&EPA
United
Air rad R*<£*tkn
Procflctioa Afeaqr
EPA
Man* 1993
Acid Rain Program
Allowance Allocations and
Reserves
In order to reduce acid rain sin die United States and
Title IV of the Clean Air Act Amendments of 1990 established
the Acid Rain Program. ,Tfce program wfll cut sulfur dioxide
emissions, in fratf and substantially reduce nitrogen oxides
emissions from electric utility plants. This fact sheet discusses
allowance allocations and reserve programs within the Acid Rain
Program and is one of a series containing information about the
program. ' <" ^;—-,- ^ %/,-/.. ",-../.. " *,^-.-;f- , "
INTRODUCTION:
The overall goal of the Acid Rain
Program is to achieve significant
environmental benefits through
reductions in emissions of sulfur dioxide
(SO2) and nitrogen oxides (NO^), the
primary causes of acid rain. To achieve
this goal at the lowest cost to society,
the program employs both traditional
and innovative, market-based approaches
for controlling air pollution. In addition,
the program encourages energy
efficiency and pollution prevention.
Title IV of the Clean Air Act sets
as its primary goal the reduction of
annual SO2 emissions by lO.mfllkm tons
below 1980 levels. To achieve these
reductions, the law requires a two-phase
tightening of the restrictions placed on
fossil fuePfired power plants.
Phase I begins in 1995 and affects
110 mostly coal-burning electric utility
planits located in 21 eastern and
midwestern states. Phase n, which
begins in the year 2000, tightens the
annual emissions limits imposed on
these large, higher emitting plants and
also sets restrictions on smaller, cleaner
planits fired by coal, ofl and gas. These
emission limits are implemented through
allocating "allowances". Tfce program
affects existing utility units with an
output capacity of greater than 25
megawatts and virtually all new utility
unitu f
Tne Act also caDs for a 2 million-
ton reduction in NO, emissions by the
year 2000. A figffif5^*1* portion of the
reduction win be achieved by coal-fired
utility boilers that wfll be required to
meet new emissions standards based on
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NO. burner technology.
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5||owa:ace .trading component" of the
Acui '^m"!|fo|ram allows utilities to
";^pjopt tfie most cost-effective strategy to
reduce SO2 emissions at units in their
syste'msl""' The Acid Rain Program
. operating permit outlines the specific
program "retirements and compliance
"""'^ions'chbsen by each source: Affected
-;v; !^tieV'als5rw^ to install
system! tiSlat1""1 continuousry monitor
of Sp2> NOjp and other related
, '"in 'order"to track"progress,
,..isu|| '' Compliance, ' and provide
' • • • gfgf|g|py fo^fljjiTtrading "cbmponent cf
tjbg program. '"•" In"" any year ""that
^^j'^iipliance is " not achfeved, excess
*S"l^^^^Si ""geialties ""will apply, and
^j^i^'l^^^^elS&ieF will/have'"" "-aftowances
" '"" J ^ggjg| rmrnJM&ateity " from their
gSSIils' Sjfni^ Submit a plan to EPA
^"'''''speciies'"'1' ""how the excess ' SO2
_u|i
"'Smissiois will Hie" offset
'' '
J!jAn' allowance authorizes a unit
" I, industrial source to '
following a
year "II ...... tie ..... end' ...... of each year, the
tliSt hold an amount of allowances .....
""
...... ..... ...... ......
:j| ..... ""'jeast .......... ejgul ........ to ......... S
"I'p ......... a ..... 'uiul'thmf emits 5,000 tons of SO2
must hold It least 5,000 allowances that
?iffT- ....... i ...... ............ ....... |.r..r.. ...... ' ...... .mi ........ ji.isiMMi .......... Mini ........ n ............................ ........ ' ....................................... /< ........................... < •
are usable m
,;(!„
Allowances are fuDy marketable
oH, traded, or banked
|or'iw«"'ni"'"futiire years.
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group, or individual holding allowances
has an account in EPA's Allowance
'''' ....... ........ Parties" must "
notify EPA to have transfers recorded in
the ATS accounts, but it: is not necessary
to record all transfers with EPA until
such time that the allowances are to be
used to meet a unit's SO2 emissions
limitation requirement
HOW ARE ALLOWANCES
ALLOCATED?
PHASE f
Phase I allowance allocations are listed
in Table A of the Clean Air Act
Amendments of 1990. Additional
allowance allocations are made for
various units, including affected units in
Illinois, Indiana, and Ohio, which are
allocated a proportional share of 200,000
additional allowances each year from
1995 to 1999. Table 1 (finalized January
11, 1993) implements the Phase I
allocations.
PHASE n
There are three different
categories of allowances: basic
allowances, bonus allowances, and the
allowances that affect unite in certain
mid-Western States.
To calculate the_ allowances for
Phase n, which begins in the year 2000,
EPA uses the National Allowance Data
Base, which contains historical data on
almos all utility units.
Tables 2 through 4 of the rule
allocate allowances to eligible units.
Allowances wffl be allocated to accounts
n i n I n 1 1 n i '/; :'i iiii ' , kii iiiiiiiiJiP .,
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' affected unit, corporation,
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BASIC ALLOWANCES
Phase II basic allowance
allocations are generally based on
historic emissions rates and utilization.
During Phase II, the Act places a cap 011
the number of these allowances issued to
units each year at 8.90 million. This
effectively caps emissions and ensures
that the mandated emissions reductions
will be maintained over time.
