Clean Air Interstate Rule: Review and Analysis

Congressional research reportMay 20, 2005

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Order Code RL32927

CRS Report for Congress

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Clean Air Interstate Rule: Review and Analysis

May 20, 2005

nae redacted

Specialist in Energy Policy

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Clean Air Interstate Rule: Review and Analysis

Summary

On March 10, 2005, the Environmental Protection Agency (EPA) issued its final

rule to address the effects of interstate transport of air pollutants on nonattainment

of the National Ambient Air Quality Standards (NAAQS) for fine particulates (PM2.5)

and ozone (specifically, the eight-hour standard). The Clean Air Interstate Rule

(CAIR) was first proposed as the Interstate Air Quality (IAQ) rule and appeared in

the Federal Register January 30, 2004. For PM2.5, CAIR finds that the interstate

transport of sulfur dioxide (SO2) and nitrogen oxides (NOx) from 23 states and the

District of Columbia contributes significantly to downwind nonattainment; for ozone,

CAIR finds that interstate transport of NOx from 25 states and the District of

Columbia contributes significantly to downwind nonattainment of the eight-hour

standard. This result differs some from the proposed rule because of improved

modeling.

EPA decided in CAIR to create three emissions caps: Two are annual emissions

caps that address the interstate contribution of SO2 and NOx to PM2.5 nonattainment;

the third cap is a seasonal cap to address interstate contribution of NOx to ozone

nonattainment. The three caps are implemented in two phases: Phase 1 begins in

2009 for the NOx caps and 2010 for the SO2 cap. Improved modeling and other

considerations resulted in some changes in the final rule from the proposed IAQ. For

example, in CAIR, EPA added a fuel-type adjustment factor to the NOx allocation

formula that provides significantly more NOx allowances to states that have coalfired electric generation compared with those with natural gas-fired generation.

Although changes to the proposed rule may be important in specific cases, they

do not represent a major shift in the thrust and scope of CAIR. That CAIR has not

had the visibility of the contemporaneous mercury (Hg) rule should not be interpreted

to mean that the underlying issue of PM2.5 and eight-hour ozone compliance has been

solved. EPA is currently reviewing the stringency of the PM2.5 NAAQS, a process

that may result in a more stringent standard. Given CAIR’s lengthy schedule, it seems

likely that if the PM2.5 NAAQS is strengthened, efforts to revise CAIR would occur.

Likewise, CAIR does not address the most potent environmental issue

surrounding fossil-fuel-fired electric generating facilities — global warming and the

possibility of carbon dioxide reductions. Movement on that issue over the next

decade could result in a modification of CAIR, or a new multi-pollutant control

regime. Bills have been introduced in Congress to create such a system.

Finally, CAIR raises questions about the future of the Bush Administration’s

legislative initiative — Clear Skies. Clear Skies represents a complete rewrite of

Title IV of the Clean Air Act and would impose a comprehensive cap-and-trade

system on utility SO2, NOx, and Hg emissions. In addition, Clear Skies would alter,

delete, or hold in abeyance for some time existing sections of the CAA with respect

to affected electric facilities and industrial sources that chose to opt into the program.

With the promulgation of CAIR that achieves NOx and SO2 emissions reductions

from most of the country’s electricity generating facilities, and of the final Hg rule,

it is unclear what impetus remains for Clear Skies. This report will not be updated.

Contents

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Why Did EPA Do It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

How Did EPA Come Up With All Its Determinations? . . . . . . . . . . . . . . . . 5

Significant Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Regional Cap/State Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Reducing PM2.5: The SO2 and NOx Annual Caps . . . . . . . . . . . . . . . . . . . . 9

SO2 Annual Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

NOx Annual Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Reducing Ozone Formation: The Seasonal NOx Cap . . . . . . . . . . . . . . . . 14

Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Timing of Reductions: Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Adequacy of Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Meshing with the Clean Air Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Section 126 Petitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Regional Haze: BART . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

List of Tables

Table 1. Estimated Schedule for Eight-Hour Ozone and PM2.5 NAAQS . . . . . . . 4

Table 2. States Determined to Contribute Significantly to Downwind

Nonattainment of the PM2.5 and Eight-Hour Ozone NAAQS . . . . . . . . . . . . 6

Table 3. Projected Control Costs for Electric Generators under CAIR . . . . . . . . 9

Table 4. Projected Net Banking Before and During CAIR . . . . . . . . . . . . . . . . . 15

Table 5. Projected Emissions Under CAIR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Table 6. Projected Impact of CAIR on Eastern U.S. Compliance with PM2.5

and Eight-Hour Ozone NAAQS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Clean Air Interstate Rule:

Review and Analysis

Overview

On March 10, 2005, the Environmental Protection Agency (EPA) issued its final

rule to address the effects of interstate transport of air pollutants on nonattainment

of the National Ambient Air Quality Standards (NAAQS) for fine particulates (PM2.5)

and ozone (specifically, the eight-hour standard).1 The Clean Air Interstate Rule

(CAIR) was first proposed as the Interstate Air Quality (IAQ) rule and appeared in

the Federal Register January 30, 2004.2 For PM2.5, CAIR finds that the interstate

transport of sulfur dioxide (SO2) and nitrogen oxides (NOx) from 23 states and the

District of Columbia contributes significantly to downwind nonattainment; for ozone,

CAIR finds that interstate transport of NOx from 25 states and the District of

Columbia contributes significantly to downwind nonattainment of the eight-hour

standard.

To remedy the situation, the rule generally follows (with some important

exceptions) the methodology EPA employed in an earlier regulation that addressed

interstate transport of ozone pollution, the NOx SIP Call.3 In the NOx SIP Call, EPA

found 21 states and the District of Columbia significantly contributed to

nonattainment of the 1-hour ozone NAAQS.4 To remedy the situation, EPA set

statewide emissions budgets for NOx emissions, and recommended that states

achieve those budgets through “highly cost-effective” controls on electric generators

and large industrial facilities under a regional cap-and-trade program. States began

implementing controls on May 31, 2004.

Environmental Protection Agency, Rule to Reduce Interstate Transport of Fine Particulate

Matter and Ozone (Clean Air Interstate Rule); Revsions to Acid Rain Program; Revisions

to the NOx SIP Call; Final Rule (70 Federal Register 25162-25405, May 12, 2005).

(Hereafter cited as Clean Air Interstate Rule.)

Environmental Protection Agency, Rule to Reduce Interstate Transport of Fine Particulate

Matter and Ozone (Interstate Air Quality Rule); Proposed Rule (69 Federal Register 45664650). For an analysis of the proposed IAQ rule, see CRS Report RL32273, Air Quality:

EPA’s Proposed Interstate Air Quality Rule, by (name redacted) and (name redacted). (Hereafter

cited as Proposed Interstate Air Quality Rule.)

