YEAR 1 

GRAND TOTAL: (1.46) 

YEAR 2 YEAR 3 YEAR 4 YEAR 5 DISC SUM 

$0.00 

$0.00 

$28.57 

$1.90 

$5.24 

$35.71 

$5.85 

$0.00 

$28.57 

$1.90 

$5.24 

$41.56 

COST SAVINGS 

$5.85 

$0.00 

$28.57 

$1.53 

$5.24 

$41.19 

COST 

ADJUSTED FOR 

$9.77 

$22.25 

$28.57 

$5.56 

$21.54 

$87.69 

SAVINGS 

$12.59 

$31.60 

$43.88 

$5.56 

$21.54 

$115.17 

— $ MILLION 

EXCESS CREDITS 

$26.09 

$38.30 

$129.59 

$12.87 

$45.23 

$252.08 

$84.54 

$84.50 
TABLE 2D 

P.17 

CASE 4: EXCHANGES AT A RATIO OF 2:1 AND MAXIMUM SULFUR CONTENT OF 0.10 PERCENT IN 1994-95 

DIESEL FUEL SEGREGATED 

SULFUR REDUCTION 

1994-95 

MARG COST: 0.043 

YEAR 1 

1991-93 

MARC COST: 0.0215 

GENERATION AND USE OF CREDITS 

ANNUAL COSTS IN $ MILLION/YEAR 

PAD1 

PAD2 

PAD3 

PAO 4 

PAD5 

PAD1 

PAD2 

PAD 3 

PAD 4 

PADS 

PAD1 

PAD2 

PAD3 

PAD 4 

PADS 

0.00 

0.00 

0.00 

0.09 

0.07 

YEAR 1 

YEAR 1 

2 

0.09 

0.00 

0.11 

0.09 

0.07 

YEAR 3 

0.11 

0.00 

0.11 

0.09 

0.07 

YEAR 4 YEAR 5 

YEAR 2 YEAR 3 

0.15 

0.13 

0.13 

0.18 

0.17 

YEAR 4 

0.17 

0.13 

0. 

0. 

0, 

YEAR 5 

13 

18 

17 

SUM 

0.00 

0.00 

0.00 

68.99 

196.74 

151.11 

0.00 

979.66 

68.99 

196.74 

184.69 

0.00 

979.66 

68.99 

196.74 

(100.74) 

(538.38) 

(890.60) 

0.00 

(56.21) 

(33.58) 

(538.38) 

(890.60) 

0.00 

(56.21) 

201.48 

(1,076.75) 

178.12 

206.96 

477.79 

GRAND TOTAL: (12.41) 

YEAR 2 YEAR 3 YEAR 4 YEAR 5 DISC SUM 

$0.00 

$0.00 

$0.00 

$1.90 

$5.24 

$4.74 

$0.00 

$28.57 

$1.90 

$5.24 

$5.85 

$0.00 

$28.57 

$1.53 

$5.24 

$9.77 

$44.56 

$43.88 

$5.56 

$21.54 

$12.59 

$44.56 

$43.88 

$5.56 

$21.54 

$25.08 

$63.91 

$112.52 

$12.87 

$45.23 

$7.14 $40.45 $41.19 $125.31 $128.13 $259.62 

COST SAVINGS — $ MILLION $77.00 

COST SAVINGS ADJUSTED FOR EXCESS CREDITS $76.64 
CASE 5: BANKING AND TRADING OVER THREE YEARS 

DIESEL FUEL SEGREGATED 

SULFUR REDUCTION 

MARG COST: 0.0185 

ADJ. 

MARG COST 0.022385 

GENERATION AND USE OF CREDITS 

YEAR 1 YEAR 2 YEAR 3 

ANNUAL COSTS IN $ MILLION/YEAR 

0.00 

0.00 

0.11 

0.09 

0.07 

0.11 

0.00 

0.11 

0.09 

0.07 

0.11 

0.00 

0.11 

0.09 

0.07 

YEAR 1 YEAR 2 YEAR 3 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

PAD1 

FAD 2 

PAD3 

PAD4 

PAD5 

PAD1 

PAD2 

PAD3 

PAD 4 

PADS 

TOTAL COST $35.71 $41.56 $41.19 

COST ADJUSTED FOR EXCESS CREDITS 

SUM 

0.00 

0.00 

1,959.32 

137.97 

393.47 

YEAR 1 

$0.00 

$0.00 

$28.57 

$1.90 

$5.24 

369.38 

0.00 

1,959.32 

137.97 

393.47 

GRAND TOTAL: 

