O CPA United States Environmental
X/CirV Protection Agency
Initial Results of Updated
Clear Skies Analysis
July 1,2003
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2 rnft United States Environmental
'O'Crri Protection Agency
Initial Results of Updated
Clear Skies Analysis
July 1,2003
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What Has Changed Since the 2002 Analysis?
Updated current and future year emission files
- New electric generation unit (EGU) controls (e.g., Centralis power plant)
- New state programs (e.g., North Carolina state law)
- New federal control programs (e.g., Nonroad Diesel)
- Updated current year emissions inventory from 1996 to 2001
Updated IPM modeling with EPA and EIA assumptions
Updated air quality model (new version of REMSAD)
Updated benefits and air quality modeling approaches
Oklahoma and Kansas now in the Western NOx Zone
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Summary
The 2003 analysis reaffirms previous analytical results - Clear
Skies provides substantial benefits to the public at a
reasonable cost.
Clear Skies delivers approximately $110 billion annually in health benefits by 2020.
~An alternative estimate is $21 billion.
- Many additional benefits are not monetized.
- Benefits begin right after passage of the Act.
Clear Skies yields significant environmental benefits, including important
reductions in sulfur, nitrogen, and mercury deposition. Annual monetized benefits
of visibility are $3 billion by 2020.
With Clear Skies, by 2020, 35 counties (home to approximately 12 million people)
would be brought into attainment with the fine particle standard, leaving only 8
eastern counties in non-attainment. Clear Skies would also bring 3 counties (home
to approximately 6 million people) into attainment with the 8-hour ozone standard,
and remaining counties closer to attainment.
Clear Skies is projected to cost $6.3 billion annually in 2020 ($1999) and prices of
electricity, coal, and natural gas only increase a small amount. Varying key
assumptions increases costs by less than 10%.
- Technological improvements in emission controls could reduce overall cost of compliance.
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Projected Emissions from Electric Generating Units
The Clear Skies Act will result in significant over-compliance in the early years, particularly
for SO2, because sources are allowed to bank excess emissions reductions and use them
later. The use of these banked allowances for compliance in the later years of the
program (e.g., 2020) results in SO2 and mercury emissions initially above the second
phase cap, gradually declining to the cap level.
Based on current technological capabilities, the cost of mercury removal is expected to
reach the safety valve price ($35,000/lb) by 2010. However, technological improvements
could decrease the cost of mercury control over time and cause prices to remain below
safety valve levels. EPA saw scrubber costs drop and performance improve during the
1990s when the power sector faced regulatory controls for S02. There is no significant
change in projected S02 and NOx emissions when Clear Skies is modeled without the
safety valve.
SO, EnvtMom from ElectiicKy
Generators with Clear Skies
-Piqect*ft SO Emit wart
» SO, Cap
MO* Emissions from Electricity
Generators with Clear Skies
2000
2006
»1o
201S
xa
- Projected MO* Emutiotii
-NOx Cat'
Mg &i**won* feonCoai-Firad Electricity
Generators with Clear Slues
ho cr.issioni
Note: Projected emissions data for SO2, NOx and mercury are from IPM.
Note: The analysis presented represents EPA's estimates. ElA's modeling would likely show different impacts.
4
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Clear Skies Safety Valve Provision
Under the safety valve mechanism, the price of allowances is capped, meaning
that if the allowance price exceeds the "safety-valve," EPA will borrow allowances
from the following year auction to make more allowances available at that price.
The purpose of this provision is to minimize unanticipated market volatility and
provide more market information that industry can rely upon for compliance
decisions.
The safety valve mechanism ensures the cost of control does not exceed a
certain level, but also ensures that emissions reductions are achieved.
The future year cap is reduced by the borrowed amount, and the emissions
reductions are achieved.
The Clear Skies Act "safety valve" provisions for are $4,000 a ton for SO2 and
NOx and $35,000/pound for mercury.
Current Clear Skies modeling suggests that the mercury safety valve price will be
reached, however, we believe that this is a conservative cost estimate since
technology will likely advance and the cost for mercury control will decrease over
time.
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Projected S02 Emissions from Power Plants with the Base Case
and Clear Skies in 2020
f
» i n ~ K
1'
* * o* s
CO
B s'5Mt
¦ _ ft) -
.-. »»» i(.< i
aJjS-
Projected S02 Emissions from Power Plants
With the Base Case and Clear Skies (2020)
0
75.000 tons
n Base Case
1 1 Power Planl SO:
n Clear Skies
u Power Planl SO.
» Fossil Power Plants with
Negligible SO. Emissions
6
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Projected NOx Emissions from Power Plants with the Base Case
and Clear Skies in 2020
Projected NOx Emissions from Power Plants
With the Base Case and Clear Skies (2020) ] 2200010ns
~ Base Case Power
Plant NO,
1I Clear Skies Power
Plant NO.
Fossil Power Plants with
Negligible NO. Emissions
7
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Projected Mercury Emissions from Power Plants with the Base
Case and Clear Skies in 2020
Projected Mercury Emissions from Coal-Fired Power
Plants With the Base Case and Clear Skies (2020) jo.38 Ions
Base Case
E3 power Plant Hg
. Clear Skies
Power Plant Hg
Other Fossil Power
Plants (Non-coal)
8
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Changes to EPA's Air Quality Modeling
Updated ambient design values used to calculate attainment to 1999-2001
ambient data.
New current year baseline inventory (2001).