For background and discussion of the NOx SIP Call, see CRS Report 98-236, Air Quality:

EPA’s Ozone Transport Rule, OTAG, and Section 126 Petitions — A Hazy Situation?, by

(name redacted) and (name redacted).

Originally, the rule included 22 states; however, Wisconsin was removed from the rule’s

reduction requirements by the court during litigation in 2000. See Michigan v. EPA, 213

F.3d 663 (D.C. Cir. 2000) cert. denied 532 U.S. 904 (2001)

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With CAIR, EPA creates regional emissions caps for NOx and SO2 to be

implemented in two phases — 2010 (2009 for NOx) and 2015. Two caps (annual

SO2 emissions and annual NOx emissions) apply to the region of 23 states (and

District of Columbia) found to contribute to PM2.5 nonattainment, and one cap

(seasonal NOx emissions) applies to the region of 25 states (and District of

Columbia) found to contribute to eight-hour ozone nonattainment. The regional caps

for the affected states are as follows:

SO2 annual caps: 3.6 million tons in 2010 and 2.5 million in 2015

NOx annual caps: 1.5 million tons in 2009 and 1.3 million in 2015

NOx ozone season caps: 580,000 tons in 2009 and 480,000 tons in

2015

Based on methodology centered on reductions from electric generating facilities

and adjusted for type of fossil fuel burned, each affected state is assigned a portion

of the regional cap in the form of a statewide “emissions budget” or cap. Each

covered state is required to submit a revised State Implementation Plan (SIP)

identifying measures it intends to implement to achieve its emissions budget. States

are free to choose whatever means they deem appropriate, subject to EPA approval.

However, EPA strongly believes that the regional emissions caps can be most costeffectively achieved through regional cap-and-trade programs focused on electric

generators and strongly encourages that states choose that option. A model cap-andtrade scheme for states to adopt is included in the final rule. That model scheme

achieves a state’s emissions budget through emission limitations solely on electric

generating units.

Background

Why Did EPA Do It?

In 1997, EPA finalized new NAAQS for both PM2.5 and ozone.5 The new

NAAQS for ozone revised the previous ozone NAAQS by tightening the standard

from 0.12 parts per million (ppm) to 0.08 ppm, increasing the averaging time from

one hour to eight hours, and measuring compliance by averaging concentrations

rather than by counting individual peak concentrations exceeding the standard. The

new PM2.5 NAAQS was set at an annual maximum concentration of 15 micrograms

per cubic meter (µg/m3) based on the three-year average of annual arithmetic mean

PM2.5 concentrations from one or more community-oriented monitors; and a 24-hour

concentration of 65 µg/m3, based on the three-year average of the 98th percentile of

24-hour PM2.5 concentrations at each population-oriented monitor within an area.

EPA has taken a cautious approach to implementing the two NAAQS. Attempts

to coordinate the new eight-hour ozone standard with the previous 1-hour standard

proved difficult and subject to considerable litigation. In the case of the PM2.5

standard, comprehensive monitoring data were unavailable in 1997 to determine

Published in the Federal Register on July 18 (62 FR 38652-38896), the standards became

effective September 16, 1997.

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compliance and make designations. In 1998, the Congress set a statutory schedule

for the two NAAQS, based on EPA’s previously announced Interim Implementation

Policy.6 Judicial review and other factors combined to delay the designations.

In 2004-2005, EPA issued designations on attainment and nonattainment for the

eight-hour ozone NAAQS and the PM2.5 NAAQS. For PM2.5, EPA analysis indicates

violations of the NAAQS over the eastern part of the United States and parts of

California and Montana. Specifically, data show 39 nonattainment areas covering

all or part of 224 counties in 20 states either fail to meet the standard or cause a

downwind county to fail. All or part of 208 counties violate the annual standard; a

few violate both the annual and the 24-hour standard; none violate only the 24-hour

standard. The population of the affected counties is 90 million.7 For the eight-hour

ozone NAAQS, EPA analysis indicates widespread violations of the NAAQS over

the eastern and midwestern United States, California, and Texas, along with scattered

areas in Louisiana, Arizona, and Colorado. Specifically, data show 126

nonattainment areas covering all or part of 474 counties in 31 states violate the eighthour ozone standard. The population of the affected counties is 159 million.8

The 1997 eight-hour ozone and PM2.5 NAAQS set in motion the Clean Air Act’s

(CAA) SIP process under Section 110. The promulgation of the revised ozone

NAAQS and the new PM2.5 NAAQS meant that the SIPs of many states were no

longer adequate to bring those states into compliance by the statutory deadline.

Under Section 110(k)(5), if EPA finds a SIP inadequate, it must require the affected

state to submit a revised SIP that includes sufficient measures to bring that state into

compliance. This is known as a “SIP Call.”

In the case of the eight-hour ozone and the PM2.5 NAAQS, the process of

developing effective compliance strategies is complicated by the problem of

transported air pollutants. Under Section 110(a)(2)(D), SIPs must include adequate

provisions to prevent sources within that state from contributing significantly to

nonattainment in one or more downwind states. Finding that interstate transport of

SO2 and NOx contributes significantly to ozone and PM2.5 nonattainment, the EPA

issued the proposed Interstate Air Quality rule (IAQ) in December 2003 to mitigate

the problem. This rule was finalized as the Clean Air Interstate Rule (CAIR) in

March 2005.

Combining the requirements of the CAA with EPA intentions as stated in the

rule, the major milestones for implementing the eight-hour ozone and PM2.5 NAAQS

are set out in Table 1.

Transportation Equity Act for the 21st Century, P.L. 105-178, Title VI.

For more on PM designations, see EPA’s website at [http://epa.gov/pmdesignations/].

For more on eight-hour ozone designations, see EPA’s website at [http://www.epa.gov/

ozonedesignations/].

