Acid Rain and Related Programs
2006 PROGRESS REPORT





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2006    PROGRESS    REPORT

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                           The Acid Rain Program was
                           designed to reduce the adverse
                           effects of acid deposition
                           through reductions in annual
                           emissions of SO0 and  NOV.
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        he U.S. Environmental Protection Agency
        (EPA) publishes an annual report to update
   , ,   the public on compliance with the Acid Rain
Program (ARP), its status of implementation, and
progress toward achieving environmental  goals.

The Add Rain and Related Programs 2006 Progress
Report updates data reported in previous years,
specifically:

• Sulfur dioxide (S02) emissions, allowance market
  information, and program compliance.

• Nitrogen oxides (NOX) emissions and program
  compliance.
   Key Findings
    Total S02 emissions fell below 10 million
    tons for the first time under ARP.
   • NOX emissions in 2006 were 3.3 million
    tons below 1990 levels.

   • Acid deposition has declined significantly
    from levels measured before ARP,
    with corresponding water quality
    improvements in lakes and streams.

   • Estimated public health benefits from ARP
    emission reductions exceed program costs
    by a margin of more than 40 to 1.
• Status and trends in acid deposition, air quality,
  and ecological effects.

• New programs, such as the Clean Air Interstate
  Rule (CAIR), that are building on the ARP to further
  improve environmental quality.

In this year's report, EPA incorporates early CAIR
compliance planning into the findings associated
with the ARP, including contributions to a significant
S02 emission decrease in 2006, and other relation-
ships between the ARP, CAIR, and other new air
quality rules.

For more information on the ARP, CAIR, and related
programs, including additional information on S02
and NOX emissions, acid deposition monitoring,
environmental effects of acid deposition, and
detailed unit-level emission data, please visit EPA's
Clean Air Markets Web site at
.

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Sulfur dioxide (S02) and nitrogen oxides (NOX) are the
key pollutants involved in the formation of acid rain.
These pollutants also contribute to the formation of
fine particles (sulfates and nitrates) that are associated
with significant human health effects and regional
haze. Sulfates and nitrates are transported and
deposited at levels harmful to sensitive ecosystems in
many areas of the country. Additionally,  NOX combines
with volatile organic compounds (VOCs) to form
ground-level ozone (smog). The U.S. electric power
industry accounts for approximately 70 percent of
total U.S. S02 emissions and 20 percent of total U.S.
NOY emissions from man-made sources.1
   A
The Acid Rain Program (ARP) was created under Title
IV of the 1990 Clean  Air Act Amendments (CAAA) to
reduce the adverse effects of acid deposition through
reductions in annual emissions of SO, and NOY. The
                                 Z       A
Act calls for S02 reductions of 10 million tons from
1980 emission levels, largely achieved through a
market-based cap and trade program, which utilizes
emission caps to permanently limit S02 emissions
from power plants. NOX reductions under the ARP
are achieved through a program closer to a more
traditional, rate-based regulatory system. The NOX
program is designed to limit NOX emission levels to
2 million tons less than those projected for the year
2000 without implementation of Title IV.

Since the start of the  ARP in 1995, reductions in
S02 and NOX emissions from the power sector have
contributed to significant improvements in air quality
and environmental and human health. The S02
program affected  3,520 electric generating units
(EGUs) in 2006 (with most emissions produced by
1,062 coal-fired units). The NOX program applied to a
subset of 982 operating coal-fired units in 2006.

The 2006 compliance year marked the 12th year of
the program. During this period, the ARP has:

• Reduced S02 emissions by more than 6.3 million tons
  from 1990 levels, or about 40 percent of total power
  sector emissions.

  • S02 emissions from ARP units fell sharply, declining
    830,000 tons from 2005 levels. Reduced energy
    demand, decreased oil use because of fuel
    prices, and early Clean Air Interstate Rule (CAIR)
    compliance all appear to be  factors in this decline.

  « Total S02 emissions fell below 10 million tons
    for the first time under the ARP. Sources emitted
    approximately 9.4 million tons of S02 in 2006,
    below the emission cap of 9.5 million tons.

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  » With nearly 6.1 million unused (banked)
    allowances from prior years, S02 emissions were
    40 percent below the total 2006 allowable S02
    emissions of 15.7 million tons.

• Cut NOX emissions by 3.3 million tons from 1990
  levels, so that emissions in 2006 were less than half
  the level anticipated without the program. Other
  efforts, such as the NOX Budget Trading Program
  (NBP) in the eastern United States, also contributed
  to this reduction.

• Led to significant decreases in acid deposition. For
  example, between the 1989-1991 and 2004-2006
  observation periods, wet sulfate deposition
  decreased 35 percent in the Northeast and 33
  percent in the Midwest. These reductions have
  resulted in  positive changes in environmental
  indicators,  including improved water quality in
  lakes and streams.

• Provided the most complete and accurate emission
  data ever developed and made those data available
  through comprehensive electronic data reporting
  and Web-based tools for agencies, researchers,
  affected sources, and the public.

• Delivered pioneering e-government results,
  automating administrative processes, reducing
  paper use, and providing online systems for doing
  business with  EPA.

• Achieved extremely high compliance levels, with
  100 percent compliance with the allowance
  holding requirements for S02 in 2006, and a single
  unit out of compliance for NOX.

• Reduced implementation costs by allowing sources
  to choose cost-effective compliance strategies.
After 12 years of implementation, monitoring, and
assessment, the ARP has proven to be an effective and
efficient means of meeting emission reduction goals
under the Clean Air Act (CAA). A 2005 study estimated
the program's benefits at $122 billion annually in 2010,
while cost estimates are around $3 billion annually (in
2000$).2 Despite the program's historic and projected
benefits, EPA analyses of recent studies of human
health, data from long-term monitoring networks,
and ecological assessments have revealed the need for
additional emission reductions to protect human health
and continue ecological recovery and protection. EPA
recognized the need for further S02 and NOX controls
on the power industry to address pollutant transport
problems many states face in efforts to attain National
Ambient Air Quality Standards (NAAQS) for ozone and
fine particles. The success of the acid rain trading and
NOX emission reduction programs, along with the need
for further reductions, provided the impetus for a suite
of new rules promulgated in 2005:  CAIR, the Clean Air
Visibility Rule (CAVR), and the Clean Air Mercury Rule
(CAMR).

Building on the ARP model, EPA promulgated CAIR
in the spring of 2005 to address transport of fine

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particles and ozone in the eastern United States,
CAVR to improve visibility in national parks and
wilderness areas, and CAMRto reduce nationwide
mercury emissions from coal-fired power plants.
Starting in 2009 and 2010, CAIR establishes regional
caps on S02 and NOX emissions. Annual S02 emissions
for affected eastern states are capped at 3.7 million
tons in 2010 and 2.6 million tons in 2015. Annual
NOX emissions for affected eastern states are capped
at 1.5 million tons in 2009 and 1.3 million tons in
2015. CAIR will operate concurrently with the ARR

CAVR addresses S02 and NOX power sector emissions
from non-CAIR states located in the West and parts
of New England. Affected sources under CAVR must
reduce S02 and NOX emissions that impair visibility
in national parks and wilderness areas. Notably, EPA
allows states to establish additional regional cap and
trade programs to accomplish these reductions from
power plants and other stationary sources.

CAMR establishes a national cap on mercury emissions
beginning in 2010 and utilizes a market-based cap
and trade program. Additionally, new coal-fired
power plants will be required to meet standards of
performance that limit mercury emissions. These
programs will serve as a key component of strategies
to protect human health and the environment across
the  United States into the next decade.

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From 2005 to 2006 ARP sources
reduced SO2 emissions below
10 million tons for the first
time under the program, and
NOV emissions fell to 3.4 million
   /\
tons, a decrease of nearly 50
percent from 1990 levels.


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   Origins of the Acid Rain Program
Acid deposition, more commonly known as acid
rain, occurs when emissions of sulfur dioxide (S02)
and nitrogen oxides (NOX) react with water, oxygen,
and oxidants in the atmosphere to form various
acidic compounds. Prevailing winds transport these
compounds hundreds of miles, often across state
borders, where they impair air quality and damage
public health, acidify lakes and streams, harm
sensitive forests and coastal ecosystems, degrade
visibility, and accelerate the decay of building
materials.

The Acid Rain Program (ARP), established under
Title IV of the 1990 Clean Air Act Amendments
(CAAA), requires major reductions of S02 and NOX
emissions from the electric power industry. The S02
                    program sets a permanent cap on the total amount
                    of S02 that may be emitted by electric generating
                    units (EGUs) in the contiguous United States. The
                    program is phased in, with the final 2010 S02 cap set
                    at 8.95 million tons, a level of about one-half of the
                    emissions from the power sector in 1980.

                    As seen in Figure 1, emissions of both S02 and
                    NOX have decreased markedly under the ARP while
                    combustion of fossil fuels, measured as "heat input,"
                    for electricity generation has increased significantly.

                    Using a market-based cap and trade mechanism to
                    reduce S02 emissions allows flexibility for individual
                    combustion units to select their own methods of
                    compliance. Currently, one allowance provides a
Figure 1: Trends in Electricity Generation, Fossil Energy Use, Prices, and Emissions
from the Electric Power Industry
                 60%
           OJ
           Oi
           c
           (0
           U
           C
           
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regulated unit limited authorization to emit one ton
of S02. The Clean Air Act (CAA) allocates allowances
to regulated units based on historic fuel consumption
and specific emission rates prior to the start of the
program.3 The total allowances allocated for each year
equal the S02 emission cap. The program encourages
early reductions by allowing sources to bank unused
allowances in one year and use them in a later year.

The ARP adopts a more traditional approach to
achieve NOY emission reductions. Rate-based limits
          A
apply to most of the coal-fired electric utility boilers
subject to the ARP. An owner can meet these
NOX limits on an individual unit basis or through
averaging plans involving groups of its units.

The ARP is composed of two  phases for S02 and
NOX. Phase I applied primarily to the largest coal-
fired electric generation sources from 1995-1999 for
SO, and from 1996-1999 for NOY. Phase II for both
   Z                         A
pollutants began in 2000. In 2006, the S02 Phase II
requirements applied to 3,520 units, with most of
the emissions produced by 1,062 coal-fired units. The
Phase II NOX requirements applied to 982 of those units
that have a generation capacity of 25 megawatts (MW)
or more and burned coal between 1990 and 1995.