New Base Case and Clear Skies inventories to reflect revised IPM Base
Case and Clear Skies runs.
New version of REM SAD:
- Updates and corrections to the dry deposition code and the secondary
organic aerosol (SOA) code
- Updates to mercury chemistry
Improved method in which modeled percent reduction for each of the PM2 5
species was applied to the ambient measurements (instead of using total
pm25).
Built proposed Nonroad Diesel controls into the Base Case.
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Current Projected Attainment with the Fine Particle
(PM2.5) Standard
Legend
I 1 <= 14.04 ppb
| 14 05- 15.04 ppb
~ 15.05 -16.04 ppb
~ 16.05 - 17.04 ppb
I >= 17.05 ppb
Number of Counties
Hawaii
Alaska
PM2.5 standard =15 p/m3
129 Nonattainment Counties
There are 129
counties
nationwide
(114 counties
in the East)
that exceed
the annual
fine particle
standard of
15 |j/m3.
* 65 million
people (43
million
people in the
East) live in
counties that
would not
meet this
standard.
Note: Based on 1999-2001 monitoring data of counties with monitors that have three years of complete data.
10
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Clear Skies with Other Air Programs Would Substantially
Improve Fine Particle Attainment over the Next Two Decades
Counties Exceeding the
Annual Fine Particle Standard in 2001
Most counties would be brought into attainment with
the PM2 5 standard by 2020:
Clear Skies and existing programs will bring 111
counties (home to approximately 32 million
people) into attainment with the fine particle
standard (compared to current conditions).
Remaining Counties Likely to Exceed the Annual
Fine Particle Standard with Clear Skies in 2020
PM2.5
standard =
15 p/m3
129 Nonattainment Counties
Manhattan red
There are 129 counties nationwide (114 counties in
the East) that are currently estimated to exceed the
annual fine particle standard of 15 |j/m3.
65 million people (43 million people in the East)
currently live in counties that would not meet the
standard.
Notes: Based on 1999-2001 data of counties with monitors that have three years of complete data. Additional federal and state programs must bring all counties into
attainment by 2016 at the latest. The methodology used to predict nonattainment status in the West is different than that used for the East.
Manhattan=White
18 Nonattainment Counties
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Clear Skies Achieves Early Benefits by Bringing More Areas
into Attainment with the PM2.5 Standard in 2010
PM2.5
standard
15 p/m3
Remaining Counties Likely to Exceed the Annual
Fine Particle Standard under the Base Case in 2010
PM2 5 attainment status in 2010 Clear Skies case:
Clear Skies would bring 42 additional eastern counties (home to
approximately 14 million people) into attainment with the fine
particle standard (as compared to the Base Case).
Remaining Counties Likely to Exceed the Annual
Fine Particle Standard with Clear Skies in 2010
Manhatian~< )range
Number
Legend counties
~ <- 14 04 ug/m3 130
I 14 05- 15.04 t>9/m3 35
D 15 05-16.04 us/m3 33
m 16 05 -17.04 ug/m3 19
J 17 .05 ug/m3 17
69 Nonattainment Counties
PM2 5 attainment status in 2010 base case:
» Existing programs will bring 45 eastern counties (home to
approximately 10 million people) into attainment with the fine
particle standard (compared to current conditions).
Number
Legend counties
c:
<= 14.04 ug/m3
176
14 05-15 04 ug/m3
31
TZ
15,05-16.04 ug/m3
15
1=
16.05-17.04 UQ/m3
8
>= 17.05 ug/m3
4
27 Nonattainment Counties
Notes: Based on 1999-2001 data of counties with monitors that have three years of complete data. Additional federal and state programs must bring all counties
into attainment by 2016 at the latest. Clear Skies is not expected to bring additional counties into attainment for 2020 in the West. Therefore, the western region is
not presented here.
12
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Clear Skies Would Bring More Areas into Attainment with the
PM2.5 Standard in 2020
PM2 5 attainment status in 2020 Clear Skies Case:
Clear Skies would bring 35 additional eastern counties (home to
approximately 12 million people) into attainment with the fine
particle standard (as compared to the Base Case).
Remaining Counties Likely to Exceed the Annual
Fine Particle Standard with Clear Skies in 2020
Manhattan Yellow
Remaining Counties Likely to Exceed the Annual
Fine Particle Standard under the Base Case in 2020
PM2 5 attainment status in 2020 base case:
Existing programs will bring 71 eastern counties (home to
approximately 18 million people) into attainment with the fine
particle standard (compared to current conditions).
Number
Legend counties
| <= 14.04 ug/m3 156
14.05 - 15.04 ugfm3 33
15.05 - 16.04 ugftn3 23
m 16 05 - 17.04 ug/m3 10
>= 17 05 u^m3 10
43 Nonattainment Counties
Manhattan=Gray
8 Nonattainment Counties
PM2.5
standard =
15 p/m3
Number
Legend counties
~ <= 14 04 ug/m3 216
1405 - 15.04 i#m3 10
1505 - 1604 u^m3
~ 1605 - 17 04 ttfm3
¦ >= 17.05 u^m3
Notes: Based on 1999-2001 data of counties with monitors that have three years of complete data. Additional federal and state programs must bring all counties
into attainment by 2016 at the iatest. Clear Skies is not expected to bring additional counties into attainment for 2020 in the West. Therefore, the western region is
not presented here.
