# The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR45299 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** August 30, 2018 - **Citation:** R45299 ## Text The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control (name redacted) Analyst in Environmental Policy Updated August 30, 2018 Congressional Research Service 7-.... www.crs.gov R45299 SUMMARY The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Notwithstanding air quality progress since 1970, challenges remain to reduce pollution in areas exceeding federal standards and to ensure continued compliance elsewhere. The movement of air pollutants across state lines, known as interstate transport, has made it difficult for some downwind states to attain federal ozone and fine particulate matter (PM2.5) standards, partly because states lack authority to limit emissions from other states. R45299 August 30, 2018 nae redatc ed Analyst in Environmental Policy -re-acte--@crs.loc.gov For a copy of the full report, please call 7-.... or visit www.crs.gov. The Clean Air Act’s “Good Neighbor” provision (Section 110(a)(2)(D)) seeks to address this issue and requires states to prohibit emissions that significantly contribute to another state’s air quality problems. It requires each state’s implementation plan (SIP)—a collection of air quality regulations and documents—to prohibit emissions that either “significantly contribute” to nonattainment or “interfere with maintenance” of federal air quality standards in another state. The act also authorizes states to petition EPA to issue a finding that emissions from “any major source or group of stationary sources” violate the Good Neighbor provision (Section 126(b)). EPA and the states have implemented regional programs to address interstate ozone and PM2.5 transport and comply with the Good Neighbor provision. These programs set emission “budgets” for ozone and PM2.5 precursor emissions—specifically, sulfur dioxide (SO2) and nitrogen oxide (NOx) as PM2.5 precursors and seasonal NOx emissions as an ozone precursor. The current program—the Cross State Air Pollution Rule (CSAPR)—focuses on limiting interstate transport of power sector SO2 and NOx emissions to eastern states. Power sector emissions in CSAPR states are below emission budgets as a result of regulatory and market factors (see figure). Annual SO2, annual NOx, and ozone season NOx emissions from CSAPR sources decreased 77%, 41%, and 15%, respectively, between 2009 and 2016. CSAPR Emission Trends: 2009-2016 Source: EPA Air Markets Program Data, https://ampd.epa.gov/ampd/. Notes: The Clean Air Interstate Rule was in effect 2009 through the end of 2014 and was replaced by CSAPR on January 1, 2015. EPA has concluded that regional SO2 and NOx programs have reduced interstate transport of PM2.5 and ozone. The Energy Information Administration’s national-scale analysis identifies market and regulatory factors contributing to emission reductions. It is unclear whether emissions will remain well below budgets, given recent prices of ozone season NOx allowances (i.e., authorization for each ton emitted) and the supply of banked allowances for future use in lieu of emission reductions. Research indicates that ozone transport harms air quality in downwind states. However, stakeholder views vary regarding the extent to which interstate transport impacts air quality. Some note that some coal-fired power plants Congressional Research Service The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control do not fully use already-installed pollution controls. Several states have sought additional upwind reductions in ozone precursors through Section 126(b) petitions. Others have questioned the feasibility of achieving additional reductions in ozone precursors, raising concerns about emissions from international or natural sources. EPA recently proposed to determine that CSAPR fully addresses Good Neighbor obligations for the 2008 ozone standard but has not yet made a “Good Neighbor” determination for the more stringent 2015 ozone standard. The agency has therefore not yet determined whether and how it will update the CSAPR budgets with respect to the 2015 ozone standard. Members of Congress may have an interest in better understanding how EPA and states implement the Clean Air Act’s Good Neighbor provision, particularly as EPA continues its assessment of Good Neighbor obligations under the 2015 ozone standard. The following issues, among others, may inform deliberations about interstate air transport. First, the extent to which existing programs will improve air quality in areas not meeting the 2015 ozone standard is to be determined. CSAPR has not addressed NOx emissions from nonpower sector sources, such as large industrial boilers. EPA concluded that industrial sources have potential to cost-effectively reduce NOx emissions but is less certain about the structure of potential NOx control strategies. Second, some have questioned whether additional regulatory incentives are necessary to fulfill Good Neighbor obligations, particularly given current NOx allowance prices. These prices are below the marginal abatement cost, which may result in higher emissions. Third, EPA’s current air quality initiatives may indirectly affect its Good Neighbor assessments. EPA recently sought comment on potential flexibilities for the development of Good Neighbor SIPs. Congressional Research Service The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Contents Introduction ..................................................................................................................................... 1 Background ..................................................................................................................................... 3 Implementing the Good Neighbor Provision .................................................................................. 5 SIPs Process .............................................................................................................................. 5 Section 126(b) Petitions ............................................................................................................ 6 Interpreting “Significant Contribution” .................................................................................... 9 Programs Addressing Interstate Pollution ..................................................................................... 10 Acid Rain Program.................................................................................................................. 12 Ozone Control: Regional NOx Programs ................................................................................ 13 Ozone Transport Commission NOx Budget Program ....................................................... 13 NOx Budget Trading Program ........................................................................................... 14 Ozone and PM Control: Regional SO2 and NOx Trading Programs ....................................... 16 Clean Air Interstate Rule ................................................................................................... 17 Cross State Air Pollution Rule .......................................................................................... 18 Results of Regional SO2 and NOx Trading Programs ....................................................... 22 Status of Good Neighbor Determinations for Ozone Standards .................................................... 25 Good Neighbor Determinations and the 2008 Ozone Standard .............................................. 26 Good Neighbor Determinations and the 2015 Ozone Standard .............................................. 28 Issues for Congressional Consideration ........................................................................................ 28 NOx Emission Trends .............................................................................................................. 29 Incentives for NOx Reductions ................................................................................................ 31 Related EPA Air Quality Initiatives......................................................................................... 31 Figures Figure 1. Implementation Timeline of Regional Ozone and Particulate Matter Control Programs...................................................................................................................................... 11 Figure 2. States Covered by CSAPR ............................................................................................. 19 Figure 3. CSAPR Sources Emission Trends, 2009-2016 .............................................................. 23 Figure 4. Comparison of CSAPR Emissions Budgets and Actual Emissions in 2016 .................. 24 Contacts Author Contact Information .......................................................................................................... 32 Congressional Research Service The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Introduction The movement of air pollutants across state lines, known as interstate transport, has posed a decades-long challenge to air quality protection. The Clean Air Act (CAA) assigns responsibility to states to limit emissions from sources within their borders as needed to attain federal healthbased air quality standards. A state’s air quality, however, may be affected by emissions from upwind sources located in a different state. Hence, controlling emissions within the border of a state may not be sufficient to attain the air quality standard. The downwind state lacks authority to limit emissions from the sources in the upwind state(s) but is nonetheless responsible for attaining the federal standards. Interstate transport has made it difficult for some downwind states to attain federal standards for ozone and fine particulate matter (PM2.5). Both of these pollutants are formed by precursor emissions that can travel long distances. Specifically, sulfur dioxide (SO2) and nitrogen oxide (NOx) contribute to the formation of PM2.5 in the air.1 NOx and volatile organic compounds (VOCs) react in sunlight to form ground-level ozone, the main component of smog.2 Studies have shown that these precursor emissions, as well as ozone and PM2.5, are regional pollutants, meaning that they can travel hundreds of miles through the atmosphere.3 For example, Bergin et al.’s study of the eastern United States concluded that regional transport affected air quality in most eastern states. They attributed an average of 77% of each state’s ozone and PM2.5 concentrations to emissions from upwind states.4 These regional emissions are associated with health impacts and are therefore of concern. For example, research shows that ground-level ozone is associated with aggravated asthma, chronic bronchitis, heart attacks, and premature death.5 Studies have also linked exposure to particulate matter to respiratory illnesses, such as aggravated asthma, as well as heart attacks and premature death.6 The CAA’s “Good Neighbor” provision recognizes such interstate issues and requires states to prohibit emissions that significantly contribute to air quality problems in another state (Section 1 PM 2.5 is also directly emitted by sources (e.g., construction sites, unpaved roads, smokestacks, or fires). See U.S. Environmental Protection Agency (EPA), Particulate Matter (PM) Basics, https://www.epa.gov/pm-pollution/ particulate-matter-pm-basics#main-content. For detailed information about PM and the formation of PM, see National Research Council, Global Sources of Local Pollution: An Assessment of Long-Range Transport of Key Air Pollutants to and from the United States, 2010, pp. 67-76. 2 EPA, Basic Information about Ozone, https://www.epa.gov/ozone-pollution/basic-information-about-ozone. 3 EPA, Interstate Air Pollution Transport, https://www.epa.gov/airmarkets/interstate-air-pollution-transport. See also EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74514, October 26, 2016; and EPA, Fact Sheet. The Cross-State Air Pollution Rule: Reducing the Interstate Transport of Fine Particulate Matter and Ozone, July 2011, p. 1, https://www.epa.gov/sites/production/files/2016-09/documents/csaprfactsheet.pdf. 4 Michelle S. Bergin et al., “Regional Air Quality: Local and Interstate Impacts of NO and SO Emissions on Ozone x 2 and Fine Particulate Matter in the Eastern United States,” Environmental Science & Technology, vol. 41, no. 13 (2007), pp. 4677-4689. In addition, EPA summarizes studies about regional transport. See EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74514. 5 In addition, ground-level ozone is associated with environmental effects, such as negative impacts on forests and crop yields. For information about the health and environmental effects of ozone, see EPA, Basic Information about Ozone; and EPA, Integrated Science Assessment (ISA) of Ozone and Related Photochemical Oxidants, February 2013, https://cfpub.epa.gov/ncea/isa/recordisplay.cfm?deid=247492. 6 EPA, Health and Environmental Effects of Particulate Matter (PM), https://www.epa.gov/pm-pollution/health-andenvironmental-effects-particulate-matter-pm. See also EPA, Integrated Science Assessment for Particulate Matter, December 2009, https://cfpub.epa.gov/ncea/isa/recordisplay.cfm?deid=216546. Congressional Research Service R45299 · VERSION 3 · UPDATED 1 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control 110(a)(2)(D)). It requires each state’s implementation plan—a collection of air quality regulations and documents—to include adequate provisions to prohibit emissions that either “contribute significantly” to nonattainment or “interfere with maintenance” of federal air quality standards in another state.7 Since the 1990s, the U.S. Environmental Protection Agency (EPA) and the states have implemented various regional programs to address interstate air transport. Many of these programs have since concluded. The current program—the Cross State Air Pollution Rule (CSAPR, pronounced “Casper”)—is an emissions trading program for 28 states in the eastern part of the United States. EPA established CSAPR to limit interstate transport of power sector SO2 and NOx emissions and help states comply with the 1997 and 2006 PM2.5 standards as well as the 1997 and 2008 ozone standards. EPA has attributed emission reductions to CSAPR and the agency’s other emissions trading programs, such as the Acid Rain Program: annual SO2 emissions from power plants participating in CSAPR were 1.2 million tons in 2016, an 87% reduction from 2005 levels.8 CSAPR power plants also emitted 420,000 tons of NOx in the 2016 ozone season, roughly an 80% reduction from the 1990 ozone season NOx emissions.9 Emissions reduction progress notwithstanding, some areas of the country do not meet federal air quality standards for pollutants like ozone and particulate matter. In 2018, EPA designated 52 areas with approximately 200 counties or partial counties as “nonattainment” with respect to the 2015 ozone standard.10 Members of Congress representing both downwind and upwind states may have an interest in how EPA and states implement the CAA’s Good Neighbor provision, particularly as states begin to develop plans for nonattainment areas to come into compliance with the 2015 ozone standards. Some downwind states with nonattainment areas have attributed their ozone violations—at least in part—to emission sources from upwind states.11 Downwind states have also expressed concerns that transported air pollution contributes to harmful human health impacts and adversely affects economic growth.12 For example, a Maryland state agency reported that transport of 7 CAA §110(a)(2); 42 U.S.C. §7410(a)(2). 