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Table 1. Estimated Schedule for Eight-Hour Ozone and PM2.5

NAAQS

Milestones

Governors submit

designations of

nonattainment areas

Eight-hour Ozone

NAAQS

July 2003

EPA Proposes Clean

Air Interstate rule

(CAIR)

PM2.5 NAAQS

February 2004

January 2004

EPA promulgates final

implementation rule

April 2004 (phase 1)

Expected early 2006

EPA promulgates final

designations

April 2004

January 2005

EPA issues final CAIR

March 2005 (published May 2005)

States submit CAIR

SIPs

Required 18 months after CAIR is issued

(September 2006)

States submit revised

Three years after effective Three years after effective

SIPs to achieve PM2.5 and date of designations (June date of designations

Ozone NAAQS

2007)

(April 2008)

NAAQS compliance

deadline

CAIR compliance

deadlines

Varies according to

severity of the problem

(2007-2021)

5 to10 years after

designations (2010-2015)

Two phases: 2010 (2009 for NOx) and 2015

As indicated by Table 1, EPA would require states to submit their CAIR SIPs

before the NAAQS nonattainment SIPs are required. EPA justifies the submission

of transported air pollutant SIPs by upwind states before the submission of

nonattainment SIPs by downwind states on the basis of Section 110(a)(1-2) and

Section 172(b) of the Clean Air Act and on policy considerations.9 EPA argues that

the upwind reductions will facilitate planning by downwind states and that downwind

states will benefit from the relatively early reductions because they themselves

contribute to nonattainment elsewhere.

Section 110 requires submission of SIPs to attain NAAQS, including transport provisions,

within three years after promulgation of a NAAQS. Section 172(b) requires submission of

SIPs in response to a nonattainment designation within three years of the designation. EPA

argues this sequence indicates the priority given to the transport SIPs over the nonattainment

SIPs. Proposed Interstate Air Quality Rule, p. 4624.

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How Did EPA Come Up With All Its Determinations?

CAIR is based on a series of determinations by EPA with respect to pollution

transport, cost-effective pollution control, and compliance feasibility. These

determinations are made within the SIP process of Sections 110(k)(5) and

110(a)(2)(D). 10

Significant Contribution. The pivotal finding by EPA in the rule is that

affected states significantly contribute to nonattainment in downwind states. This

determination defines the geographic scope of the rule. For states in the eastern

United States, EPA conducted a series of modeling runs to determine the contribution

various upwind states are projected to make to areas in the eastern United States

projected by EPA to be in nonattainment in 2010 and 2015. For ozone

nonattainment, a “significant contribution” was defined by EPA as the product of

three factors: (1) actual amount of transported pollution from upwind states that

contribute to nonattainment in downwind states; (2) how often contributions over

specific thresholds occur; and (3) the comparative amount of the upwind transported

contribution to the total nonattainment situation in the downwind area.11 For the

eight-hour ozone NAAQS, EPA modeled the emissions impact of the 31 states east

of or bordering the Mississippi River on 40 eastern downwind counties projected by

EPA to be in noncompliance in 2010. States whose maximum contribution was

estimated at less than 2 parts per billion (ppb) and/or that contribute less than 1% to

total nonattainment were screened out. After evaluating the remaining eastern states

on the three criteria above on 40 eastern downwind counties, 25 states and the

District of Columbia were found to make a significant contribution to

nonattainment.12 These states constitute the region covered under CAIR seasonal

NOx cap and are shown in Table 2.

For the PM2.5 NAAQS, EPA modeled the emissions impacts of 37 eastern states

on 62 eastern downwind counties projected by EPA to be in noncompliance in

2010.13 Because the controlling PM2.5 NAAQS is the annual standard, EPA

considered only two of the three factors listed for ozone in determining significant

contribution: actual amount and comparative amount.14 In the proposed rule, EPA

suggested that the threshold for determining significant contribution be 0.15 µg/m3

— 1% of the annual standard of 15 µg/m3. In the final rule, EPA settled on 0.2 µg/m3

Section 110(k)(5) provides for EPA to issue a SIP Call if existing SIPs are determined to

be substantially inadequate to attain or maintain a NAAQS or mitigate interstate pollutant

transport as described in sections 176A (involving Interstate Transport Commissions) or 184

(involving control of interstate ozone air pollution). Section 110(a)(2)(D) requires states to

submit SIPs to the EPA that contain adequate provisions prohibiting emissions of any air

pollutant that contributes significantly to NAAQS or Prevention of Significant Deterioration

(PSD) nonattainment in any other state.

Clean Air Interstate Rule, p. 25246.

For modeling purposes, the District of Columbia’s emissions were combined with those

of Maryland. Clean Air Interstate Rule, p. 25249.

Clean Air Interstate Rule, p. 25247.

Proposed Interstate Air Quality Rule, p. 4608.

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as the threshold.15 Based on that threshold, EPA found 23 states and the District of

Columbia were projected to contribute significantly to 2010 PM2.5 nonattainment.

These states constitute the region covered under CAIR’s annual NOx and SO2 caps

and are shown in Table 2.

Table 2. States Determined to Contribute Significantly to

Downwind Nonattainment of the PM2.5 and Eight-Hour Ozone

NAAQS

States contributing to Downwind

Nonattainment of the PM2.5 NAAQS

States contributing to Downwind

Nonattainment of the eight-hour ozone

NAAQS

Alabama

Arkansas

Connecticut

Delaware (proposed)

Delaware

District of Columbia

Florida

Georgia

Illinois

Indiana

Iowa

Kentucky

Louisiana

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

New Jersey (proposed)

New Jersey

New York

North Carolina

Ohio

Pennsylvania

South Carolina

Clean Air Interstate Rule, p. 25246.

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States contributing to Downwind

Nonattainment of the PM2.5 NAAQS

States contributing to Downwind

Nonattainment of the eight-hour ozone

NAAQS

Tennessee

Texas

Virginia

West Virginia

Wisconsin

Source: Clean Air Interstate Rule, p. 25167.

EPA does not specify the process by which it determined that interstate transport

of pollution is not a significant contributor to nonattainment in states such as

California, Arizona, or Montana. The proposed rule simply stated:

In analyzing significant contribution to nonattainment, we determined it was

reasonable to exclude the Western U.S., including the States of Washington,

Idaho, Oregon, California, Nevada, Utah and Arizona from further analysis due

to geography, meteorology, and topography. Based on these factors, we

concluded that the PM2.5 and eight-hour ozone nonattainment problems are not

likely to be affected significantly by pollution transported across these States’

boundaries. Therefore, for the purpose of assessing States’ contributions to

nonattainment in other States, we have only analyzed the nonattainment counties

located in the rest of the U.S.16

The rule provides no other specific basis for EPA’s determination that western

nonattainment areas should not be subject to the rigorous modeling eastern

nonattainment areas were. None of the extensive modeling conducted for

nonattainment areas in the eastern United States was conducted on nonattainment

areas in the western United States.

Regional Cap/State Budget. With a determination of significant

contribution, CAIR moves toward developing a cost-effective remedy. Maintaining

the need to base its remedy on “highly cost-effective reductions,” EPA examined the

potential balance of local control to interstate controls along with the availability and

timing of cost-effective pollution control measures in upwind states. Projecting

nonattainment areas in 2010, EPA concluded in the proposed rule that for many

PM2.5 nonattainment areas:

it would be difficult, if not impossible, to reach attainment unless transport is

reduced to a much greater degree and over a much broader regional area than by

the simultaneous adoption of local controls within specific nonattainment areas.