SO2 Emission Reductions
Electric power generation is by far the largest
single source of S02 emissions in the United States,
accounting for approximately 70 percent of total S02
emissions nationwide.4

As shown in Figure 2, ARP sources have reduced
annual S02 emissions by 46 percent compared to
1980 levels and 40 percent compared to 1990 levels.
Reductions in S02 emissions from other sources
not affected by the ARP (including industrial and
commercial boilers and the metals and refining
industries) and use of cleaner fuels in residential and
commercial burners have contributed to a similar
overall decline (47 percent) in annual S02 emissions
from all sources since 1980. National S02 emissions
from all sources have fallen from nearly 26 million
tons in 1980 to less than 14 million tons in 2006 (see
).
Figure 2: SO  Emissions from Acid Rain Program Sources
     20.On
                                 19I-  13.0   13.1
                                 12.5   i—i   i—i   12.5
                                 Phase I (1995-1999) Sources  • All Affected Sources
                                 Phase II (2000 on) Sources    — Allowances Allocated
11.2 ... -me


7.0

	




10.0


	 *_
^


' 10.2
9.6


—


9.5


	
—


10.3 10.2
9.5


—


9.5


—


9.5


—

9.4
9.5


          1980   1985  1990  1995   1996  1997  1998   1999  2000  2001   2002  2003  2004   2005  2006
                                                 Year
 Source: EPA, 2007
[8]-

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Figure 3:  SO  Emissions and the Allowance Bank, 1995-2006
        25
    •w?  20
    C
    C
    o
        15
        10
             • Allowances allocated
             • Unused allowances from previous years
             - Actual emissions from affected sources
                     21.6
                            19.9
                                   18.8
                                          18.2
                                                                            17.1
                                                                                   16.4
                                                                                          15.7
                     11.7
              1995   1996
1997   1998
1999
2000   2001
  Year
2002   2003   2004    2005
2006
Source: EPA, 2007
For 2006, EPA allocated over 9.5 million S02
allowances  under the ARR Together with more
than 6.1  million unused allowances carried over (or
banked) from prior years, there were 15.7 million
allowances  available for use in 2006. Sources emitted
approximately 9.4 million tons of S02 in 2006, less
than the  allowances allocated for the year, and far less
than the total allowances available (see Figure 3).5
                       The number of banked allowances grew, from 6.1
                       million available for 2006 compliance to 6.3 million
                       available for 2007 and future years. In the next several
                       years, industry anticipation of stringent  emission
                       requirements under CAIR is expected to encourage
                       sources to pursue additional reductions. While
                       these reductions will result in an increase in banked
                       allowances, tighter retirement ratios under CAIR (that
Figure 4:  State-by-State SO  Emission Levels, 1990-2006
                                                                           I  I  SO2 Emissions in 1990
                                                                           I  I  SO2 Emissions in 1995
                                                                           ^M  SO2 Emissions in 2000
                                                                           I  I  SO2 Emissions in 2006
                                                                           Scale: Largest bar equals
                                                                           2.2 million tons of SO2
                                                                           emissions in Ohio, 1990
Source: EPA, 2007
                                                                                              -[9]

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in effect lower the S02 emission cap) will lead to
depletion  of the bank and further reduce emissions.
In 2010, the total number of Title IV allowances
allocated annually will drop to 8.95 million and remain
statutorily fixed at that annual level. Because of the
retirement ratios in the CAIR region, EPA projects that
emissions will be significantly lower than this statutory
cap. Table 1 explains in more detail the origin of the
allowances that were available for use in 2006, and
Table 3  shows how those allowances were used.

From 2005 to 2006, reductions in S02 emissions from
ARP units in 35 states and the District of Columbia
totaled  873,000 tons. Modest increases in  13 states
totaled  43,000 tons, resulting in a net national
decrease of 830,000 tons, or more than 8 percent,
for the year. Among the  states with large reductions,
12 states (Florida, Illinois, Indiana, Kansas, Kentucky,
Massachusetts, North Carolina, Nevada, New York,
Ohio, Pennsylvania, and Virginia) decreased emissions
by more than 25,000 tons each. The largest reduction
was in Ohio,  where ARP  units reduced emissions  by
more than 123,000 tons from 2005 levels.

The states with the highest emitting sources  in  1990
have seen the greatest S02 reductions during the
ARP (see Figure 4 on page 9). Most of these states
are  upwind of the areas the ARP was  designed to
protect, and  reductions have resulted  in important
environmental and health benefits over a large region.

For the 32 states and the District of Columbia that
reduced annual S02 emissions from 1990 to 2006, total
annual S02 emissions were approximately 6.7 million
tons lower in 2006 than they were in 1990. For the 16
states where  annual emissions increased from 1990 to
2006, total emissions were up by only  about 328,000
tons from 1990 levels. In  contrast, the  2006 emissions
were more than 100,000 tons less than 1990 levels in
each of 13 states: Florida, Georgia, Illinois, Indiana,
Kentucky, Massachusetts, Missouri, New York, Ohio,
Pennsylvania, Tennessee,  West Virginia, and Wisconsin.
The six states with the greatest annual reductions
Table 1:  Origin of 2006 Allowable
SO2 Emission Levels
 Initial       '  9,191,897
 Allocation   ,
 Allowance    1250,000
 Auction      i
 Opt-in        97,678
 Allowances
 Total Banked  16,116,062
 Allowances**
 The initial allocation of
i allowances is granted to
I units* based on the product
| of their historical utilization
| and emission rates specified
| in the CAA.
| The allowance auction
| provides  allowances to the
| market that were set aside in
| a Special Allowance Reserve
I when the initial allowance
| allocation was made.
| Opt-in allowances are provided
I to units entering the program
| voluntarily. There were eight
| opt-in units in 2006.
| Banked allowances accrue
| in accounts from previous
I years. These allowances were
| available for compliance in
| 2006 or any future year.
* In this report, the term "unit" means a fossil fuel-fired combustor that
  serves a generator that provides electricity for sale. The vast majority of
  S02 emissions under the program result from coal-fired generation units,
  but oil and natural gas units are also included in the program.
** Total banked allowances are adjusted from the 2005 Progress Report
   to account for additional deductions made for electronic data reporting
   (EDR) resubmissions after 2005 reconciliation was completed.
Source: EPA, 2007

include Ohio, which decreased emissions by 1.3 million
tons, and Illinois, Indiana, Missouri, Tennessee,  and
West Virginia, each of which reduced emissions by
more than 500,000 tons per year.
"10}"

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 Why SO2 Emissions Decreased

 Sharply in 2006
For the first time under the ARP, S02 emissions in 2006 fell below 10
million tons. Overall reductions from 2005 were over 830,000 tons
(see Table 2). This decrease stemmed from a number of factors:

• Heat input (measured in million British thermal units (mmBtu))
  dropped for oil-fired units, with a comparable increase in heat
  input from gas-fired units as well as much less oil use at dual fuel
  units classified as gas-fired units. Switching from oil to gas reduces
  S02 because oil is higher in sulfur content than natural gas. Fuel
  switching resulted in about a 243,000-ton S02 reduction from oil
  and gas units combined.
  Emissions from coal-fired ui
  Reductions came from botr
  installed flue qas desulfuriz.
ecreased by about 593,000 tons.
ontrolled units and those with
equipment (scrubbers).
  • Reductions in heat input and the S02 emission rate of units
    without scrubbers resulted in a decrease of about 412,000 tons
    of S02 emissions. Overall heat input for these units was down
    2.1 percent, but the overall emission rate was down even more,
    about 3.5 percent. The emission rate decline may be partially
    attributable to early CAIR compliance planning.

  • Units equipped with scrubbers (either in both 2005 and 2006, or
    just 2006) caused a decrease in S02 emissions of about 182,000
    tons. Heat input to these units declined by less than 1  percent,
    but their emission rate dropped nearly 11 percent, reflecting the
    addition  of several scrubbers on previously uncontrolled units.
    Some of the scrubber installations were expected as a result of
    existing state or federal actions. Others appear to be part of an
    early compliance response to CAIR.

• Overall, about 650 coal units had at least some decrease in mass
  emissions due to reduced heat input, reduced emission rate, or both.

Table 2:  SO2, NOX, and  Heat Input  Trends in
Acid Rain Program Units, by Fuel Type
                        S02    NOX  HI    S02   NOX   HI
                           i.   I   A I     I    L  \    A I
Notes: All emission data are in thousand tons and all heat input data are in
billion mmBtu. Totals may not reflect individual rows due to rounding. Fuel type
represents primary fuel type, and many units may combust more than one fuel.

Source: EPA, 2007
SO2  Program  Compliance
Approximately 9.4 million allowances were
deducted from sources' accounts in 2006 to
cover emissions. Table 3 displays these allowance
deductions, as well as the remaining banked
allowances from  1995 through  2006. In 2006,
all ARP facilities were in compliance with the
S02 allowance holding requirements.  Title IV set
a penalty of $2,000 per ton in 1990, which is
adjusted annually for inflation. The 2006 penalty
level was set at $3,152 per excess ton. The ARP's
cap and trade approach offers emission sources
the flexibility to comply with regulations using
their choice of the most cost-effective strategies
available. Since the program's inception,
the compliance rate has consistently been
extraordinarily high.

Table 3:  SO2 Allowance  Reconciliation
Summary, 2006
                                                             Total Allowances Held (1995-2006 Vintages)* 15,655,637
                                                             Facility Accounts**                             12,483,262
                                                             General Accounts*
                                                             Allowances Deducted for Emissions"
                                                                                                       3,172,375
                                                                        9,392,922
                                                             Penalty Allowance Deductions (2007 Vintage)          0
                                                             Banked Allowances                        6,262,715
                                                             Facility Accounts
                                                                          3,090,340
                                                             General Accounts
                                                                                                       3,172,375
                               * The allowance transfer deadline is March 1 of the year following
                                 the compliance year. At this point, facility accounts are frozen,
                                 and no further transfers of allowances are recorded. The freeze on
                                 accounts is removed when the annual reconciliation is complete.

                               ** From 1995 through 2005, EPA reconciled emissions and
                                  allowances for compliance under the ARP separately
                                  for each unit.  In 2006, EPA began reconciling emissions
                                  and allowances at the facility level for compliance purposes.

                               *** General accounts that are not subject to reconciliation can
                                   be established in the Allowance Tracking System (ATS) by any
                                   utility, individual, or other organization.

                               **** Includes 489 allowances deducted from opt-in sources for
                                    reduced utilization.

                               Source: EPA, 2007
                                                                                                         -[11]

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SO2 Allowance  Market
Figure 5 shows the cumulative volume of S02
allowances transferred under the ARR The figure
differentiates between allowances transferred in
private transactions and those annually allocated
and transferred to sources' accounts by EPA. Private
transactions are indicative of both market interest
and use of allowances as a compliance strategy.
Of the nearly 330 million allowances transferred
since 1994, about 68 percent were traded in private
transactions. In December 2001, parties began to use
a system developed by EPA to allow online allowance
transfers. In 2006, account holders registered about
94 percent of all private allowance transfers through
EPA's online transfer system.6

In 2006, nearly 6,400 private allowance transfers
(moving roughly 22.4 million allowances of past,
current, and future vintages) were recorded in the
EPA Allowance Tracking System  (ATS). About 9.5
million (42 percent) were transferred in economically
significant transactions (i.e., between economically
unrelated parties). Transfers between economically
unrelated parties are "arm's length"  transactions
and are considered a better indicator of an active,
functioning market than are transactions among the
various units of a given company.
                                         In the majority of all private transfers, allowances
                                         were acquired by power companies. Figure 6 shows
                                         the annual volume of S02 allowances transferred
                                         under the ARP (excluding allocations, retirements,
                                         and other transfers by EPA) since official recording
                                         of transfers began in 1994. Note that the volume
                                         of private transfers recorded in 2006 rose for the
                                         second straight year and returned to levels not seen
                                         since 2000-2001. Market liquidity had declined due
                                         to an overall contraction in the related electricity
                                         markets following disruptions precipitated by events
                                         such as the collapse of Enron in late 2001.
Figure 5: Cumulative SO  Allowances Transferred through 2006
    C
    o
    
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Figure 6:  SO Allowances Transferred under the Acid Rain Program
Irt  30-°
 §  25-° H
=  20.0 -
•S  15.0 -
 1 55 MW |
! Wet Bottom > 65 MW i
'Vertically Fired
I Total All Units
Source: EPA, 2007
0.45
0.50
0.40
0.46
0.68
0.86
0.84
0.80
n/a

132 |
113 |
301 |
295 |
37 |
54
24
26
982 !