8 EPA reports emissions reductions achieved under several cap-and-trade programs designed to reduce SO 2 and NOx from power plants, including the Acid Rain Program, the Clean Air Interstate Rule (CAIR), and CSAPR (which replaced CAIR in 2015). EPA reports that most of the SO2 and NOx emission reductions since 2005 occurred in response to CAIR. See EPA, 2016 Program Progress, “Emission Reductions,” https://www3.epa.gov/airmarkets/ progress/reports/pdfs/2016_full_report.pdf, and “Emission Reductions: SO2 Emission Trends,” https://www3.epa.gov/ airmarkets/progress/reports/pdfs/2016_full_report.pdf. 9 EPA, 2016 Program Progress, “Emission Reductions: Ozone Season NO Emission Trends.” https://www3.epa.gov/ x airmarkets/progress/reports/pdfs/2016_full_report.pdf. 10 On April 30, 2018, EPA designated 51 areas as nonattainment with the 2015 ozone standard. EPA designated one more area as nonattainment on July 17, 2018. For the designations of 51 nonattainment areas, see EPA, “Additional Air Quality Designations for the 2015 Ozone National Ambient Air Quality Standards,” 83 Federal Register 25776, June 4, 2018. For the July 2018 designation, see EPA, “Additional Air Quality Designations for the 2015 Ozone National Ambient Air Quality Standards—San Antonio, Texas Area,” 83 Federal Register 35136, July 25, 2018. For more information about the 2015 ozone standard and EPA’s recent designations, see CRS Report R43092, Implementing EPA’s 2015 Ozone Air Quality Standards, by (name redacted) and (name redacted) . 11 In their recommendations to EPA regarding designation of nonattainment areas, Delaware, New Jersey, and Wisconsin attributed ozone violations in their jurisdiction to emissions transported from other states. See state recommendation letters to EPA, https://www.epa.gov/ozone-designations/2015-ozone-standards-staterecommendations-epa-responses-and-technical-support. 12 For example, see U.S. Senator Richard Blumenthal et al., letter to Honorable Scott Pruitt, Administrator, EPA, February 23, 2018, https://www.blumenthal.senate.gov/imo/media/doc/ Congressional Research Service R45299 · VERSION 3 · UPDATED 2 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control emissions from upwind states has required Maryland’s sources to compensate with “deeper instate emissions reductions,” thereby adding economic costs to the state’s business community.13 Upwind states have disagreed with the approach used by EPA to determine whether emissions from upwind sources contribute to downwind air quality problems. For instance, Ohio’s state environmental agency described EPA’s transport approach as “deeply flawed,” concluding that it would place “an unfair amount of responsibility” on upwind power plants to reduce emissions.14 To assist Members and staff in understanding interstate transport issues, this report presents background information about the CAA’s interstate transport provision, provides a brief history of regional programs leading up to CSAPR, discusses key aspects of the CSAPR program and program results, summarizes the status of Good Neighbor determinations with respect to ozone standards, and concludes with issues for congressional consideration. Background The CAA requires EPA to establish national standards for air pollutants that meet the criteria in Section 108(a)(1). These pollutants—the “criteria pollutants”—are those that EPA has determined “may reasonably be anticipated to endanger public health or welfare” and whose presence in “ambient air results from numerous or diverse mobile or stationary sources.”15 EPA must design two types of National Ambient Air Quality Standards (NAAQS) for the criteria pollutants. Primary NAAQS must protect public health with an “adequate margin of safety,” and secondary NAAQS must “protect public welfare from any known or anticipated adverse effects.”16 The NAAQS are concentration standards measured in parts per million (ppm) by volume, parts per billion (ppb) by volume, and micrograms per cubic meter of air (µg/m3).17 The NAAQS do not set direct limits on emissions but rather define what EPA considers to be clean air for the pollutant in question.18 Section 109(d) of the act requires periodic NAAQS reviews. Every five years, EPA must review the NAAQS and the science upon which the NAAQS are based and then revise the NAAQS if necessary. This multi-step process is rarely completed within the five-year review cycle and is often the subject of litigation that results in court-ordered deadlines for completion of NAAQS 2018.02.23%20Letter%20to%20Pruitt%20re%20CT%20Clean%20Air%20Act%20Petition.pdf; and U.S. Congress, Senate Environment and Public Works Committee, Subcommittee on Clean Air and Nuclear Safety, Cooperative Federalism Under the Clean Air Act: State Perspectives, 115th Cong., 2nd sess., April 10, 2018. See testimony of Shawn Garvin, Department of Natural Resources and Environmental Control, p. 3, https://www.epw.senate.gov/public/_cache/ files/7/9/79fab6e4-ae5d-4e6f-af30-d4cd30d7b3d7/18D52D3F4801CCF26167EC7F17CD4C16.garvin-testimony04.10.2018.pdf. 13 Maryland Department of Environment, “Governor Larry Hogan Announces State Lawsuit Against EPA,” press release, September 27, 2017, http://news.maryland.gov/mde/2017/09/27/governor-larry-hogan-announces-statelawsuit-against-epa/. 14 Craig Butler, Director, Ohio Environmental Protection Agency, letter to Honorable Gina McCarthy, Administrator, EPA, February 1, 2016, p. 1. See EPA-HQ-OAR-2015-0500-0283 at http://www.regulations.gov. 15 CAA §108(a)(1), codified at 42 U.S.C. §7408(a)(1). EPA determined that the following pollutants meet the Section 108 criteria: (1) carbon monoxide, (2) lead, (3) nitrogen dioxide, (4) ozone, (5) particulate matter, and (6) sulfur dioxide. For more information about the act’s requirements, see CRS Report RL30853, Clean Air Act: A Summary of the Act and Its Major Requirements, by (name redacted) . 16 CAA §109(b), codified at 42 U.S.C. §7409(b). 17 EPA, “NAAQS Table,” https://www.epa.gov/criteria-air-pollutants/naaqs-table. 18 CRS Report R43092, Implementing EPA’s 2015 Ozone Air Quality Standards, by (name redacted) and (name re dacted). Congressional Research Service R45299 · VERSION 3 · UPDATED 3 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control reviews.19 Since January 1997, EPA has completed at least one review for each of the six criteria pollutants (carbon monoxide, lead, nitrogen dioxide, ozone, particulate matter, and sulfur dioxide), with standards being made more stringent for five of the six.20 Most of the revisions finalized in this time period were for the ozone and particulate matter standards.21 The CAA assigns responsibility to states to establish procedures to attain and maintain the NAAQS within their borders. In particular, the act requires each state to submit a new or revised state implementation plan (SIP) to EPA within three years of a NAAQS promulgation or revision.22 This SIP submission, also known as an “infrastructure SIP,” outlines how the state will implement, maintain, and enforce the NAAQS.23 The infrastructure SIP allows EPA to “review the basic structural requirements of [a state’s] air quality management program in light of each new or revised NAAQS.”24 Examples of the basic structural requirements include enforceable emission limits, an air monitoring program, an enforcement program, air quality modeling capabilities, and “adequate personnel, resources, and legal authority.”25 The state’s SIP must also address its interstate transport obligations under the CCAA. EPA refers to this section of the SIP submission as the “Good Neighbor SIP.” The Good Neighbor SIP must prohibit “certain emissions of air pollutants because of the impact they would have on air quality in other states.”26 Specifically, the state’s Good Neighbor SIP must prohibit sources in that state from “emitting any air pollutant in amounts which will … contribute significantly to nonattainment in, or interfere with maintenance” of a NAAQS in another state.27 EPA reviews SIPs to ensure they meet statutory requirements. The agency also has authority to require states to revise their SIPs. Furthermore, the act requires EPA, under certain conditions, to 19 On May 9, 2018, the EPA Administrator announced five principles—one of which was meeting statutory deadlines—for EPA to follow in future NAAQS reviews. See E. Scott Pruitt, EPA Administrator, memorandum to Assistant Administrators, May 9, 2018, https://www.epa.gov/criteria-air-pollutants/back-basics-process-reviewingnational-ambient-air-quality-standards. 20 EPA has not revised the carbon monoxide (CO) NAAQS since 1985, when it revoked the secondary CO NAAQS. See EPA, Table of Historical Carbon Monoxide (CO) National Ambient Air Quality Standards (NAAQS), https://www.epa.gov/co-pollution/table-historical-carbon-monoxide-co-national-ambient-air-quality-standards-naaqs. For a summary of current NAAQS for all six criteria pollutants and links to the history of standards for each of these pollutants, see EPA, “NAAQS Table.” 21 For a summary of the most recent ozone NAAQS revision, see CRS Report R43092, Implementing EPA’s 2015 Ozone Air Quality Standards, by (na me redacted) and (name redacted) . For a summary of the most recent particulate matter NAAQS revision, see CRS Report R42934, Air Quality: EPA’s 2013 Changes to the Particulate Matter (PM) Standard, by (n ame redacted). 22 CAA §110(a)(1); 42 U.S.C. §7410(a)(1). 23 EPA, Guidance on Infrastructure State Implementation Plan (SIP) Elements under the Clean Air Act Sections 110(a)(1) and 110(a)(2), September 2013, p. 1, https://www.epa.gov/sites/production/files/2015-12/documents/ guidance_on_infrastructure_sip_elements_multipollutant_final_sept_2013.pdf. 24 EPA, Guidance on Infrastructure State Implementation Plan, p. 2. 25 EPA, Guidance on Infrastructure State Implementation Plan, p. 2. 26 The Good Neighbor SIP is part of the infrastructure SIP. States with nonattainment areas must also submit “nonattainment SIPs” that address more detailed statutory requirements for coming into attainment. See EPA, “Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals,” 76 Federal Register 48216, August 8, 2011. See also EPA, “Notice of Availability of the Environmental Protection Agency’s Preliminary Interstate Ozone Transport Modeling Data for the 2015 Ozone National Ambient Air Quality Standard (NAAQS),” 82 Federal Register 1734, January 6, 2017. 27 CAA §110(a)(2)(D)(i)(I); 42 U.S.C. §7410(a)(2)(D)(i)(I). Congressional Research Service R45299 · VERSION 3 · UPDATED 4 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control impose sanctions and to issue a Federal Implementation Plan (FIP) if a state fails or declines to submit or implement an adequate SIP.28 Recognizing ongoing challenges with ozone transport, the 1990 CAA Amendments established regional planning provisions specific to ozone. For example, CAA Section 184 created a multistate ozone transport region, known as the Ozone Transport Region (OTR), and established the northeast Ozone Transport Commission (OTC) to advise EPA about ozone controls in the OTR.29 The OTR is comprised of 12 Northeastern and Mid-Atlantic states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, certain counties in Northern Virginia) and Washington, DC.30 The CAA required states in the OTR to impose controls on sources in all specified areas, regardless of attainment status. Such controls included enhanced vehicle inspection and maintenance programs and reasonably available control technology for sources of VOCs.31 In addition, CAA Section 176A allows EPA to establish transport regions to address regional pollution problems contributing to violations of a primary NAAQS. The agency must establish a commission, comprised of EPA and state officials, for each transport region that makes recommendations to EPA on appropriate mitigation strategies. Implementing the Good Neighbor Provision The CAA provides two independent statutory authorities to facilitate compliance with the Good Neighbor provision: (1) the SIPs process under Section 110 and (2) a petition process under Section 126(b). While these authorities are separate, they each address the same objective—that is, the Good Neighbor provision in Section 110(a)(2)(D)(i).32 The remainder of this section describes how these authorities may be used to enforce the Good Neighbor provision. SIPs Process As previously noted, a state’s SIP must prohibit sources in that state from “emitting any air pollutant in amounts which will … contribute significantly to nonattainment in, or interfere with maintenance” of a NAAQS in another state.33 If EPA finds an existing SIP inadequate, it must require the state to revise the SIP.34 This procedure is known as a “SIP call” and it can be issued to multiple states at the same time. Specifically, EPA must issue a SIP call whenever the agency determines that the SIP is “substantially inadequate to attain or maintain” a particular NAAQS, to ensure that the state’s sources do not contribute significantly to a downwind state’s 28 Regarding EPA’s authority to issue FIPs, see CAA Section 110(c)(1); 42 U.S.C. Section 7410(c)(1). Regarding the sanctions EPA may impose, see CAA Section 110(m); 42 U.S.C. Section 7410(m). 