Source: http://www.epa.gov/airmarkets/progsregs/arp/opt-in.html
Timestamp: 2013-05-25 21:55:40
Document Index: 17207845

Matched Legal Cases: ['art 72', 'art 72', 'art 72', 'art 75', 'art 75', 'art 75', 'art 73']

Opt-in Program Fact Sheet | Basic Information | Acid Rain Program | Programs and Regulations | Business | Clean Air Markets | Air & Radiation Home | US EPA
Programs and Regulations Acid Rain Program Basic Information
Opt-in Program Fact Sheet
Opt-in Program Fact Sheet The Opt-in Program expands EPA's Acid Rain Program to include additional sulfur dioxide (SO2) emitting sources. Recognizing that there are additional emission reduction opportunities in the industrial sector, Congress established the Opt-in Program under section 410 of the Clean Air Act Amendments of 1990. The Opt-in Program allows sources not required to participate in the Acid Rain Program the opportunity to enter the program on a voluntary basis and receive their own acid rain allowances. The participation of these additional sources will reduce the cost of achieving the 10 million ton reduction in SO2 emissions mandated under the Clean Air Act. As participating sources reduce their SO2 emissions at a relatively low cost, their reductions—in the form of allowances—can be transferred to electric utilities where emission reductions are more expensive.
The Opt-in Program offers a combustion source a financial incentive to voluntarily reduce its SO2 emissions. By reducing emissions below its allowance allocation, an opt-in source will have unused allowances, which it can sell in the SO2 allowance market. Opting in will be profitable if the revenue from allowances exceeds the combined cost of the emissions reduction and the cost of participating in the Opt-in Program.
An opt-in source must comply with the same provisions as utility units affected under the Acid Rain Program. These provisions relate to allowance trading, permitting, excess emissions, monitoring, end-of-year compliance and enforcement. Most basic to the program is the requirement that each year the opt-in source must hold enough allowances to cover its annual SO2 emissions.
Frequently Asked Questions about the Opt-in Program
Who Can Opt-in? How Does a Source Opt-in? How Is the Number of Opt-in Allowances Calculated? Are There Restrictions on Opt-in Allowances? Why is EPA Concerned with Reductions in Utilization? Questions About the Thermal Energy Exception What is the Thermal Energy Exception?
What is a Thermal Energy Plan?
How are Allowances Transferred Under a Thermal Energy Plan?
Must a Thermal Energy Plan Be Renewed?
May a Retiring Source Participate Under the Thermal Energy Exception
May a Source Withdraw From the Opt-in Program? Additional Information Opt-in Forms
Who Can Opt-in?
Any operating stationary combustion sources that emit SO2 but is not otherwise required to meet the mandatory SO2 emissions limitations of Title IV is eligible to opt into the Acid Rain Program. Combustion sources are defined as fossil fuel-fired boilers, turbines or internal combustion engines.
Examples of Eligible Combustion Sources
Existing utility units serving generators less than 25 megawatts Simple combustion turbines built before November, 1990 Industrial boilers Non-affected municipal waste combustors burning some amount of fossil fuel Examples of Ineligible Sources
Utility units affected under 40 CFR part 72.6 New units exempt under 40 CFR part 72.7 Retired units exempt under 40 CFR part 72.8 Mobile sources The Clean Air Markets Division has published a guidance document to help sources determine whether or not they are affected by the Acid Rain Program (see "Do the Acid Rain SO2 Regulations Apply to You?", Document #EPA 430-R-94-002). Top of Page
How Does A Source Opt-in?
In order to enter the Opt-in Program, a combustion source must submit an opt-in permit application and monitoring plan to its permitting authority, receive an opt-in permit, and install and certify its emission monitors. After receipt of a complete opt-in permit application and after the monitoring plan is determined to be sufficient, the permitting authority, will issue a draft opt-in permit for the source to review. The draft permit is then made available for public comment and eventually issued or denied within 18 months of receipt of a complete application. The opt-in source must renew the opt-in permit before it expires, and, in most cases, the permit will last for 5 years.
The opt-in permit application must clearly identify the combustion source and contain all of the information needed to calculate the combustion source's allowance allocation, including its fuel input and emissions data as well as historic and current emission limits.