                                                                                          13

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Figure 7: NO  Emission Trends for Acid Rain Program Units, 1990-2006
                  6.1     5.9     6.0    6.0
                                             5.5
                                                    5.1
                                                                 4.5
                                                                       4.2
                                                                              3.8     3.6
                                                                                           3.4
           1990
1995    1996   1997   1998   1999   2000    2001   2002   2003    2004   2005   2006
                                 Year
NO Program Affected Sources       D Title IV Sources Not Affected for NOx
Source: EPA, 2007
Figure 8:  State-by-State NO Emission Levels for Acid Rain Program Sources, 1990-2006
                                                                         NOx Emissions in 1990
                                                                         NOx Emissions in 1995
                                                                     ^| NOx Emissions in 2000
                                                                     |   | NOx Emissions in 2006

                                                                     Scale: Largest bar equals 500
                                                                     thousand tons of NOx emissions
                                                                     in Ohio, 1990
                                                                     Note: NBP states shaded in gray
Source: EPA, 2007
 14

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was responsible for a large portion of these annual
NOX reductions, other programs—such as the Ozone
Transport Commission (OTC), NOX Budget Trading
Program (NBP) under EPA's NOX State Implementation
Plan (SIP) Call, and other regional  NOX emission
control programs—also contributed significantly to
the NOX reductions achieved by sources in 2006.

From 2005 to 2006,  NOY emissions from ARP units
                     A
dropped by 224,000 tons, a net decrease of more
than 6 percent. Thirty-six states and the District of
Columbia reduced 2006 NOX emissions by 247,000
tons below 2005 levels. Of these states, Alabama,
Florida, Iowa, Louisiana, Nevada, New York, and Ohio
reduced their NOX emissions by more than 10,000
tons each from 2005 levels. Twelve states had modest
increases  in  NOX emissions in 2006, totaling 23,000
tons above 2005 levels.

As with S02, the states with the highest N0x-emitting
sources in 1990 tended to see the  greatest power
plant NOX emission reductions (see Figure 8). The
sum of reductions in the 41 states  and the District of
Columbia that had lower annual NOV emissions in
                                A
2006 than in 1990 was approximately 3 million tons,
   Role  of Seasonal  NOV
                               A
   Control  Programs in
   Reducing Annual  Emissions
   States subject to EPA's 1998 NOX SIP Call have achieved
   significant reductions in ozone season NOX emissions sin
   the baseline vears 1990 and 2000. All of these states ha
  implemented under the CAAA, with many of them
  reducing their emissions by more than half since 1990. A
  significant portion of these decreases in NOX emissions has
  been achieved since 2000, largely as a result of reductions
  under the OTC program and NBP. With the CAIR ozone
  season NOX program taking effect in 2009, further
  emission declines will occur across the region through the
  year 2020. For NBP compliance reports, see:
  .
while the sum of increases in the seven states that had
higher annual NOX emissions in 2006 than in 1990
was much smaller, about 37,000 tons. Nine of the
13 states with NOY emission decreases of more than
                A
100,000 tons were in the Ohio River Basin.
The ARP requires program participants to measure,
record, and report emissions using continuous
emission monitoring systems (CEMS) or an approved
alternative measurement method. The vast majority
of emissions are monitored with CEMS while the
alternatives provide an efficient means of monitoring
emissions from the large universe of units with lower
overall mass emissions. Figures 9 and 10 on page
17 show the number of units with and without S02
CEMS for various fuel types, as well as the amount of
S02 emissions monitored using CEMS.

CEMS and approved alternatives are a cornerstone
of the ARP's accountability and transparency. Since
the program's inception in 1995, affected sources
have met stringent monitor quality assurance
and control requirements, and reported hourly
emission data in quarterly electronic reports to EPA.
Using automated software  audits, EPA rigorously
                                                                                              15!

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checks the completeness, quality, and integrity of
these data. All emission data are available to the
public on the Data and Maps Web site maintained
by EPA's Clean Air Markets Division (CAMD) at
. The
site also provides access to other data associated
with emission trading programs, including reports,
queries, maps, charts,  and file downloads covering
source information, emissions,  allowances, program
compliance, and air quality.

The emission monitoring requirements for the ARP are
found in 40 CFR Part 75. These provisions are also re-
quired for participation  in the NBR The Part 75 require-
ments will also be used in the future to implement
CAIRandCAMR.
Emissions Collection and
Monitoring Plan  System
(ECMPS)

CAMD is reengineering the way the regulated community
maintains, evaluates, and submits monitoring plans, quality
assurance (QA) certifications, and quarterly emission data.
An important tool in this effort is the Emissions Collection
and Monitoring Plan System (ECMPS). ECMPS will replace
the current processes and multiple software tools used for
evaluating, submitting, and receiving the data.    '""
be available for use in 2008, but will be required for all
sources beginning in 2009.

CAMD's goals for the ECMPS project include:
   Creating a single desktop tool for
   to import and evaluate their data
»  Creating a new data reporting format based on the
   flexible XML (Extensible Markup Language) standard.

»  Creating a centralized database at CAMD for receiving
   and maintaining submitted data. The desktop tool has
   direct access to this database.

»  Providing users with the ability to assure the quality
   of data prior to submission and receive one set of
   evaluation results (feedback).
       taminq selec
                          ie of the electronic data
   Developing and implementing new security
 16

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Figure 9: SO2 Monitoring Methodology for the Acid Rain Program, Number of Units


                                      • 13
                                                             1,062
                     • 2,158
                                                             168n
Coal Units w/ CEMS   • Oil Units w/o CEMS

Gas Units w/o CEMS  D Gas Units w/ CEMS
                                            Oil Units w/ CEMS         D Other Fuel Units w/ CEMS

                                            Other Fuel Units w/o CEMS
Note: "Other fuel units" include units that in 2006 combusted primarily wood, waste, or other non-fossil fuel. The total number of units in Figure 9
excludes 64 affected units that did not operate in 2006.

Source: EPA, 2007
Figure 10:  Monitoring Methodology for the Acid Rain Program, Total SO2 Mass


                                        • 0.40%
                                                   *
                                                      1.18%
                          98.41 %
            Coal Units w/CEMS
                          D All Other Units w/CEMS
All Other Units w/o CEMS
Note: Percentages do not add to 100 percent due to rounding.

Source: EPA, 2007
                                                                                            -[17]

-------
Emission reductions attributed
to the ARP have helped reduce
wet sulfate acid deposition by
up to 35 percent since the late
1980s in some eastern regions
of the United States.

       ——s» JT^^^^'WWPBMfttS^^^fc^^^^^^

-------
   Status and Trends in Air Quality, Acid Deposition,
   and Ecological Effects
The emission reductions achieved under the ARP
have led to important environmental and public
health benefits. These include improvements in air
quality with significant benefits to human health;
reductions in acid deposition; the beginnings of
recovery from acidification in fresh water lakes and
streams; improvements in visibility; and reduced risk
to forests, materials, and structures.  Table 5 on page
20 shows the regional changes in key air quality and
atmospheric deposition measurements linked to
the ARP's SO, and NOY emission  reductions.
           Z       A
To evaluate the impact of emission reductions on
the environment, scientists and policymakers use
data collected from long-term national monitoring
networks such as the Clean Air Status and Trends
Network (CASTNET) and the National Atmospheric
Deposition Program/National Trends Network (NADP/
NTN). These complementary, long-term monitoring
networks provide information on a variety of indicators
necessary for tracking temporal and spatial trends in
regional air quality and acid deposition (see Table 6  on
page 21).

CASTNET provides atmospheric data on the dry
deposition component of total acid deposition,
ground-level ozone, and other forms of atmospheric
pollution. Established in 1987, CASTNET now
consists of 87 sites across the United States. EPA's
Office of Air and Radiation operates most of the
monitoring stations; the National Park Service (NPS)
funds and operates approximately 30 stations in
cooperation with EPA. Many CASTNET sites have
a continuous 20-year data record, reflecting EPA's
commitment to long-term environmental monitoring.
Information and data from CASTNET are available at
.

NADP/NTN is a nationwide, long-term network
tracking the chemistry of precipitation. NADP/NTN
offers data on hydrogen (acidity as pH), sulfate,
nitrate, ammonium, chloride, and base cations.
The network is a cooperative effort involving many
groups, including the State Agricultural Experiment
Stations, U.S. Geological Survey, U.S. Department
of Agriculture, EPA, NPS, the National Oceanic and
Atmospheric Administration (NOAA), and other
governmental and private entities. NADP/NTN has
grown from 22 stations at the end of 1978 to more
than 250 sites spanning the continental United
States, Alaska, Puerto Rico, and the Virgin Islands.
Information and data from NADP/NTN are available at
.
                                                                                           19]

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While CASTNET provides ambient air quality data,
EPA also uses data from other ambient monitoring
networks, including the State and Local Ambient
Monitoring and National Ambient Monitoring
Systems (SLAMS/NAMS). These networks are used to
document National Ambient Air Quality Standards
(NAAQS) attainment and show trends in ambient air
quality overtime.
Table 5: Regional Changes in Air Quality and Deposition of Sulfur and Nitrogen,
1989-1991 versus 2004-2006 (From Rural Monitoring Networks)
Ambient S02
Concentration (ug/m3)


Wet Sulfate
Concentration (mg/L)


Ambient Sulfate
Concentration (ug/m3)


Wet Sulfate
Deposition (kg/ha)


Wet Inorganic
Nitrogen Deposition
(kg/ha)

Wet Nitrate
Concentration (mg/L)


Ambient Nitrate
Concentration (ug/m3)


Total Ambient Nitrate
Concentration (Nitrate
+ Nitric Acid) (ug/m3)


Mid-Atlantic
Midwest
Northeast
: Southeast
Mid-Atlantic
Midwest
Northeast
Southeast
Mid-Atlantic
Midwest
Northeast
Southeast
Mid-Atlantic
Midwest
Northeast
Southeast
Mid-Atlantic
Midwest
Northeast
Southeast
Mid-Atlantic
Midwest
Northeast
Southeast
Mid-Atlantic
Midwest
; Northeast
Southeast
: Mid-Atlantic
Midwest
Northeast
Southeast
" 	 ———— 	
10.0
6.7
	 	 5.2 	
2.3
2.2
	 i.9 	
1.3
6.2
	 5.4 	
3.8
5.4
	 26"8 	
22.3
22.2
	 18/1 	
5.9
5.9
	 55 	
4.3
1.5
	 15 	
1.4
0.8
0.8
2.1
0.4
	 06 	
3.2
	 40 	
	 i~9 	
2.2
*Percent change is estimated from raw measurement data, not rounded; refined techniques for measuring and calculating pe
	 """"""7* ~ ""** 	
5.1
2.8
	 3.3 	
1.6
1.5
	 1.1 	
1.1
4.4
	 3.6 	
2.4
4.1
	 'i'g.i 	
14.9
14.5
	 143 	
5.0
5.4
	 41 	
4.1
1.0
	 i7 	
0.8
0.7
0.7
1.7
0.4
	 67 	
2.5
	 37 	
	 1A 	
2.0

-39
-49
-58
	 -37 	
-31
-33
-40
-18
-29
	 -34 	
-37
-24
	 -28 	
-33
-35
	 -2?* 	
-16*
-9*
	 -25* 	
-5*
-30
	 -17 	
-38
-10
-1*
-18
3*
	 17 	
-20*
	 -20* 	
	 -26* 	
-7*
centages yield values that are at or below the sensitivity of the method may not be
significant due to the combination of margin of error and spatial averaging.
Source: CASTNET and NADP/NTN, 2007
 20

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Table 6:  Air Quality and Acid  Deposition Measures
 Sulfur Dioxide  S02        X
Primary precursor of wet and dry acid deposition; primary precursor to
fine particles in many regions.
 Sulfate Ion     SO,
 Nitrate Ion     N03        X
Major contributor to wet acid deposition; major component of fine
particles in the Midwest and East; can be transported over large
distances; formed from reaction of S02 in the atmosphere.