In addition, we found that much of the air quality improvement that did occur in

Proposed Interstate Air Quality Rule, p. 4581.

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downwind areas with this strategy was due to reductions in transported sulfate

attributable to upwind SO2 emissions.17

EPA conclusions with respect to eight-hour ozone nonattainment areas were less

dramatic, but still significant enough for EPA to conclude that further regional

reductions were warranted.18

Calling for a combination of local and interstate transport control, EPA

developed criteria for determining “highly cost-effective” transport control levels.

SO2 and NOx are emitted by a variety of sources. Sulfur dioxide is primarily emitted

by stationary sources, particularly coal-fired electric generators (69% of the total in

2003) and industrial combustion (14% of the total in 2003).19 In the case of nitrogen

oxides, mobile sources are the primary source, although stationary sources,

particularly electric generators (22% of the total in 2003) and industrial combustion

(14% of the total in 2003), make substantial contributions to the overall totals.

Generally arguing that electric generators provided the most cost-effective emission

reduction source and that data were lacking on other stationary sources, EPA focused

on reductions from electric generators to determine emission caps. In contrast, for the

NOx SIP Call, large industrial combustion sources were included in EPA’s costeffectiveness calculations.

Focusing on electric generators 25 megawatts (MW) or greater, EPA developed

a threshold for controlling transported pollutants by comparing the average and

marginal costs of other SO2 and NOx regulatory actions, along with other factors.

Specifically, EPA compared the average and marginal costs of installing flue-gas

desulfurization (FGD) and selective catalytic reduction (SCR) technologies on

electric generators with the average and marginal costs of other regulatory actions,

including Best Available Control Technology (BACT) determinations, individual

state actions, New Source Performance Standards (NSPS), and various mobile source

decisions. Finding the electric generating control technologies to be “highly costeffective,” EPA determined the final regionwide caps for affected states by assuming

these control technologies were installed on electric generators. The projected cost

per ton removed is shown in Table 3.

Based on the assumption that states would solely target electric generators for

control, EPA proceeded to determine the appropriate individual statewide emission

budgets. As noted earlier, under the SIP process, states are not required to adopt a

electric-generator-only strategy in complying with its emissions budget; however,

they must if they choose to participant in the EPA-sponsored regional trading

program set up under the model rule.

Proposed Interstate Air Quality Rule, p. 4582.

Specifically, EPA modeling indicated that from 22% to 96% of projected 2010

nonattainment of the eight-hour ozone NAAQS is due to transport, depending on the specific

area. Proposed Interstate Air Quality Rule, p. 4584.

Based on EPA data for 2003. See [http://www.epa.gov/airtrends/econ-emissions.html].

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Table 3. Projected Control Costs for Electric Generators under

CAIR

(1999 $/ton removed)

2010

2015

(2009 for NOx) (2009 for NOx)

Average cost Marginal cost Average cost Marginal cost

SO2 Control Costs

$500

SO2 Control Cost

(high cost case*)

NOx Control Costs

$700

$800

$500

$1,300

$1,000

$1,200

$700

$1,600

NOx Control Costs

with Compliance

Supplement Pool

(CSP)

$1,300

$1,600

NOx Control Costs

(high cost case*)

$1,400

$1,700

Source: Clean Air Interstate Rule, pp. 25201-4613-4615.

* Assumes high electricity demand and high natural gas prices.

The Rule

As noted above, EPA decided in its final rule to create three emissions caps:

Two are annual emissions caps that address the interstate contribution of SO2 and

NOx to PM2.5 nonattainment; the third is a seasonal cap to address interstate NOx

contribution to ozone nonattainment. Each of these caps and their accompanying

model trading schemes has to be integrated into the existing multilayered fabric of

the Clean Air Act (CAA). As discussed below, each cap faced unique problems in

meshing with the CAA.

Reducing PM2.5: The SO2 and NOx Annual Caps

Reducing PM2.5 is a year-round problem, unlike ozone, which is a seasonal

problem. Overwhelmingly, nonattainment areas are in noncompliance with the

annual PM2.5 NAAQS, not the 24-hour standard. Thus, the two caps are averaged on

an annual basis, an averaging time that provides maximum flexibility and potential

cost-savings to polluters.

SO2 Annual Cap. Unlike annual NOx emissions, annual SO2 emissions are

already controlled to some degree by an existing statutory cap-and-trade program —

Title IV of the CAA. Indeed, it is the success of the Title IV program that has

encouraged the development of other market-oriented programs, including the NOx

SIP Call and CAIR. Title IV of the 1990 CAA Amendments required the reduction

of SO2 emissions from electric generators from about 15 million tons in 1988 to 8.95

million tons by January 1, 2000. In addition, it mandates that the 8.95 million ton

cap be maintained into the future, requiring new SO2 emitting utility plants to offset

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their emissions with further reductions from existing facilities. To implement the

program, Title IV created a comprehensive permit and emissions allowance system.

An allowance is a limited authorization to emit a ton of SO2 during or after a specific

year. Issued by EPA, the allowances are allocated to existing power plants according

to formulas provided in Title IV. The utility receives the allowances for a given plant

regardless of the actual operation of the plant. For example, a utility may choose to

shut down an existing power plant and use those allowances to offset emissions from

two or more newer, cleaner facilities. Generally, a power plant that commenced

operation after enactment receives no allowances, requiring it to obtain allowances

from the existing pool of allowances in order to operate. A utility may trade

allowances nationally as well as bank allowances for future use or sale.

Developing a new regional cap-and-trade SO2 program raised several issues

with respect to the statutory nationwide SO2 cap-and-trade program created under

Title IV. Among the issues EPA had to resolve were (1) allocation of state budgets,

(2) treatment of excess Title IV allowances by the more stringent CAIR program, and

(3) treatment of existing banked Title IV allowances.

Because the Title IV program is both statutory and successful, EPA felt it

needed to protect the program, thus limiting its ability to suggest alternative

allocation schemes under CAIR.20 Based on the assumption that states would solely

target electric generators for control, EPA proceeded to determine CAIR’s

appropriate statewide emission budgets by melding CAIR’s allocation scheme into

the existing Title IV acid rain program. With both programs based on electric

generators, the effect of this allocation scheme is to continue the grandfathering of

pre-1990 existing plants under CAIR. EPA recognizes this, but argues that

maintaining the integrity of the Title IV program prevents it from pursuing alternative

allocation schemes that might provide relief to newly constructed sources.