29 CAA §184; 42 U.S.C. §7511(c). See also Philip E. Karmel, “Interstate Transport and Regional Approaches to Regulating Air Pollution,” in The Clean Air Act Handbook, ed. Julie R. Domike and Alec C. Zacaroli, 4th ed. (Chicago: American Bar Association, 2016), pp. 115-136. 30 CAA §184(a); 42 U.S.C. §7511(c). 31 CAA §184; 42 U.S.C. §7511(c). For further analysis of this provision, see also Philip E. Karmel, “Interstate Transport and Regional Approaches to Regulating Air Pollution,” in The Clean Air Act Handbook, ed. Julie R. Domike and Alec C. Zacaroli, 4th ed. (Chicago: American Bar Association, 2016), pp. 115-136. 32 EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26675, June 8, 2018. 33 CAA §110(a)(2)(D)(i)(I); 42 U.S.C. §7410(a)(2)(D)(i)(I). 34 CAA §110(k)(5); 42 U.S.C. §7410(k)(5). Congressional Research Service R45299 · VERSION 3 · UPDATED 5 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control nonattainment, or if it is otherwise inadequate to meet any CAA requirement.35 EPA can also issue a SIP call if states do not meet the CAA Section 184 requirements of the OTR. Section 126(b) Petitions Under CAA Section 126(b), any state or political subdivision can petition EPA to issue a “finding that any major source or group of stationary sources emits or would emit any air pollutant in violation” of the Good Neighbor provision.36 Section 126(b) requires EPA to make a decision within 60 days. If EPA grants the petition, the sources identified in the petition must cease operations within three months unless they comply with emission controls and compliance schedules set by EPA. While Section 126(b) and a SIP call each enforce the Good Neighbor provision, they differ in their implementation.37 First, a state or political subdivision must initiate the 126(b) petition, whereas EPA initiates the SIP call. Second, unlike a SIP call, the 126(b) petition is limited to a “major source or group of stationary sources” and cannot be used to address minor or mobile sources.38 Third, EPA may directly regulate upwind sources when it grants a 126(b) petition, whereas a SIP call results in direct EPA regulation only if EPA issues a FIP in response to a state’s failure to respond adequately to the SIP call. EPA’s review of 126(b) petitions has sometimes coincided with the agency’s SIP call process. For example, in 1998, EPA coordinated its review of eight 126(b) petitions when it promulgated a SIP call. EPA acknowledged the distinction between the CAA authorities for the 126(b) petition process and the SIP call but coordinated the two actions because they were both designed to reduce ozone transport in the eastern United States.39 States have also submitted 126(b) petitions ahead of the deadlines for Good Neighbor SIPs.40 For example, in 2011, EPA granted a 126(b) petition from New Jersey, finding that a coal-fired generating station in Pennsylvania contributed significantly to nonattainment with the SO2 NAAQS in New Jersey.41 Some considered EPA’s approval of this petition to reflect a more expansive interpretation of Section 126 in which 126(b) petitions are not necessarily limited to 35 CAA §110(k)(5); 42 U.S.C. §7410(k)(5). 36 CAA §126(b); 42 U.S.C. §7426(b). Section 302(j) defines major stationary source as “any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant (including any major emitting facility or source of fugitive emissions of any such pollutant, as determined by rule by the Administrator)” (CAA §302(j); 42 U.S.C. §7602(j)). Section 126(b) cannot be used to address emissions from mobile sources, such as cars and trucks. Another section of the CAA—Title II (42 U.S.C. §§7521-7590)— contains most of the act’s provisions for mobile sources. 37 CAA §126(b); 42 U.S.C. §7426(b). For additional discussion of the differences between 126(b) petitions and a SIP call, see Philip E. Karmel, “Interstate Transport and Regional Approaches to Regulating Air Pollution,” in The Clean Air Act Handbook, pp. 133-134. 38 Karmel, “Interstate Transport,” in The Clean Air Act Handbook, p. 133. 39 EPA, “Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone,” 63 Federal Register 57361-57362, October 27, 1998. 40 As previously noted, the Good Neighbor SIP is part of the infrastructure SIP. States with nonattainment areas must also submit “nonattainment SIPs” that address more detailed statutory requirements for coming into attainment. See EPA, “Federal Implementation Plans,” 76 Federal Register 48216. 41 EPA, “Final Response to Petition from New Jersey Regarding SO Emissions from the Portland Generating Station,” 2 76 Federal Register 69052, November 7, 2011. Congressional Research Service R45299 · VERSION 3 · UPDATED 6 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control the time frame of Good Neighbor SIP updates.42 Whereas EPA had previously considered 126(b) petitions several years after revising a NAAQS—and after making attainment and nonattainment designations for revised standards—EPA approved New Jersey’s 126(b) petition before Pennsylvania was required to complete its Good Neighbor SIP for the 2010 revision to the SO2 NAAQS.43 EPA promulgated an emissions limit for the generating station that would reduce its SO2 emissions by 81% and set a compliance deadline of three years.44 In 2013, the U.S. Court of Appeals for the Third Circuit upheld EPA’s interpretation of Section 126, concluding that the CAA allows EPA to make a Section 126 finding independently of the Section 110 SIP process.45 States have continued to submit Section 126(b) petitions related to ozone interstate transport. For example, Connecticut, Delaware, Maryland, and New York have submitted 126(b) petitions related to compliance with the 2008 and/or 2015 ozone NAAQS.46 As of July 2018, EPA has denied the petition from Connecticut and has proposed to deny petitions from Delaware and Maryland.47 Among the various reasons for denying Connecticut’s petition, EPA found that the petition did not reflect current operations at the named source—a power plant located in Pennsylvania.48 In particular, EPA stated that the air quality modeling in Connecticut’s petition was based on 2011 emissions data and therefore did not account for subsequent NOx reductions, noting that the named source “primarily burned natural gas with a low NOx emission rate in the 2017 ozone season.”49 In addition, EPA conducted its own analysis using the agency’s current multi-step framework for determining what constitutes a significant contribution.50 The agency’s analysis did not identify additional “highly cost-effective controls available at the source and thus no basis to determine that [the named source] emits or would emit in violation of the good neighbor provision with respect to the 2008 ozone NAAQS.”51 While EPA “expects the facility to 42 Karmel, “Interstate Transport,” in The Clean Air Act Handbook, p. 134. 43 For EPA’s discussion about the timing of 126(b) petitions and Good Neighbor SIPs, see EPA, “Final Response to Petition from New Jersey Regarding SO2 Emissions from the Portland Generating Station,” 76 Federal Register 6905369056, November 7, 2011. For the 2010 SO2 NAAQS revision, see EPA, “Primary National Ambient Air Quality Standard for Sulfur Dioxide; Final Rule,” 75 Federal Register 35520, June 22, 2010. 44 EPA, “Final Response to Petition from New Jersey Regarding SO Emissions from the Portland Generating Station,” 2 76 Federal Register 69066-69068, November 7, 2011. 45 GenOn REMA, LLC v. EPA, 722 F.3d 513, 521-22 (3d Cir. 2013). 46 EPA, Ozone National Ambient Air Quality Standards (NAAQS) Section 126 Petitions, June 2018, https://www.epa.gov/ozone-pollution/ozone-national-ambient-air-quality-standards-naaqs-section-126-petitions. 47 For the final decision on Connecticut’s petition, see EPA, “Response to June 1, 2016 Clean Air Act Section 126(b) Petition from Connecticut,” 83 Federal Register 16064, April 13, 2018. For the proposed denial of Delaware and Maryland’s petitions, see EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26675, June 8, 2018. 48 EPA also concluded that Connecticut’s petition did not provide enough information regarding the source’s impact on air quality in Connecticut on high ozone days. For example, EPA stated that the petition did not demonstrate whether the days in which emissions from the named source had the largest impact on Connecticut’s air quality monitors coincided with the highest modeled ozone days at the Connecticut monitors. EPA, “Response to June 1, 2016 Clean Air Act Section 126(b) Petition from Connecticut,” 83 Federal Register 16064, 16071-16072, April 13, 2018. See also Connecticut Department of Energy and Environmental Protection, Petition to the U.S. EPA Pursuant to Section 126 of the Clean Air Act for Abatement of Emissions from the Brunner Island Coal Fired Generating Units in Pennsylvania, as Such Generating Units Significantly Contribute to Nonattainment of, and Interfere with Maintenance of, the 2008 Ozone NAAQS in the State of Connecticut, June 1, 2016. 49 EPA, “Response to June 1, 2016 Clean Air Act Section 126(b) Petition from Connecticut,” 83 Federal Register 16072, April 13, 2018. 50 Regulatory actions and litigation have led to EPA’s establishment of the current framework that it uses to assess Good Neighbor obligations. The framework establishes a screening threshold and accounts for both cost and air quality improvements. See “Framework to Assess Good Neighbor Provision” in this report for complete discussion. 51 EPA, “Response to June 1, 2016 Clean Air Act Section 126(b) Petition from Connecticut,” 83 Federal Register Congressional Research Service R45299 · VERSION 3 · UPDATED 7 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control continue operating primarily by burning natural gas in future ozone seasons,”52 others have expressed concern that there is no “enforceable requirement prohibiting” the named source from switching back to coal.53 Similarly, in June 2018, EPA proposed to deny petitions from Delaware and Maryland, in part because EPA found “several elements of the states’ analyses … insufficient to support the states’ conclusions.”54 For example, EPA said that Delaware’s petitions did “not provide any analysis indicating that Delaware may be violating or have difficulty maintaining the 2008 or 2015 ozone NAAQS in a future year associated with the relevant attainment dates.”55 EPA also noted that Delaware used 2011 emissions data, which EPA characterized as “generally higher than, and therefore not representative of, current and future projected emissions levels at these [named sources] and in the rest of the region.”56 Delaware has disagreed with EPA’s proposed denial on various grounds. Among other things, Delaware stated that EPA has not “shown valid modeling or justification that Delaware will attain the 2015 ozone standard by its 2021 Marginal nonattainment deadline.”57 In particular, EPA’s projections analyzed the year 2023, which is the attainment deadline for areas designated as moderate nonattainment with respect to the 2015 ozone standard.58 Finally, EPA proposed to deny Maryland’s petition, in part because the agency disagreed with Maryland that NOx limits for 36 named sources should be based on the respective units’ lowest observed emissions rates.59 Specifically, Maryland’s petition concluded that the 36 named sources were operating pollution controls “sub-optimally based on a comparison of their lowest observed NOx emissions rates between 2005 and 2008, which Maryland describes as the ‘best’ observed 16065. 52 EPA, “Response to June 1, 2016 Clean Air Act Section 126(b) Petition from Connecticut,” 83 Federal Register 16072. 53 Arthur N. Marin, Executive Director, Northeast States for Coordinated Air Use Management, letter to William Wehrum, Assistant Administrator, Office of Air and Radiation, EPA, March 26, 2018, http://www.nescaum.org/ documents/nescaum-comments-ct-126-petition-20180326.pdf/. 54 EPA also proposed to find that, based on its own analysis, there are “no additional highly cost-effective emissions reductions available at the sources, and, thus, that none of the named sources currently emit or would emit in violation of the good neighbor provision with respect to the relevant ozone standard.” EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26677, June 8, 2018. 55 For complete discussion, see EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26676, June 8, 2018; and Delaware’s four 126(b) petitions (Brunner Island, Conemaugh, Harrison, Homer City), available at Delaware Department of Natural Resources and Environmental Control, Delaware’s 126(b) Petitions for Clean Air, http://www.dnrec.delaware.gov/Air/Pages/126-Petitions.aspx. 56 EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26676, June 8, 2018. Delaware has responded that EPA’s 2017 data show two of the named sources operating with emissions rates similar to those in 2011, see Delaware Department of Natural Resources and Environmental Control, Testimony on EPA’s Proposed Denial of Delaware’s 126(b) Petitions, June 22, 2018, p. 2, http://www.dnrec.delaware.gov/Air/Documents/06-22-Dave-Fees-testimony-at-EPA-public-hearing.pdf. 57 Delaware Department of Natural Resources and Environmental Control, Testimony on EPA’s Proposed Denial, p. 3. 58 EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26678. See also EPA, Ozone NAAQS Timelines, https://www.epa.gov/ozone-pollution/ozone-naaqs-timelines. 