YEAR 2 

$5.85 

$0.00 

$28.57 

$1.90 

$5.24 

(235.06) 

(1,938.15) 

(1,246.84) 

(137.97) 

(618.31) 

YEAR 3 

$5.85 

$0.00 

$28.57 

$1.53 

$5.24 

134.32 

(1,938.15) 

2,671.80 

137.97 

168.63 

1174.57 

DISC SUM 

$10.15 

$0.00 

$78.15 

$4.89 

$14.33 

$107.53 

$89.57 

P.18 

TABLE 2E 
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SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

TABLE 3B 

PAD: PAD2 

CASE: UNSEGREGATED 

CAPITAL: UNCONSTRAINED 

489 178.485 MMBY 

SULFUR 

CONTENT 

SUL. RED. 

FOR CRED. MARGIN 

BASE 

CREDIT BASE 

0.2S 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

9,195.35 

9,179.97 

9,171.72 

9,163.41 

9,149.29 

9,129.31 

9,104.53 

9,062.20 

9,007.70 

8,974.14 

TOTAL CHANGE IN INC. COST AVG. COST 

COST MARGIN SUL. REDUCT. CRE1 

$ $ 

15.38 

23.63 

31.94 

46.06 

66.04 

90.82 

133.15 

187.65 

221.21 

8.25 

8.31 

14.12 

19.98 

24.78 

42.33 

54.50 

33.56 

0.000 

0.026 

0.023 

0.023 

0.040 

0.056 

0.069 

0.119 

0.153 ' 

0.188 

OS 

D] 

0 

0 

0 

0 

0 

0 

0 

0 

0 

>T 

.T 

029 

026 

026 

029 

034 

039 

OSO 

062 

069 

CREDITS 

GENERATED 

mil. 

535.46 

892.43 

1,249.40 

1,606.37 

1,963.34 

2,320.31 

2,677.28 

3,034.25 

3,212.73 

CREDITS 

NEEDED 

mil 

(3,212.73) 

(2,677.28) 

(2,320.31) 

(1,963.34) 

(1,606.37) 

(1,249.40) 

(892.43) 

(535.46) 

(178.48) 

0.00 

PAD: 

CASE: 

CAPITAL: 

PAD2 

UNSEGREGATED 

CONSTRAINED 

489 178.485 MMBY 

SULFUR 

CONTENT 

SUL. RED. 

FOR CRED. 

BASE 

CREDIT BASE 

MARGINAL COST 

ADJ. FOR DISC. RATE 

0.25 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SULFUR 

CONTENT 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

SUL. RED. 

FOR CRED. 

MARGIN 

9,195.35 

9,000.00 

TOTAL CHANGE IN INC. COST AVG. COST 

COST MARGIN SUL. REDUCT. CREDIT 

$ $ 

195.35 

0.000 

0.365 0.365 

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 

CREDITS 

GENERATED 

mil. 

535.46 

892.43 

1.249.40 

1,606.37 

1,963.34 

2,320.31 

2,677.28 

3,034.25 

3,212.73 

SUL. RED. 

FOR CRED. 

CREDITS 

NEEDED 

mil 

(3,212.73) 

(2,677.28) 

(2,320.31) 

(1,963.34) 

(1,606.37) 

(1,249.40) 

(892.43) 

(535.46) 

(178.48) 

0.00 

BASE 

CREDIT BASE 

0.2 5 

0.2 3 

0.2 0 

0.1 8 

0.1 6 

0.1 4 

0.1 2 

0.1 0 

0.0 8 

0.0 6 

0.0 5 

0.0 0 

0.0 3 

0.0 5 

0.07 

0.0 9 

0.1 1 

0.1 3 

0.1 5 

0.17 

0.1 8 

0.000 

0.534 

0.000 

0.000 

0.000 

0.000 

0.000 

0.000 

0.000 

0.000 

0.00 0 

0.486 

0.000 

0.000 

0.00 0 

0.000 

0.000 

0.00 0 

0.00 0 

0.000 

0.00 0 

0.03 1 

0.02 8 

0.02 8 

0.04 8 

0.06 8 

0.08 4 

0.14 3 

0.18 5 

0.22 8 

0.00 0 

0.02 9 

0.02 5 

0.02 6 

0.04 4 

0.06 2 

0.07 6 

0.13 0 

0.16 8 

0.20 7 

0.000 

0.026 

0.023 

0.023 

0.040 

056 

069 

119 

153 

188 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17. 

