Technical Support Document (TSD) 

for the Transport Rule 

Docket ID No. EPA-HQ-OAR-2009-0491 

Other Remedy Options Evaluated 

U.S. Environmental Protection Agency 

Office of Air and Radiation 

July 2010 

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OTHER OPTIONS EVALUATED 

EPA considered several remedy options for reducing emissions from electric generating 

units (EGUs) that contribute significantly to nonattainment or interfere with maintenance 

of the air quality standards by downwind states. Three of the remedy options are 

discussed in the preamble of the proposed Transport Rule: the preferred remedy known 

as State Budgets/Limited Trading; and two other options, State Budgets/Intrastate 

Trading and Direct Control. See section V of the preamble of the proposed Transport 

Rule for details on these remedies. As discussed in preamble section V, the preferred 

remedy, State Budgets/Limited Trading, would use state-specific emissions budgets and 

allow for intrastate and limited interstate trading. This approach would assure 

environmental results while providing some limited flexibility to covered sources. EPA 

believes the remedy options discussed in the preamble are consistent with the Court’s 

opinion in North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). 

However, EPA also considered variations of the remedies presented in the preamble of 

the proposed Transport Rule and other remedy concepts. Suggestions were submitted by 

states and other stakeholders during a robust outreach period before EPA began crafting 

the proposed rule. EPA evaluated these suggestions, as well as several permutations of 

the remedies presented in the proposed Transport Rule preamble. 

This document summarizes the features of remedy concepts, and permutations of the 

remedies presented in the proposed Transport Rule preamble, that EPA evaluated during 

the process of developing the proposed Transport Rule but decided not to present in the 

preamble. Sections 1 and 2 look at options with interstate trading and intrastate trading, 

respectively; section 3 looks at options with direct control; and section 4 looks at other 

concepts. The docket for the proposed Transport Rule includes letters and meeting notes 

on the suggestions that EPA received from stakeholders in March and April 2009 during 

outreach discussions before the development of the proposal. 

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(1) OPTIONS WITH INTERSTATE TRADING

This type of potential remedy would involve: setting state emissions budgets; allocating 

allowances to the covered sources within each state, with the total allocation within the 

state equaling the state’s budget; allowing trading of allowances; and requiring each 

covered source to hold allowances -- in an amount at least equaling the source’s 

emissions -- that are allocated within any state included in the trading program. EPA 

considered several permutations of this type of potential remedy. 

A. Unrestricted, regionwide interstate trading. EPA considered adoption of a program of 

unrestricted, regionwide trading, similar to the cap and trade programs that EPA has 

implemented for the Acid Rain, NOX SIP Call, and CAIR programs. In these programs, 

an overall cap is set on a national or regionwide basis. If a source holds an allowance for 

every ton of emissions, the source is in compliance with the program’s emissions 

limitation. EPA decided not to pursue this option. EPA decided instead to propose an 

option that would provide for limited interstate trading and greater assurance that 

emissions reductions necessary to eliminate significant contribution and interference with 

maintenance would occur “within each State” as required by section 110(a)(2)(D)(i)(I). 

42 U.S.C. 7410(a)(2)(D)(i); see also North Carolina, 531 F.3d at 907. 

B. Interstate trading with potential of triggering provision limiting future trading to only 

intrastate trading. EPA considered an approach of allowing regionwide interstate trading, 

where a provision that limited future trading to only intrastate trading would be 

automatically triggered for a state if the state was not making reasonable progress toward 

elimination of significant contribution or interference with maintenance. For each state, a 

level of total emissions from covered sources would be set above the state budget and, if 

that level were exceeded, the sources in the state would be limited thereafter to intrastate 

trading. EPA decided not to pursue this option. On one hand, EPA was concerned that, 

for a given compliance year under the program, the Agency could not determine -- until 

the second quarter of the following year -- whether the level of total covered-source 

emissions in a state in the compliance year had exceeded the state budget and that an 

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intrastate-trading-only requirement could therefore not be imposed until 2 years after the 

compliance year. This would mean that total emissions in a state could exceed the state 

budget for 2 years in a row before there was any consequence for the sources in the state. 

On the other hand, EPA was also concerned that sources might need a longer transition 

period (e.g., more than 2 years) to shift from complying with an interstate trading 

program to complying with an intrastate trading program. 

C. Interstate trading with direct control. See section (3)A below. 

(2) OPTIONS WITH INTRASTATE TRADING 

This type of potential remedy would involve: setting state emissions budgets; allocating 

allowances to the covered sources within each state, with the total allocation within the 

state equaling the state’s budget; allowing trading of allowances; and requiring each 

covered source to hold allowances -- in an amount at least equaling the source’s 

emissions -- that are allocated only within the source’s state. EPA considered several 

permutations of this type of potential remedy. 