Perhaps the most obvious problem with a CAIR-Title IV interface is the creation

of surplus Title IV allowances as sources in the regional control area reduce

emissions to the more stringent CAIR limits while the rest of the country is under the

Title IV caps. To prevent the build-up of Title IV allowances, EPA mandates CAIRaffected states require a two-for-one redemption of CAA Title IV allowances during

phase 1, and a 2.86-for-one redemption of Title IV allowances during phase 2. Such

redemption ratios would represent a 50% reduction during phase 1 and 65% during

phase 2. These Title IV allowance redemptions are required regardless of whether

or not the state chooses to participate in the EPA-sponsored CAIR SO2 trading

scheme.

Modifying Title IV allowances could be questioned by some; however,

allowances are not cast in concrete by the 1990 CAAA. As noted, an allowance is

a limited authorization to emit SO2. Title IV states explicitly that an allowance is not

a property right, and that “[n]othing in this title or in any other provision of law shall

be construed to limit the authority of the United States to terminate or limit such

authorization.” (Section 403(f)). The Senate report on Title IV (from which this

language originated) elaborates on this provision with the following:

Clean Air Interstate Rule, p. 25229.

CRS-11

The purpose in characterizing the legal or property status of allowances in new

section [403](f) of the Act is to make clear that regulatory actions taken

subsequent to the issuance of allowances are not subject to the “takings clause”

of the U.S. Constitution. Allowances are, in large part, simply iterations of each

unit’s permit under this title. Since the permits will be, in effect, legally binding

statements of each unit’s emissions limitation obligations under the pollution

control program established herein, the subsection makes clear that should the

Congress or the Administrator limit, revoke or otherwise modify the allowances

or the underlying regulatory program established by new title IV of the Act or the

regulations promulgated pursuant thereto, the U.S. government will not be

obliged to compensate allowance-holders for loss of the allowances or any loss

in their value. Allowances are but the means of implementing an emissions

limitation program, which can be altered in response to changes in the

environment or for other reasons of public policy.21

Thus, EPA may have significant flexibility in modifying Title IV allowances “in

response to changes in the environment or for other reasons of public policy.” EPA

provides a detailed defense of its decision to use Title IV allowances in its CAIR

trading program in the rule.22

At the beginning of 2004, the Title IV allowance bank had about 7.6 million

allowances.23 EPA decided that pre-2010 banked Title IV allowances may be used

on a one-for-one basis for meeting the more stringent reductions under CAIR in order

to encourage early reductions.24 Essentially, this means that pre-2010 allowances

could double in value beginning in 2010 and nearly triple in value beginning in 2015.

One revision EPA does make in the Title IV program per se as part of the CAIR

SO2 trading program is to change the unit-by-unit allowance-holding requirement to

a source-by-source system, effective July 1, 2006.25 EPA argues that it is important

to provide this additional compliance flexibility, and that it does not affect the

emissions monitoring and reporting requirements, which remain applied on a unit-byunit basis.

NOx Annual Cap. Unlike SO2, there is no statutory cap-and-trade program

for NOx emissions from electric utilities. However, there is a regional, seasonal NOx

cap-and-trade program (the NOx SIP Call) that includes electric utility and other

major stationary sources. Like the model trading programs suggested under CAIR,

the NOx SIP Call trading program is the product of an EPA-sponsored model rule

and regional trading scheme that was voluntarily adopted by the affected states to

achieve their emissions budgets. As discussed in the next section, CAIR eliminates

the NOx SIP Call’s seasonal cap-and-trade scheme starting in 2009 in favor of the

seasonal CAIR NOx program.

S.Rept. 101-228, December 20, 1989, p. 321.

See Clean Air Interstate Rule, pp. 25291-25296.

For more information on the Title IV emissions bank, see EPA’s most recent annual report

at [http://www.epa.gov/airmarkets/cmprpt/arp03/2003report.pdf].

Clean Air Interstate Rule, pp. 25284-25285.

Ibid., pp. 25296-25299.

CRS-12

Unlike its approach with the SO2 program, EPA did not attempt to meld the

CAIR annual program with the existing NOx SIP Call by using a cap-and-trade

scheme based on the NOx SIP Call. EPA calculated emission budgets for states by

multiplying a NOx emission rate specified in the rule by the state’s electric

generating units’ historical annual heat input. The rule sets the NOx emission rate

at 0.15 lb./mmBtu during phase 1, increasing the stringency to 0.125 lb./mmBtu

during phase 2. The baseline for the annual heat input is the highest annual input for

any year 1999 through 2002 on a unit-by-unit basis.26 For powerplants beginning

operations after 2002 or for rewarding early reductions, or for assisting utilities

having difficulties meeting their emissions limitations, EPA provides for a

Compliance Supplement Pool (CSP) of 200,000 allowances to be allocated to states

in proportion to their reduction requirement.

The final annual CAIR NOx program includes three major changes from the

proposed rule. First, the phase 1 compliance deadline was accelerated from 2010 to

2009. EPA believes that accelerating the phase 1 deadline for both NOx and SO2 is

not practical, but a one-year acceleration of the NOx deadline was feasible.27 Second,

EPA chose to weight the heat input baseline by fuel type. Specifically, the adjustment

factors are 1.0 for coal, 0.4 for natural gas, and 0.6 for oil.28 This departure from the

NOx SIP Call methodology (and the proposed rule) is justified by EPA on equity

grounds.29 The adjustment represents a 2½ weighing of coal combustion compared

with natural gas combustion providing states with substantial coal-fired generation

a significantly larger emissions budget than they would have received if all fossil fuel

combustion were weighed the same. Third, EPA decided to offer states a voluntary

opt-in provision for non-electric utility units that meet specific criteria.30

The NOx annual cap and its model trading program presented several issues

with respect to its relationship to CAIR’s seasonal NOx program and the existing

NOx SIP Call, including (1) melding CAIR methodology with the existing NOx SIP

Call; (2) non-electric utilities included in the NOx SIP Call, but not CAIR cap

determinations and model trading programs; and (3) annual versus seasonal controls.

Some of these problems were resolved by EPA’s decision in the final rule to include

a seasonal NOx cap in addition to the annual CAIR NOx cap discussed here.

Despite its emphasis on using NOx SIP methodology in developing CAIR, the

annual CAIR NOx cap-and-trade scheme differs significantly from the NOx SIP Call

in terms of the state budget determined and the scope of participants. EPA’s choice

of focusing only on electric generators runs counter to the cost-benefit analysis, the

recommendations of the Ozone Transport Assessment Group (OTAG), and EPA’s

Ibid., p. 25230.

Ibid., p. 25222.

Ibid., p. 25231.

Ibid., pp. 25286-25288.