0.18 
SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

TABLE 3C 

P.21 

CASE: 

CAPITAL: 

PAD: 

CASE: 

CAPITAL: 

MARGINAL 

ADJ. FOR 

UNSEGREGATED 

UNCONSTRAINED 

BASE 

CREDIT BASE 

* 

PAD3 

UNSEGREGATED 

CONSTRAINED 

BASE 

CREDIT BASE 

COST 

DISC. RATE 

BASE 

CREDIT BASE 

1327 

SULFUR 

CONTENT 

0.24 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

1327 

SULFUR 

CONTENT 

0.24 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SULFUR 

CONTENT 

0.24 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SUL. 

FOR 

SUL 

FOR 

SUL 

FOR 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

484.355 

MARGIN 

17,983.43 

17,957.62 

17,944.60 

17,930.14 

17,911.66 

17,869.60 

17,811.66 

17,747.42 

17,673.38 

17,606.21 

484.355 

MARGIN 

17,983.43 

17,957.62 

17,944.60 

17,930.14 

17,000.00 

YEAR 1 

0.000 

0.023 

0.020 

0.022 

1.406 

0.000 

0.000 

0.000 

0.000 

0.000 

MMBY 

TOTAL 

COST 

25.81 

38.83 

53.29 

71.77 

113.83 

171.77 

236.01 

310.05 

377.22 

MMBY 

TOTAL 

COST 

25.81 

38.83 

53.29 

983.43 

YEAR 2 

0.000 

0.021 

0.018 

0.020 

1.278 

0.000 

0.000 

0.000 

0.000 

0.000 

CHANGE IN 

MARGIN 

13.02 

14.46 

18.48 

42.06 

57.94 

64.24 

74.04 

67.17 

CHANGE IN 

MARGIN 

13.02 

14.46 

930.14 

YEAR 3 

0.000 

0.019 

0.016 

0.018 

0.023 

0.053 

0.072 

0.080 

0.092 

0.168 

INC. COST 

SUL. REDUCT. 

$ 

0.000 

0.016 

0.013 

0.015 

0.O19 

0.043 

0.060 

0.066 

0.076 

0.139 

INC. COST 

SUL. REDUCT. 

$ 

0.000 

0.016 

0.013 

0.015 

0.960 

YEAR 4 

0.000 

0.018 

0.015 

0.016 

0.021 

0.048 

0.066 

0.073 

0.084 

0.153 

AVG. COST 

CREDIT 

$ 

0.018 

0.016 

0.016 

0.016 

0.021 

O.027 

0.032 

0.038 

0.043 

AVG. COST 

CREDIT 

$ 

0.018 

0.016 

0.016 

0.226 

YEAR 5 

0.000 

0.016 

0.013 

0.015 

0.019 

0.043 

0.060 

0.066 

0.076 

0.139 

CREDITS 

GENERATED 

mil. 

1,453.07 

2,421.78 

3,390.49 

4,359.20 

5,327.91 

6,296.62 

7,265.33 

8,234.04 

8,718.39 

CREDITS 

GENERATED 

mil. 

1,453.07 

2,421.78 

3,390.49 

4,359.20 

5,327.91 

6,296.62 

7,265.33 

8,234.04 

8,718.39 

SUL. RED. 

FOR CRED. 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

CREDITS 

NEEDED 

mil 

(8,718.39) 

(7,265.33) 

(6,296.62) 

(5,327.91) 

(4,359.20) 

(3,390.49) 

(2,421.78) 

(1,453.07) 

(484.35) 

0.00 

CREDITS 

NEEDED 

mil 

(8,718.39) 

(7,265.33) 

(6,296.62) 

(5,327.91) 

(4,359.20) 

(3,390.49) 

(2,421.78) 

(1,453.07) 

(484.35) 

0.00 
SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

TABLE 3D 

PAD: PAD4 

CASE: UNSEGREGATED 

CAPITAL: UNCONSTRAINED 

84 30.66 MMBY 

SULFUR 

CONTENT 

SUL. RED. 

FOR CRED. 