A. Intrastate trading with a “safety valve”. EPA considered adding a provision that 

would allow sources to buy, and use for compliance, additional allowances above the 

state budget at a price set above the cost effectiveness level on which the state budget was 

based to allow sources increased flexibility. EPA decided not to pursue this option. EPA 

decided instead to address in the preamble an option with intrastate trading that would 

provide greater assurance that emissions reductions necessary to eliminate significant 

contribution and interference with maintenance would occur “within each State” as 

required by section 110(a)(2)(D)(i)(I). 42 U.S.C. 7410(a)(2)(D)(i); see also North 

Carolina, 531 F.3d at 907. 

B. Intrastate trading limited to within-company trading in a state. EPA considered an 

approach of dividing each state budget among the owners of covered sources in the state 

and limiting trading to sources in the state with the same owner. EPA decided not to 

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pursue this option and decided instead to address in the preamble an option with intrastate 

trading that would not make compliance much more difficult for owners with few sources 

in a given state than for owners with several in-state sources. 

C. Intrastate trading coupled with sub-regional trading. The Lake Michigan Air Directors 

Consortium (LADCO) suggested an approach that would allow intrastate trading and that 

would group states into blocks within which interstate trading would be allowed, with 

“flow control” provisions that would limit the use of banked allowances. The Texas 

Commission on Environmental Quality (TCEQ) also suggested the adoption of trading 

zones. This would result in larger allowance markets than an approach that only allowed 

intrastate trading. EPA decided not to pursue this option. EPA decided instead to 

address in the preamble two separate options -- one with limited interstate trading and 

one with intrastate trading -- that would each provide greater assurance that emissions 

reductions necessary to eliminate significant contribution and interference with 

maintenance would occur “within each State” as required by section 110(a)(2)(D)(i)(I). 

42 U.S.C. 7410(a)(2)(D)(i); see also North Carolina, 531 F.3d at 907. 

D. Intrastate trading with direct control. See section (3)B below. 

(3) OPTIONS WITH DIRECT CONTROL 

A. Direct control with interstate trading. EPA considered direct control in the form of 

unit-specific performance-based standards, company-wide performance-based standards, 

minimum performance-based standards, or performance standards based on best available 

retrofit technology (BART) emissions controls or reasonably available control 

technology (RACT) for all covered sources, along with interstate trading. The 

Collaborative, a group of the Ozone Transport Commission (OTC) and LADCO states, 

suggested adoption of minimum control requirements or performance standards for 

covered sources, state-wide emissions caps, and interstate trading with a regional 

emissions cap that might be more stringent than the statewide caps. EPA decided not to 

pursue the option of combining direct control and interstate trading. With regard to both 

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the direct control option and the interstate trading option, EPA was concerned about 

including, in each option, provisions that would afford greater assurance that emissions 

reductions necessary to eliminate significant contribution and interference with 

maintenance would occur “within each State” as required by section 110(a)(2)(D)(i)(I). 

Id. EPA was also concerned that the interstate trading option with these provisions 

would afford such assurance, without adding to the option the complexity associated with 

imposition of direct control requirements. Consequently, EPA decided to address the 

direct control and interstate trading options separately and include such provisions in 

each option. 

B. Direct control with intrastate trading. The Central States Air Resource Agencies 

CenSARA suggested the imposition of performance-based standards for all covered 

sources, along with intrastate trading. EPA decided not to pursue this option. EPA 

decided instead to address in the preamble two separate options -- one with intrastate 

trading and one with direct control -- that would each provide greater assurance that 

emission reductions necessary to eliminate significant contribution and interference with 

maintenance would occur “within each State” as required by section 110(a)(2)(D)(i)(I). 

Id. EPA was concerned that the intrastate trading option would provide such assurance, 

without adding to the option the complexity associated with imposition of direct control 

requirements. 

(4) OTHER REMEDY CONCEPTS 

The Collaborative, a group of the Ozone Transport Commission (OTC) and LADCO 

states, suggested a comprehensive national/regional “framework” to address transport and 

other Clean Air Act issues, including the suggested adoption of minimum emissions 

control requirements or performance standards for electric generating units (EGUs) and 

non-EGUs, statewide emission caps, and interstate trading with a regional emissions cap 

that might be more stringent than the statewide caps, resulting in additional emission 

reductions starting in 2014. Groups of OTC states and LADCO states also separately 

made suggestions on addressing interstate pollution transport issues from a regional 

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perspective, including an emphasis on the importance of emissions reductions in the nearterm (e.g., 2012-2016) and in the longer term (e.g., 2017-2025) and of the use of 

interstate trading. Many of the suggestions by the Collaborative, OTC, and LADCO 

were applied in the proposed Transport Rule.