13
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Current Projected Attainment in the US with the 8-hour Ozone
Standard
Legend
I I <» 79 ppb
J 80-84 ppb
~ 85 - 89 ppb
~ 90 - 94 ppb
I >=95 ppb
Number of Counties
Alaska
Hawaii
8-hour Ozone
Standard = 85 ppb
290 Nonattainment Counties
There are 290
counties
nationwide
(268 counties
in the East)
that exceed
the 8-hour
ozone
standard.
111 million
people (87
million
people in the
East) live in
counties that
would not
meet this
standard.
Note: Based on 1999-2001 monitoring data of counties with monitors that have three years of complete data.
14
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Clear Skies with Other Air Programs Would Substantially
Improve Ozone Attainment over the Next Two Decades
Counties Exceeding the
8-hour Ozone Standard in 2001
8-hour Ozone
Standard =
85 ppb
290 Nonattainment Counties
There are 290 counties nationwide (268 counties in
the East) currently estimated to exceed the 8-hour
ozone standard.
111 million people (87 million people in the
East) currently live in counties with projected
ozone concentrations greater than the 8-hour
ozone standard of 85 ppb.
Most counties would be brought into attainment with
the ozone standard by 2020 :
Clear Skies and existing programs (primarily the
NOx SIP Call and vehicle rules, including the
proposed non-road rule) will bring 263 counties
(home to approximately 77 million people) into
attainment with the 8-hour ozone standard
(compared to current conditions).
Remaining Counties Likely to Exceed the 8-hour
Ozone Standard with Clear Skies in 2020
"o
27 Nonattainment Counties
Notes: Based on 1999-2001 data of counties with monitors that have three years of complete data. Additional federal and state programs must bring all counties into
attainment between 2007 and 2021. The methodology used to predict nonattainment status in the West is different than that used for the East. 15
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Clear Skies Achieves Early Benefits by Bringing More Areas
into Attainment with the 8-hour Ozone Standard in 2010
Remaining Counties Likely to Exceed the 8-
hour Ozone Standard under Base Case in 2010
Ozone attainment status in 2010 Clear Skies case:
The NOx SIP Call will bring many Eastern counties into attainment with
the 8-hour ozone standard.
With Clear Skies, as compared to the Base Case, the number of
counties out of attainment with the 8-hour ozone standard decreases
from 47 to 44 (approximately 1 million more people living in counties
in attainment).
Remaining Counties Likely to Exceed the 8-hour
Ozone Standard with Clear Skies in 2010
Legend
I I <= 79pcb
| 60 - 84 ppt)
85 - 69 ppt>
~ 90 - 94 ppb
I > = 95 ppb
Number
of
Counties
361
58
25
44 Nonattainment Counties
8-hour Ozone
Standard =
85 ppb
Legend counties
79 ppb 339
^ 80 - 64 ppb 77
85 89 ppb 28
~ 90 - 94 ppb 14
¦ > = 95ppb 5
47 Nonattainment Counties
Ozone attainment status in 2010 base case:
Existing programs (primarily the NOx SIP Call and vehicle
rules) will bring 221 additional eastern counties (home to
approximately 61 million people) into attainment with the 8'
hour ozone standard (compared to current conditions).
Notes: Based on 1999-2001 data of counties with monitors that have three years of complete data. Additional federal and state programs must bring all counties into
attainment between 2007 and 2021. Clear Skies is not expected to bring additional counties into attainment for 2010 in the West. Therefore, the western region is not
presented here. 16
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Clear Skies Would Bring More Areas into Attainment with the
8-hour Ozone Standard in 2020
Remaining Counties Likely to Exceed the 8-hour
Ozone Standard under Base Case in 2020
Ozone attainment status in 2020 Clear Skies case:
The NOx SIP Call will bring many Eastern counties into attainment
with the 8-hour ozone standard.
Clear Skies would bring 3 additional counties (home to
approximately 6 million people) into attainment with the 8-hour
ozone standard (as compared to the Base Case).
Remaining Counties Likely to Exceed the 8-hour
Ozone Standard with Clear Skies in 2020
8-hour Ozone
Standard
85 ppb
Number
Of
Counties
Legend
| | <=79 ppb 418
~ 80 - 84 ppb 22
n
15
I | 90-94 ppb J
95 ppb 1
23 Nonattainment Counties
Legend
Counties
Ozone attainment status in 2020 base case:
d
<=79ppb 431
SO -84 ppb 12
85-89 ppb 14
JCZ
90 - 94 ppb 5
>= 95 ppb 1
Existing programs (primarily the NOx SIP Call and vehicle rules,
including the proposed non-road rule) will bring 245 eastern
counties (home to approximately 65 million people) into
attainment with the 8-hour ozone standard (compared to current
conditions).
Notes: Based on 1999-2001 data of counties with monitors that have three years of complete data. Additional federal and state programs must bring all counties
into attainment between 2007 and 2021. Clear Skies is not expected to bring additional counties into attainment for 2020 in the West. Therefore, the western region
is not presented here.
20 Nonattainment Counties
17
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Changes to EPA's Health Benefits Modeling
Used proposed Nonroad Rule methods.
Population exposure.
- Ambient PM monitored data adjusted using REMSAD results (instead of using
REMSAD results directly)
Demographic data.
- 2000 Census data (instead of 1990 data)
- Improved future population projections
Health effects incidence/prevalence data.
- Updated baseline incidence/prevalence for health endpoints
Concentration-Response functions.