BASE 

CREDIT BASE 

0.32 

0.23 

0.20 

0.18 

0.16 

14 

12 

10 

08 

0.06 

0.05 

MARGIN 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

1,376.98 

1,374.75 

1,374.22 

1,373.70 

1,372.95 

1,371.40 

1,368.74 

1,365.74 

1,361.90 

1,358.62 

TOTAL CHANGE IN INC. COST AVG. COST 

COST MARGIN SUL. REDUCT. CRE1 

$ $ 

2.23 

2.76 

3.28 

4.03 

5.5 8 

8.24 

11.2 4 

15.0 8 

18.36 

0.5 3 

0.5 2 

0.7 5 

1.5 5 

2.6 6 

3.0 0 

3.8 4 

3.2 8 

0.00 0 

0.01 5 

0.00 9 

0.00 8 

0.01 2 

0.02 5 

0.04 3 

0.04 9 

0.06 3 

0.10 7 

OST 

DIT 

0.024 

0.018 

0.015 

0.015 

0.017 

0.021 

0.024 

0.029 

0.033 

CREDITS 

GENERATED 

mil. 

91.98 

153.30 

214.62 

275.94 

337.26 

398.58 

459.90 

521.22 

551.88 

CREDITS 

NEEDED 

mil 

(551.88) 

(459.90) 

(398.58) 

(337.26) 

(275.94) 

(214.62) 

(153.30) 

(91.98) 

(30.66) 

0.00 

PAD: 

CASE: 

CAPITAL: 

PAD 4 

UNSEGRECATED 

CONSTRAINED 

84 30.66 MMBY 

SULFUR 

CONTENT 

SUL. RED. 

FOR CRED. MARGIN 

BASE 

CREDIT BASE 

MARGINAL COST 

ADJ. FOR DISC. RATE 

BASE 

CREDIT BASE 

0.32 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SULFUR SUL 

CONTENT FOR 

0.32 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

1,376.98 

1,374.75 

1,374.22 

1,373.70 

1,372.95 

1,371.40 

1,300.00 

YEAR 1 

0.000 

0.022 

0.013 

0.012 

0.018 

0.037 

1.705 

0.000 

0.000 

0.000 

TOTAL CHANGE IN INC. COST AVG. COST 

COST MARGIN SUL. REDUCT. CREDIT 

$ $ 

2.23 

2.76 

3.28 

4.03 

5.58 

76.98 

YEAR 2 

0.00 0 

0.02 0 

0.01 2 

0.01 1 

0.01 6 

0.03 4 

1.550 

0.000 

0.000 

0.000 

0.53 

0.52 

0.75 

1.55 

71.40 

YEAR 3 

0.000 

0.018 

0.010 

0.010 

0.015 

0.031 

0.052 

0.059 

0.076 

0.129 

0.000 

0.015 

0.009 

0.008 

0.012 

0.025 

1.164 

YEAR 4 

000 

017 

010 

009 

013 

028 

048 

054 

069 

0.02 4 

0.01 8 

0.01 5 

0.01 5 

0.01 7 

0.19 3 

0.118 

YEAR 5 

0.000 

0.015 

0.009 

0.008 

0.012 

0.025 

0.043 

0.049 

0.063 

0.107 

CREDITS 

GENERATED 

mil. 

91.98 

153.30 

214.62 

275.94 

337.26 

398.58 

459.90 

521.22 

551.88 

SUL. RED. 

FOR CRED. 

CREDITS 

NEEDED 

mil 

(551.88) 

(459.90) 

(398.58) 

(337.26) 

(275.94) 

(214.62) 

(153.30) 

(91.98) 

(30.66) 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 
SPREADSHEET FOR DIESEL FUEL SULFUR ANALYSIS 

TABLE 3E 

CASE: 

CAPITAL: 

PAD: 

CASE: 

CAPITAL: 

MARGINAL 

ADJ. FOR 

UNSEGREGATED 

UNCONSTRAINED 

BASE 

CREDIT BASE 

* 

PAD5 

UNSEGREGATED 

CONSTRAINED 

BASE 

CREDIT BASE 

COST 

DISC. RATE 

BASE 

CREDIT BASE 

267 

SULFUR 

CONTENT 

0.23 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

267 

SULFUR 

CONTENT 

0.23 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SULFUR 

CONTENT 

0.23 

0.23 

0.20 

0.18 

0.16 

0.14 

0.12 

0.10 

0.08 

0.06 

0.05 

SUL. 

FOR 

SUL. 

FOR 

SUL 

FOR 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

RED. 

CRED. 