59 For complete discussion, see EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26677, and Maryland Department of Environment, Petition to the U.S. EPA Pursuant to Section 126 of the Clean Air Act for Abatement of Emissions from 36 Coal-Fired Electric Generating Units at 19 Plants in Five States that Significantly Contribute to Nonattainment of, and Interfere with Maintenance of, the 2008 Ozone NAAQS in the State of Maryland, November 16, 2016, http://news.maryland.gov/mde/wp-content/uploads/sites/ 6/2016/11/MD_126_Petition_Final_111616.pdf. Congressional Research Service R45299 · VERSION 3 · UPDATED 8 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control emissions rates, to emissions rates from the 2015 and 2016 ozone seasons.”60 EPA disagreed that the lowest historical NOx emissions rate is representative of “ongoing achievable NOx rates” in part because over time, some NOx controls (e.g., selective catalytic reduction [SCR] systems) “may have some broken-in components and routine maintenance schedules entailing replacement of individual components.” EPA stated that in a 2016 rulemaking addressing regional ozone transport, the agency determined that the “third lowest fleetwide average coal-fired [power plant] NOx rate” for power plants using SCR to be “most representative of ongoing, achievable emission rates.”61 Maryland has disagreed with EPA’s proposed denial, noting that it will “testify in opposition to the proposal and use all available tools, including litigation.”62 Interpreting “Significant Contribution” Enforcement of the CAA’s interstate transport provisions hinges on a key test in Section 110(a)(2)(D)(i)—whether one state “significantly contributes” to a violation of the NAAQS in another state. The CAA does not, however, define what constitutes a significant contribution. Instead, this phrase has been interpreted through EPA rulemakings addressing interstate air pollution. The agency’s interpretation has been contentious at times, given that it “inherently involves a decision on how much emissions control responsibility should be assigned to upwind states, and how much responsibility should be left to downwind states.”63 Stakeholders have challenged the legality of EPA’s interpretations over the years.64 The regulatory actions and litigation have led to EPA’s establishment of the current framework to address the Good Neighbor provision for ozone and particulate matter.65 The framework establishes a screening threshold—interstate pollution that exceeds 1% of the NAAQS—to identify states with sources that may contribute significantly to air quality problems in downwind states.66 Upwind states that exceed this threshold for interstate pollution are evaluated further— considering cost and air quality factors—to determine whether emission reductions are needed.67 EPA has clarified that it generally uses this framework to determine what constitutes a significant contribution when evaluating Good Neighbor SIPs and when evaluating a 126(b) petition.68 See “Framework to Assess Good Neighbor Provision” for detailed discussion of the framework. 60 EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26677. 61 EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26677. 62 Maryland Department of Environment, “Maryland Environment Secretary Grumbles Statement on EPA’s Proposed Denial of the Maryland Department of the Environment’s Clean Air Act Petition,” press release, June 1, 2018, http://news.maryland.gov/mde/2018/06/01/maryland-environment-secretary-grumbles-statement-on-epas-proposeddenial-of-the-maryland-department-of-the-environments-clean-air-act-petition/. 63 EPA, “Federal Implementation Plans,” 76 Federal Register 48248. 64 For a summary of how litigation has influenced implementation of the Good Neighbor provision, see CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 65 EPA, “Federal Implementation Plans,” 76 Federal Register 48208 (see in particular Section VI). For brief summary of the framework, see Peter Tsirigotis, Director, EPA Office of Air Quality Planning and Standards, memorandum to Regional Air Division Directors, EPA Regions 1-10, March 27, 2018, https://www.epa.gov/sites/production/files/201803/documents/transport_memo_03_27_18_1.pdf. 66 EPA, “Federal Implementation Plans,” 76 Federal Register 48248. Under this approach, 1% of the 2015 ozone NAAQS (70 ppb) equals 0.7 ppb. 67 EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74507-74508. 68 EPA stated, “While either provision may be applied to address interstate transport, they are also closely linked in that a violation of the prohibition in CAA Section 110(a)(2)(D)(i) is a condition precedent for action under CAA Section Congressional Research Service R45299 · VERSION 3 · UPDATED 9 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Programs Addressing Interstate Pollution Pursuant to the CAA, EPA and states have implemented various market-based programs that target regional emissions of SO2 and NOx from power plants. One type of market-based program, known as emissions trading, sets a limit (or “cap”) on total emissions within a defined geographic area or economic sector and requires covered entities to surrender an allowance for each unit— typically a ton—of emissions.69 Such programs are also known as “cap-and-trade.” Under an emissions cap, covered entities with relatively low emission-reduction costs have a financial incentive to reduce emissions because they can sell unused allowances to entities that face higher costs to reduce their facility emissions. The requirements vary by each program. For example, policymakers may decide to distribute the emission allowances to covered entities at no cost (based on, for example, previous years’ emissions), sell the allowances (e.g., through an auction), or use some combination of these strategies. In addition, some programs may permit covered entities to “bank” or save surplus allowances for future use while others may not. The remainder of this section presents a brief history of the interstate transport programs implemented prior to 2015, given their cumulative impact on regional emission reductions. The “Cross State Air Pollution Rule” section then provides more detail about CSAPR, the current emissions trading program intended to limit interstate transport of power sector SO2 and NOx emissions. Figure 1 summarizes the timeline of the regional programs for ozone and particulate matter control. 126(b) and, critically, that significant contribution to nonattainment and interference with maintenance are construed identically for purposes of both provisions (since the identical terms are naturally interpreted as meaning the same thing in the two linked provisions).” See EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26675. 69 EPA, What Is Emissions Trading?, https://www.epa.gov/emissions-trading-resources/what-emissions-trading. Congressional Research Service R45299 · VERSION 3 · UPDATED 10 Figure 1. Implementation Timeline of Regional Ozone and Particulate Matter Control Programs Source: CRS analysis. Notes: The program dates in the figure represent the timeline for implementation and not enactment of statutory mandates. In addition, the Acid Rain Program, which seeks to reduce power sector emissions that cause acid rain (i.e., SO2 and NOx), was established under the 1990 CAA Amendments and remains in effect today. a. CAIR refers to the Clean Air Interstate Rule. b. CSAPR refers to the Cross State Air Pollution Rule. c. OTC NOx refers to the Ozone Transport Commission Nitrogen Oxide Budget Program. d. NOx SIP Call refers to the Nitrogen Oxide State Implementation Plan Call. e. Clean Air Act (CAA) of 1970 initially mandated the “Good Neighbor” provision, which was subsequently amended under the 1977 CAA and the 1990 amendments. CRS-11 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Acid Rain Program EPA established the Acid Rain Program (ARP) under Title IV of the 1990 CAA Amendments to reduce power sector emissions that cause acid rain.70 Specifically, the ARP targets SO2 emissions through cap-and-trade and addressed NOx emissions through an emissions-rate-based program.71 Since its inception over two decades ago, the ARP has achieved notable reductions in these regional pollutants at lower-than-predicted costs. The market-based program also served as the basis for subsequent programs addressing interstate pollution.72 Under Title IV of the CAA, EPA implemented the ARP in two phases. The first phase—1995 to 1999—included 110 high-emitting coal-fired power plants, which had been identified in the statute and spanned 21 eastern and midwestern states.73 The second phase began in 2000 and included more coal-fired power plants as well as those firing oil and natural gas, accounting for nearly all fossil-fueled power plants in the lower 48 states.74 EPA set the annual SO2 emissions cap at 9.97 million allowances in 2000 and decreased it in subsequent years. The ARP remains in effect today. The annual SO2 cap—8.95 million tons of SO2 per year—has not changed since 2010. The annual cap is roughly half of the SO2 emitted by the power sector in 1980.75 EPA distributed SO2 allowances based on statutory formulas and accounted for historical emission rates and fuel consumption.76 The “existing” power plant units—those in operation prior to November 15, 1990—received allowances for free.77 The “new” power plant units—those commencing operations after November 15, 1990—generally did not receive free allowances and had to purchase them on the market.78 At the end of each year, covered power plants have to surrender one allowance for each ton of SO2 emitted. Unused allowances can either be sold or 70 CAA §401; 42 U.S.C. §7651. 71 CAA Title IV set goals for the year 2000 of reducing annual SO 2 emissions by 10 million tons from 1980 levels and reducing annual NOx emissions by 2 million tons, also from 1980 levels. CAA §401(b); 42 U.S.C. §7651(b). See also CRS Report RL30853, Clean Air Act: A Summary of the Act and Its Major Requirements, by (name redacted) . 72 According to EPA’s 2016 Progress Report, covered sources in the ARP emitted 1.5 million tons of SO on an annual 2 basis—a 91% reduction below 1990 levels—and 1.2 million tons of NOx on an annual basis—an 81% reduction below 1990 levels. See EPA, 2016 Progress Report: Cross-State Air Pollution Rule and Acid Rain Program, “Program Basics,” 2016, pp. 7-8, https://www3.epa.gov/airmarkets/progress/reports/pdfs/2016_full_report.pdf. For additional discussion about the results of the ARP, see Gabriel Chan et al., The SO2 Allowance Trading System and the Clean Air Act Amendments of 1990: Reflections on Twenty Years of Policy Innovation, Harvard Environmental Economics Program, January 2012, https://heep.hks.harvard.edu/files/heep/files/so2-brief_digital_final.pdf. 73 CAA §404(e), Table A; 42 U.S.C. §7651(c)(e), Table A. 74 EPA, Acid Rain Program, SO Reductions, https://www.epa.gov/airmarkets/acid-rain-program. See also Richard 2 Schmalensee and Robert Stavins, “Lessons Learned from Three Decades of Experience with Cap and Trade,” Review of Environmental Economics and Policy, vol. 11, no. 1 (Winter 2017), p. 61. 75 EPA, 2016 Progress Report, p. 8. EPA reports the cap in units of allowances: The annual SO cap is 8.95 million 2 allowances. The CAA defines each allowance as one ton. See definition of allowance in CAA §402(3); 42 U.S.C. §7651(a)(3). 76 CAA §403; 42 U.S.C. §7651(b). EPA elaborated on and codified the distribution criteria at 40 C.F.R. 73.10. 77 For statutory definition, see CAA §402(8); 42 U.S.C. §7651(a)(8). For statutory direction on distribution of SO 2 allowances, see CAA §403; 42 U.S.C. §7651(b). 78 New power plants that met statutory criteria could receive some allowances from EPA. For statutory definition, see CAA §402(10); 42 U.S.C. §7651(a)(10). For statutory direction on distribution of SO2 allowances to new units, see CAA §403(e); 42 U.S.C. §7651(b)(e). Congressional Research Service R45299 · VERSION 3 · UPDATED 12 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control banked for use in later years.79 The market value of unused allowances, therefore, serves as an incentive for power plants to “reduce emissions at the lowest cost.”80 The NOx portion of the ARP does not involve cap-and-trade but follows a more traditional regulatory approach. It is implemented through boiler-specific NOx emission rates.81 This program has provided power plants with some compliance flexibility, for example, by allowing the use of emissions rate averaging plans for units under common control, provided they meet certain conditions.82 According to one analysis of the ARP, the NOx portion “helped demonstrate the cost-effectiveness of NOx controls,” and by 2000, it “encouraged the installation of advanced NOx combustion controls, such as low-NOx burners, and the development of new power plant designs with lower NOx emission rates.”83 While the ARP reduced SO2 and NOx emissions from the power sector, additional reductions were needed to meet ambient air quality standards under the CAA and to address the statute’s Good Neighbor provision.84 For example, in 1997, EPA revised the NAAQS for ozone and particulate matter—which are formed by SO2 and NOx—to be more stringent.85 The next sections summarize some of the programs designed to achieve these reductions. Ozone Control: Regional NOx Programs Ozone control strategies had focused on VOC emissions until the mid-1990s, when market-based programs began targeting another ozone precursor, NOx, given its “important role … in ozone formation and transport.”86 Specifically, two regional trading programs were implemented between 1999 and 2009 to address ozone by reducing NOx emissions. The first one, the “Ozone Transport Commission NOx Budget Program,” was in effect between 1999 and 2002. It was then replaced by the second program, the “NOx Budget Trading Program,” which ran until 2009. Ozone Transport Commission NOx Budget Program The OTC—a multistate organization established under the 1990 CAA Amendments to advise EPA on ozone transport issues—developed the NOx Budget Program and implemented it through a Memorandum of Understanding (MOU) with nearly all of the OTC states.87 The OTC NOx Budget Program set a regional budget (i.e., cap) on NOx emissions from electric utilities and large 79 For more implementation details, see EPA, Acid Rain Program. 80 Chan et al., The SO 2 Allowance Trading System, p. 4. 81 EPA, Acid Rain Program, Overview. 82 EPA, 2016 Progress Report, p. 10. 83 Sam Napolitano et al., “The U.S. Acid Rain Program: Key Insights from the Design, Operation, and Assessment of a Cap-and-Trade Program,” Electricity Journal, vol. 20, no. 7 (August/September 2007), p. 50. 84 Chan et al., The SO Allowance Trading System, p. 17. 2 85 For the 1997 ozone NAAQS revision, see EPA, “National Ambient Air Quality Standards for Ozone,” 62 Federal Register 38856, July 18, 1997. For the 1997 particulate matter NAAQS revision, see EPA, “National Ambient Air Quality Standards for Particulate Matter,” 62 Federal Register 38652, July 18, 1997. 