- Non-fatal heart attacks, school loss days added
- New epidemiological studies for certain endpoints (hospital admissions, ER visits for
asthma)
Valuation of changes in health outcome.
- New valuation for alternative estimate
18
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Summary of Human Health and Environmental Benefits of
Reducing Fine Particles (PM2 5) and Ozone1 with Clear Skies
Quantifiable health benefits would total approximately $110 billion annually in 2020.
~.An alternative estimate is $21 billion.2
Each year, by 2020, Americans would experience:
14,100 fewer premature deaths;
~ An alternative estimate projects 8,400 fewer premature deaths.2
8,800 fewer cases of chronic bronchitis;
23,000 fewer non-fatal heart attacks;
30,000 fewer hospitalizations/emergency room visits for cardiovascular & respiratory symptoms;
Included in this total are 15,000 fewer hospital and emergency room visits for asthma.
12.5 million fewer days with respiratory illnesses and symptoms, including work loss days (1.6 million), restricted activity
days (10.3 million), and school absences (200,000).
~ Included in this total are hundreds of thousands fewer respiratory symptoms and illnesses for asthmatics, including
approximately 180,000 fewer asthma attacks.
Reductions in fine particles (PM25) and ozone would result in substantial early benefits, including 7,900
fewer premature deaths and $54 billion annually in 2010.
An alternative estimate projects 4,700 fewer premature deaths and $10 billion annually in health benefits.2
In 2020, annual visibility benefits would be $3 billion in selected National Parks and Wilderness areas.
Additional significant health and environmental benefits (e.g., reduced human exposure to mercury and
fewer acidified lakes) are expected, but cannot currently be quantified and/or monetized.
1. Ozone benefits were calculated for the eastern U.S. and areas of the West where significant ozone changes are expected. Total national ozone benefits may be slightly higher than reflected here.
2.The two sets of estimates reflect alternative assumptions regarding the effects of airborne particles on public health. The base estimate relies on estimates of the potential cumulative effect of long-
term exposure to particles, while the alternative estimate presumes that PM effects are limited to those that accumulate over much shorter time periods. The alternatives also use different
approaches to value health effects damages. (It is of note that, based on recent preliminary findings from the Health Effects Institute, the magnitude of mortality from short-term exposure (alternative
estimates) and hospital/ER admissions estimates (both estimates) may be overstated.) The key assumptions, uncertainties, and valuation methodologies underlying the approaches used to produce
these results are detailed in Technical Addendum: Methodologies for Benefit Analysis of the Clear Skies Act, 2003 that will be released on the Clear Skies website shortly. 19
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Visibility Improvements in 2020 with Clear Skies
Projected Changes in Visibility with Clear
Skies compared to the Base Case in 2020
)
<
N- '
»
.*»
w '
I
Improvement
in Deciview
¦ >3
¦ 2-3
¦ '-2
C3 5-1
~ ~/- 5
~J - 5 - -1
Projected Changes in Visibility with Clear Skies
and Base Case in 2020 compared to 2001
Clear Skies would improve visibility over much of the
eastern U.S. 1-2 deciviews beyond the Base Case.1
In the southeastern U.S., this translates into an improvement in
visual range of approximately 2-4 miles.
Clear Skies along with existing programs would improve
visibility in a large portion of the East and Midwest 2-3
deciviews (approximately 5-9 miles in those areas) from
current levels.
Visibility in some areas would improve more than 3
deciviews.
Western skies currently have much better visibility than the
East. The Western Regional Air Partnership agreement is
honored.
This allows growth in the West without degrading visibility.
I
Monetized Visibility Benefits
In 2020, annual visibility benefits would be $3 billion in selected
National Parks and Wilderness Areas. In 2010, early benefits
would be $1 billion.
This assessment projects benefits due to improvements in
impaired visibility in National Parks and Wilderness areas in many
areas in the Southeast, Southwest, and California.
This estimate does not include the value of improving visibility in
residential areas, or of improving visibility at Parks and Wilderness
Areas in other areas of the country (such as the Northeast).
1This analysis calculated changes in air quality and in visibility, measured in terms of deciviews, a standard measure of relative visibility change; a one or two deciview change
translates to a noticeable change in visibility for most individuals. The improvement in visual range in miles associated with each change in deciview depends on the absolute
visibilitv.
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Sulfur Deposition Improvements in 2020 with Clear Skies
I
Legend
Percent Reduction
¦ >60
30 lo CO
30
¦ 5 to 15
»/-$
¦ -15 to -5
-30 to -15
-Wto -30
Projected Improvements in Adirondack Lakes
21%
i
12%
1
-
Curent Base (2030) Clav Skies (2030)
Projected Changes in Sulfur Deposition with
Clear Skies compared to the Base Case in 2020
Clear Skies would reduce sulfur deposition up to 60% beyond
Base Case in some of the most acid-sensitive regions of the
country, including the Appalachian Mountains, southern Blue
Ridge, and southeastern U.S.
Together with existing programs, Clear Skies would reduce
sulfur deposition 30-60% across the most of the eastern U.S.
and several sensitive areas of the West.
Projected Changes in Sulfur Deposition with Clear
Skies and Base Case in 2020 compared to 2001
Clear Skies would
eliminate chronic
acidity in Adirondack
region lakes by 2030,
and only 1% of lakes
would remain
chronically acidic in
the Northeast region.
Clear Skies would benefit acid-sensitive ecosystems
in the Southeast, by slowing the deterioration of
stream health expected under the Base Case.