CRS-13

NOx SIP Call.31 OTAG’s recommendations to EPA with respect to the NOx SIP

Call called for NOx controls on large and medium non-utility stationary sources in

addition to controlling utility sources. In the final NOx SIP Call, EPA calculated

state emission budgets based on five sectors: electric utility, nonutility sources, area

sources, nonroad engines, and highway vehicles. Budgets were based on costeffective reductions, with substantial reductions required from electric generators and

from nonutility sources. Indeed, EPA used a 70% reduction requirement for large

industrial facilities and Reasonably Available Control Technology (RACT) control

(generally 25%-50%) for smaller sources.32 In CAIR, arguing a lack of data, EPA

generally released the other stationary source components from the rule. EPA notes

it had sufficient data in 1997 to propose a NOx SIP Call that included these sources,

but argues it doesn’t have sufficient data in 2005 to include these sources in CAIR

because of the increased geographic scope of CAIR and its inclusion of SO2.33

The methodological differences resulting from the exclusion of stationary

industrial sources from CAIR but not the NOx SIP Call presents difficulties for the

CAIR cap-and-trade program. By permitting only electric utilities to participate in

the CAIR model trading programs, along with the decision to eliminate the NOx SIP

Call trading program, industrial sources currently covered under the SIP Call would

have been left hanging with respect to the CAIR model trading program. In the final

rule, EPA decided to permit states to include NOx SIP Call industrial sources under

its model seasonal NOx trading program, but not its model annual NOx trading

program.

A final issue is the seasonal nature of the NOx SIP Call versus the annual nature

of the CAIR NOx program. In the proposed IAQ, EPA argued this was not a

problem. In the CAIR, EPA partly changed its approach and included a third cap to

respond to the seasonal nature of the ozone program. However, it included no flow

control mechanisms to prevent the excessive use of emission banks in meeting

emission limitations such as are contained in the current NOx SIP Call trading

program.

OTAG was created by EPA and the 37 easternmost states under the 1990 Clean Air Act

Amendments to recommend ways of reducing ozone transport in the northeastern part of the

country. Final recommendations were made in 1997.

Specifically, for utility sources, EPA used a NOx emission rate of 0.15 lb. NOx/mmBtu

to determine budget allocations. For area sources, EPA assumed no new controls. For

nonutility sources, EPA used a 70% reduction requirement for large sources, and RACT

controls (generally 25%-50%) for smaller sources. EPA calculated the highway vehicle

budget by assuming implementation of existing SIPs, along with the following federal

measures: national low emission vehicle standards, 2004 heavy-duty engine standards, and

revisions to emissions test procedures. Finally, EPA calculated the budget for nonroad

engines assuming implementation of existing SIPs, along with the following federal

measures: federal small engine standards (Phase II), and 1997 proposed nonroad diesel

engine standards. See proposed Ozone Transport Rule and Appendix B (OTAG

Recommendations), 62 Federal Register 60318-60420, November 7, 1997.

Clean Air Interstate Rule, p. 25214.

CRS-14

Reducing Ozone Formation: The Seasonal NOx Cap

In the final rule, EPA decided to include a seasonal NOx program directly

focused on ozone nonattainment. This decision represents a reversal on EPA’s part

from its proposed rule that argued that ozone-affected states should be included in

the proposed annual NOx program and no seasonal program was necessary.

The seasonal NOx trading program is completely separate from the annual NOx

trading program in its operations, and would replace the existing NOx SIP Call

seasonal trading program. Allowances banked under the seasonal program cannot be

used for complying with the annual program and vice-versa. Likewise, existing

banked allowances under the NOx SIP Call trading program can be used only with

the seasonal NOx program. As in the NOx SIP Call, the ozone season is defined as

May-September. In the final rule, EPA found that five states — Connecticut,

Massachusetts, New Jersey, Delaware, and Arkansas — would be covered under the

seasonal NOx program, but not the annual NOx program.34 All of these states are

currently covered by the NOx SIP Call.

However, EPA’s CAIR seasonal NOx program’s emissions budget allocation

methodology is based on its CAIR annual NOx program’s methodology, not the

existing NOx SIP Call. This includes the sole focus on electric generating units,

employing the same emission rates and historic baselines that the annual program

uses, and the inclusion of fuel-type adjustment factors for determining baseline heat

rates.

The decision to include a seasonal NOx cap and model trading program under

CAIR reflects a desire by EPA to eliminate the existing NOx SIP Call trading

program. EPA believes its updated modeling justified an enlarged emissions cap,

and that its CAIR cost-effectiveness strategy is the most appropriate means of

distributing state budgets. As discussed previously, the differing scope and

methodologies created significant interfacing challenges.

Perhaps the greatest challenge was the exclusion of industrial sources covered

under the NOx SIP Call from the allocation methodology used for the CAIR seasonal

state budgets and trading program. EPA essentially provides NOx SIP Call states

two options.35 First, the state can choose to adopt the seasonal NOx program’s

electric-generating-units-only system and assign reduction requirements accordingly.

As those states would be achieving their CAIR budgets solely through controlling

electric generating facilities, previously controlled industrial sources would no longer

have reduction requirements under the eliminated NOx SIP Call. The other option

for states would be to include industrial sources currently covered under the NOx SIP

Call in the seasonal trading program. Emission limitations for those sources would

remain the same as under the current NOx SIP Call.

When EPA issued the final rule, it also proposed to include New Jersey and Delaware

under the annual NOx and SO2 caps for contributing to PM2.5 nonattainment.

Clean Air Interstate Rule, p. 25290.

CRS-15

Another melding problem resulted from the geographic difference between the

21-state NOx SIP Call program and the 25-state CAIR program. Because of different

methodologies, Rhode Island is included under the NOx SIP Call, but not the CAIR

NOx program. EPA decided to give Rhode Island two options: (1) join the CAIR

seasonal NOx trading program, or (2) develop an alternative method to achieve its

NOx SIP Call requirements.36

Issues

Timing of Reductions: Banking

Providing flexibility to participants is at the heart of the CAIR cap-and-trade

implementation strategy. EPA hopes the adoption of the model trading program by

states will achieve emission reductions earlier and less expensively than a commandand-control system. Incentives to achieve reductions earlier than necessary include

(1) one-for-one redemption of SO2 allowances banked before 2010 for more stringent

CAIR requirements; (2) one-for-one use of NOx SIP Call allowances banked before

2009 for the seasonal NOx program; and (3) creation of a Compliance Supplemental

Pool (CSP) with 200,000 annual NOx allowances that states can use to reward early

reductions by electric utilities.37

However, analysis of projected banking activity before and during CAIR does

not indicate that early reductions will be significant. As indicated in Table 4, none

of the three trading program under CAIR is projected to have any net increase in

banked allowances before the 2009/2010 phase 1 dates. For the SO2 program, the

current bank of 7.6 million allowances is projected to fall to 6.9 million allowances

in 2010. From that point, the bank declines, producing the “glide slope” of reductions

that EPA wants in order to reduce costs.38 However, that “glide slope” does not

appear to include any additional early reductions resulting from CAIR.