86 EPA and OTC, NO Budget Program, 1999-2002 Progress Report, March 2003, p. 1, https://www.epa.gov/sites/ x production/files/2015-08/documents/otcreport.pdf. 87 The OTC is comprised of the governors of the 12 states in the OTR (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia) and the mayor of the District of Columbia. CAA §184; 42 U.S.C. §7511(c). All states in the OTC signed the MOU except for Virginia. EPA and OTC, NOx Budget Program, p. 1. For the MOU, see https://otcair.org/upload/Documents/ Memorandums/att2.htm. Congressional Research Service R45299 · VERSION 3 · UPDATED 13 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control industrial boilers during the “ozone season” (May through September), which is the time of year weather conditions are most favorable for ozone formation.88 Under the MOU, states “were responsible for adopting regulations, identifying sources, allocating NOx allowances, and ensuring compliance,” while EPA was “responsible for approving the states’ regulations and tracking allowances and emissions.”89 Before emissions trading began under the OTC NOx Budget Program, sources under the ARP were required to meet CAA emission rate standards that were in effect at that time. Sources could not emit above the NOx level expected if using Reasonably Available Control Technology.90 Next, the cap-and-trade program began in 1999 and ran until 2002, at which point the OTC NOx Budget Program was effectively replaced by the NOx Budget Trading Program (see next section). In 2002, the sources participating in the OTC NOx Budget Program reduced ozone season NOx emissions 60% below 1990 baseline levels.91 Despite the NOx reductions in the Northeast, many northeastern and mid-Atlantic states were unable to meet a statutory deadline to attain the onehour ozone NAAQS. EPA concluded that these areas had not met this statutory deadline largely because of ozone transport from upwind areas.92 NOx Budget Trading Program The NOx Budget Trading Program (NBP) effectively replaced the OTC NOx Budget Program and was implemented between 2003 and 2009. The NBP encompassed a wider geographic area than the OTC NOx Budget Program and targeted NOx reductions from electric utilities and nonutility sources (e.g., large industrial boilers).93 EPA established the NBP under the NOx SIP Call, which required a number of eastern and midwestern states, plus the District of Columbia, to revise their SIPs to address regional ozone transport.94 The NOx SIP Call set a NOx ozone season budget for each state and required upwind states to adopt SIPs that would reduce NOx emissions to a level that would meet the budgets. In the NOx SIP Call, EPA observed that “virtually every nonattainment problem is caused by numerous sources over a wide geographic area,” leading the agency to conclude that “the solution to the problem is the implementation over a wide area of controls on many sources, each of which may have a small or unmeasurable ambient impact by itself.”95 Ultimately, EPA expected that this 88 EPA and OTC, NO Budget Program, pp. 1-3. x 89 EPA, Ozone Transport Commission NO x Budget Program, https://www.epa.gov/airmarkets/ozone-transportcommission-nox-budget-program. 90 The NO component of the ARP—boiler-specific NO emission rates on an annual basis—was in effect at the same x x time as the ozone NOx trading programs, which addressed NOx emissions in the summer (i.e., ozone season). The ARP NOx program remains in effect today and applies to “ARP-affected units that are older, historically coal-fired boilers.” EPA, 2016 Progress Report, p. 15. See also EPA and OTC, NOx Budget Program, p. 4. For summary and detailed analysis of the OTC NOx Budget Program, see Dallas Burtraw and Sarah Jo Szambelan, U.S. Emissions Trading Markets for SO2 and NOx, Resources for the Future, October 2009, pp. 21-24, http://www.rff.org/files/sharepoint/ WorkImages/Download/RFF-DP-09-40.pdf. 91 EPA and OTC, NO Budget Program, p. 6. x 92 EPA, “Finding of Significant Contribution,” 63 Federal Register 57361. 93 Nonutility sources refers to industrial sources that produce electricity or steam primarily for internal use. Examples include boilers and turbines at manufacturing facilities, such as paper mills and petroleum refineries. See EPA, The NOx Budget Program: 2008 Emission, Compliance, and Market Analyses, July 2009, p. 3, https://www.epa.gov/sites/ production/files/2015-08/documents/nbp_2008_ecm_analyses.pdf. 94 EPA, “Finding of Significant Contribution,” 63 Federal Register 57356. 95 EPA, “Finding of Significant Contribution,” 63 Federal Register 57377. Congressional Research Service R45299 · VERSION 3 · UPDATED 14 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control would “eliminat[e] the emissions that significantly contribute to nonattainment or interference with maintenance of the ozone NAAQS in downwind states.”96 EPA based the NOx SIP Call in part on recommendations from the Ozone Transport Assessment Group (OTAG), a group created by EPA and the 37 easternmost states.97 Of most relevance, OTAG recommended strategies to reduce NOx emissions from utilities as well as large and medium nonutility sources in a trading program.98 EPA accounted for the cost of NOx controls when establishing the NOx budgets.99 EPA identified cost-effective reductions in the electric utility and nonutility source sectors. These control strategies informed the establishment of the NOx emission budgets.100 EPA did not identify costeffective controls in other sectors—namely, area sources (i.e., nonmobile sources that emit less than 100 tons of NOx per year),101 nonroad engines (i.e., mobile sources that do not operate on roads and highways, such as engines used to power snowmobiles, chainsaws, or lawnmowers),102 or highway vehicles. Under the NOx SIP Call, states could require their sources to comply with the emissions budget or participate in a regional cap-and-trade program. EPA developed a model rule for a regional emissions trading program—known as the NOx Budget Trading Program—to assist states interested in the trading option. All of the jurisdictions—20 states and the District of Columbia—adopted the NBP into their SIPs and participated in the NBP.103 In 2008, NBP emissions were 9% below the 2008 cap, representing a 75% reduction compared to 1990 baseline levels.104 This also represented a 62% reduction below a 2000 baseline, which accounted for emission reductions that occurred under the 1990 CAA Amendments before implementation of the NBP.105 96 EPA, “Response to Clean Air Act Section 126(b) Petitions from Delaware and Maryland,” 83 Federal Register 26668. 97 The westernmost OTAG states ranged from North Dakota to Texas, with all remaining OTAG states located eastward of these states. For a map of OTAG states, see EPA, Supplemental Ozone Transport Rulemaking Regulatory Analysis, April 7, 1998, p. 1-2, https://archive.epa.gov/ttn/ozone/web/pdf/supregan.pdf. 98 EPA, “Finding of Significant Contribution,” 63 Federal Register 57358-57359. 99 In 2000, the D.C. Circuit held in Michigan v. EPA that nothing in Section 110(a)(2)(D) bars EPA from considering costs. For additional information, see CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 100 EPA, “Finding of Significant Contribution,” 63 Federal Register 57405. 101 EPA, “Finding of Significant Contribution,” 63 Federal Register 57498. Examples of area sources of NO emissions x include wildfires and residential water heaters. EPA, “Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone,” 62 Federal Register 60353, November 7, 1997. 102 Additional examples of nonroad engines are those used for agricultural, construction, and mining equipment as well as aircraft and train engines. EPA, “Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone,” 62 Federal Register 60359. 103 The NO SIP Call included 22 states and the District of Columbia, but a later ruling removed one state (Wisconsin) x and parts of two other states (Missouri and Georgia). The court left requirements for the remaining 19 states in place. See Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000) cert. denied 532 U.S. 904 (2001). See also EPA, 2016 Program Progress, “Program Basics.” 104 EPA, The NO Budget Program: 2008 Emission, Compliance, and Market Analyses, July 2009, p. 4, x https://www.epa.gov/sites/production/files/2015-08/documents/nbp_2008_ecm_analyses.pdf. 105 EPA, The NO Budget Program, p. 4. x Congressional Research Service R45299 · VERSION 3 · UPDATED 15 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control EPA observed that ozone season NOx emissions decreased each year between 2003 and 2008 and attributed these reductions in part to the installation of NOx controls.106 The agency noted that emissions vary year-to-year due to variables such as weather, electricity demand, and fuel costs. For example, EPA attributed the NOx reductions between 2007 and 2008 primarily to lower electricity demand. However, analysis of the entire NBP period—2003 to 2008—shows a reduction in ozone season NOx emissions despite a slight increase in demand for electricity. EPA reported that the average NOx emission rate for the 10 highest electricity demand days (i.e., hot days when use of air conditioning is high) decreased in each year of the NBP. This metric for peak electricity days was 44% lower in 2008 compared to 2003.107 EPA reported that ozone concentrations decreased by 10% between the years 2002 and 2007 across all states participating in the NBP.108 EPA also observed a “strong association between areas with the greatest NOx emission reductions from NBP sources and downwind monitoring sites measuring the greatest improvements in ozone.”109 Progress notwithstanding, some NBP areas remained in nonattainment status with the ozone NAAQS as the NBP program concluded by the end of 2008.110 Ozone and PM Control: Regional SO2 and NOx Trading Programs In 2005, EPA determined that interstate transport of SO2 and NOx contributed significantly to ozone and PM2.5 nonattainment.111 Specifically, EPA found that (1) interstate transport of NOx from 25 states and the District of Columbia contributed significantly to nonattainment, or interfered with maintenance, of the 1997 eight-hour ozone NAAQS; and (2) interstate transport of SO2 and NOx from 23 states and the District of Columbia contributed significantly to nonattainment, or interfered with maintenance, of the 1997 PM2.5 NAAQS.112 To address these findings, EPA promulgated a rule that applied to 28 eastern states and the District of Columbia.113 This rulemaking is known as the Clean Air Interstate Rule (CAIR). 106 EPA, The NO x Budget Program, pp. 5-6. 107 EPA, The NO x Budget Program, p. 6. 108 Based on ozone concentrations averaged over an eight-hour time interval and after adjusting for meteorological conditions. See EPA, NOx Budget Trading Program: Compliance and Environmental Results, December 2008, p. 44, https://www.epa.gov/sites/production/files/2015-08/documents/2007-nbp-report.pdf. 109 Based on ozone concentrations averaged over an eight-hour time interval and after adjusting for meteorological conditions. See EPA, NOx Budget Trading Program: Compliance and Environmental Results, p. 44. 110 EPA, The NO Budget Program: 2008 Emission, Compliance, and Market Analyses, July 2009, p. 6, x https://www.epa.gov/sites/production/files/2015-08/documents/nbp_2008_ecm_analyses.pdf. The NBP was effectively replaced by the ozone season NOx component of the Clean Air Interstate Rule. See EPA, 2016 Program Progress, p. 8. 111 EPA identified the geographic areas and interstate air emissions transport through a series of modeling runs. EPA also used several criteria to determine what constituted a “significant contribution” for ozone nonattainment and for PM2.5 nonattainment. EPA changed this approach in CSAPR, which replaced CAIR. The CSAPR approach is discussed later in this report. 112 EPA, “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NOx SIP Call; Final Rule,” 70 Federal Register 25167, May 12, 2005. 113 EPA, “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule),” 70 Federal Register 25170. The totals reported in this paragraph include Minnesota, which EPA included in the CAIR final rule. EPA subsequently promulgated a final rule to stay the effectiveness of CAIR and associated CAIR FIP requirements for Minnesota. More recent publications may therefore exclude Minnesota from the total number of states that were subject to CAIR. For Final Stay of CAIR and CAIR FIP for Minnesota, see EPA, “Administrative Stay of Clean Air Interstate Rule for Minnesota; Administrative Stay of Federal Implementation Plan to Reduce Interstate Congressional Research Service R45299 · VERSION 3 · UPDATED 16 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control A legal challenge, however, vacated and remanded CAIR to EPA.114 CAIR remained in effect while EPA responded to the court decision and developed a new regional program addressing air transport, known as CSAPR. CSAPR replaced CAIR on January 1, 2015, and remains in effect today.115 The remainder of this section discusses each program in turn. Clean Air Interstate Rule CAIR established a regional cap-and-trade program to reduce power sector SO2 and NOx emissions. Specifically, CAIR established emission budgets for each of the 28 states as well as a model rule for a multi-state cap-and-trade program in the power sector.116 Under CAIR, states could achieve their emission budgets by requiring their sources to participate in the cap-and-trade program. CAIR set three emissions caps: Two were annual emissions caps to limit SO2 and NOx as precursor emissions to PM2.5, and the third was an ozone season cap limiting NOx as a precursor emission to ozone. The annual NOx and seasonal NOx caps were implemented as the “CAIR NOx annual” and “CAIR ozone season NOx” programs, respectively, in 2009. The SO2 emissions cap was implemented as the “CAIR SO2 annual” program in 2010.117 The scope of CAIR differed from prior NOx trading programs. Whereas the NBP had included both electric generators and nonutility industrial sources (e.g., boilers and turbines), CAIR focused only on electric generators. As previously noted, OTAG’s recommendations for the NOx SIP Call included NOx controls for medium and large nonutility stationary sources as well as electric generating units. While nonutility sources emit both NOx and SO2, EPA did not require NOx and SO2 reductions from these sources under CAIR. EPA concluded that it needed more reliable emissions data and better information about control costs to require reductions from nonutility sources in CAIR. Specifically, EPA stated that it lacked information about the costs to integrate NOx and SO2 controls at nonutility sources and therefore could not determine whether such controls would qualify as “highly cost-effective” under CAIR.118 Some stakeholders disagreed with this conclusion, noting that EPA had cost information from the NOx SIP Call. EPA responded that the geographic scope of the NOx SIP Call differed somewhat from CAIR, and therefore it had limited emissions data about nonutility sources in CAIR states that were outside of the NOx SIP Call. In addition, EPA expected that projected NOx and SO2 emissions from nonutility sources were “significantly lower than projected” emissions from Transport of Fine Particulate Matter and Ozone for Minnesota,” 74 Federal Register 56721, November 3, 2009. 