Note: Sulfur deposition in the West is generally low. The large percentage increases
correspond to relatively small changes in actual deposition from expected increases in
emissions primarily from sources not affected by Clear Skies (e.g., metals processing,
petroleum refining, chemical and fertilizer manufacturing). A few power plants are
expected to increase emissions slightly under existing programs.
21
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Nitrogen Deposition Improvements with Clear Skies in 2020
Projected Changes in Nitrogen Deposition with
Clear Skies compared to the Base Case in 2020
Projected Changes in Nitrogen Deposition with Clear
Skies and Base Case in 2020 compared to 2001
Clear Skies would reduce nitrogen deposition up
to 20% beyond the Base Case across much of
the country.
Clear Skies along with existing programs would
reduce nitrogen deposition across much of the
country by 20 to 50 percent.
Note: The increases in nitrogen deposition at locations in Louisiana and
Washington state occur under the Base Case and with Clear Skies and
are the result of increases in emissions from manufacturing and refining
sources.
Legend
Ptrcvnt Reduction
>so
36 to 50
20 to 35
5 to 20
~A- 5
-20 to-5
-------
Note: An "airshed" depicts a modeled approximation of a
large proportion of sources contributing to air quality in a
particular receptor region.
PropcM SO, Emitctont from Ens ting Power
Generation Source* m the Southern Blue Rioge Airshed (2020) J»«m
¦ Mm c«m
¦¦Ml W| 11
[-lOMrSW
Projected NO, Emissions from Existing Power
Generation Sources in the Southern Blue Ridge Airshed (2020)
]um
¦ MwC-w
~ CWSM
ftttfM XMNO
OtW?MW
* PIMh
Airshed for the
Southern Blue
Ridge Mountains
This page shows regional airshed maps that were developed
for the Southern Blue Ridge Mountains (which includes
Great Smoky Mountain National Park).
Multiple emission sources in numerous states contribute to
air quality degradation and acid deposition in the Southern
Blue Ridge region.
In 2020, emissions from power plants in the Southern Blue
Ridge region are projected to be substantially lower with
Clear Skies than under the Base Case:
S02 emissions are projected to decrease 61 %;
NOx emissions are projected to decrease 68%.
SOz and NOx Emissions in the Airsheds (2020)
_ 6,000,000 ¦
c 5,000,000-
i- 4,000,000
c 3,000,000-
| 2,000,000-
f 1,000,000-
I
\
%
s<
%
\
\
32
\
%
N<
\
%
X
3x
23
-------
Mercury Deposition Improvements in 2020 with
Clear Skies
Base Case covers all sectors
Projected Changes in Mercury Deposition with
Clear Skies compared to Base Case in 2020
Eating contaminated fish is the primary route of exposure
to mercury. Developing fetuses are most at risk for
neurological harm due to mercury.
As shown in the top map, considering Clear Skies without
the safety valve, Clear Skies could potentially reduce
mercury deposition 5-15%* beyond the Base Case across
much of the East.
In some areas mercury deposition would be reduced
up to 60%.
Legend
Percent Reduction
>60
30 to 60
15 to 30
5 to 16
/- S
15 10 '5
* These results are based on modeling the Clear Skies mercury cap without
triggering the safety valve (see page 5 for a description of the safety valve).
Note: The increases in mercury deposition in the bottom map occur under the
Base Case and with Clear Skies and are the result of increases in emissions
from sources other than power plants that are not affected by Clear Skies.
24
Projected Changes in Mercury Deposition with Clear
Skies and Base Case in 2020 compared to 2001
As shown in the bottom map, together with existing
programs, Clear Skies would contribute to a 15-60%*
reduction in mercury deposition from current levels
throughout the East and Midwest.
Reductions are expected to occur in many places where
fish advisories are in effect due to elevated levels of
mercury.
Base Case covers all sectors.
-------
Changes to EPA's Economic Modeling
Updated EPA 2003 IPM Base Case (Base Case): The 2003 Base Case
includes Title IV, the NOx SIP Call, NSR settlements, and state-specific caps in
Connecticut, Massachusetts, Missouri, New Hampshire, North Carolina, Texas,
and Wisconsin all finalized before March 2003.
Updated EPA 2003 IPM Modeling Assumptions: EPA has recently
enhanced IPM to better reflect the power sector and incorporate the best
available information.
- Some modeling assumptions used in IPM have been updated from the 2000 version
used to model the Clear Skies Act of 2002. A summary of these changes are listed
on the following slide.
- The revised assumptions were used in IPM runs completed for analysis of the 2003
reintroduced Clear Skies Act.
25
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Updates to EPA's Economic Modeling Assumptions
Assumption
Change
Cost, performance, emission, and removal
rate assumptions for new conventional
units and existing nuclear units
Revised to ensure consistency with AEO 2003.
Renewable energy programs and
renewable portfolio standards
Updated information largely based on AEO 2003.
Fuel oil assumptions
Incorporation consistent with AEO 2003.
Coal supply curves
Revised to incorporate the coal productivity, labor productivity, and transportation escalators used in AEO
2003.
Existing generation capacity -
planned/committed units
159 GW of new capacity by 2005 was added to the model based on information in the RDI database and
AEO 2003 inventory.
Inventory of installed S02 and NOx
controls
Updated inventory of installed S02 and NOx controls based on information reported by utilities, vendors,
state regulatory agencies, and regional EPA offices.
Updated baseline for state controls
Added state-specific caps in Massachusetts, New Hampshire, North Carolina, Texas, and Wisconsin.