0.00 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

97.455 

MARGIN 

5,088.90 

5,088.90 

5,085.01 

5,082.42 

5,079.14 

5.073.69 

5,066.31 

5,058.87 

5,051.43 

5,042.92 

5,036.46 

97.455 

MARGIN 

5,088.90 

5,088.90 

5,085.01 

5,082.42 

5,079.14 

5,073.67 

5,000.00 

YEAR 1 

0.000 

0.019 

0.019 

0.025 

0.041 

0.553 

0.000 

0.000 

0.000 

0.000 

MMBY 

TOTAL 

COST 

0.00 

3.89 

6.48 

9.76 

15.21 

22.59 

30.03 

37.47 

45.98 

52.44 

MMBY 

TOTAL 

COST 

0.00 

3.89 

6.48 

9.76 

15.23 

88.90 

YEAR 2 

0.000 

0.018 

0.018 

0.022 

0.037 

0.503 

0.000 

0.000 

0.000 

0.000 

CHANGE IN 

MARGIN 

3.89 

2.59 

3.28 

5.45 

7.38 

7.44 

7.44 

8.51 

6.46 

CHANGE IN 

MARGIN 

0.00 

3.89 

2.59 

3.28 

5.47 

73.67 

YEAR 3 

0.000 

0.016 

0.016 

0.020 

0.034 

0.046 

0.046 

0.046 

0.053 

0.080 

INC 

SUL. 

INC 

SUL. 

COST 

REDUCT. 

$ 

0.000 

0.013 

0.013 

0.017 

0.028 

0.038 

0.038 

0.038 

0.044 

0.066 

. COST 

REDUCT. 

$ 

0.000 

0.013 

0.013 

0.017 

0.028 

0.378 

YEAR 4 

0.000 

0.015 

0.015 

0.019 

0.031 

0.042 

0;042 

0.042 

0.048 

0.073 

AVG. COST 

CREDIT 

$ 

0.013 

0.013 

0.014 

0.017 

0.021 

0.024 

0.026 

0.028 

0.030 

AVG. COST 

CREDIT 

$ 

0.013 

0.013 

0.014 

0.017 

0.083 

YEAR 5 

0.000 

0.013 

0.013 

0.017 

0.028 

0.038 

0.038 

0.038 

0.044 

0.066 

CREDITS 

GENERATED 

mil. 

292.37 

487.28 

682.19 

877.10 

1,072.01 

1,266.92 

1,461.83 

1,656.74 

1,754.19 

CREDITS 

GENERATED 

mil. 

292.37 

487.28 

682.19 

877.10 

1,072.01 

1,266.92 

1,461.83 

1,656.74 

1,754.19 

SUL. RED. 

FOR CRED. 

0.03 

0.05 

0.07 

0.09 

0.11 

0.13 

0.15 

0.17 

0.18 

CREDITS 

NEEDED 

mil. 

(1,754.19) 

(1,461.83) 

(1,266.92) 

(1,072.01) 

(877.10) 

(682.19) 

(487.28) 

(292.37) 

(97.45) 

0.00 

CREDITS 

NEEDED 

mil. 

(1,754.19) 

(1,461.83) 

(1,266.92) 

(1,072.01) 

(877.10) 

(682.19) 

(487.28) 

(292.37) 

(97.45) 

0.00 
" '7 ' 

TABLE 4A 

CASE 1: FULL BANKING AND TRADING 

DIESEL FUEL UNSEGREGATED 

SULFUR REDUCTION 

MARG COST: 0.03 

GENERATION AND USE OF CREDITS 

ANNUAL COSTS IN $ MILLION/YEAR 

PAD1 

PAD2 

PAD3 

PAD4 

PAD5 

PAD1 

PAD2 

PAD3 

PAD 4 

PADS 

PAD1 

PAD2 

PAD3 

PAD 4 

PAD5 

YEAR 1 

0.09 

0.00 

0.07 

0.09 

0.07 

YEAR 1 

604.44 

0.00 

3,390.49 

275.94 

682.19 

YEAR 1 

$10.15 

$0.00 

$53.29 

$4.03 

$9.76 

$77.23 

YEAR 2 

0.09 

0.00 

0.07 

0.09 

0.07 

YEAR 2 

604.44 

0.00 

3,390.49 

275.94 

682.19 

YEAR 2 

$10.15 

$0.00 

$53.29 

$4.03 

$9.76 

$77.23 

3 

0.0 9 

0.0 0 

0.0 9 

0.0 9 

0.0 7 

3 

YEAR 4 

0.1 1 

0.0 7 

0.0 9 

0.1 1 

0.0 7 

YEAR 4 

YEAR 5 

0.1 3 

0.0 7 

0.0 9 

0.1 1 

0.0 9 

YEAR 5 

604.44 (470.12) 

0.00 (1,963.34) 

4,359.20 (4,359.20) 

275.94 (214.62) 

682.19 (1,072.01) 