114 North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008). See also CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 115 EPA, 2016 Program Progress, p. 9. 116 EPA, “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule),” 70 Federal Register 25162. 117 EPA, 2016 Program Progress, pp. 10-11. 118 EPA, “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule),” 70 Federal Register 25214-25215. Congressional Research Service R45299 · VERSION 3 · UPDATED 17 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control electric generators.119 EPA concluded that states would be better positioned to “make decisions regarding any additional control requirements for [non-utility] sources.”120 CAIR was challenged in court. The U.S. Court of Appeals for the District of Columbia concluded that CAIR was flawed, finding among other things that the CAIR trading program did not assure some “measurable” emission reduction in each upwind state.121 The court reasoned that the “[e]missions reduction by the upwind states collectively was not enough to satisfy Section 110(a)(2)(D).”122 The court ultimately remanded CAIR to EPA in December 2008, allowing CAIR to remain in effect while EPA developed a replacement rule.123 The CAIR programs for NOx (annual and ozone season) began in 2009 and the CAIR SO2 program began in 2010. The programs continued through the end of 2014.124 Cross State Air Pollution Rule In 2011, EPA promulgated CSAPR to address the court’s concerns regarding CAIR.125 CSAPR implementation began in 2015—replacing CAIR—and it remains in effect today. Similar to CAIR, CSAPR aims to reduce ozone and PM2.5 interstate transport. As shown in Figure 2, CSAPR requires 27 states to reduce SO2 emissions, annual NOX emissions, and/or ozone season NOX emissions from the power sector.126 Specifically, CSAPR sets annual SO2, annual NOx, and ozone-season NOx budgets for the covered states and allows states to determine how they will achieve those budgets, including the option of emissions trading. 119 EPA projected that in 2010, under base case conditions, electric generator emissions would contribute 70% of SO 2 (and 25% NOx) in the CAIR region compared to 15% of SO2 (and 16% NOx) from nonelectric generator boilers and turbines. EPA, “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule),” 70 Federal Register 25214. 120 EPA, “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule),” 70 Federal Register 25215. 121 North Carolina v. EPA, 531 F.3d 896, 908 (D.C. Cir. 2008). CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 122 CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 123 Though initially vacating the CAIR rule, the D.C. Circuit revised its opinion some months later, leaving CAIR in effect “until it is replaced by a rule consistent with our opinion.” North Carolina v. EPA, 550 F.3d 1176, 1178 (D.C. Cir. 2008). See also CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 124 EPA, 2016 Program Progress, p. 11. 125 EPA, “Federal Implementation Plans,” 76 Federal Register 48207. 126 CSAPR covers 27 states as of July 2018. Some changes have been made since EPA promulgated the 2011 CSAPR rulemaking. For list of CSAPR states, see EPA, “States That Are Affected by the Cross-State Air Pollution Rule (CSAPR),” https://www.epa.gov/csapr/states-are-affected-cross-state-air-pollution-rule-csapr. Congressional Research Service R45299 · VERSION 3 · UPDATED 18 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Figure 2. States Covered by CSAPR Source: EPA (2018), “Map of States Covered by CSAPR,” https://www.epa.gov/airmarkets/map-states-coveredcsapr. Note: Alaska and Hawaii (not shown) are not covered under the Acid Rain Program (ARP), which applies to power plants in the contiguous United States, nor are they covered under the Cross State Air Pollution Rule (CSAPR). CSAPR differs from CAIR in other ways, though, and introduced a new approach to measuring a significant contribution under Section 110(a)(2)(D). EPA had previously relied on a regional analysis of significant contributions (e.g., in CAIR and the NOx SIP Call).127 As previously noted, the D.C. Circuit found the regional approach flawed in a ruling on CAIR.128 As a result, EPA used state-specific information under CSAPR to determine significant contributions at the state level. After various legal challenges, the approach used in CSAPR remains in effect today. EPA has determined that it can use this framework to assess the Good Neighbor provision each time it revises the relevant NAAQS.129 Framework to Assess Good Neighbor Provision EPA developed a multi-step framework to assess states’ Good Neighbor obligations and determine each state’s significant contribution in CSAPR. First, EPA conducted air quality 127 EPA, “Federal Implementation Plans,” 76 Federal Register 48248. 128 North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008). See also CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 129 EPA, “Cross-State Air Pollution Rule Update,” 81 Federal Register 74507. Congressional Research Service R45299 · VERSION 3 · UPDATED 19 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control modeling to project “downwind air quality problems”—that is, it identified downwind monitoring receptors expected to have difficulty attaining or maintaining the NAAQS.130 Next, EPA identified the links between upwind states and the downwind air quality monitoring sites with projected attainment or maintenance difficulties. EPA then identified which of these linked upwind states “contribute at least one percent of the relevant NAAQS” at the downwind sites.131 The agency next assessed the cost-effectiveness of emission control measures and air quality factors to determine whether states exceeding this threshold made significant contributions or interfered with maintenance of a NAAQS in a downwind state. That is, EPA determined that an upwind state contributes significantly to a nonattainment or interference with maintenance of a NAAQS if it produced more than 1% of NAAQS concentration in at least one downwind state and if this pollution could be mitigated using cost-effective measures. EPA modified the way it considered costs under CSAPR. Whereas EPA had previously based “significant contribution” on the emissions that “could be removed using ‘highly cost effective’ controls,” the agency accounted for both cost and air quality improvement to measure significant contributions under CSAPR.132 In CSAPR, EPA (1) quantified each state’s emission reductions available at increasing costs per ton (“cost thresholds”), (2) evaluated the impact of upwind reductions on downwind air quality, and (3) identified the cost thresholds providing “effective emission reductions and downwind air quality improvement.”133 The last step of the Good Neighbor assessment framework requires the adoption of “permanent and enforceable measures needed to achieve” the emission reductions.134 EPA implemented this step through its promulgation of FIPs, giving states the option to replace the FIP with a SIP. 135 The FIPs specified the emission budgets for each state, reflecting the required SO2 and NOx reductions from power plants in the state, and established the trading programs as each state’s remedy to meet the emissions budgets.136 Legal challenges, which eventually reached the Supreme Court, delayed CSAPR implementation.137 The Court largely upheld EPA’s approach, holding that EPA’s consideration of cost in establishing states’ emission budgets was a “permissible construction of the statute.”138 130 For a summary of the process, see EPA, “Federal Implementation Plans,” 76 Federal Register 48211. See also Tsirigotis, pp. 2-3. 131 EPA, “Federal Implementation Plans,” 76 Federal Register 48248. 132 EPA, “Federal Implementation Plans,” 76 Federal Register 48248. 133 EPA, “Federal Implementation Plans,” 76 Federal Register 48248. 134 Tsirigotis, p. 3. 135 EPA, “Federal Implementation Plans,” 76 Federal Register 48209. 136 See EPA, “Federal Implementation Plans,” 76 Federal Register 48210, and EPA, Regulatory Impact Analysis of the Cross-State Air Pollution Rule (CSAPR) Update for the 2008 National Ambient Air Quality Standards for GroundLevel Ozone, September 2016, p. ES-8, https://www3.epa.gov/ttn/ecas/docs/ria/transport_ria_final-csapr-update_201609.pdf. 137 EPA v. EME Homer City Generation, L.P., 134 S. Ct. 1584 (2014). For summary of the CSAPR legal challenges and the Supreme Court’s ruling, see CRS Report R43699, Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act, by (name redacted) . 138 EPA v. EME Homer City Generation, L.P., 134 S. Ct. 1584, 1606–07 (2014). Congressional Research Service R45299 · VERSION 3 · UPDATED 20 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control CSAPR Emissions Trading Programs In response to the CAIR litigation, EPA designed “air quality-assured interstate emission trading programs” to implement CSAPR.139 The CSAPR trading programs allow for interstate trading but include provisions meant to ensure that all of the necessary reductions would occur in each individual state. Specifically, EPA stated that the CSAPR assurance provisions “ensure that no state’s emissions … exceed that specific state’s budget plus the variability limit (i.e., the state’s assurance level).”140 EPA established four interstate trading programs for affected power plants under CSAPR: two for annual SO2, one for annual NOX, and one for ozone-season NOX.141 These trading programs aim to help downwind areas attain the 1997 and 2006 annual PM2.5 NAAQS and the 1997 and 2008 ozone NAAQS. The first phase of CSAPR, which began in 2015, sought to address the 1997 and 2006 PM2.5 NAAQS as well as the 1997 ozone NAAQS. The second phase of CSAPR, referred to as the CSAPR Update, began in 2017 and has sought to address the 2008 ozone NAAQS.142 The total emissions budget for each CSAPR trading program equals the sum of the individual state budgets covered by that program. Affected power plants receive an allocation of allowances based on the emission budget for that trading program in the state. Each affected power plant must have an allowance to emit each ton of the relevant pollutant. It may comply with its allowance allocation by using control technologies to reduce emissions—and sell or bank any surplus allowances—or buy more allowances on the market.143 EPA’s “CSAPR Update” rulemaking updated the ozone season NOx program with respect to the 2008 ozone NAAQS.144 Specifically, the CSAPR Update promulgated new FIPs for 22 states; 21 of these states were covered in the original CSAPR ozone season NOx trading program.145 The updated ozone season NOx trading began in 2017 and largely replaced the original CSAPR ozone season NOx trading program.146 EPA concluded based on its modeling analysis that emissions from 10 of the states covered in the original CSAPR ozone season NOx trading program “no longer significantly contribute to downwind nonattainment or interference with maintenance” of 139 EPA, “Federal Implementation Plans,” 76 Federal Register 48210. 140 Each state’s emissions budget accounts for the “inherent variability in power system operations.” See EPA, “Federal Implementation Plans,” 76 Federal Register 48212, 48265, 48303. 141 One SO trading program—SO Group 1—covers sources in states that need to make larger reductions to eliminate 2 2 their significant contribution, while the second—SO2 Group 2—includes sources in states that need to make smaller reductions. EPA, 2016 Program Progress, p. 9. 142 EPA, 2016 Program Progress, p. 9. 143 EPA clarified that while allowance trading—buying, selling, and banking—is allowed without restriction, there is a limit on the surrender of SO2 allowances. A power plant in a Group 1 state can use only SO2 allowances allocated to Group 1 states. Likewise, a power plant in a Group 2 state can use only Group 2 SO 2 allowances to cover SO2 emissions. EPA, “Federal Implementation Plans,” 76 Federal Register 48263-42864, 48284. See also EPA, 2016 Program Progress, p. 9. 144 EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74507. 145 Kansas was not covered in the original CSAPR ozone season NO program but was included in the CSAPR Update. x See EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74506. 146 The original ozone season CSAPR program was renamed “CSAPR NO Ozone Season Group 1 Trading Program” x and now includes just one state: Georgia. Georgia is not included in the CSAPR Update trading program, “CSAPR NO x Ozone Season Group 2.” See EPA, “Determination Regarding Good Neighbor Obligations for the 2008 Ozone National Ambient Air Quality Standard,” 83 Federal Register 31922, July 10, 2018; EPA, Overview of the Cross-State Air Pollution Rule (CSAPR), https://www.epa.gov/csapr/overview-cross-state-air-pollution-rule-csapr; and EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74504. Congressional Research Service R45299 · VERSION 3 · UPDATED 21 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control either the 1997 ozone NAAQS or the 2008 ozone NAAQS.147 Various states and stakeholders have filed a petition for review of the CSPAR Update to the D.C. Circuit.148 CSAPR does not address the Good Neighbor provision with respect to either the 2012 revision to the PM2.5 NAAQS149 or the 2015 revision150 to the ozone NAAQS.151 As of July 2018, states and EPA are in the process of evaluating interstate ozone transport with respect to the 2015 ozone NAAQS (see discussion under “Good Neighbor Determinations and the 2015 Ozone Standard”). Regarding the 2012 PM2.5 standard, a 2016 EPA analysis determined that “few areas in the United States” would “have problems attaining and maintaining the 2012 PM2.5 NAAQS due to the relatively small number and limited geographic scope of projected nonattainment and maintenance receptors.”152 EPA concluded that “most states will be able to develop good neighbor SIPs that demonstrate that they do not contribute significantly to nonattainment or interfere with maintenance of the 2012 PM2.5 NAAQS in any downwind state.”153 Currently, nine areas are designated nonattainment with the 2012 PM2.5 standard, four of which are located in two CSAPR states (Ohio and Pennsylvania). No areas are currently designated as maintenance with that standard.154 Results of Regional SO2 and NOx Trading Programs Power sector SO2 and NOx emissions have declined since 2005. EPA has attributed most of these reductions to CAIR, which was in effect through the end of 2014.155 The agency noted that other programs, such as state NOx emission control programs, also contributed to the reductions in annual and ozone season NOx achieved by 2016.156 Figure 3 illustrates the trend of declining emissions, showing that annual SO2, annual NOx, and ozone season NOx decreased between 2009 (the first year of CAIR) and 2016 (the latest year for which the EPA Air Markets Program Data website reports emissions for all three programs). 