Mercury emissions modification factors
(EMFs)
Mercury EMFs were revised based on latest technical data; the major changes were the SCR+FGD
assumptions:
- For bituminous coal, the removal rate was changed from 95% to 90%.
- For subbituminous coal, smaller (25-85%) removal rates for SCR +FGD are now used.
Also modeled with EIA assumptions.
Annual electricity demand growth
Annual electricity demand growth rate was changed from 1.2% to 1.55%.
Also modeled with EIA assumptions.
Natural gas supply prices
Revisions were based on the latest version of ICF's North American Natural Gas Analysis System
(NANGAS) model. The impact is an approximate 15% increase in gas prices in the model output,
relative to Clear Skies 2002 model output.
Also modeled with EIA assumptions.
Activated carbon injection (ACI) cost and
performance data
ACI removal was changed from 80% to 90%, based on the latest full-scale test data. (EIA also uses 90%
removal.)
Title IV allowance bank
Updated Title IV bank assumptions based on most current data from ICF, Inc. Private Practice projections.
26
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Projected Annual Costs of the Clear Skies Act
Projected Annual Costs of the Clear Skies Act ($1999)
7 r
s
1
s
« 3
&3
43
44
10
2005
2010
2015
2020
Total annual costs of the Clear
Skies Act are projected to be
$6.3 billion ($1999) in 2020.
The net present value (NPV) of
the difference in costs between
Clear Skies and the EPA Base
Case is $52.5 billion ($1999) for
the period between 2005 and
2025.
The 2003 analysis projects
annual costs slightly lower than
projected by the 2002 analysis.
Note: Cost projections are based on modeling using IPM and are based on best available engineering estimates. These projections show the costs to power generators over
and above the costs they will incur to meet statutory and regulatory requirements that are already in effect. The projections do not include costs associated with the purchase
of allowances from the auction. Nor do the projections consider future technological changes that could lower compliance costs or electric demand response that would lower
costs through reduced power generation. In the absence of Clear Skies legislation, there are existing statutory provisions that will, in the future, require EPA and states to
impose additional requirements (and thus additional costs) on power generators between now and 2020 (e.g., states will be required to meet the PM2.5 and ozone NAAQS).
When compared to existing Clean Air Act requirements, Clear Skies may actually result in cost savings because a cap-and-trade approach is more efficient than existing
regulatory programs. When the Acid Rain Program was implemented using a cap-and-trade program, compliance costs to achieve the mandated reductions were
significantly lower than predicted as sources took advantage of the flexibility provided by a cap and trade program.
Note: EPA's net present value calculation is based on annual costs from IPM and cover the years 2005-2025. See chapter 7, table 7.1 of the IPM documentation for more
information on the discount rates used for various plant types. ( )
Note: The analysis presented represents EPA's estimates. ElA's modeling would likely show different impacts.
27
-------
Projected Allowance Prices with Clear Skies
¦im
p
140'
90
Projected Marginal Cost of S0^ Reductions.
2010-2020 ($1999)
#
mi mi m
Projected Marginal Cost of NOx Reductions,
2010-2020 ($1999)
_ " lonm 1
¦ ~~ "
* * *
Zor>« 2
Protected Marginal Cost of Mercury Reductions.
2010-2020 {$1999)
CM ¦
xooc
I act*
KMC
Note: The dollar value is the projected allowance price,
representing the marginal cost (i.e., the cost of reducing the last
ton) of emissions reductions. Marginal costs are based on
modeling using IPM.
Note: The analysis presented represents EPA's estimates.
ElA's modeling would likely show different impacts.
28
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Projected Coal Capacity with Further Emissions Controls
In 2020 with Clear Skies, 81% of all coal-fired capacity is
projected to have one or more of the following: selective
catalytic reduction (SCR) forNOx, flue gas desulfization
(scrubbers) for S02, and/or activated carbon injection (ACI)
for mercury. Of this capacity, 34% is due to Clear Skies.
There will be about 300 GW of coal-fired units in 2020.
Graphics show cumulative capacity with existing controls,
controls projected to be retrofitted under the NOx SIP call,
NSR settlements and state enacted programs, CAA Title IV,
and controls projected to be retrofitted with Clear Skies.
Projected Coal-Fired Capacity with ACI
-------
Projected Generation Mix in 2020
Generation Mix in 2020 in EPA's Base Case
Coal w*t>out
Generation Mix in 2020 with Clear Skies
Combined Cycto Gm
26%
CMYGas Sttam and
Turbmts.
6%
Coal wrtm Actvancad
MO* and SO} Controls
27%
Coal w#t Mercury
Control
1%
Coil wHhout
Adv ant ad MO* or SO,
Controls
8%
Coal Advancad
NOx o« SO. Control
9%
Note: Projections are from EPA's modeling using IPM. Coal units with S02 and/or NOx controls includes units with advanced post-combustion S02 and/or NOx controls (scrubbers for S02
removal and SCR or SNCR for NOx removal). Coal units without S02 and/or NOx controls could include PM and/or NOx combustion controls. The base case in IPM includes Title IV, the
NOx SIP Call, NSR settlements, and state-specific caps in CT, MA, MO, NC, NH, TX, and Wl. The "Other category includes generation from nuclear, hydro, solar, wind, geothermal,
biomass. landfill gas, and fuel cells. Control technology percentages are approximations. S02 controls include a very small amount of IGCC.
