On March 10, 2005, the Environmental Protection Agency (EPA) issued its final rule toaddress the effects of interstate transport of air pollutants on nonattainment of the National AmbientAir Quality Standards (NAAQS) for fine particulates (PM 2.5 ) and ozone (specifically, the eight-hourstandard). (1) The Clean AirInterstate Rule (CAIR) was first proposed as the Interstate Air Quality (IAQ) rule and appeared inthe Federal Register January 30, 2004. (2) For PM 2.5 , CAIR finds that the interstate transport of sulfur dioxide(SO 2 ) and nitrogen oxides (NOx) from 23 states and the District of Columbia contributessignificantly to downwind nonattainment; for ozone, CAIR finds that interstate transport of NOxfrom 25 states and the District of Columbia contributes significantly to downwind nonattainment ofthe eight-hour standard. To remedy the situation, the rule generally follows (with some important exceptions) themethodology EPA employed in an earlier regulation that addressed interstate transport of ozonepollution, the NOx SIP Call. (3) In the NOx SIP Call, EPA found 21 states and the District ofColumbia significantly contributed to nonattainment of the 1-hour ozone NAAQS. (4) To remedy the situation, EPAset statewide emissions budgets for NOx emissions, and recommended that states achieve thosebudgets through "highly cost-effective" controls on electric generators and large industrial facilitiesunder a regional cap-and-trade program. States began implementing controls on May 31, 2004. With CAIR, EPA creates regional emissions caps for NOx and SO 2 to be implemented in twophases -- 2010 (2009 for NOx) and 2015. Two caps (annual SO 2 emissions and annual NOxemissions) apply to the region of 23 states (and District of Columbia) found to contribute to PM 2.5 nonattainment, and one cap (seasonal NOx emissions) applies to the region of 25 states (and Districtof Columbia) found to contribute to eight-hour ozone nonattainment. The regional caps for theaffected states are as follows: SO 2 annual caps: 3.6 million tons in 2010 and 2.5 million in2015 NOx annual caps: 1.5 million tons in 2009 and 1.3 million in2015 NOx ozone season caps: 580,000 tons in 2009 and 480,000 tons in2015 Based on methodology centered on reductions from electric generating facilities and adjustedfor type of fossil fuel burned, each affected state is assigned a portion of the regional cap in the formof a statewide "emissions budget" or cap. Each covered state is required to submit a revised StateImplementation Plan (SIP) identifying measures it intends to implement to achieve its emissionsbudget. States are free to choose whatever means they deem appropriate, subject to EPA approval. However, EPA strongly believes that the regional emissions caps can be most cost-effectivelyachieved through regional cap-and-trade programs focused on electric generators and stronglyencourages that states choose that option. A model cap-and-trade scheme for states to adopt isincluded in the final rule. That model scheme achieves a state's emissions budget through emissionlimitations solely on electric generating units. In 1997, EPA finalized new NAAQS for both PM 2.5 and ozone. (5) The new NAAQS for ozonerevised the previous ozone NAAQS by tightening the standard from 0.12 parts per million (ppm) to0.08 ppm, increasing the averaging time from one hour to eight hours, and measuring complianceby averaging concentrations rather than by counting individual peak concentrations exceeding thestandard. The new PM 2.5 NAAQS was set at an annual maximum concentration of 15 microgramsper cubic meter (Âµg/m 3 ) based on the three-year average of annual arithmetic mean PM 2.5 concentrations from one or more community-oriented monitors; and a 24-hour concentration of 65Âµg/m 3 , based on the three-year average of the 98th percentile of 24-hour PM 2.5 concentrations at eachpopulation-oriented monitor within an area. EPA has taken a cautious approach to implementing the two NAAQS. Attempts tocoordinate the new eight-hour ozone standard with the previous 1-hour standard proved difficult andsubject to considerable litigation. In the case of the PM 2.5 standard, comprehensive monitoring datawere unavailable in 1997 to determine compliance and make designations. In 1998, the Congressset a statutory schedule for the two NAAQS, based on EPA's previously announced InterimImplementation Policy. (6) Judicial review and other factors combined to delay the designations. In 2004-2005, EPA issued designations