Contributor to acid and nitrogen wet deposition; major component of fine
particles in urban areas; formed from reaction of NOX in the atmosphere.
 Nitric Acid     HN03      X
Strong acid and major component of dry nitrogen deposition; formed as
a secondary product from NOX in the atmosphere.
 Ammonium
 Ion
Contributor to wet and dry nitrogen deposition; major component of
fine particles; provides neutralizing role for acidic compounds; formed
from ammonia gas in the atmosphere.
 Ionic
 Hydrogen
Indicator of acidity in precipitation; formed from the reaction of sulfate
and nitrate in water.
 Calcium       Ca2+       X         X
 Magnesium    Mg2+       X         X
 Potassium     K+         X         X
 Sodium        Na+        X         X

Source: EPA, 2007
These base cations neutralize acidic compounds in precipitation and
the environment; also play a major role in plant nutrition and soil
productivity.
                                                                                                            21

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   Accountability and  the ARP:  Assessing Ecological Response
   to track, assess, and report on the trends and conditions in
   the environment as they respond to program implementation
   and emission reductions.
   The data collected through air monitoring networks, such
   as CASTNET and NADP, provide a picture of changes in
   air quality and pollutant deposition as a result of emission
   reductions achieved by the ARP (see Figure 11). However,
   to assess the ecological impact of the ARP,  EPA must go a
   step further and look at how changes in pollutant deposition
   correspond to changes in  ecosystem conditions. This step
   requires examining the trends and conditions of ecosystems
   that are susceptible to changes in pollutant deposition and,
   specifically, studying a few key ecological indicators that can
   be used to represent ecosystem response and recovery.

   EPA's Temporally Integrated Monitoring of I
   and Long-Term Monitoring (LTM) programs  are designed to
   detect trends in the chemistry of lakes or streams in regions
   sensitive to acid deposition. TIME/LTM monitors a total of
   145 lakes and  147 streams, representing all  of the major acid
   sensitive regions of the northern and eastern United States
   (New England; Adirondack Mountains; northern Appalachian
   Plateau, including the Catskill Mountains; and  the Ridge/Blue
   Ridge Provinces of Virginia) (see Figure 11). TIME/LTM measures
   a variety of important chemical characteristics, including acid
   neutralizing capacity (ANC), pH, sulfate,  nitrate, major cations
   (e.g., calcium and magnesium), and aluminum. The TIME
   program is the most coherent individual  regional dataset for
   this kind of analysis. In addition, the U.S. Geological Survey
   has been measuring surface water quality at several research
   watersheds throughout the United States, where sample
   collection  during hydrologic events and ancillary data on
   other watershed characteristics have been used to assess the
   watershed processes controlling acidification of surface waters.
                To determine whether decreased emissions have had the
                intended effect of reducing impacts of acid deposition on
                            PA links emission trends with data from the
                CASTNET and NADP networks and the TIME/LTM programs.
                Combining these links in the "chain of accountability"
                allows EPA to determine whether emission reductions, and
                consequent reductions in pollutant deposition, translate into
                ecological response (i.e., changes in surface water quality
                necessary to  protect fish and other aquatic organisms). This
                integration of data enables EPA to assess the effectiveness
                of the ARP in meeting its goal of protecting ecosystems by
                reducing the adverse effects of acid deposition.
                Without long-term monitoring of atmospheric deposition anc
                lake and stream chemistry, EPA would not be able to assess
                the ecological response to the emission reductions achieved
                by the ARP. Such monitoring networks are critical for tracking
                the progress made in restoring and/or protecting sensitive
                ecosystems under regulatory programs and informing future
                policy decisions.
  Figure 11:  National Deposition and Surface Water Monitoring Sites
    Total Acid Deposition
    • Spatial Patterns
    • Long-term Trends     |
    Source: EPA, 2007
                                               CAAA Title IV Emission
                                                    Reductions
          ARP
Development & Implementation
                                              Accountability/Monitoring
Reports to Congress and Public
• How do emission reductions correlate
  with decreases in deposition?
• Are surface waters recovering?
• Are we meeting the goals?
• Are additional reductions necessary?
[22]-

-------
In March 2005, EPA promulgated CAMR to reduce
mercury emissions from power plants by 2010. In
conjunction with CAIR, mercury emission reductions
under CAMR are expected to reduce atmospheric
concentrations and deposition of mercury. Cutting
mercury emissions would also translate to reductions
in methylmercury contamination in fish, particularly
in mercury-sensitive watersheds throughout many
parts of the United States. This reduction  would
improve the  health of people and wildlife that con-
sume fish from these waters. These reductions will be
achieved through implementation of a combination
of independently operated state programs plus an
interstate emission  cap and trade program modeled
after the ARR

In order to assess the efficacy of these emerging
regulatory programs, scientific information is needed,
including a more complete understanding of the fate
of mercury emissions with respect to total (i.e., wet
and dry) deposition, a quantifiable assessment of the
sources contributing to mercury deposition (especially
coal-fired power plant emissions), and an assessment
as to whether or not mercury "hotspots" exist or
may develop over the course of implementing the
mercury rules. At present, EPA lacks the ambient
mercury concentration and deposition data,
particularly on dry deposition in source-impacted
areas, to adequately assess the atmospheric mercury
changes anticipated from the regulatory programs.
In addition, mercury atmospheric data are needed to
evaluate  and improve mercury model estimates and
to facilitate source apportionment analyses.

To meet some of these data needs, EPA is
collaborating with NADP, as  well as other federal
agencies, states, tribes, academic institutions,
industry,  and other organizations to establish
a new, coordinated network for monitoring
atmospheric mercury species. The network will
measure air concentrations of mercury in its gaseous
and particulate forms, event-based mercury wet
deposition, and meteorological  and land-cover
variables needed for estimating dry deposition fluxes.
When fully implemented, the network will serve
many functions, including:

• Facilitate the calculation of wet, dry, and total
  mercury deposition.

• Provide data for evaluating predictive and
  diagnostic models and for assessing source-
  receptor relationships.

• Build a data set for analyzing  spatial and temporal
  trends of ambient mercury concentrations and wet
  deposition in selected locations.

The network will consist of monitoring stations with
a broad range of classifications, including rural,
suburban, and urban; near-source/high-emissions;
sensitive ecosystems; and regionally representative.
Stations will adopt standard operational procedures
based on methods developed from EPA and other
research efforts. Data will be quality-assured and
accessible online. For more information about this
effort, please visit the NADP mercury initiative Web
site at .
                                                                                               23

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   Emerging Issues:  Remote
   Assessment Methods
   Satellite observations and other remote sensing technologies
   are emerging as potentially useful new techniques for
   understanding atmospheric chemistry and analyzing changes
   in atmospheric pollutant concentrations. For example, the
   NASA EOS Aura orbiting satellite platform launched in
   2004 includes the Ozone Monitoring Instrument (OMI).7
   Researchers have developed an algorithm using the output
   of this instrument to observe from space the signal of S02
   gases in the atmosphere near the ground. Using weekly,
   monthly, or annual average S02 concentrations observed by
   this instrument, maps of degassing and air pollution stationary
   sources can be generated. S02 emissions have been measured
   by OMI over known sources of air pollution, such  as the Ohio
   River Valley (see Figure 12).

   Figure 12:  Two-Year Average SO2
   Burdens over the Ohio River Valley
Air Quality
Data collected from monitoring networks show
that the decline in S02 emissions from the power
industry has improved air quality.10 Based on EPA's
latest air emission trends data located at , the national
composite average of S02 annual mean ambient
concentrations decreased 53 percent between
1990 and 2006 as shown in Figure 13. The largest
single-year  reduction  (21 percent) occurred in the
first year of the ARP, between 1994 and 1995.

These trends are consistent with the ambient trends
observed in the CASTNET network. During the
late 1990s,  following implementation of Phase I of
the ARP, dramatic regional improvements in S02
and ambient sulfate concentrations were observed
at CASTNET sites throughout the eastern United
States,  due  to the large reductions in S02 emissions
from ARP sources. Analyses of regional monitoring
data from CASTNET show the geographic pattern
of S02  and  airborne sulfate in the eastern United
States.  Three-year mean  annual concentrations
of S02  and  sulfate from CASTNET long-term
monitoring  sites are compared from 1989-1991
and 2004-2006 in both tabular form and graphic-
ally in maps (see Table 5  on page 20 and Figures
17a through 18b on page 28).

The map in  Figure 17a shows that from 1989-1991,
prior to implementation of Phase I of the ARP,
the highest  ambient concentrations of S02 in the
East were observed in western Pennsylvania and
along the Ohio River Valley. Figure 17b indicates a
significant decline in those concentrations in nearly
all affected  areas after implementation of the ARP
and other programs.

Before  the ARP,  in 1989-1991, the highest ambient
sulfate  concentrations, greater than 7 micrograms
per cubic meter (ug/m3), were also observed in
[24]-

-------
western Pennsylvania, along the Ohio River Valley,
and in northern Alabama. Most of the eastern
United States experienced annual ambient sulfate
concentrations greater than 5 ug/m3. Like S02
concentrations, ambient sulfate concentrations have
decreased since the program was implemented, with
average concentrations decreasing 35 percent in all
regions of the East (see Table 7 on page 27). Both
the size of the affected region and magnitude of the
highest concentrations have dramatically declined,
with the largest decreases observed along the Ohio
River Valley (see Figures 18a and 18b on page 28).
Figure 13:  National SO2 Air Quality, 1990-2006 (Based on Annual Arithmetic
Average)
    a
    a
     *,
    c
   _o
   ".p
    (0
   +-•
    c
    0)
    u
    c
    o
   u
   +-•
    c
    0)
   !5
    E
   O
   to
        0.04-
0.03-
0.02-
0.01-
        0.00
                                            National Ambient Air Quality Standard
                                     10% of sites have concentrations above this line.
                 i     i     i     i     i     i     i     i     i     i     i    i     i     i     i     r
           1990  1991  1992  1993  1994 1995 1996 1997 1998 1999 2000  2001  2002  2003  2004  2005 2006
                                                 Year
Source: EPA, 2007
                                                                                              25

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Emerging Issues: Trends in Sulfate

Concentrations

Since S02 is a precursor to the formation of sulfate, reductions
in S02 emissions under the ARP were expected to translate into
similar reductions in sulfate. Although there is an observed
downward trend in the ambient concentration of sulfate since
the implementation of the ARP, these reductions have not been
as dramatic as those observed for S02 emissions and ambient
S02 concentrations.

