&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 ------- ,, iii ., Si'i ,iiiiiiii:li,,:r. !,!;' L^j* ' E" «ll»«»» " *"""' « « NO. burner technology. " ' "" *' Jill l!!i;!iil|i||i<;«il,!!!11 ill.1!* iiirililil'^iLilillliJIinKlllligthliJ1!'1 IK ,. li,,',,,!,,. •, tm iiiiij hiHiuiiiiii i, ii FI; : <<;; • »f ii) i ii lilii ik» iilllilili"!'",:!! ||||||«,|||!|||||I|,| II i'i .juiri»iiLii'fjnli, Jliiuiii iiii 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. illli illlli • i^tiil^ iiiiiililK iH»W^ , , [[[ , ...................... ,,, ................ , j i, < , .,. 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 ., ' > ' affected unit, corporation, 1" Sf i!-sc i' > i Ai\A :|;> -1 :,,ff i: ', • ^ Wh 7, \ \ *! 'i > :i ^ylk ; ! 1 1 Jiiiii i: »i;;:: ' # i?i '' ' 'ViiiiiT !:i , i i 'a < YI,,; '!' ,: ' i ?i :\\ < i ;i »!'; • s ------- r 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. ------- ' f ' Ill I.... ;, ; ,; ;;:; l> i;:,;;;,; - '" ^1*"" : :!:w ; iiiiii ;"!' 11 , 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. ' '"" '. ,. ,i' JJt •i1! l< "' ' •' !•'• ' • SjB^ nil 1'' H i-nni.1 1 'Ij i £; 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. |l ! I.IUII II IIIIIII III ------- |