on attainment and nonattainment for the eight-hourozone NAAQS and the PM 2.5 NAAQS. For PM 2.5 , EPA analysis indicates violations of the NAAQSover the eastern part of the United States and parts of California and Montana. Specifically, datashow 39 nonattainment areas covering all or part of 224 counties in 20 states either fail to meet thestandard or cause a downwind county to fail. All or part of 208 counties violate the annual standard;a few violate both the annual and the 24-hour standard; none violate only the 24-hour standard. Thepopulation of the affected counties is 90 million. (7) For the eight-hour ozone NAAQS, EPA analysis indicateswidespread violations of the NAAQS over the eastern and midwestern United States, California, andTexas, along with scattered areas in Louisiana, Arizona, and Colorado. Specifically, data show 126nonattainment areas covering all or part of 474 counties in 31 states violate the eight-hour ozonestandard. The population of the affected counties is 159 million. (8) The 1997 eight-hour ozone and PM 2.5 NAAQS set in motion the Clean Air Act's (CAA) SIPprocess under Section 110. The promulgation of the revised ozone NAAQS and the new PM 2.5 NAAQS meant that the SIPs of many states were no longer adequate to bring those states intocompliance by the statutory deadline. Under Section 110(k)(5), if EPA finds a SIP inadequate, itmust require the affected state to submit a revised SIP that includes sufficient measures to bring thatstate into compliance. This is known as a "SIP Call." In the case of the eight-hour ozone and the PM 2.5 NAAQS, the process of developingeffective compliance strategies is complicated by the problem of transported air pollutants. UnderSection 110(a)(2)(D), SIPs must include adequate provisions to prevent sources within that statefrom contributing significantly to nonattainment in one or more downwind states. Finding thatinterstate transport of SO 2 and NOx contributes significantly to ozone and PM 2.5 nonattainment, theEPA issued the proposed Interstate Air Quality rule (IAQ) in December 2003 to mitigate theproblem. This rule was finalized as the Clean Air Interstate Rule (CAIR) in March 2005. Combining the requirements of the CAA with EPA intentions as stated in the rule, the majormilestones for implementing the eight-hour ozone and PM 2.5 NAAQS are set out in Table 1 . Table 1. Estimated Schedule for Eight-Hour Ozone and PM 2.5 NAAQS As indicated by Table 1 , EPA would require states to submit their CAIR SIPs before theNAAQS nonattainment SIPs are required. EPA justifies the submission of transported air pollutantSIPs by upwind states before the submission of nonattainment SIPs by downwind states on the basisof Section 110(a)(1-2) and Section 172(b) of the Clean Air Act and on policy considerations. (9) EPA argues that the upwindreductions will facilitate planning by downwind states and that downwind states will benefit fromthe relatively early reductions because they themselves contribute to nonattainment elsewhere. CAIR is based on a series of determinations by EPA with respect to pollution transport,cost-effective pollution control, and compliance feasibility. These determinations are made withinthe SIP process of Sections 110(k)(5) and 110(a)(2)(D). (10) Significant Contribution. The pivotal finding byEPA in the rule is that affected states significantly contribute to nonattainment in downwind states. This determination defines the geographic scope of the rule. For states in the eastern United States,EPA conducted a series of modeling runs to determine the contribution various upwind states areprojected to make to areas in the eastern United States projected by EPA to be in nonattainment in2010 and 2015. For ozone nonattainment, a "significant contribution" was defined by EPA as theproduct of three factors: (1) actual amount of transported pollution from upwind states thatcontribute to nonattainment in downwind states; (2) how often contributions over specific thresholdsoccur; and (3) the comparative amount of the upwind transported contribution to the totalnonattainment situation in the downwind area. (11) For the eight-hour ozone NAAQS, EPA modeled the emissionsimpact of the 31 states east of or bordering the Mississippi River on 40 eastern downwind countiesprojected by EPA to be in noncompliance in 2010. States whose maximum contribution wasestimated at less than 2 parts per billion (ppb) and/or that contribute less than 1% to totalnonattainment were screened out.