The ARP was established to reduce emissions of the two key
contributors to the formation of acid deposition, S02 and NOX.
As discussed earlier, S02 and NOX emissions can react in the
atmosphere to form fine particulates which are harmful to the
human respiratory system and damaging to sensitive ecosystems.
Sulfate particles are formed after gaseous S02 is emitted and
oxidized by hydroxyl radical ions. Sulfate particles can then
be deposited on the surface (dry deposition) or the particles
can react with H202 or 03 in clouds or fog to form sulfuric acid
(H2S04). Sulfuric acid in wet deposition is known as acid rain.

                                                              In order to assess environmental results of the ARP, air quality
                                                              monitoring networks, such as CASTNET, were established to
                                                              measure ambient concentrations of S02 and sulfate. These data,
                                                              combined with S02 emission data from CEMS at ARP-affected
                                                              sources, provide an idea of how emission reductions under the
                                                              ARP are translating into reductions in acid deposition over time
                                                              (see Figures 14 through 16 and Table 7).
     Figure 14:  Trends in Regional Annual SO2        Figure 15:  Trends in Regional SO2 Ambient
     Emissions (Coal-fired, Acid Rain Program Units) Concentrations (CASTNET Sites)
                          Y
                              Regional SO2 Emissions (tons)
                              from CEMS Measurements


                              ^JJ 6,400 tons

                              ^H Pre CAAA: 1935

                              ^H Phase I: 1996-1999
                              EIZI Phase II: 2003-2006
Regional SO2
Concentrations (ug/m3)
from CASTNET Measurements

^^|J? ug/m3

|   | Pre CAAA: 1987-1990
^^ Pre-ARP: 1993-1994
^f Phase I: 1996-1999
   I Phase II: 2003-2006
      Source: EPA, 2007
                                                               Source: EPA, 2007
[26]-

-------
Further study is necessary to understand the cause of annual
changes in ambient sulfate concentrations. A study of
meteorological data and multiple species data, such as ozone
and ammonia ion concentrations, might provide insight into
the factors influencing the rate of sulfate formation and what,
if any, additional sources or pollutants might be responsible for
the trends in sulfate concentrations in air quality.
Figure 16:  Trends in Regional Ambient
Sulfate Concentrations (CASTNET Sites)
                                                                       N  y
                                                                       y
                                                                               Average Regional SO4
                                                                               Concentrations (ug/m3)
                                                                               from CASTNET Measurements
                                                                                     PreCAAA: 1987-1990
                                                                                     Pre-ARP: 1993-1994
                                                                                     Phase I: 1996-1999
                                                                                     Phase II: 2003-2006
                                                                         V
                                                      Source: EPA, 2007
Table 7:  Summary of Regional Trends Data (SO2 Emissions and Ambient SO2
and Sulfate Concentrations)
       Region
                      Change in SO  Emissions     Change in SO  Concentration
                                                        1987-1990
                           Change in Sulfate
                            Concentration
                              1987-1990
                            2003-2006
  2003-2006
2003-2006
Northeast
Midwest
Mid-Atlantic
Southeast
Total Change in East
-79%
-68%
-58%
-66%
-67%
-64%
-50%
-44%
-40%
-50%
-43%
-38%
-33%
-29%
-35%
* Data are not available for 1987-1989; therefore, 1985 is used for this comparison.

Source: EPA, 2007; CASTNET, 2007
                                                                                                        -[27]

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Figure 17a: Annual Mean Ambient SO2
Concentration, 1989-1991
Source: CASTNET
Figure 17b: Annual Mean Ambient SO2
Concentration, 2004-2006
                                           Source: CASTNET
Figure 18a: Annual Mean Ambient Sulfate Figure 18b: Annual Mean Ambient Sulfate
Concentration, 1989-1991                  Concentration, 2004-2006
:
Source: CASTNET
Note: For maps depicting these trends for the entire continental United States, see maps available at .
[28]-

-------
NOX
Although the ARP has met its NOX emission
reduction targets, emissions from other sources
(such as motor vehicles and agriculture) have led to
increased ambient nitrate concentrations in some
areas. NOX levels can also be affected by emissions
transported via air currents over wide regions.11 From
2004 through 2006, reduced ozone season NOX
emissions from power plants under the NOX SIP Call
led to more significant region-specific improvements
in some indicators than have been seen in previous
years. For instance, annual mean ambient nitrate
concentrations for 2004-2006 decreased in the
Midwest by nearly 20 percent from the annual
mean concentration in 1989-1991 (see Figures
19aand 19b). While these improvements maybe
partly attributed to added NOX controls installed for
compliance with the NOX SIP Call, the findings at this
time are not conclusive.
Figure 19a: Annual Mean Total Nitrate      Figure 19b: Annual Mean Total Nitrate
Ambient Concentration, 1989-1991          Ambient Concentration, 2004-2006
 Source: CASTNET
                                                Source: CASTNET
Note: For maps depicting these trends for the entire continental United States, see maps available at .
                                                                                          -[29]

-------
Acid Deposition
NADP/NTN monitoring data show significant
improvements in some deposition indicators. For
example, wet sulfate deposition (sulfate that falls
to the earth through rain, snow, and fog) has
decreased since the implementation of the ARP in
much of the Ohio River Valley and northeastern
United States. Some of the greatest reductions
have occurred in the mid-Appalachian region,
including Maryland, New York, West Virginia,
Virginia, and most of Pennsylvania. Other less
dramatic reductions have been observed across
much of New England, portions of the southern
Appalachian Mountains, and some areas of the
Midwest. Between the 1989-1991 and 2004-2006
observation periods, average decreases in wet
deposition of sulfate averaged around 30 percent
for the eastern United States (see Table 5 on page
20 and Figures 20a and 20b). Along with wet
sulfate deposition, wet sulfate concentrations have
also decreased  significantly. Since the 1989-1991
period, average levels decreased 40 percent in the
Northeast, 31 percent in the Mid-Atlantic, and
33 percent in the Midwest. A strong correlation
between large-scale S02 emission reductions
and large reductions in sulfate concentrations in
precipitation has been noted in the Northeast, one
of the areas most affected by acid deposition.
Figure 20a: Annual Mean Wet Sulfate
Deposition, 1989-1991
Source: NADP
Figure 20b: Annual Mean Wet Sulfate
Deposition, 2004-2006
                                                Note: For maps depicting these data for the entire continental United States,
                                                see maps available at .
[30]-

-------
Figure 21 a:  Annual Mean Wet Inorganic
Nitrogen Deposition, 1989-1991
I^

Source: NADP
Figure 21 b: Annual Mean Wet Inorganic
Nitrogen Deposition, 2004-2006
 Source: NADP
A principal reason for reduced concentrations of
sulfate in precipitation in the Northeast is a reduction
in the long-range transport of sulfate from emission
sources located in the Ohio River Valley. The reductions
in sulfate documented in the  Northeast, particularly
across New England and portions of New York, were
also affected by S02 emission reductions in eastern
Canada. NADP data indicate that similar reductions in
precipitation acidity, expressed as hydrogen ion (H+)
concentrations, occurred concurrently with sulfate
reductions, but have not decreased as dramatically
due to a simultaneous decline in acid-neutralizing
base cations, which act to buffer acidity.

Reductions in nitrogen deposition recorded since the
early 1990s have been less pronounced than those
for sulfur. As noted earlier, emission trends from
source categories other than ARP sources significantly
affect air concentrations and deposition of nitrogen.
Inorganic nitrogen deposition decreased modestly in
the Mid-Atlantic and Northeast but remained virtually
unchanged in other regions (see Figures 21a  and 21b).
Note: For maps depicting these data for the entire continental United States,
see maps available at .
                                                                                               -[31]

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   Emerging  Issues: Using Critical  Loads to  Assess  Ecosystem  Health
   A critical load is a quantitative estimate of the exposure to
   one or more pollutants below which significant harmful
   effects on specific sensitive elements of the environment do
      -From the 1988 United Nations Economic Commission
      for Europe (UNECE) Protocol Concerning the Control
      of Nitrogen Oxides or Their Transboundary Fluxes.
      Accepted by the United States in July 1989.

   Recommendations in separate reports of the National
   Research Council (NRC) and the federal Clean Air Act
   Advisory Committee (CAAAC) urge EPA to expand its
   ecosystem protection capacities by exploring issues such
   as the use of critical loads in the development of
   secondary NAAQS.

   The NRC formed a Committee on Air Quality Management
   to examine the role of science and technology in the
   implementation of the CAA and to recommend ways in
   which the scientific and technical foundations for air quality
   findings and recommendations to EPA, the NRC Committee
   pointed out the need for alternative air quality standards to
   protect ecosystems and recommended investigating the use of
   critical loads as a potential mechanism to address this need.12
   CAAAC echoed the recommendation to examine critical  loads
   as a useful tool for ecosystem protection in its 2005 report
   to EPA.13

   Critical loads provide a science-based tool for managers
   and policymakers to assess the progress made by federal
   air emission reduction programs, evaluate the impact of
   potential  new emission sources in federally protected areas,
   and manage  sensitive natural resources where air pollution
   and other disturbances occur. Critical loads were first
   developed and applied in Europe to address the impacts
   of acid deposition associated with S02 and NOX emissions.
   The UNECE Convention on Long-Range Transboundary Air
   Pollution was signed in 1 979. Critical loads were adopted
   in 1988 as part of the protocol process to address the
   effects of air  pollution on ecosystems, human health,
   and cultural resources.
   In North America, the concept of critical loads was applied
   in the 1 960s with the first Great Lakes Water Quality
   Agreement, which set lake phosphorus loading limits to
reduce eutrophication. Canada established the first critical
load for air pollution in the 1980s (for wet sulfate deposition)
as part of a U.S.-Canada memorandum on transboundary
air pollution.  Although the United States was a signatory to
the memorandum, critical loads were not used in the United
States until 1989, when the U.S. Forest Service applied the
critical loads concept as a screening tool to protect air quality
in Class I areas.

Over the past five years, there has been renewed interest
in critical loads in the United States. Recent critical loads
initiatives include the Conference of New
and Eastern Canadian  Premiers project to map forest
sensitivity to sulfur and nitrogen  deposition; the Federal
Land Managers Air Quality Report, which articulated a
commitment to fostering the development of critical loads;
a series of meetings known as the "Riverside Meetings"
convened by  the U.S. Forest Service; and a 2006 multi-
agency Critical  Loads Workshop.