BONUS ALLOWANCES
In addition to the basic
allowances, bonus allowances will be
allocated to units in states with overall
utility emissions rates at or below 0.8
Ibs/mmBtu, and several other groups of
units. These allocations are made only
for the years 2000 through 2009 and are
limited to 530,000 allowances annually.
MID-WESTERN ALLOWANCES
Finally, a third type of allowance
category affects Phase I units in certain
mid-Western States. The total
allocation to all these units is 50,000
annually. This category of allowances
and the "basic" allowances discussed
-above are called "permanent" allowances
because both types continue in
perpetuity.
WHAT ARE THE ALLOWANCE
RESERVES?
The rule also provides for the
creation of four , different allowance
reserves. The reserves are pools of
allowances that are taken from affected
units, or created and redistribute I to
units that qualify for a particular reserve
program. The Phase I Extension
Reserve makes available 3.5 million
allowances to eligible Phase I units
which install reduction technologies with
high SO2 removal efficiencies; the
Conservation and Renewable Energy
Reserve contains 300,000 allowances for
units achieving SO2 emissions reductions
through demand-side energy
conservation measures or renewable
energy generation; a Special Allowance
Reserve provides 250,000 allowances for
the annual auction and sales program.
Finally, approximately 500,000
allowances are reserved for qualifying
Clean Coal Technology re-powered
units.
WILL EPA REVISE THE.
ALLOCATIONS?
The Act requires that EPA revise
the promulgated Phase II allocations by
June 1, 1998 to account for the actual
number of allowances that must be
allocated for repowering projects in
Phase II (under §409), as well as for new
utility units coming on-line after
fLaalization of these regulations, but
before 1996.
Section 409 provides additional
allowances and an extension of the
Phase n deadline for compliance with
emission limitation requirements as an
incentive^ for higher-emitting coal plants
to meet their emission limitations
tlirough the installation of clean coal
.technology. Because,, some of -these
'allowances must be taken from other
Phase n units' bask allowances in order
to maintain a cap on SO2 emissions, it
was necessary for EPA to estimate the
number of repowering allowances. The
level of .repowering win be known by
1998 and the allocations win be revised
at that time.
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tfnits
«EDtcTlON
receive ' additional
••I i
r3uSonT"r'accomph'shed in
j~"|ojji|j|eji implementation of the
:.m 'Onry_a few Phase I and
l|i;; cTrn:;:::; PJaase II uti^ty'1'stems' ''will fee eligible
TJE£. V):::PI:: "';for :'"tSese'' ""early reliiuctiah credits.
''* • ' i'11! '.; iBfii''"I"; trif*i'» 'WiiilBlii!'11 ME f ti • .- -,
SJ^SS'.^^Ejigible Phase I units receive allowances
iijj^ i^^^ |f Ibr voluntary emissions reductions made
t:^;^'F;f:!' -Irfer enactment and before January 1,
,ii L; ,,i , i '!!: 1^95. El^bie" Phase II units receive"
•i'](in . i in iiiiiiiiiiiiii 11 nn iiiH^^^ 11 iiiiiiiiiii i i _.. _
allowances tor voluntary SO2 emissions
11 " i1 I ' !' "I'll!11!1 !' I1, i. 'I ,lv"i|l ' IWilJ lfl" "! '',",. '!:;„ ^ * "
tter. F ' i""':;" 'reductions made between January i,
i:^ I :: b:: ir- 1995, and' January 1, 2000.
DIESEL
•• _i_Vffm" "P-*^-" M. Aw^^^^*^*—**-* •
s .in i « ! f ' ' " .: HP 'iiTle Set ^gateS a pfogfain that
. LI : 'i'1.! i: . Bl . i"11,1' tsHiii '.iiifst1 I.M.II . • i. ••& •-.• • .
': >• - .T- s "^•"'allows small diesel fuel, refineries to be
to; help defray the
T witi the lew
M SnisiiiiS1:1:'""
of com
''" l ! ! "*' ' iSulifunzatipn "standarWfpr diesel fuel.
allocated only
desulfurized
sr 1, 1993,
year's' diesel
er_x._. prograjn is
ia^ped^lt a total'of 35,000 allowances
tS~'^ I:;?:;,, ' afjniially." ' '^Eacl individual refinery is
"" : :": : "' ^elgible' "for"1 ib more "than 1^00
'^allowances. ' '"" '.
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IS AFFECTED BY AC3D RAIN
PROGRAM REQUIREMENTS?
For units or facilities that are not
sure whether they are affected by the
Acid Rain Program Requirements, EPA
has added a procedure by which these
units may request a determination from
the Agency. The request will be
submitted in writing to the Director,
Acid Rain Division and include relevant
facts. The Administrator (or her
delegate) will provide a written response
which will be binding upon the
permitting authority. If the unit
disagrees with the Administrator's
decision, the unit may appeal through
"' EPA's t Acid Rain Administrative
Appeals procedures.
FOR MORE INFORMATION
Write to:
U.S. EPA
Acid Rain Division (6204J)
401 M Street SW
Washington, DC 20460
"If you would like to receive other
fact sheets on the Acid Rain Program,
call the Acid fcain Hotline at 617-674-
7377 or the EPA Public Lnfqnnation
Center (PIC) at 202-260-2080.
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