Note: The analysis presented represents EPA's estimates. ElA's modeling would likely show different impacts.
30
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Coal Production for Electricity Generation in 1990 and
2000 and Projected Production with Clear Skies in 2020
Coal Production for the Power Sector
| 2000 Actual
] 2020, Clear Skies
Coal Production in 1990. 2000, and
Projected with Clear Skies In 2020
1.20*
1.000
800
c 600
2.
400
200
QFor oth«r Sectors
¦ For Powtr Gerxiatic-n
1990
2000
2020
Scale: Appalachia 2000 = 299 million tons
i projections
Notes: 2020 national coal production
Annual 1994, Table 4 (DOE/EIA-0584 (2000))
(DOE/EIA-0584 (2000)), January, 2002. 2020
Integrated Planning Model. 2020 production
In 1990, EIA did not report the coal produced
the power generation sector. For an estimate
the same percentage (85%).
are EPA estimates from IPM. 1990 data is from the Coal Industry
2000 data is from the Coal Industry Annual 2000, Table 4 and Table 63
production for the power generation sector is derived from the
fOr other sectors is derived from the National Energy Modeling System.
1 or power generators. From 1998-2000. 85% of coal produced was for
of coal produced for the power generation sector in 1990, EPA assumed
Note: The analysis presented represents EPA's estimates. ElA's modeling would
likely show different impacts.
- Other n
Western
^Interior /
Northwest
Powder River
Basin
Southwest^*
Nortli Dakota
Lignite
Appalachia
Northern
Appal achia
.¦
'¦
miirois^V
Basin
Gulf Coast
Lignite
> vY s-
J Central
_ > Appalachia
Soutliern
Appalachia
31
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Impact on Electricity Prices and Fuel Prices
Retail electricity prices are expected to gradually decline from today's levels but then rise over time
with Clear Skies. (Prices are expected to drop initially due to the increase of excess generation
capacity; in 2010 prices would begin to increase due to new capacity requirements, which lead to
higher capital costs and greater natural gas use, and higher retail prices passed onto consumers.)
Clear Skies will have a small effect on national electricity, coal, and, natural gas prices.
The impact on coal-fired capacity is small.
Projected Retail Electricity Prices with Clear Skies
S
s
c
u
u
? IMS 2810 7015 20 ?0
r Clear Skies Baca Cat*
Average Coal Mine Month and Henry Hub Natural
Gas Prices (1999$)
%
* 4
₯
«*
CO
3
» » 1 1
2000 2005 2010 2015 2020
C tear Sbl»« Natural Gat Clear SMea ¦ Ceal
- B Case Natural Gas - -But Cast Coal
Note: Retail prices from 2000 are from AE02003. Prices for the period 2005 and after were calculated using the Retail Electricity Price Model (see
Section G for a description of the Model).
The coal price represents an average minemouth price across all twelve grades of coal in the model mined in 39 supply regions. The natural gas price
is the Henry Hub price. Fuel prices for 2005 to 2020 are EPA's projections from IPM.
Note: The analysis presented represents EPA's estimates. ElA's modeling would likely show different impacts.
-------
Impact of Clear Skies on the NOx SIP Call Region
Summertime NOx emissions in the SIP Call region with Clear Skies are significantly
lower than the emissions predicted under the NOx SIP Call. The additional
reductions with Clear Skies come from the approximately 25 GW of additional SCR
retrofits by 2020.
Summertime NOx Emissions in the SIP Call Region
600 -i
500
(A
£ 400
re
200
100
¦ Base Case
~ Clear Skies
2010
2020
Coal-Fired Capacity Retrofitted with SCR in the
SIP Call Region (GW)
§
O
140
120
100
80
60
40
20
¦ Base Case
~ Clear Skies
1
2010
2020
Note: The NOx SIP Call Region includes nineteen Eastern States and DC. Summertime NOx emissions occur between May
1 and September 30. Georgia is not currently part of the SIP Call program; however, EPA is drafting regulations that would
include Georgia in the SIP Call Region by 2007 and a significant number of utilities in Georgia are installing controls to comply
with potential future requirements. For these reasons, EPA has included Georgia in the SIP Call region modeled under the
Base Case. This does not materially change the trends.
33
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Co-benefits Emissions
In 2010, mercury emissions
are projected to be reduced
to 34 tons based on the
mercury emission
reductions that will occur
from the emission controls
plants will install to meet the
S02 and NOx caps.
In 2010, an additional 1 GW
of scrubbers and 3 GW of
SCR is projected with Clear
Skies to comply with the
mercury cap; these retrofits
are not projected under a
policy scenario that covers
S02 and NOx only.
Note: The analysis presented represents EPA's estimates. ElA's modeling would likely show different impacts.
50
Coal-fired Generation Mercury
Emissions with Clear Skies Levels
Covering S02 and NOx Only
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Impact of Changes in IPM Modeling Assumptions
EPA has explored the impact of changing assumptions in the model to:
- AEO 2003 natural gas prices
- AEO 2003 electricity growth
- Mercury emission modification factors (EMFs) used by EIA
To measure the pure impact of the assumptions, as opposed to the
safety valve effect, a Clear Skies Case without the safety valve was used
in IPM modeling of power grid behavior and emissions. With the safety
valve modeled, the impacts would be smaller than those shown. (The
sensitivity analysis did not extend to air quality and benefits analysis.)
The assumptions used in the sensitivities for natural gas prices,
electricity growth and mercury removal efficiencies were those used by
EIA in its 2003 modeling.