For  more information on EPA's assessment-related activities,
go to . See also .
[32]-

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Acid rain, resulting from S02 and NOX emissions, is
one of many large-scale anthropogenic effects that
negatively affect the health of lakes and streams in the
United States. Since the implementation of the ARP,
scientists have observed measurable improvements
in some lakes and streams in four regions of the
eastern United States—New England, the Adirondack
Mountains, the northern Appalachians (including the
Catskill Mountains), and the southern Appalachians
(including the Blue Ridge)—and found signs of recovery
in many, but not all, of those areas (see Figure 22).14

The long-term monitoring networks that exist in
these regions provide information on the chemistry
of lakes and streams, and a look at how water bodies
are  responding to changes in emissions. The data
presented here show regional trends in acidification
from 1990 to 2005 (see Figure 22). For each lake
or stream in the  network,  measurements of various
indicators of recovery from acidification were taken.
These measurements were plotted against time,
and trends for the given lake or stream during the
15-year period were then calculated as the change in
each of the measurements per year (e.g., change in
concentration of sulfate per year). Using the trends
calculated for each water body, median regional
changes were determined for each of the measures
of recovery. A negative value of the "slope of the
regional trend" means that the measure has been
declining in the region, while a positive value means
it has been increasing. The greater the value of the
trend, the greater the yearly change. Movement
         Figure 22: Regional Trends in Eastern Lakes and Streams, 1990-2005
                     Sulfate (|jeq/L/yr)

                     Nitrate (|jeq/L/yr)

                       ANC (|jeq/L/yr)

                Hydrogen Ion (|jeq/L/yr)

                Base Cations (|jeq/L/yr)
                                 -2.5   -2.0  -1.5   -1.0  -0.5   0.0    0.5
                                                Slope of Regional Trend
                     1.0
                                             I So. Appalachian Streams (n=69)
                                             I No. Appalachian Streams (n=9)
                                             ] Adirondack Lakes (n=49)
                                             ] New England Lakes (n=31)
         Note: Bars show the magnitude of the regional trend for each variable in each region.
         Source: EPA, 2007
                                                                                                !33]

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toward recovery is indicated by positive trends in acid
neutralizing capacity (ANC) and negative trends in
sulfate, nitrate, hydrogen ion (measured in micro-
equivalents per liter per year [ueq/L/yr]), and aluminum
(measured in micrograms per liter per year [pg/IV
yr]). Negative trends in base cations (which are weak
acid cations in soils, such as calcium, magnesium,
and potassium) and positive trends in organic acids
can balance out the decreasing trends in sulfate and
nitrate and prevent ANC from increasing. The results
of these regional trend analyses are shown in Figure
22 on page 33 and Table 8.

Trends in surface water from 1990 to 2005  include:

• Sulfate concentrations are declining substantially
  in all but one of the regions. In the southern
  Appalachians, however, sulfate concentrations are
  increasing. This region is unusual because its soils
  can store large amounts of sulfate deposited from
  the atmosphere. Only after large amounts  of sulfate
  have accumulated in the  soils do stream water
                       sulfate concentrations begin to increase, remaining
                       elevated until the stored sulfur is depleted. This
                       phenomenon is now being observed in the
                       southern Appalachians, despite decreasing sulfate
                       in atmospheric deposition. Still, due to inclusion
                       of the latest data, the magnitude and direction of
                       the trends in this region are substantially changed
                       from the 2005 Add Rain Program Progress Report.
Table 8:  Results of Regional Trend Analyses on Lakes and Streams, 1990-2005"
 Sulfate (ueq/L/yr)
 Nitrate (ueq/L/yr)
 Acid Neutralizing Capacity
 (ueq/L/yr)
 Base Cations (ueq/L/yr)
 Hydrogen Ion (ueq/L/yr)
 Organic Acids (ueq/L/yr)
 Aluminum (ug/L/yr)
    -1.42

    -0.03
    +0.15

    -0.93
    -0.01
    +0.04
insufficient data
-2.07
-0.37
+0.93

-1.19
-0.24

+0.15
-4.72
    -2.30
    -0.31
    +0.80

    -2.25
    +0.01
    -0.06
insufficient data
    +0.09

    -0.10
    +0.08

    +0.17
    -0.01
insufficient data
insufficient data
* Values show the slope of the regional trend (the median value for the trends in all of the sites in the region). Regional trends that
 are statistically significant are shown in bold.
Source: EPA, 2007
 34

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  Trend estimates using previous data (through the
  early 2000s) were heavily influenced by gypsy
  moth defoliation of trees in most of the region's
  watersheds, particularly affecting trends in ANC,
  sulfate, and nitrate. As ecosystems have recovered
  from the impacts of this defoliation event, the
  extent of deposition impacts on this  region appear
  less severe than in past years.

• Nitrate concentrations are decreasing significantly
  in all of the regions. This trend does not appear to
  reflect changes in emissions or deposition in these
  areas and is likely a result of ecosystem factors.

• The acidity of lake and stream water, as indicated
  by ANC trends, is decreasing in three of the four
  regions as a result of declining sulfate (and to some
  extent nitrate).

• Base cations are decreasing in the northern
  Appalachians, Adirondack  Lakes, and New England
  Lakes. This may be a concern because, although
  base cation concentrations in lakes and streams are
  expected to decrease when rates of atmospheric
  deposition decline, if they decrease too much, they
  limit recovery in pH and ANC.

• Concentrations of organic acids, natural forms of
  acidity, are currently increasing in many parts of the
  world, but the cause is still being debated. Increases
  in organic acids over time can limit the amount
  of recovery observed. Only the New England and
  Adirondack regions are showing significant increases
  in organic acids, which may be responsible for 10-15
  percent less recovery (in ANC) than expected.

• Aluminum is a critical element because it increases
  when lakes and streams acidify, and is very toxic to
  fish and other wildlife. The one region where good
  aluminum data exist (the Adirondacks) is showing
  strong declines in the most toxic form  of aluminum
  (inorganic monomeric aluminum).
                                                                                                 35

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CAIR will reduce SO2 emissions
NOX emissions by approximately
60 percent from 2003 levels

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   Understanding Clean Air Rules
Building on the ARP and NBP, EPA finalized CAIR
in 2005, requiring further S02 and  NOX emission
reductions in 28 eastern states and the District of
Columbia. CAIR will reduce region-wide S02 emissions
by approximately 70 percent and NOX emissions
by approximately 60 percent from 2003 levels to
prevent significant contribution to nonattainment in
                                 downwind ozone and PM25 nonattainment areas.
                                 CAIR includes emission budgets for each jurisdiction
                                 based on application of highly cost-effective controls
                                 to fossil fuel-fired EGUs in model cap and trade
                                 programs with two phases of reductions.  However,
                                 states have discretion in deciding which sources to
                                 control to meet the budget, and whether to par-
                                 ticipate in the federally run cap and trade programs
                                 delineated in the model rules.
  Rules and  Programs to  Ensure Further Improvements
  A combination of well-established, existing programs, and new    In the spring of 2005, EPA prom
  regulations that will soon begin implementation, are in a position   rules designed to achieve additic
  to address the interstate transport of ozone, fine particles,        mercury from power plants. The
  and mercury deposition. Together, these rules and programs      and CAVR.15 See Figure 23 for a
  will help ensure further improvements in human health and       power sector rules are connecte
  environmental protection. Along with the ARP, the NOX SIP Call
  in the eastern United States and the Tier 2 mobile source and
  diesel rules establish programs that will help states achieve the
  ozone and fine particle NAAQS.

  Figure 23:  Key Clean Air Rules Related to Electric Power Industry
                                 In the spring of 2005, EPA promulgated a suite of air quality
                                 rules designed to achieve additional reductions of S02, NOX, and
                                 mercury from power plants. These rules include CAIR, CAMR,
                                 and CAVR.15 See Figure 23 for a flow-chart showing how the
                                 power sector rules are connected.
                                                  Clean Air Act (CAA)
     Section 110-State
    Implementation Plans
          (SIPs)
 Section 111 (New
Source Performance
   Standards)
    Section 111(d)
(State Plans for Non-Criteria
 Pollutants from Existing
      Sources)
Parts C and D
(New Source
  Review)
Sections 169Aand
169B (Visibility SIPs)
Acid Rain Program
 (1995-forward)
  Source: EPA, 2007
                                                                                                     37

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To address their contribution to unhealthy levels of
fine particles in downwind states, CAIR requires 25
eastern states and the District of Columbia to reduce
and cap annual S02 and NOX emissions.

In addition, CAIR requires 25 eastern states and the
District of Columbia to reduce and cap ozone season
(May through September) NOX emissions to address
their contribution to unhealthy levels of 8-hour ozone.
As shown in Figure 24, most states covered under
CAIR are required to address contributions to both
PM25 and ozone nonattainment, and therefore reduce
annual SO, and NOY emissions as well as seasonal NOY
         Z       A                             A
emissions. These reductions will help states attain the
NAAQS for ozone and fine particles in most areas that
were designated as being in nonattainment as of April
2006 (see Figure 25).
All the states covered under CAIR have chosen to
participate in the trading programs for S02 and NOX.
Some states also have direct control programs that
complement the trading programs.

Generally, the CAIR model rules include fossil fuel-fired
boilers and combustion turbines serving an electric
generator with a nameplate capacity greater than
25 MW and producing electricity for sale. These are
generally the same types of sources as covered under
the ARP and NOY SIP Call. However, the universe
               A
of CAIR sources is somewhat more inclusive in two
ways. First, CAIR affects some sources that either
permanently (e.g., simple-cycle turbines and certain
cogeneration units) or temporarily (e.g., independent
power producers, or IPPs, with power-purchase
agreements in effect) were exempt from the ARP. EPA
included these units because they were designed and
Figure 24: States Covered under CAIR/CAVR/CAMR for SO2, NOX, and Mercury
                                                                            CAIR Emission Caps*
                                                                                 (million tons)
Annual S02
  (2010)

Annual NOX
  (2009)
                                                                                  2009/2010  2015

                                                                                     3.7     2.6
                                                                                     1.5
                                         1.3
                                                                       Seasonal NOX    0.6     0.5
                                                                         (2009)
                                                                              *for the affected regions

                                                                       CAMR Annual Emission  Caps*
                                                                                    (tons)
      States not covered by CAIR, but covered by CAVR
      States controlled for fine particles (annual SO? and NO,)
      States controlled for ozone (ozone season NO,)
      States controlled for both fine particles (annual SO2 and NO,) and ozone (ozone season NO,)

      All states, plus 2 tribes and the District of Columbia, are covered by CAMR.
                    Mercury
             2010

              38
2018

 15
                                CAVR
                      Outside of CAIR Region — BART
Source: EPA, 2007
[38]-

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Figure 25:  Projected Nonattainment Areas in 2020 After Reductions From CAIR, CAVR,
and Clean Air Act Programs
                                                                            Legend
                                                                                Both PM and Ozone
                                                                                Nonattainment
                                                                                PM Only
                                                                                Nonattainment
                                                                                Ozone Only
                                                                                Nonattainment
                                                                                Nonattainment Areas
                                                                                Projected to Attain
                                         Area
                                         Count
                                           3

                                           13

                                           7

                                          106
Note: Figure 25 depicts 129 areas that, as of April 2006, were in nonattainment of the PM2B or ozone NAAQS (or both). As indicated in
the legend, 106 of those areas are projected to attain the applicable NAAQS by 2020 as a result of existing programs, such as Title IV of
the Clean Air Act, the NOX SIP Call, some existing state rules, and the addition of CAIR and CAVR. Note that the 23 areas that are forecast
to remain in nonattainment may need to adopt additional local or regional controls to attain the NAAQS by the dates set pursuant to the
CAA. These additional local or regional measures are not forecast in Figure 25, and therefore the figure overstates the extent of expected
nonattainment in 2020.
Source: EPA, 2006
operated to be in the business of producing electricity
for sale and were part of the universe of sources that
EPA demonstrated could reduce emissions in a highly
cost-effective manner for purposes of CAIR.

Second, CAIR affects some power-generating sources
that were not regulated under the NOX SIP Call because
the CAIR definition of "fossil-fuel-fired" is consistent
with the definition used in the ARP (i.e., combusting
any fossil fuel is considered "fossil fuel-fired"). The NOX
SIP Call definition only considers a source to be "fossil
fuel-fired" if more than 50 percent of annual heat input
results from combusting fossil fuels.

The majority of the approximately 320 new sources
expected to be affected under CAIR are simple-cycle
combustion turbines outside the NOX SIP Call region
that came online prior to 1991. Most of the others
are IPP units or cogeneration units that were exempt
from the ARP. Table 9 on page 40 delineates the
expanding coverage of electricity generators from the
ARP to CAIR and CAMR.