147 EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74507. 148 Wisconsin v. EPA, No. 16-1406 (D.C. Cir. November 23, 2016). 149 Referred to as the “2012” PM2.5 NAAQS revision because EPA signed the rule in late 2012. The rule was published in the Federal Register in early 2013. EPA, “National Ambient Air Quality Standards for Particulate Matter,” 78 Federal Register 3086, January 15, 2013. 150 EPA, “National Ambient Air Quality Standards for Ozone,” 80 Federal Register 65292, October 26, 2015. 151 EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74507. EPA stated it addressed the Good Neighbor provision for the 2012 PM2.5 NAAQS in a memorandum. See EPA, “Information on the Interstate Transport ‘Good Neighbor’ Provision for the 2012 Fine Particulate Matter National Ambient Air Quality Standards under Clean Air Act Section 110(a)(2)(D)(i)(I),” March 17, 2016, https://www.epa.gov/pm-pollution/ information-interstate-transport-good-neighbor-provision-2012-fine-particulate-matter. 152 Stephen D. Page, Director, EPA Office of Air Quality Planning and Standards, letter to EPA Regional Air Division Directors, Regions 1-10, March 17, 2016, p. 3, https://www.epa.gov/sites/production/files/2016-08/documents/goodneighbor-memo_implementation.pdf. 153 Page, March 17, 2016, p. 7. 154 As of June 30, 2018. The states with nonattainment areas for the 2012 PM 2.5 standard are California, Idaho, Ohio, and Pennsylvania. See EPA, Green Book: PM-2.5 (2012) Designated Area/State Information, June 30, 2018, https://www3.epa.gov/airquality/greenbook/kbtc.html. 155 EPA, 2016 Program Progress, p. 18. 156 EPA, 2016 Program Progress, pp. 24, 30. Congressional Research Service R45299 · VERSION 3 · UPDATED 22 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Figure 3. CSAPR Sources Emission Trends, 2009-2016 Source: EPA Air Markets Program Data, https://ampd.epa.gov/ampd/. Note: CAIR was in effect from 2009 through the end of 2014 and was replaced by CSAPR on January 1, 2015. EPA attributed the SO2 reductions under CAIR/CSAPR and the ARP largely to the greater use of pollution control technologies on coal-fired power plant units and “increased generation at natural gas-fired units that emit very little SO2 emissions.”157 As noted by the U.S. Energy Information Administration (EIA), nearly all SO2 emissions from the electricity sector are associated with coal-fired generation.158 EPA reported that the average SO2 emissions rate for units subject to either the CSAPR or ARP decreased 81% compared to 2005 rates. Most of the reductions were from coal-fired units.159 Analysis from EIA reveals a similar trend at the national level, suggesting that a combination of market and regulatory factors have contributed to SO2 reductions. EIA reported a 73% reduction in national power sector SO2 emissions from 2006 to 2015, which it described as “much larger” than the 32% reduction in coal-fired generation in that same period.160 EIA attributed the national SO2 reductions to (1) changes in the electricity generation mix (e.g., less coal-fired generation and more natural-gas-fired generation), (2) the installation of pollution control technologies at coal- and oil-fired plants (in particular, to comply with the Mercury and Air Toxics rule), and (3) lower use of the most-polluting power plants (e.g., retirements of coal-fired units).161 Another EIA analysis reported that the eastern region of the United States—which includes all of the CSAPR states except Texas—had the largest share of capacity retirements between 2008 and 2017 compared to the rest of the continental United States.162 157 EPA, 2016 Program Progress, p. 19. 158 EIA, “Sulfur Dioxide Emissions from U.S. Power Plants Have Fallen Faster Than Goal Generation,” February 3, 2017, https://www.eia.gov/todayinenergy/detail.php?id=29812. 159 EPA, 2016 Program Progress, p. 19. 160 EIA, “Sulfur Dioxide Emissions.” 161 EIA, “Sulfur Dioxide Emissions.” EIA stated that various factors influence the decision to retire a power plant and analyzed retirements from the past decade in a separate report. See EIA, “Almost All Power Plants That Retired in the Past Decade Were Powered by Fossil Fuels,” January 9, 2018, https://www.eia.gov/todayinenergy/detail.php?id= 34452. 162 EIA analyzed the lower 48 states of the United States and divided them into three regions: Western, Texas, and Eastern. See EIA, “Almost All Power Plants.” Congressional Research Service R45299 · VERSION 3 · UPDATED 23 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control In addition, emissions in 2016 were below the total emission budgets for each CSAPR trading program (see Figure 4).163 EPA observed that this resulted in CSAPR allowance prices at the end of 2016 that “were well below the marginal cost for reductions projected at the time of the final rule [and that such prices] are subject, in part, to downward pressure from the available banks of allowances.”164 Figure 4. Comparison of CSAPR Emissions Budgets and Actual Emissions in 2016 Source: EPA 2016 Progress Report and EPA Air Markets Program Data, https://ampd.epa.gov/ampd/. EPA reported that preliminary data from the 2017 ozone season—the first CSAPR Update compliance period—show that ozone season NOx emissions were below the total emission budget.165 Emission allowance prices are generally affected by a number of factors, including supply and demand, program design elements that influence supply and demand, and legal and regulatory uncertainty.166 Analyses of ozone season NOx highlight summer weather as a key factor (e.g., higher than average temperatures could lead to greater demand for electricity). Power sector compliance strategies (e.g., use of installed control technologies, switching to lower emitting fuels, or retiring higher emitting units) are also relevant to ozone season allowance prices.167 Recent allowance prices in the CSAPR Update trading program appear to be lower than the marginal cost to reduce ozone season NOx emission. One brokerage firm reported that by May 163 EPA, 2016 Program Progress, pp. 24, 30. 164 EPA, 2016 Program Progress, pp. 24, 30. 165 In 2017, CSAPR Update sources emitted a total of 294,478 tons of ozone season NO , below the total budget of x 316,464 tons. EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31927. 166 Allowance banking—saving allowances for use in future years—is an example of a program design feature that may influence allowance supply. For discussion about how legal and regulatory uncertainty has affected allowance prices in regional SO2 and NOx markets, see Burtraw and Szambelan, U.S. Emissions Trading Markets for SO2 and NOx. 167 For example, see Evolution Markets, Market Update: Cross State Air Pollution Rule, March 21, 2018, p. 2, http://www.evomarkets.com/content/news/reports_28_report_file.pdf; and Energy Ventures Analysis, “First Ozone Season Under the CSAPR Update Rule Begins Amid Uncertain Market Conditions,” May 31, 2017, https://www.evainc.com/energy-blog/first-csapr-ozone-season-underway/. Congressional Research Service R45299 · VERSION 3 · UPDATED 24 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control 2018—the start of the 2018 ozone season—NOx allowance prices ranged from $150 to $175 per ton, suggesting that the availability of allowance prices at such low prices “could lead to some decisions not to run some pollution controls at maximum output. This would, in turn, lead to higher emissions.”168 The brokerage firm reported the marginal cost of ozone season NOx reductions to be about $300 per ton, though EPA considered higher marginal costs to develop the CSPAR Update emission budgets.169 Specifically, EPA considered several cost thresholds—ranging from $800 per ton to $6,400 per ton—and based the CSAPR Update emission budgets on reductions that could be achieved at $1,400 per ton. EPA concluded that a $1,400 per ton threshold would maximize the incremental benefits—the emission reductions and corresponding downwind air quality improvements—compared to other marginal cost thresholds.170 EPA identified NOx control strategies at this cost threshold to include optimizing use of existing operational Selective Catalytic Reduction (SCR) controls, turning on existing but idled controls—for example, SCR that had not been used for several seasons—and installing advanced combustion controls, such as low-NOx burners.171 EPA has reported improvements in air quality, attributing progress in part to the regional SO2 and NOx transport programs.172 For example, 34 of the 36 areas in the eastern United States that were designated as nonattainment for the 1997 PM2.5 NAAQS now show concentrations below that standard based on 2014-2016 data.173 In terms of ozone, all 92 of the eastern areas originally identified as nonattainment under the 1997 ozone standard now show concentrations below that standard based on 2014-2016 data.174 The 2014-2016 monitoring data also showed that 17 of the 22 areas in the eastern United States that were originally designated as nonattainment with the 2008 ozone standard now have concentrations below that standard.175 Status of Good Neighbor Determinations for Ozone Standards As previously noted, revisions to the NAAQS trigger the SIPs review process, through which EPA determines whether states have met their Good Neighbor obligations. EPA has not yet finalized its Good Neighbor determinations for either the 2008 revision or the 2015 revision to the ozone standards. The remainder of this section summarizes the status of EPA’s Good Neighbor determinations under each standard. 168 Evolution Markets, Market Update, p. 2, http://www.evomarkets.com/content/news/reports_28_report_file.pdf. 169 Evolution Markets, Market Update, p. 2. 170 EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74508, 74543. 171 EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74541, 74543. See also EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31927. 172 EPA, 2016 Program Progress, pp. 55-70. 173 EPA had designated a total of 39 areas as nonattainment with respect to the 1997 PM 2.5 standard; 36 of these areas were located in the eastern United States. EPA, 2016 Program Progress, p. 67. 174 EPA, 2016 Program Progress, p. 59. 175 EPA, 2016 Program Progress, p. 59. Congressional Research Service R45299 · VERSION 3 · UPDATED 25 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Good Neighbor Determinations and the 2008 Ozone Standard EPA first sought to address ozone transport with respect to the 2008 ozone standard in the 2016 CSAPR Update. Specifically, the CSAPR Update covered 22 states and promulgated FIPs with ozone season NOx budgets for power plants.176 EPA concluded at the time, however, that it could not determine whether the CSAPR Update fully addressed the Good Neighbor provision with respect to the 2008 ozone standard for 21 of the 22 covered states.177 In other words, the 2016 CSAPR Update “did not fully satisfy the EPA’s obligation to address the good neighbor provision requirements” for those 21 states.178 EPA based its 2016 conclusion in part on the agency’s projection of air quality problems at downwind monitors in 2017, even with implementation of the CSAPR Update. EPA found that 21 of the 22 CSAPR Update states would contribute “equal to or greater than 1 percent of the 2008 ozone NAAQS” to at least one nonattainment or maintenance monitor in 2017.179 Since then, EPA has updated its air quality modeling and, on June 29, 2018, proposed to determine that the CSAPR Update fully addresses 20 of the 21 remaining Good Neighbor obligations for the 2008 ozone standards.180 As such, the agency has “proposed to determine that it has no outstanding, unfulfilled obligation under Clean Air Act Section 110(c)(1) to establish additional requirements for sources in these states to further reduce transported ozone pollution under” the CAA’s Good Neighbor provision with respect to the 2008 ozone NAAQS.181 EPA based its proposed determination on the updated air quality modeling, which projected air quality in 2023—a longer analytical time frame than it used in the CSAPR Update.182 The updated projections showed that in 2023, there would not be any nonattainment or maintenance monitors with respect to the 2008 ozone standard in the eastern United States.183 EPA’s selection of a future analytic year is an important factor in the Good Neighbor determination.184 The agency based its selection of 2023 on two primary factors: (1) the 176 EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74504, 74540. 177 Tennessee was the only state for which EPA found the CSAPR Update FIP fully addressed the Good Neighbor provision with respect to the 2008 ozone standard. See EPA, “Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS,” 81 Federal Register 74504, 74540; and EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31920. 178 EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31920. 179 EPA’s analysis projected nonattainment monitors in Connecticut, Texas, and Wisconsin in 2017 and maintenanceonly monitors in Connecticut, Maryland, Michigan, New York, and Texas in 2017. EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31922. 180 Kentucky is the only one out of the group of 21 not covered by this proposed determination. EPA will address Kentucky in a separate rulemaking. EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31915, 31923. 181 EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31916. 