35
-------
Effects of Assumptions for Natural Gas Prices, Electricity
Growth, and Emission Modification Factors (EMFs)
Projected annual costs decline
or remain about the same when
the model is run with ElA's
natural gas assumptions,
electricity growth assumptions,
and/or EMFs. Assumptions
lead to building much cleaner
new coal-fired capacity that
leads to lower overall cost.
Annual costs increase less than
10% by 2020.
Coal-fired generation increases.
Allowance prices are relatively
close, except for mercury.
Projected Annual Costs ($1099) Using EPA and EtA
Assumption* for Growth. Gas. and MarcuryEMFs
2010
7015
If . SK»s Mvtrcut MteCy >*r»» di *»g tfAa&iurcU^t
H uwy inc.g E Ws mnmpBtm »*« on
mI*i4m1 fctfrfv * 01*09 aimrMwftw and EMF i I
Protected Generation Mix In 2010 I 2020 Using EPA and EIA
Assumptions for Growth, Cat, and Mercury BMfs
6.000
$000
2010
2020
IBQJ
(f'ffit c«*i-
a »if iilxm n wr hi
cur i
CtaiStiei Wt> Cbii'iMu Vd C be- Sllu
t v»r»t v** v «¦»# wtfj
E ** M4U* pent 6»*t I *'»
4» *« ptWm ei MH|#ltii| te>
OtiftOiOKtr' $»,<> »<>«*»> t
rw »
I Coal n I»rai <7 as
arjul»*T nHyrtm
¦ Other |
36
-------
Effects of Assumptions for Natural Gas Prices, Electricity
Growth, and EMFs
Projected Marginal Cost of S02 Reductions ($1999)
1,400
1,200
1,000
800
600
400
200
0
2010
2015
2020
- Clear Skies without safety valve using EPA assumptions
- Clear Skies without safety valve using ElA's assumptions for Growth and Gas
Clear Skies without safety valve using ElA's assumptions for Growth, Gas. and EMF's
Projected Marginal Costs of NOx Reductions ($1999) - Zone 1
1,750
1,500
1,250
g 1,000
5 750
500
250
0
2010
2015
2020
- Clear Skies without safety valve using EPA assumptions
Clear Skies without safety valve using EIA assumptions for Growth and Gas
Clear Skies without safety valve using EIA assumptions for Growth, Gas, and EMF's
Pio|«ct«d M 41 gtrial Cost of M *r cui y Reduction*
($1999)
70,000
60,000
50.000
40.000
30.000
20.000
10,000
0
2010
2015
2020
~r- Cloar Ske* without valv» uting EPA attumptions
CI»«| Sk»» wdhovt v«lv» u«tog E'A 'or Growth Q»%
Clear Stent without aa>aty valva using EIA assumptions for Growth Gas and 6Mf»
Projected Marginal Costs of NOx Reductions ($1999) - Zone 2
1,750
1,500
1,250
| 1,000
S 750
500
250
0
2010
2015
2020
H Clear Skies without safety valve using EPA assumptions
Clear Skies without safety valve using EIA assumptions for Growth and Gas
Clear Skies without safety valve using EIA assumptions for Growth, Gas, and EMF's
37
-------
Conclusion
The 2003 analysis reaffirms previous analytical results - Clear
Skies provides substantial benefits to the public for a
reasonable cost and impact
Clear Skies delivers approximately $110 billion annually in health benefits by 2020.
~An alternative estimate is $21 billion.
- Many additional benefits are not monetized.
- Benefits begin right after passage of the Act.
Clear Skies yields significant environmental benefits, including important
reductions in sulfur, nitrogen, and mercury deposition. Annual monetized benefits
of visibility are $3 billion by 2020.
With Clear Skies, by 2020, 35 counties (home to approximately 12 million people)
would be brought into attainment with the fine particle standard, leaving only 8
eastern counties in non-attainment. Clear Skies would also bring 3 counties (home
to approximately 6 million people) into attainment with the 8-hour ozone standard,
and remaining counties closer to attainment.
Clear Skies is projected to cost $6.3 billion annually in 2020 ($1999) and prices of
electricity, coal, and natural gas only increase a small amount. Varying key
assumptions increases costs by less than 10%.
- Technological improvements in emission controls could reduce overall cost of compliance.
38
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Notes on EPA's Analysis Using a "Base Case"
The information presented in this analysis reflects EPA's modeling of the Clear
Skies Act of 2003.
- EPA has updated this information to reflect modifications:
Changes included in the Clear Skies Act of 2003.
Revisions to the Base Case to reflect newly promulgated rules at the state and
federal level since the initial analysis was undertaken.
This analysis compares new programs to a Base Case (Existing Control Programs),
which is typical when calculating costs and benefits of Agency rulemakings.
- The Base Case reflects implementation of current control programs only:
Does not include yet-to-be developed regulations such as those to implement
the National Ambient Air Quality Standards.
- The EPA 2003 Base Case for power sector modeling includes:
Title IV, the NOx SIP Call, NSR settlements, and state-specific caps in
Connecticut, Massachusetts, Missouri, New Hampshire, North Carolina, Texas,
and Wisconsin all finalized before March 2003.
- For air quality modeling, the Base Case also includes the federal and state
control programs in the EPA 2003 IPM Base Case, as well as the Tier II, Heavy
Duty Diesel, and Non-Road Diesel rules.
39
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