YEAR 3 

$10.15 

$0.00 

$71.77 

$4.03 

$9.76 

GRAND TOTAL: 

YEAR 4 

$13.69 

$31.94 

$71.77 

$5.58 

$9.76 

SUM 

(335.80) 1,007.40 

(1,963.34) (3,926.67) 

(4,359.20) 2,421.77 

(214.62) 398.58 

(877.10) 97.46 

(1.46) 

YEAR 5 

$17.48 

$31.94 

$71.77 

$5.58 

$15.21 

DISC SUM 

$49.99 

$45.81 

$263.99 

$19.03 

$44.42 

$95.71 $132.74 $141.98 $423.24 

COST SAVINGS — $ MILLION $579.99 

COST SAVINGS ADJUSTED FOR EXCESS CREDITS $579.96 
CASE 2: MAXIMUM SULFUR CONTENT OF 0.10 PERCENT IN 1994-95 

DIESEL FUEL UNSEGREGATED 

TABLE 4B 

SULFUR REDUCTION 

MARC COST: 0.0215 

GENERATION AND USE OF CREDITS 

ANNUAL COSTS IN $ MILLION/YEAR 

PAD1 

PAD2 

PAD3 

PAD4 

PAD5 

YEAR 1 YEAR 2 

YEAR 1 

YEAR 3 YEAR 4 YEAR 5 

0.00 

0.00 

0.00 

0.00 

0.05 

0.03 

0.00 

0.07 

0.09 

0.05 

0.07 

0.00 

0.07 

0.09 

0.07 

0.13 

0.13 

0.13 

0.13 

0.13 

0.13 

0.13 

0.13 

0.13 

0.13 

YEAR 2 YEAR 3 YEAR 4 YEAR 5 SUM 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

PAD1 

PAD2 

PAD 3 

PAD 4 

PAD5 

0.00 

0.00 

0.00 

0.00 

487.28 

YEAR 1 

$0.00 

$0.00 

$0.00 

$0.00 

$6.48 

201.48 

0.00 

3,390.49 

275.94 

487.28 

YEAR 2 

$3.13 

$0.00 

$53.29 

$4.03 

$6.48 

470.12 

0.00 

3,390.49 

275.94 

682.19 

YEAR 3 

$7.53 

$0.00 

$53.29 

$4.03 

$9.76 

(335.80) 

(892.43) 

(2,421.78) 

(153.30) 

(487.28) 

GRAND TOTAL: 

YEAR 4 

$17.48 

$90.82 

$171.77 

$8.24 

$30.03 

(335.80) 

(892.43) 

(2,421.78) 

(153.30) 

(487.28) 

YEAR 5 

$17.48 

$90.82 

$171.77 

$8.24 

$30.03 

(0.00) 

(1,784.85) 

1,937.42 

245.28 

682.19 

1,080.04 

DISC SUM 

$34^14 

$130.27 

$338.86 

$18.81 

$63.51 

$6.48 $66.93 $74.61 $318.34 $318.34 $585.59 

COST SAVINGS — $ MILLION $417.64 

COST SAVINGS ADJUSTED FOR EXCESS CREDITS $433.50 
TABLE 4C 

CASE 3: EXCHANGES IN 1994-95 AT A RATIO OF 2:1 

DIESEL FUEL UNSEGREGATED 

SULFUR REDUCTION 

1994-95 

MARG COST: 0.064 

1991-93 

MARG COST: 0.032 

GENERATION AND USE OF CREDITS 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

YEAR 1 

YEAR 1 

YEAR 2 YEAR 3 YEAR 4 

YEAR 2 YEAR 3 YEAR 4 

YEAR 5 

0.09 

0.00 

0.07 

0.09 

0.07 

0.09 

0.00 

0.07 

0.09 

0.07 

0.11 

0.07 

0.09 

0.11 

0.07 

0.18 

0.11 

0.11 

0.15 

0.17 

0.18 

0.11 

0.13 

0.17 

0.17 

YEAR 5 SUM 

ANNUAL COSTS IN $ MILLION/YEAR 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

302.22 

0.00 

1,695.24 

137.97 

341.09 

302.22 

0.00 

1,695.24 

137.97 

341.09 

369.38 

624.70 

2,179.60 

168.63 

341.09 

0.00 

(1,249.40) 

(3-.390.49) 

(91.98) 

(97.45) 

GRAND TOTAL: 

(1 

(2 

0.00 

249.40) 

421.78) 

(30.66) 

(97.45) 

(1 

973.82 

,874.09) 