Table 4. Projected Net Banking Before and During CAIR

2003

2007

2010

2015

2020

2026

SO2 Annual

(million tons)

7.6

6.9

4.3

1.0

NOx Annual

NOx Seasonal

(million tons)

n/a

0.06

0.15

0.22

0.29

Source: Environmental Protection Agency, IPM CAIR 2004 Final Run, located at [http://www.epa.

gov/airmarkets/epa-ipm/iaqr.html].

Ibid., p. 25290.

Ibid., pp. 25284-25286.

Ibid., p. 25284.

CRS-16

For the annual NOx trading program, the projected banking activities indicates

no “glide slope” whatsoever. There is no net banking activity projected under the

annual NOx program. For the seasonal program, the model projects no banking

before the 2009 compliance dates, but a slowly accumulating bank of seasonal NOx

allowance after 2009. This accumulation continues through the projected period.

The effect this activity has on emission reductions is indicated in Table 5. As

suggested above, the SO2 banking activity results in a smoothing out of the phase 1

and phase 2 reduction requirement, but at the cost of emissions remaining over actual

cap levels through the projected period. In contrast, the annual NOx emission levels

follow the reduction requirement in lockstep with no smoothing of the emission

levels over time. Finally, the emissions levels under the seasonal program remain

below the cap limits throughout the period.

Table 5. Projected Emissions Under CAIR

(million tons)

Regional emissions

2003

2010

(2009 for

NOx)

2015

2020

SO2 Baseline Emissions

9.4

8.7

7.9

7.7

SO2 Emissions after CAIR

n/a

5.1

4.0

3.3

NOx Baseline Emissions

3.2

2.7

2.8

NOx Emissions after CAIR

n/a

1.5

1.3

Seasonal NOx Baseline Emissions

1.05

0.68

0.70

Seasonal NOx Emissions after CAIR

n/a

0.56

0.47

Cair caps

(phase 1/

phase 1)

3.6/2.5

1.5/1.3

0.58/0.48

Source: Environmental Protection Agency, 2005.

The last trend is interesting. When EPA proposed the IAQ, it did not include

a seasonal NOx cap for ozone mitigation. Its decision in CAIR to include a seasonal

NOx program with separate seasonal caps appears, at first, to be a major change from

the proposed rule. However, the result above suggests that the annual NOx control

requirement is dictating control strategies, not the seasonal cap.39 Indeed, the result

indicates that compliance with the annual cap results in a slight overcontrol situation

with respect to the seasonal cap — hence the slowly increasing bank of seasonal

allowances. If this projection proves correct, seasonal allowances may have little

value — something states may want to consider in deciding whether to include their

industrial NOx SIP Call sources in the seasonal CAIR program.

According to EPA’s modeling runs, the actual emissions under the seasonal NOx program

continue under the control requirements with no banking activities. The seasonal NOx

credits banked over the projected time period just continue to accumulate. Discussions with

EPA indicate the model sees the annual NOx requirement as the controlling metric under

CAIR, not the seasonal cap. Telephone communications with EPA (May 5, 2005).

CRS-17

Adequacy of Reductions

The purpose of CAIR is to address interstate transport of pollutants that are

hindering downwind states from attaining the eight-hour ozone and PM2.5 NAAQS.

As indicated by Table 6, most eastern U.S. counties currently in nonattainment will

come into compliance with the PM2.5 and eight-hour ozone NAAQS by implementing

existing CAA programs over the next 5-10 years. In terms of the remaining counties,

CAIR is predicted by EPA to have a greater impact on PM2.5 attainment in the eastern

United States than on eastern U.S. eight-hour ozone attainment. According to EPA,

CAIR will bring only three additional counties (out of the remaining 40) into

compliance with the eight-hour ozone NAAQS in 2010, and only a total of six

additional counties (out of remaining 22) by 2015. In contrast, EPA projects CAIR

will bring 52 additional counties (out of the remaining 79) into compliance with the

PM2.5 NAAQS by 2010, and a total of 57 additional counties (out of the remaining

74) by 2015.

Table 6. Projected Impact of CAIR on Eastern U.S. Compliance

with PM2.5 and Eight-Hour Ozone NAAQS

Eastern U.S. ozone NAAQS

nonattainment counties

Without CAIR

Eastern U.S. PM2.5 NAAQS

nonattainment counties

With CAIR

Without CAIR

With CAIR

2005

408

n/a

195

n/a

2010

2015

Source:

Clean Air Interstate Rule, p. 25165; 2005 data from EPA website at

[http://www.epa.gov/cair/charts_files/nonattain_maps.pdf].

As noted above, the purpose of CAIR is to address interstate transport of SO2

and NOx, not to achieve the PM2.5 and eight-hour ozone NAAQS on its own. That

task will require a combination of interstate and local controls. However, the relative

lack of impact of the seasonal cap on ozone attainment raises questions. If data are

a problem, some may ask why not include industrial sources for seasonal NOx

control only (as is currently the case with the NOx SIP Call)? EPA has already

decided to separate the phase 1 deadlines between NOx (2009) and SO2 (2010); why

not include industrial sources for seasonal NOx only? There are only five states that

are under the CAIR seasonal program but not the NOx SIP Call, so EPA’s data

concerns would be lessened.

In addition, do EPA’s projections of seasonal NOx banking suggest that the

seasonal cap could be strengthened slightly? The seasonal NOx program is separate

from the annual NOx program (as are the environmental problems they address), so

the budget allocation schemes do not have to be identical.

With respect to the SO2 results, the lessening of progress between 2010 and

2015 may raise questions. How much is this the result of the banking activities

during that time period? Would a tighter reduction schedule or inclusion of industrial

CRS-18

sources improve the results? What should EPA response be if it chooses to increase

the stringency of the PM2.5 standard in the future?

EPA believes it has struck the correct balance between addressing the interstate

transport component of nonattainment and the need for local controls. Ultimately,

it may be the Congress or the courts that determine whether that assessment is

correct.

Meshing with the Clean Air Act

EPA does not provide any direct regulatory relief to facilities covered under

CAIR, specifically New Source Review.40 No exemptions or safe harbors are

provided to facilities that meet the requirements of CAIR. However, two provisions

of CAIR may offer some future relief from CAA requirements, depending on future

EPA determinations. These are discussed below.