How the New Trading
Programs Work
States had the choice of participating in the federal
cap and trade programs to reduce S02 and NOX
emissions and all have elected to do so. The result is
a larger seasonal NOX program beginning in 2009, a
new annual NOX program beginning in 2009, and a
new S02 program in the CAIR region with a tighter,
regional cap in 2010. All three new CAIR programs
require additional reductions in 2015 (See timeline in
Figure 26 on page 41). States can either  submit state
plans for EPA approval or come under a federal plan
that also serves as a backstop to enter the program.
The state plans can use EPA's model trading rules, with
                                                                                                  -[39]

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Table 9:  Overview of Fossil Fuel-Fired Electricity Generators Covered under EPA's
Cap and Trade Programs
I Basic
 Applicability
>25
 Exceptions
>25
coal-fired
utility boilers
that burned
coal between
1990-95
Same as S02
plus some
boiler types
>2BMW(but
OTC states may
be >1 BMW) and
certain non-EGUs
greater than 250
mmBtu/hr
Certain cogens,
plus units that
burn less than
50% fossil fuel
                                           >25
>25MW and
certain non-
EGUs greater
than 250
mmBtu/hr*
>25 MW, coal-fired
                                         Certain cogens j Certain cogens | Certain cogens
                                                         (different than
                                                         NBP)
                                                      (different than
                                                      NBP)
             (same as CAIR)
 Geographic
 coverage
Certain IPPs,
cogens, qualify-
ing facilities,
and simple
cycle turbines
48 contiguous j 48 contiguous  | 20 states + DC     25 states + DC   25 states + DC  50 states + DC
states + DC
           states + DC
                                                         + 2 tribes
* States in the NBP can expand their CAIR NOX ozone season program applicability to include non-EGUs in the NBP.
Source: EPA, 2007
state-specific approaches to allocating NOX allowances,
allowing sources to opt-in, and including industrial
sources that are subject to the NOX SIP Call trading
program. The federal backstop program was published
in May 2006 and went into effect in June 2006.
Therefore, the regulated community has faced CAIR
requirements that have been in effect since June 2006.

Under Title IV of the CAA, the ARP will continue to
operate even after the new regional CAIR S02 trading
program begins in 2010. (Title IV NOX requirements
also remain unchanged under CAIR.) Sources will use
Title IV S02 allowances to demonstrate compliance
with annual CAIR requirements as well  as with annual
Title IV requirements. As a result, banked Title IV
allowances can be used for CAIR compliance, and
sources in all states subject to CAIR for  S02 will be
subject to two S02 trading programs that share the
same  currency.

Under CAIR, however, one allowance does not always
cover  one ton of emissions. Instead, for purposes of
                                   CAIR, S02 allowances of vintage 2009 and earlier will
                                   each cover one ton of emissions; vintage 2010 - 2014
                                   allowances will authorize 0.50 tons of emissions;
                                   and vintage 2015 or later allowances will authorize
                                   0.35 tons of emissions. These ratios achieve the  more
                                   stringent reductions required under CAIR, maintain the
                                   value of ARP allowances, and make ARP compliance a
                                   foregone conclusion with CAIR compliance.

                                   The NBP will cease to operate with the start of the
                                   seasonal NOX trading program under CAIR in 2009.
                                   Sources in most CAIR states will be subject to two
                                   separate CAIR NOX trading programs:  an annual NOX
                                   program for PM2 5  control and a seasonal NOX program
                                   for ozone control.  However, these two programs will
                                   not share currency, as CAIR annual and ozone season
                                   NOX allowances are not interchangeable.

                                   EPA will provide NOX emission allowances to each state
                                   according to the state budget for each program. States
                                   covered by both programs will allocate both annual and
                                   seasonal allowances to sources (or other entities).
 40

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The CAIR seasonal NOX program allows the use of
banked allowances from the NOX SIP Call, just as
the CAIR S02 program allows the use of banked
allowances from the ARR The annual  NOX trading
program includes a limited compliance supplement
pool of allowances to be awarded for early reductions
in 2007 and 2008, or to address issues of reliability of
electricity supply in 2009.

The structure of the CAIR programs and, in particular,
the provisions allowing use of banked allowances from
ARP and NBP, exemplify EPA's effort to ensure an orderly
transition to CAIR's trading programs and strongly
encourage early reductions. There is a substantial
incentive for sources to begin complying with CAIR
immediately, and emissions already have dropped
as a result.
                                   CAIR Allowance Market and
                                   State Activity
                                   Although there will be two distinct markets, EPA
                                   expects that the prices in both the annual and seasonal
                                   markets will be established by the cost of controls for
                                   annual compliance. There  has been trading activity
                                   in the 2009 seasonal NOX market and limited annual
                                   NOX CAIR market trading.  Observers expect that
                                   active trading will not occur until CAIR SIPs have been
                                   approved and NOX allowance accounts are populated
                                   later this year.

                                   For both the S02 and NOX  markets, it will take
                                   time for buyers and sellers to continue to assess
                                   the fundamentals of the changes introduced by
                                   CAIR, but this is secondary to the achievement of
Figure 26: Timeline for Implementation of CAIR/CAMR/CAVR (2005-2018)
                             Phase I: CAIR NOX Programs
                              (ozone-season and annual)
            Early Emission Reduction Period
             (annual CAIR NOX program)
                  (07 and 08) '
                 FIP
                (June 06)
        CAIR
        signed
                                        (09)
                                              Early reductions for CAIR NOX ozone-season
                                                program and CAIR SC>2 program begin
                                             immediately because NOX SIP Call and Title IV
                                                allowances can be banked into CAIR.
                                            Phase I: CAIRSO2 Program
                                                      (10)
                                                       Phase II: CAIR NOX and
                                                        SO2 Programs Begin
                                                               (15)
                                                  ©©©©©©©©
        CAMR
        signed
          A
          CAVR
          signed
SPs Due
(Nov 06)
Regional Haze (RH)
SIPs Due (Dec 08)
Phase II: CAMR Hg Program
        (18)
         States develop SPs
            (18 months)
Phase I: CAMR Hg Program
       (10)
                CAVR BART Controls Required
                (5 years after RH SIPs approved)
                                   CAM Rand CAVR
                                                                    Note: Dotted lines indicate a range of time.
Note: During the CAIR annual NOX program early emission reduction period, owners may earn additional allowances available through a
compliance supplement pool established under EPA's CAIR rulemaking.
Source: EPA, 2007
                                                                                                 -[41]

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Figure 27:  Current and Projected SO2 Scrubber and NOX SCR Controls on
Coal-fired EGUs
            300,000
            250,000
            200,000
      S
       «J

       CQ
       cn
      (3
            50,000
                                    180 units
                                                            1209 units
Projected 201)
        111 units
                            Committed
                            2007-20D
                         Projected 2020
                                                    Projected 201>

                                                     Committed   37 units
                                                     2007-201>
                                                 Projected 2020
                                                                             Projected 20E   16 units
                                                                              Committed   27 units
                           Scrubbers
                                                                           Scrubbers + SCRs
Note: Existing, committed, and projected controls are due to existing programs as well as CAIR, CAMR, and CAVR.
Source: EPA, for IPM, 2007
the environmental accountability and results of the
program. CAIR required covered states to submit SIPs to
EPA by September 2006. The agency also promulgated
a federal implementation plan (FIP) that implements the
model trading rules for every CAIR state and offered to
leave  it in place for states not wishing to submit a SIR
EPA expects all 29 affected jurisdictions to participate in
the EPA-run trading programs.

States have some flexibility in participating  in the
trading programs, including determining NOX allowance
allocations  independently.  Nearly all states submitting
SIPs thus far have established their own allocation
methodologies, often including special set-asides
for new sources and for various state priorities, like
renewable  energy or add-on emission controls. In some
cases, states roll any unclaimed set-aside allowances
                          back into the main allowance pool; others hold them
                          over for possible distribution in the future.

                          States may also choose to allow participation by non-
                          EGUs from the NBP and can allow other units to opt-in
                          using methodologies in the CAIR model rules. Of the
                          19 states plus the District of Columbia that are subject
                          to both the NOX SIP Call and CAIR (note that Rhode
                          Island was included in the former,  but not the latter), all
                          but five have indicated they will include the NBP's non-
                          EGUs in the CAIR NOX ozone season program. Most
                          states thus far have chosen not to include the model
                          rule provisions that allow sources to opt-in.

                          Whether sources  in a state are subject to a SIP or a
                          FIP, there will be initiation of the allocation of NOV
                                                                       A
                          allowances under CAIR by the end of this year (S02
                          allowances already have been allocated under Title  IV).
[42]-

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Figure 27 shows advanced S02 and NOX controls
already in place in the CAIR region, as well as those
controls that facilities have already committed to
install or that are projected under CAIR with additional
consideration of CAMR and CAVR requirements.
CAMR requires all 50 states, the District of Columbia,
and two tribes to regulate mercury emissions from
coal-fired EGUs. CAMR establishes "standards of
performance" limiting mercury emissions from new
and existing coal-fired power plants and, like CAIR,
creates a model cap and trade program with two
phases of reductions. The first phase cap is 38 tons,
taking advantage of "co-benefit" reductions—mercury
reductions achieved by reducing S02 and NOX emissions
under CAIR—to fulfill  EPA's requirement to act on
mercury emissions. The second phase, beginning in
2018, goes further to  reduce emissions to 15 tons upon
full implementation. CAMR sets an emission reduction
requirement in the form of an annual budget for each
state and two tribes in accordance with the two caps.

New coal-fired  power plants will have to meet new
source performance standards in addition to being
subject to the caps. EPA established annual budgets
for each state, and states must ensure that current
and future mercury emissions from coal-fired  EGUs do
not exceed the annual state budget. Like CAIR, CAMR
does not exempt the units that may be exempt under
the ARR The summary of applicability across programs
in Table 9 on page 40 includes general CAMR
applicability for comparison.

Furthermore, under CAMR,  affected coal-fired
electric utility units will  be required to continuously
monitor mercury mass emissions for the first
time, regardless of whether or not they will be
participating in the trading program. Monitoring
technologies will be subject to rigorous certification
and quality assurance/quality control requirements
under 40 CFR Part 75. Affected  sources are required
to install and certify continuous emissions or sorbent
trap monitoring systems by January 1, 2009.

This new requirement is one of the primary areas
of focus for EPA's CAMR implementation efforts.
Recent work by both EPA and industry has advanced
mercury monitoring  systems, reference testing
methods, and calibration standards to a point that
measuring capabilities that had limited feasibility
a few years ago now are fully or nearly ready and
even commercially available. Over the past year, the
performance and reliability of mercury monitoring
systems have substantially improved as a result of
field demonstrations and testing by EPA and industry.
EPA continues to work closely with the regulated
community, monitoring equipment and software
vendors, academia, and other organizations to ensure
timely implementation of a technically sound, effective
CAMR mercury monitoring program.
The trading program under CAMR will work similarly
to existing programs and the S02 and NOX programs
under CAIR, with two notable differences between the
CAMR and CAIR trading programs. First, there are no
opt-in provisions included in CAMR; second, allowances
under CAMR are measured in ounces rather than tons.