(242.18) 

321.93 

828.37 

7.85 

PAD1 

PAD2 

PAD3 

PAD4 

PADS 

YEAR 1 

$10.15 

$0.00 

$53.29 

$4.03 

$9.76 

YEAR 2 

$10.15 

$0.00 

$53.29 

$4.03 

$9.76 

YEAR 3 

$13.69 

$31.94 

$71.77 

$5.58 

$9.76 

YEAR 4 

$30.21 

$66.04 

$113.83 

$11.24 

$45.98 

YEAR 5 

$30.21 

$66.04 

$171.77 

$15.08 

$45.98 

DISC SUM 

$74.02 

$121.12 

$363.89 

$31.05 

$92.65 

$77.23 $77.23 $132.74 $267.30 $329.08 $682.73 

COST SAVINGS — $ MILLION $320.50 

COST SAVINGS ADJUSTED FOR EXCESS CREDITS $320.84 
''""M 

TABLE 4D 

P.27 

CASE 4: EXCHANGES AT A RATIO OF 2 

DIESEL FUEL UNSEGREGATED 

1 AND MAXIMUM SULFUR CONTENT OF 0.10 PERCENT IN 1994-95 

SULFUR REDUCTION 

1994-95 

MARG COST: 0.047 

YEAR 1 

1991-93 

MARG COST: 0.0235 

PAD1 

PAD 2 

PAD3 

PAD 4 

PADS 

0.03 

0.00 

0.07 

0.09 

0.05 

2 

0.07 

0.00 

0.07 

0.09 

0.07 

YEAR 3 

0.07 

0.00 

0.09 

0.09 

0.07 

YEAR 4 YEAR 5 

0.17 

0.13 

0.13 

0.13 

0.15 

0.17 

0.13 

0.13 

0.13 

0.17 

GENERATION AND USE OF CREDITS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 SUM 

PAD1 

PAD2 

PAD3 

PAD4 

PAD5 

100.74 

0.00 

1,695.24 

137.97 

243.64 

235.06 

0.00 

1,695.24 

137.97 

341.09 

235.06 

0.00 

2,179.60 

137.97 

341.09 

(67.16) 

(892.43) 

(2;421.78) 

(153.30) 

(292.37) 

GRAND TOTAL: 

(67.16) 

(892.43) 

(2,421.78) 

(153.30) 

(97.45) 

(1 

436.54 

,784.85) 

726.53 

107.31 

536.00 

21.54 

ANNUAL COSTS IN $ MILLION/YEAR 

PAD1 

PAD2 

PAD 3 

PAD 4 

PADS 

AR 1 

$3 

$0 

$53 

$4 

$6 

$66 

13 

00 

29 

03 

48 

93 

YEAR 2 

COST 

$7 

$0 

$53 

$4 

$9 

$74 

53 

00 

29 

03 

76 

61 

SAVINGS 

YEAR : 

$7 

$0 

$71 

$4 

$9 

$93 

53 

00 

77 

03 

76 

09 

YEAR 4 

$26 

$90 

$171 

$8 

$37 

$334 

68 

82 

77 

24 

47 

98 

COST SAVINGS 

ADJUSTED FOR EXCESS 

YEAR 5 

$26 

$90 

$171 

$8 

$45 

$343 

68 

82 

77 

24 

98 

49 

--$ MILLION 

CREDITS 

DISC SUM 

$54 

$130 

$407 

$22 

$82 

$697 

$305 

$305 

47 

27 

42 

84 

98 

97 

26 

95 
P.28 

TABLE 4E 

CASE 5: BANKINC AND TRADING OVER THREE YEARS 

DIESEL FUEL UNSEGREGATED 

SULFUR REDUC1 

MARG COST: 

ADJ. 

MARG COST 

"ION 

0.021 

0.02541 

PADl 

PAD2 

PAD3 

PAD4 

PAD5 

YEAR 1 YEAR 2 YEAR 3 

0.07 

0.00 

0.07 

0.09 

0.07 

0.07 

0.00 

0.07 

0.09 

0.07 

0.09 

0.00 

0.09 

0.09 

0.07 

GENERATION AND USE OF CREDITS YEAR 1 YEAR 2 YEAR 3 SUM 

PADl 

PAD2 

PAD3 

PAD4 

PAD5 

470.12 

0.00 

3,390.49 

275.94 

682.19 

470.12 

0.00 

3,390,49 

275.94 

682.19 

GRAND TOTAL: 

(604.44) 

(3,212.73) 

(4,359.20) 