Section 126 Petitions. Under Section 126(b) of the CAA, any state or

political subdivision may petition EPA for a finding that any major source or group

of stationary sources located in another state is emitting pollutants that “significantly

contribute” to the nonattainment of a NAAQS by their state. EPA is to respond to

the petition within 60 days. If the petition is granted, the offending sources must

cease operations within three months unless the sources comply with emission

controls and the compliance schedules as determined by EPA to bring them into

compliance with the section.

Section 126 petitions have been on file with EPA with respect to the eight-hour

ozone standard since August 1997.41 On January 18, 2000, EPA indefinitely stayed

findings on the eight-hour ozone standard, because of litigation on that standard.42

More petitions have been received since. On March 19, 2004, EPA received a

Section 126 petition from North Carolina seeking reductions in upwind emissions to

help it achieve the PM2.5 and eight-hour ozone NAAQS.43 In CAIR, EPA did not

state how it would rule on the North Carolina petition, stating: “When we propose

action on the North Carolina petition, we will set forth our view of the interaction

between section 110(a)(2)(D) and section 126.”44

Regional Haze: BART. The reductions required under CAIR would have

the effect of reducing regional haze in the eastern United States. In the proposed rule,

EPA requested comment on the extent to which the requirements of the proposed rule

Clean Air Interstate Rule, p. 25305.

In August 1997, three states — Massachusetts, Pennsylvania, and Vermont — submitted

ozone transport petitions to EPA with respect to the eight-hour ozone NAAQS. These were

joined later by petitions from Maine and New Hampshire.

Environmental Protection Agency, Findings of Significant Contribution and Rulemaking

on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport: Final Rule,

65 Federal Register 2675-2767 (January 18, 2000).

Clean Air Interstate Rule, p. 25304.

Ibid., p. 25304.

CRS-19

could satisfy the requirements of its regional haze program. Of particular focus was

the requirement of Section 167A of the CAA that certain existing sources install best

available retrofit technology (BART) to protect visibility in national parks and

wilderness areas.45

In the proposed IAQ and in CAIR, EPA sets out a lengthy argument with respect

to CAIR and BART.46 Specifically, EPA argues that participation in CAIR should

act as a substitute for complying with BART. However, EPA also decided to defer

the decision on substituting CAIR for BART for affected units until the BART

guidelines are finalized. As stated by EPA:

The results clearly indicate that the CAIR will achieve greater reasonable

progress than BART as proposed, measured by the proposed better-than-BART

test. At this time, we can foresee no circumstances under which BART for

EGUs could produce greater visibility improvement than the CAIR. However,

for the reasons noted in section IX.C.1 above, we are deferring a final

determination of whether the CAIR makes greater reasonable progress than

BART until the BART guidelines for EGUs and the criteria for BARTalternative programs are finalized.47

Conclusion

The final CAIR rule reflects several changes from the proposed IAQ resulting

from improved modeling and other considerations. Changes include:

Inclusion of a seasonal NOx emissions cap separate from the

proposed annual NOx emission cap.

Accelerating compliance with phase 1 of the two NOx caps from

2010 to 2009.

Five states — Arkansas, Kansas, Delaware, New Jersey, and

Massachusetts — were removed from the list of states contributing

to PM2.5 nonattainment. EPA has proposed that Delaware and New

Jersey be re-included under a separate rulemaking.

Four states — Arkansas, Delaware, Massachusetts, and New Jersey

— joined Connecticut as states determined only to contribute to

eight-hour ozone nonattainment.

One state — Kansas — was removed from the rule.

One state — Georgia — was removed from the list of states

contributing to eight-hour ozone nonattainment, but remained on the

list of states contribution to PM2.5 nonattainment.

One state — Florida — was added to the list of states contributing

to eight-hour ozone nonattainment in addition to remaining on the

list of states contributing to PM2.5 nonattainment.

For more on the regional haze program, see CRS Report RL32483, Visibility, Regional

Haze and the Clean Air Act: Status of Implementation, by (name redacted).

Clean Air Interstate Rule, pp. 25300-25304.

Ibid., p. 25304.

CRS-20

Creation of a 200,000 annual NOx compliance supplement pool

(CSP) to allow states to reward early reductions or assist needy

participants.

Inclusion of a fuel-type adjustment factor to the NOx allocation

formula that provides more NOx allowances to states that burn coal

for electricity generation.

Decision not to finalize any determinations with respect to Section

126 petitions or BART.

Although these changes may be important in specific cases, they do not

represent a major shift in the thrust and scope of CAIR. Unlike the recently

promulgated mercury (Hg) rule,48 CAIR has not been particularly controversial, so

major changes were not anticipated.

That the rule has not had the visibility of the Hg rule should not be interpreted

to mean that the underlying issue of PM2.5 and eight-hour ozone compliance has been

solved. In particular, EPA is currently reviewing the stringency of the PM2.5

NAAQS, a process that could result in a more stringent standard and more counties

out of compliance. Given the lengthy time frame of CAIR, it seems likely that efforts

will be made to strengthen its provisions well before 2015, if the PM2.5 standard is

strengthened.

Likewise, CAIR does not address the most potent environmental issue

surrounding fossil-fuel-fired electric generating facilities — global warming and the

possibility of carbon dioxide reductions. Movement on that issue over the next

decade could result in a modification of CAIR, or a new multipollutant control

regime. Bills have been introduced in Congress to impose such a system.49

Finally, the promulgation of CAIR may raise questions about the future of the

Bush Administration’s legislative initiative — Clear Skies. Clear Skies represents

a complete rewrite of Title IV of the Clean Air Act and would impose a

comprehensive cap-and-trade system on utility SO2, NOx, and Hg emissions. In

addition, it would have altered, deleted, or held in abeyance for some time existing

sections of the Clean Air Act with respect to affected electric generating units and

industrial sources that chose to opt into the program.50 With the promulgation of

CAIR that achieves NOx and SO2 emissions reductions from most of the country’s

electricity generating facilities, and of the final Hg rule, it is unclear what impetus

remains for Clear Skies.

Environmental Protection Agency, Standards of Performance for New and Existing

Stationary Sources: Electric Utility Steam Generating Units; Final Rule, 70 Federal

RL32868, Mercury Emissions from Electric Power Plants: An Analysis of EPA’s Cap-andTrade Regulation, by (name redacted).

See CRS Report RL32755, Air Quality: Multi-Pollutant Legislation in the 109th Congress,

by (name redacted) and (name redacted).

See CRS Report RL32782, Clear Skies and the Clean Air Act: What’s the Difference, by

(name redacted) and (name redacted).

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