The certification of monitoring systems for the combustion source will follow the same procedures and requirements as for affected units in the mandatory utility program (see 40 CFR part 75 for more specific requirements). However, there will be no provisional, nor automatic, certification of monitoring systems for combustion sources. In addition, an approved opt-in permit for an applying combustion source will expire if the combustion source fails to complete the certification of its monitoring systems within 180 days after the permit's approval.
Renewal for an opt-in permit must be requested at least 18 months prior to the expiration of the existing opt-in permit. The opt-in permit renewal procedure is simpler than the initial opt-in permit application procedure because the allowance allocation has been established with the initial opt-in permit and cannot be altered in the renewal.
How is the Number of Opt-in Allowances Calculated?
Opt-in allowances are allocated upon entry into the Opt-in Program. The number of allowances an opt-in source receives is based on the product of its average heat input for all fuel consumed during 1985 - 1987 (known as its "baseline") and the lesser of three emissions rates: its 1985 actual emissions rate, its 1985 allowable emissions rate, and its allowable emissions rate at the time the combustion source submits an opt-in permit application.
If the source began operating after 1985, then EPA will accept an "alternative baseline" which is the average heat input for all fuel consumed during the first three consecutive calendar years for which the combustion source operated after December 31, 1985. The emissions rates used for the allowance calculation will be the actual and allowable emissions rate for the first year of this three year period as well as the combustion source's current allowable SO2 emissions rate.
Are There Restrictions on Opt-in Allowances?
There are restrictions on opt-in allowances that do not apply to allowances allocated to affected units under the Acid Rain Program. They are: 1. Only opt-in allowances dated for the current or previous years can be transferred to other accounts in the Allowance Tracking System.
2. Only opt-in allowances for past years may be offered for sale in the spot auction,
and no opt-in allowances may be offered for sale in the advance auction.
3. Opt-in allowances must be surrendered to the EPA if the opt-in source experiences reduced utilization relative to its baseline. The number of allowances surrendered will be proportional to the reduction in the opt-in source's historic operations (i.e., its baseline). The only exception to the surrender of allowances for reduced utilization is known as the thermal energy exception. Top of Page
Why is EPA Concerned with Reductions in Utilization?
Because participation in the opt-in program is voluntary and does not include all sources, the statute recognized that shifts in utilization from opt-in sources to sources not participating in the program would free up allowances without reducing emissions. EPA, in accordance with section 410(f)of the Act, will deduct allowances from an opt-in source when it shuts down or reduces utilization. For most years, utilization is calculated as the three year rolling average of heat input for the opt-in source. An opt-in source is considered to have reduced its utilization if its average utilization is below its baseline (i.e., its average historic fuel input). If an opt-in source has reduced its utilization, EPA will deduct allowances from the opt-in source as described in the equation below.
EPA will consider documented claims of demand side efficiency improvements, as well as improvements in the efficiency of electricity or steam production at the opt-in source when determining reduced utilization. EPA will give credit and not deduct allowances for any portion of the opt-in source's reduced utilization provided by efficiency improvements.
Questions About the Thermal Energy Exception
What is the Thermal Energy Exception? Title IV allows for the transfer of allowances that otherwise must be deducted to account for reduced utilization or shutdown, but the transfer may only be made to a unit that is replacing the thermal energy previously supplied by the opt-in source. Thermal energy is the thermal output or steam produced by a combustion source that is used directly as part of a manufacturing process, but not used to produce electricity. A replacement unit must be an affected unit under the Acid Rain Program and prove that it actually replaces the opt-in source's thermal energy.
What is a Thermal Energy Plan? In order for an opt-in source to transfer allowances to a replacement unit under the thermal energy exception, the opt-in source must submit a thermal energy plan and amend its opt-in permit accordingly. A thermal energy plan is entered into jointly by the opt-in source and its replacement units. The plan estimates the amount of thermal energy replaced and requires additional information on the operations of both the opt-in source and its replacement units while governed by the plan.
A thermal energy plan has a fixed duration and must be renewed. The term of the plan extends over full calendar years, so interested opt-in sources and replacement units could have a plan last as many as five years, if the opt-in permit is on a calendar year basis, or three years, if the opt-in permit begins on a date other than January 1.
How Are Allowances Transferred Under a Thermal Energy Plan? The number of allowances transferred from the opt-in source to the replacement unit is calculated using the following equation: The allowance transfer from the opt-in source to the replacement unit will take place annually. Such transfer will follow EPA's deduction of allowances to offset emissions for the previous compliance year and before any other allowance transfers are recorded in the Allowance Management System for that year. Since the number of allowances that will be transferred each year is contained in the approved thermal energy plan, the opt-in source and each replacement unit will know exactly how many allowances will be transferred.