(275.94) 

(1,072.01) 

335.80 

(3,212.73) 

2,421.78 

275.94 

292.37 

113.15 

ANNUAL COSTS IN $ MILLION/YEAR 

FAD1 

PAD2 

PAD3 

PAD4 

PAD5 

TOTAL COST 

YEAR 1 

$7.53 

$0.00 

$53.29 

$4.03 

$9.76 

$74.61 

YEAR 2 

$7.53 

$0.00 

$53.29 

$4.03 

$9.76 

$74.61 

YEAR 3 

$10.15 

$0.00 

$71.77 

$4.03 

$9.76 

$95.71 

DISC SUM 

$22.76 

$0.00 

$161.05 

$11.02 

$26.70 

$221.54 

COST ADJUSTED FOR EXCESS CREDITS $219.57 
TABLE 5 

Estimated Cost Saving from Banking and Trading 

Scenario/Case 

Cost of Excess Cost Savings 

Credits Credits Modelled Adjusted5 

--($)-- -(mil) ($ million)---

Segregated: 

Case 1: Full b & t 

Case 2: 0.1 % 

Case 3: 2:1 

Case 4: 0.1 % 2:1 

Case 5: Early compl. 

0.022 

0.0195 

0.045 

0.043 

114 

(585) 

(D 

(12) 

$ 166 

135 

85 

77 

$ 168 

128 

85 

77 

0.0185 1,175 108 90 

Unsegregated: 

Case 1: Full b & t 

Case 2 

Case 3 

Case 4 

0.1 % 

2:1 

0.1 % 2:1 

0.030 

0.0215 

0.064 

0.047 

(2) 

1,080 

8 

22 

$ 580 

418 

320 

305 

$ 580 

434 

321 

306 

Case 5: Early compl. 0.021 113 222 220 

Source: Tables 2A through 2E and Tables 4A through 4E. 

a Calculated as the sum of: (1) the modelled cost savings; and (2) the 

equilibrium permit price times the excess number of credits discounted at 10% 

for four years. For Case 5, early compliance, the latter amount is discounted 

for two years and is subtracted from estimated control costs. 
TABLE 6 

Estimation of Average Sulfur Content in Distillate, 

by PAD District 

Number 1 Fuel 

Corresponding 

PAD Region 

1 

2 

3 

4 

5 

Eastern 

Central 

Southern 

Rocky Mountain 

Western 

Diesel Fuel 

1985 1986 

0.108 

0.072 

0.114 

0.097 

0.050 

0.082 

0.102 

0.084 

0.077 

0.032 

Home Heating Oil 

1985 1986 

- -(percent) 

0.082 

0.123 

0.042 

0.112 

0.046 

0.087 

0.129 

0.070 

0.086 

0.027 

Average 

0.090 

0.106 

0.078 

0.093 

0.039 

Number 2 Fuel 

Corresponding 

PAD Region 

1 

2 

3 

4 

5 

Eastern 

Central 

Southern 

Rocky Mountain 

Western 

Diesel Fuel 

1985 1986 

0.237 

0.264 

0.225 

0.316 

0.259 

0.237 

0.262 

0.258 

0.346 

0.231 

Home Heating Oil 

1985 1986 Average 

(percent) 

0.250 

0.267 

0.255 

0.329 

0.226 

0.221 

0.260 

0.234 

0.343 

0.252 

0.236 

0.263 

0.243 

0.334 

0.234 

Corresponding 

PAD Region 

1 

2 

3 

4 

5 

Eastern 

Central 

Southern 

Rocky Mountain 

Western 

Average Percent 

Sulfur Content 

#1 Fuel #2 Fuel 

(percent) 

0.090 

0.106 

0.078 

0.093 

0.039 

0.236 

0.263 

0.243 

0.334 

0.234 

Weighted 

Volume of Sales Avg. Sulfur 

#1 Fuel #2 Fuel Content 

(bil. gal.)-- -(percent)-

0.184 

0.746 

0.030 

0.095 

0.103 

16.306 

12.527 

10.004 

1.436 

6.141 

0.234 

0.254 

0.243 

0.319 

0.231 

Sources: Sulfur Content: 

Tables 1 and 2, Diesel Fuel Oils. 1986. prepared by National Institute 

for Petroleum and Energy Research for API and U.S. DOE, Oct. 1986; and 

Tables 1 and 2, Heating Oils. 1986 August 1986. 

Volume of Sales: 

Tables 47 and 43, Petroleum Marketing Annual. 1986. Energy 

Information Administration.