182 In the CSAPR Update, EPA selected the year 2017 because it was the last full ozone season from which data could be used to determine attainment with the 2008 ozone standard by July 20, 2018, the attainment date for nonattainment areas classified as moderate. In addition, EPA did not analyze ozone season NO x reductions available after 2017 due to time constraints. Stephen D. Page, Director, EPA Office of Air Quality Planning and Standards, memorandum to EPA Regional Air Division Directors, Regions 1-10, October 27, 2017, p. 3, https://www.epa.gov/airmarkets/october-2017memo-and-supplemental-information-interstate-transport-sips-2008-ozone-naaqs. 183 Page, October 27, 2017, p. 1, and EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31923. 184 Stakeholders have disagreed with EPA’s selection in other interstate air transport analyses, such as the 126(b) petitions regarding the 2008 and 2015 ozone NAAQS. See, for example, Delaware Department of Natural Resources and Environmental Control, Testimony on EPA’s Proposed Denial of Delaware’s 126(b) Petitions, p. 3. Congressional Research Service R45299 · VERSION 3 · UPDATED 26 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control downwind attainment deadlines185 and (2) the time frame required to implement emission reductions as “expeditiously as possible.”186 As of August 2018, the next attainment dates for the 2008 ozone standard are July 20, 2021 (for areas classified as “Serious” nonattainment) and July 20, 2027 (for areas classified as “Severe” nonattainment).187 The potential to “over-control” emissions was another factor that EPA identified as relevant to the selection of the analytic year. EPA described it as relevant given the agency’s expectation that future emissions will decline through implementation of existing local, state, and federal programs and in light of holdings from the U.S. Supreme Court.188 EPA stated that it considered both downwind states’ obligation to attain the ozone standards “as expeditiously as possible” and EPA’s “obligation to avoid unnecessary over-control of upwind state emissions.”189 EPA did not specify whether it expected separate agency actions that may affect ozone precursor emissions— such as changes in the mobile source program—to affect its projections for 2023. EPA acknowledged that the year it chose—2023—is later than the attainment date for areas classified as “Serious” nonattainment (2008 ozone standard) but concluded that “it is unlikely that emissions control requirements could be promulgated and implemented by the Serious area attainment date.”190 The timing of EPA’s proposed determination was driven in part by a court order. A federal district court in New York ordered EPA to propose determinations for five states by June 30, 2018, and finalize them by December 6, 2018.191 EPA is under additional court-ordered and statutory deadlines to fully address the Good Neighbor provision with respect to the 2008 ozone standard. For example, another federal district court in California ordered EPA to address the Good Neighbor provision for Kentucky by June 30, 2018.192 EPA is subject to statutory deadlines in 2018 and 2019 to address requirements for eight CSAPR Update states.193 185 The first factor stems from the D.C. Circuit’s finding in North Carolina v. EPA that “emissions reductions required by the good neighbor provision should be evaluated considering the relevant attainment dates of downwind nonattainment areas impact by interstate transport.” For the court case, see North Carolina v. EPA, 550 F.3d 896, 91112 (D.C. Cir. 2008). 186 For complete discussion about EPA’s selection of the year 2023, see Page, October 27, 2017, pp. 4-7. 187 Page, October 27, 2017, pp. 4-5. See also EPA, Ozone NAAQS Timelines, https://www.epa.gov/ozone-pollution/ ozone-naaqs-timelines. 188 EPA pointed to holdings from the U.S. Supreme Court and the D.C. Circuit Court “that the EPA may not require emissions reductions greater than necessary to achieve attainment and maintenance of the NAAQS in downwind areas.” Page, October 27, 2017, pp. 4-6. See also EPA v. EME Homer City Generation, L.P., 134 S. Ct. 1584, 1600-01 (2014); EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 127 (D.C. Cir. 2015). 189 Page, October 27, 2017, pp. 4-6. 190 Page, October 27, 2017, p. 6. 191 The five states are Illinois, Michigan, Pennsylvania, Virginia, and West Virginia. Order, New York v. Pruitt, 1:18cv-00406-JGK (S.D.N.Y. June 12, 2018). 192 Order, Sierra Club v. Pruitt, No. 3:15-cv-04328 (N.D. Cal. May 23, 2017). EPA approved Kentucky’s Good Neighbor SIP, concluding that Kentucky’s SIP and Kentucky’s CSAPR Update FIP “fully address the requirements of the good neighbor provision for the 2008 ozone NAAQS for Kentucky.” EPA, “Air Plan Approval; Kentucky; 2008 Ozone NAAQS Interstate Transport SIP Requirements,” 83 Federal Register 33730, July 17, 2018. 193 The eight states are Indiana, Ohio, New Jersey, Maryland, Louisiana, Texas, Wisconsin, and New York. EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31931. Congressional Research Service R45299 · VERSION 3 · UPDATED 27 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control Good Neighbor Determinations and the 2015 Ozone Standard Evaluation of interstate ozone transport with respect to the 2015 ozone NAAQS is underway. EPA has conducted air quality modeling to inform the development and review of the Good Neighbor SIPs and issued the results in a memorandum in March 2018.194 States have the option to use these modeling results—for example, projections of potential nonattainment and maintenance monitoring sites with respect to the 2015 ozone NAAQS in the year 2023—to develop their Good Neighbor SIPs. States are required to submit Good Neighbor SIPs with respect to the 2015 ozone standard to EPA by October 1, 2018.195 EPA will then evaluate the adequacy of the SIPs and determine whether additional steps are necessary to address ozone transport. EPA’s March 2018 memorandum also identified “potential flexibilities” or “concepts” for developing the Good Neighbor SIPs, describing considerations for each step of the transport framework.196 One of these considerations centered on international ozone contributions. Specifically, EPA seeks feedback on the evaluation of international ozone contributions when determining whether a state significantly contributes to or interferes with maintenance of a NAAQS. This “potential flexibility” might involve developing a “consensus on evaluation of the magnitude of international ozone contributions relative to domestic, anthropogenic ozone contributions” to nonattainment or maintenance receptors and consider whether to weigh the “air quality, cost, or emission reduction factors” differently in areas with relatively high contributions from international sources.197 EPA also invited stakeholders to suggest additional concepts— “including potential EPA actions that could serve as a model”—for the way Good Neighbor obligations are translated to enforceable emissions limits.198 Issues for Congressional Consideration SO2 and NOx emissions have declined in recent decades, with SO2, annual NOx, and ozone season NOx emissions well below the 2016 CSAPR budgets (see Figure 3 and Figure 4). EPA’s analysis suggests that its regional SO2 and NOx programs have reduced interstate transport of PM2.5 and ozone in the eastern United States. EIA’s national-scale analysis also points to a combination of broader market and regulatory factors contributing to emission reductions, in particular for SO2. Going forward, it is not clear whether emissions will remain well below CSAPR budgets given recent low allowance prices for ozone season NOx and the supply of banked allowances that can be used in future years.199 In addition, EPA has not yet issued a determination about whether ozone transport contributes to air quality problems with respect to the 2015 ozone standard.200 194 Memorandum from Peter Tsirigotis, Director, to Regional Air Division Directors, EPA Regions 1-10, March 27, 2018, https://www.epa.gov/sites/production/files/2018-03/documents/transport_memo_03_27_18_1.pdf. 195 The CAA requires states to submit Good Neighbor SIPs to EPA within three years of a NAAQS revision. CAA §110(a)(1); 42 U.S.C. §7410(a)(1). 196 EPA clarified that it is not recommending any changes and that any determinations about states’ Good Neighbor obligations would undergo a notice-and-comment rulemaking. Tsirigotis, p. A-1. 197 Tsirigotis, p. A-3. 198 Under CSAPR, EPA has specified emissions budgets in a FIP to be implemented through an air-quality assured trading program. EPA’s March 2018 memo does not indicate whether or how that approach might change. Tsirigotis, p. A-3. 199 For details about the number of banked allowances, see EPA, 2016 Program Progress, pp. 44-50. 200 EPA, “Determination Regarding Good Neighbor Obligations,” 83 Federal Register 31923. Congressional Research Service R45299 · VERSION 3 · UPDATED 28 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control The agency has, therefore, not yet determined whether and how it will update the CSAPR budgets with respect to the 2015 ozone standard. Stakeholder views on interstate air pollution transport vary, generally reflecting disagreements about the level of emissions that should be reduced and which sources—and states—bear responsibility for doing so. Some stakeholders have expressed concern that interstate transport continues to harm air quality.201 For example, some stakeholders have expressed concern about transport of ozone and ozone precursor emissions to downwind states—and the health impacts associated with ozone exposure—and stated that some coal-fired power plants do not make full use of “already-installed pollution controls” to reduce ozone precursor emissions.202 As discussed earlier in this report, EPA has recently denied a 126(b) petition and proposed to deny others from states seeking additional upwind reductions in ozone precursors, in part because the agency disagreed with each state’s technical analysis (see “Section 126(b) Petitions”).203 Among the stakeholders disagreeing with the agency’s rejection of Connecticut’s 126(b) petition was a regional organization that raised concern that EPA has not used existing CAA tools to “adequately address interstate ozone transport in a timely manner.”204 On the other hand, emissions are below CSAPR budgets, and other stakeholders have questioned the feasibility of additional reductions in ozone precursors. These stakeholders have raised concerns about the extent to which international or natural sources contribute to ambient ozone concentrations.205 The following issues may inform deliberations about interstate air transport, particularly as EPA continues its assessment of Good Neighbor obligations with respect to the 2015 ozone standard. NOx Emission Trends Major sources of NOx emissions include power plants, industrial facilities, and mobile sources such as cars and trucks.206 EPA reported that NOx emissions are expected to decline in the future 201 In their recommendations to EPA regarding designation of nonattainment areas, Delaware, New Jersey, and Wisconsin attributed ozone violations in their jurisdictions to emissions transport from other states. See state recommendation letters to EPA, https://www.epa.gov/ozone-designations/2015-ozone-standards-staterecommendations-epa-responses-and-technical-support. 202 U.S. Congress, House Committee on Science, Space, and Technology, Subcommittee on Environment, State Perspectives on Regulating Background Ozone, 115th Cong., 2nd sess., June 21, 2018. Testimony of Elena Craft, Environmental Defense Fund, pp. 1-5, 9, https://science.house.gov/sites/republicans.science.house.gov/files/ documents/HHRG%E2%80%93115%E2%80%93SY18%E2%80%93WState-ECraft-20180621_0.pdf. 203 For example, Connecticut, Delaware, Maryland, and New York submitted 126(b) petitions related to compliance with the 2008 and/or 2015 ozone NAAQS. EPA, Ozone National Ambient Air Quality Standards (NAAQS) Section 126 Petitions, June 2018, https://www.epa.gov/ozone-pollution/ozone-national-ambient-air-quality-standards-naaqssection-126-petitions. 204 Arthur N. Marin, Executive Director, Northeast States for Coordinated Air Use Management, letter to William Wehrum, Assistant Administrator, EPA Office of Air and Radiation, March 26, 2018, http://www.nescaum.org/ documents/nescaum-comments-ct-126-petition-20180326.pdf/. 205 U.S. Congress, House Committee on Science, Space, and Technology, Subcommittee on Environment, State Perspectives on Regulating Background Ozone, 115th Cong., 2nd sess., June 21, 2018. See testimony of Diane D. Rath, Alamo Area Council of Governments, pp. 5-7, https://science.house.gov/sites/republicans.science.house.gov/files/ documents/HHRG%E2%80%93115%E2%80%93SY18%E2%80%93WState-DRath-20180621_0.pdf; and testimony of Timothy Franquist, Arizona Department of Air Quality, pp. 1-3, https://science.house.gov/sites/ republicans.science.house.gov/files/documents/HHRG%E2%80%93115%E2%80%93SY18%E2%80%93WStateTFranquist-20180621_0.pdf. See also EPA, Final Report on Review of Agency Actions that Potentially Burden the Safe, Efficient Development of Domestic Energy Resources Under Executive Order 13783, October 25, 2017, p. 5, https://www.epa.gov/laws-regulations/final-report-review-agency-actions-potentially-burden-safe-efficientdevelopment. 206 EPA estimated that mobile sources accounted for over 50% of continental U.S. NO emissions. EPA implements x Congressional Research Service R45299 · VERSION 3 · UPDATED 29 The Clean Air Act’s Good Neighbor Provision: Overview of Interstate Air Pollution Control through a “combination of the implementation of existing local, state, and federal emissions reduction programs and changing market conditions for [power] generation technologies and fuels.”207 EIA’s projections, however, suggest that while coal-fired power generation declines in the reference scenario, power sector NOx emissions remain relatively flat between 2017 and 2050, showing a total decline of 0.2%.208 EPA noted that nonpower-sector sources may be “wellpositioned to cost-effectively reduce NOx” emissions compared to the power sector, but the agency also concluded that it has less certainty about nonpower-sector NOx control strategies.209 The extent to which the current collection of federal and state programs—such as CSAPR and EPA mobile source programs that set tailpipe emission standards—improve air quality in areas not meeting the 2015 ozone standard is to be determined.210 In 2015, EPA projected that existing rules (e.g., those addressing automobile emission and fuel economy standa [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR45299. Public record. Not legal advice.