At the end of each year, EPA will adjust this allowance transfer to reflect the actual thermal energy replaced. In the event that the amount of replacement is altered by an opt-in source's confirmation report, a report submitted after allowance reconciliation that documents efficiency improvements, the EPA will make adjustments in the following manner: EPA will consider the number of allowances transferred to replacement units fixed after the reconciliation process has ended. The Agency will rely on the opt-in source to surrender any additional allowances needed to make the accounting consistent with both the confirmed efficiency estimates and the number of opt-in allowances available for transfer.
When a thermal energy plan is terminated, the allowance transfer for the current year would be reversed, essentially restoring the opt-in source's original allocation for the current year. Future year opt-in source allowances would remain unchanged.
Must A Thermal Energy Plan Be Renewed? A thermal energy plan will, in most circumstances, be renewed along with the renewal of the opt-in permit. At other times, the renewal of the plan will be considered a revision of the opt-in permit and will follow the procedures established for all Acid Rain permit revisions. One important aspect of renewing a thermal energy plan is the possible change in the allowable emissions rates at the replacement units. The Agency will rely on the current allowable rate in effect at the time of renewal for the allowance transfer under the thermal energy plan. May a Retiring Source Participate Under the Thermal Energy Exception? A retiring source may enter the Opt-in Program and participate in a thermal energy plan, but must be operating at the time it submits its opt-in permit application. Operating is defined for this purpose as having documented fuel consumption for more than 876 hours in the 6 months immediately preceding application (i.e., operating at 20 percent capacity factor or greater). EPA places this requirement on retiring combustion sources, to prevent sources shut down long ago from claiming allowances and increasing overall emissions. Retiring combustion sources seeking to become opt-in sources can receive an exemption from the Opt-in Program's monitoring requirements, consistent with 40 CFR part 75.67. The designated representative of such a source must petition the Administrator for such an exemption.
May a Source Withdraw From the Opt-In Program?
An opt-in source can withdraw from the program provided it meets certain conditions: The opt-in source must submit its annual compliance certification report by January 30 of the first calendar year in which the withdrawal is to be effective (rather than March 1); The opt-in source must immediately provide additional allowances if it has excess emissions; The opt-in source must surrender all allowances allocated to it for the year in which the withdrawal is to take effect and for all years thereafter. If the opt-in source does not meet these conditions to withdraw, the opt-in source shall remain in the Opt-in Program and remain subject to all requirements of the program. Withdrawal will take effect on January 1. For opt-in sources that withdraw from the program, they cannot reapply to opt in until the year before the original opt-in permit expired.
A monitoring plan is sufficient if the plan appears to contain information demonstrating that all emissions are monitored and reported in accordance with 40 CFR part 75. A determination of sufficiency shall not be construed as the approval or disapproval of the combustion source's monitoring systems. The term "permitting authority" is used to designate the entity responsible for issuing and administering permits. State and local air pollution control agencies authorized to issue permits under Titles IV and V are the permitting authority. The 1985 allowable emissions rate is the most stringent federally enforceable limitation for SO2 (in lb/mmBtu) applicable to the combustion source for 1985. The allowable emissions rate at the time of application if it exists, is a new lower emissions limit that is finalized but not yet in effect for the applying opt-in source. EPA will consider this new limit (known as "the current promulgated SO2 emissions rate") and will adjust the combustion source's allowance allocation for the year and all years after such limit takes effect. The Allowance Monitoring System (AMS) is an automated system operated by EPA's Clean Air Markets Division and used to track the allowances held by utilities, opt-in sources and other organizations and individuals. More on the Allowance Tracking System.
EPA holds annual auctions from a special allowance reserve and from offers of allowances from private holders. There are two types of auctions: (1) a spot allowance auction, in which allowances are sold that can be used in that same year for compliance purposes, and (2) an advance auction for the sale of allowances that will become usable in the future. More on Auctions.
Demand side efficiency improvements include demand side measures that improve the efficiency of electricity or steam consumption. Qualified demand side measures applicable to the calculation of utilization for opt-in sources are listed in Appendix A, Section 1 of 40 CFR part 73. Top of Page
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