Even with some states choosing to control mercury
emissions directly, EPA expects a  robust trading
program. In July 2006, EPA conducted limited modeling
meant to be illustrative of a reduced market based on
the states and tribes EPA projected would participate
in the national trading program at the time. This
more limited market represents states that allocated
close to 69 percent of the initial budget of mercury
allowances and comprises  more than 700 units. These
units represent more than 200 GW of capacity—nearly
equivalent to the number of coal-fired units in the
successful  NBP across a larger number of states. As with
the NBP, EPA expects a viable market will result.
                                                                                               J43

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Based on this modeling, prices for mercury allowances
are expected to be the same as or lower than prices
in a full national market. This is because several states
that would have required relatively large amounts
of mercury allowances to comply with CAMR, such
as Illinois, will not be participating. Overall, states
opting to participate in the trading program generally
are characterized by larger percentages of coal-fired
generation. Moreover, 21 states submitted state
plans to EPA by the November 2006 CAMR deadline,
and additional state plans have been received since.
The remaining states are actively working on plans.
Of all affected jurisdictions, 35 states and two tribes
are planning on participating in the CAMR trading
program. Twelve states have indicated they will not
participate in the trading  program, and at least one
state is still undecided. Three states (Idaho, Vermont,
and Rhode Island) and the District of Columbia do not
have any coal-fired EGUs and thus have zero budgets.

States not participating in the trading program
must ensure they meet their state budget with
other methods. Alternatives often involve control
requirements based on percent reduction provisions
determined through an analysis of control options
that  states have evaluated as feasible. Some states
have chosen to do this in phases like EPA has, though
the start of the second phase is accelerated in some
cases. Unlike a capped program, percent reduction
programs do not necessarily guarantee emissions will
remain below a state's budget, often because of the
uncertainty of new source growth overtime. Therefore,
states are often coupling these programs with caps to
ensure the state's budget will be maintained.

Where mercury trading programs are enacted, EPA
expects emission controls to exceed requirements in
2010. This is because sources are likely to optimize the
controls installed for CAIR to reduce as much mercury
as possible in anticipation of increasing prices for
mercury allowances under the lower second phase cap.

In December 2006, EPA proposed a CAMR federal
plan to be finalized in states that either fail to submit
a CAMR state plan or whose state plan is somehow
deficient. EPA is evaluating comments  and plans to
finalize the CAMR federal plan by the end of 2007
and have it go into effect in the first half of 2008. The
plan puts into place a cap and trade program in any
state in which the federal plan is finalized and contains
provisions to create trading programs for states or
regions that could emerge in the future.
CAVR supplements the emission reductions of
CAIR by requiring emission controls known as best
available retrofit technology (BART) for industrial
facilities emitting air pollutants that reduce visibility
by contributing to regional haze in national parks
and wilderness areas. For the electric power industry,
CAVR applies outside of the states covered by CAIR.
For all other industries,  it  is a nationwide program. The
pollutants include PM25 and its precursors, such as
S02, NOX, volatile organic compounds, and ammonia.
The BART requirements apply to facilities built
[44	

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Figure 28: Projected Coal-fired ECU Retrofits with CAIR/CAMR/CAVR by 2020'
  * Retrofits also include Title IV, NOX SIP Call and other State programs.
   Starbursts within circles represent Activated Carbon Injection retrofits.
   "Scrubber" also includes Reagent Injection for Fluidized Bed Combustion units. These units achieve an SO2
     removal efficiency similar to scrubbers.
   "Non-Economic" indicates that a unit that is not projected to operate.
   Coal-fired units also have additional particulate controls not shown.

Source: EPA, 2007
                                SCR Only
                                 •  <300 MW
                                 •  300 MW to 600 MW
                                 0 >600 MW
                                SCR/Scrubber
                                 •  <300 MW
                                 •  300 MW to 600 MW
                                 0 >600 MW
                                SNCR Only
                                 G  <300 MW
                                 O  300 MW to 600 MW
                                 O >600 MW
                                SNCR/Scrubber
                                 •  <300 MW
                                 •  300MWto600MW
                                 0 >600 MW
                                Scrubber Only
                                 •  <300 MW
                                 •  300 MW to 600 MW
                                 0 >600MW
                                IGCC
                                 O  <300 MW
                                 O  300 MW to 600 MW
                                 O >600 MW
                                Re power
                                 •  <300 MW
                                 •  300 MW to 600 MW
                                 0 >600 MW
                                Low NOx Burner
                                 C  <300 MW
                                 O  300MWto600MW
                                 O >SOO MW
                                Non-Economic
                                 O  <300 MW
                                 O  300 MW to 600 MW
                                    >600 MW
between 1962 and 1977 that have the potential to
emit more than 250 tons a year of visibility-impairing
pollution. The requirements cover 26 categories,
including utility and industrial boilers and large
industrial plants such as pulp mills, refineries,
and smelters.

Many of these facilities have not been subject to federal
pollution control requirements for these pollutants.
Under the  1999 regional haze rule, states are required
to set periodic goals for improving visibility in the 156
"Class I" natural areas, including national parks. CAVR
includes guidelines for states to use in determining
which facilities must install controls and the type of
controls the facilities must use. States must develop
their implementation plans by December 2007, identify
the facilities that will have to reduce emissions under
BART, set emission limits for those facilities, and require
installation of BART in 2014.
                                                                                                        -[45]

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For CAIR-affected EGUs, participation in the CAIR
programs meets federal source-specific BART
requirements because CAIR was determined to be
better than BART controls under CAVR in the CAIR
region. Specifically, controls for EGUs subject to CAIR
will result in more visibility improvement in natural
areas than BART would have provided. States could,
however, require additional reductions.
Projected Controls
Although aspects of CAIR and CAMR are in
litigation, implementation moves ahead. Having
promulgated these environmental programs, EPA has
gone on to work with states, which are now working
aggressively to put implementing rules in place.
The regulated community is going forward with
installing equipment for CAIR, entering into contracts
for construction of mercury controls, and putting
monitoring systems in place.

Sources have begun responding to the new require-
ments with investments and application of retrofit
technology. EPA estimates that in 2010, EGUs
accounting for 60 percent of total capacity will have
scrubbers,  increasing to 73 percent by 2020. Modeling
shows that the percentage of advanced controls will
go up (with the amount of capacity with advanced
controls projected to increase even faster)  and the
number of units without advanced controls will go
down, especially for larger  units (see Figure 28 on
page 45).

As observed with previous programs, the regulated
community responds with a sense of purpose and
alacrity to cap and trade programs. EPA, using existing
CAA authority, is moving to address interstate transport
Figure 29: SO2 Allowance Trading Volume and Prices from June 2000 to June 2007
               Simplified Monthly Transfer Volume and Price, 2000-2007
           C
           o
           0)
           E
           C
           s_
          H
               2.00
               1.50
               1.00
               0.50
               0.00
$1,800

$1,600

$1,400   -£

$1,200   ^
       •«_*
$1,000   g
       'Z
$800    °-

$600

$400

$200
                                (0
                                C
                                £
                                o
                                                                     .vO
                                          Date
Source: EPA, 2007

[46}	

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Figure 30: Actual and Forecasted SO Allowance Prices
                EPA Projected Allowance
                    Price, 2006 Dollars
                  $533
               Up to 2010
                 Vintage
2010-2014
 Vintage
                   June 2007 Spot Market
                         Price Range
                   $705
  2006
Vintage
  2010
Vintage
Source: EPA, 2007

of S02 and NOX emissions and lower mercury emissions
with CAIR, CAMR, and CAVR. EPA expects these
programs to deliver significant human health and
environmental improvements in a cost-effective manner
by harnessing market forces to achieve substantial
required emission reductions.

CAIR and the SO2Trading Market
In 2006 trading, prices began the year at nearly
$1,500 per ton. As EPA discussed in the 2005 Add
Rain Program Progress Report, market observers
characterized this high price as a result of uncertainty
over the implementation of CAIR. However, by
mid-2006,  prices were lower and had stabilized,
generally trading through the second half of 2006 in
a band between $400 and $600 per ton. Prices have
generally remained at this level through the end of
June 2007. EPA also observed that, during the period
              of peak allowance prices in late-2005 and early-2006,
              transfer volumes were generally lower in the market,
              which indicates that many market participants were not
              trading during this period of high volatility. EPA expects
              that trade volumes will again increase as the market
              continues to stabilize in 2007. Figure 29 shows the
              variation in S02 allowance price and transfer volume
              from June 2000 though June 2007.

              Current prices continue to compare favorably with
              EPA's updated estimate of future S02 allowance prices
              under CAIR. As shown in Figure 30, EPA projected
              that pre-2010 vintage allowances would be worth
              $533 per allowance in 2010, and that 2010-2014
              vintage allowances would be worth $267 per
              allowance due to the 2:1 retirement ratio that applies
              to those vintage allowances in the CAIR region.
                                                                                            47

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Table 10: Aquatic Ecosystem Status Categories for the Adirondacks
 Acute Concern
 Elevated Concern
 Moderate
 Concern
< 0 micro
equivalent
per Liter
(ueq/L)
I Complete loss of fish populations is expected. Planktonic communities have extremely low
I diversity and are dominated by acidophilic forms. The numbers of individuals in plankton
I species that are present are greatly reduced.
0 - 50 ueq/L  I Fish species richness is greatly reduced (more than half of expected species are missing).  On
            I average, brook trout populations experience sub-lethal effects, including loss of health and
            I reproduction (fitness). During episodes of high acid deposition, brook trout populations may
            I experience lethal effects. Diversity and distribution of zooplankton communities declines.
50-100
ueq/L
 Low Concern   |> 100 ueq/L
I Fish species richness begins to decline (sensitive species are lost from lakes). Brook trout
I populations are sensitive and variable, with possible sub-lethal effects. Diversity and
| distribution of zooplankton communities begin to decline as species that are sensitive to
 acid deposition are affected.

 Fish species richness may be unaffected. Reproducing brook trout populations are expected
 where habitat is suitable. Zooplankton communities are unaffected and exhibit expected
 diversity and distribution.
* It is important to note that the wide range of ANC values within these categories makes it likely that substantial improvements in ANC may
 occur without changing the categorization of a given lake.
Source: EPA, 2007
June 2007 spot market prices show that the prices
for the earlier vintages are trading for $505 to $705
per ton, and that the later vintages (2010-2014) are
trading for $270 to $370 per ton (see Figure 30 on
page 47). These market prices compare favorably
with, though slightly above, EPA's estimate for the
CAIR markets.

Predicting the Response of Acidified Lakes
and Streams Under CAIR
In addition to the improvements in lake and stream
acidity resulting from implementation of the ARP,
CAIR will further reduce SO, and NOY emissions,
                          Z        A
thereby reducing acid deposition and  contributing
to improvements in lake and  stream conditions. EPA
utilized a surface water chemistry model called the
Model of Acidification of Groundwater in Catchments
                                      (MAGIC) to estimate the response of acidified lakes
                                      and streams to these reductions in acid deposition.
                                      MAGIC incorporates a small number of processes that
                                      are important in influencing the long-term response of
                                      surface waters to acidic deposition.

                                      The Adirondack region of New York was selected as the
                                      location for this evaluation. Aquatic ecosystem status
                                      categories have been defined to track recovery for this
                                      area and are presented in Table 10. This analysis uses
                                      projected acid deposition scenarios for 2010, 2015,
                                      and 2020 that depict acid deposition in the absence
                                      (baseline) and presence of CAIR for each year. Using the
                                      difference between the baseline and CAIR deposition
                                      data, MAGIC projects the response of indicators of
                                      stream and lake acidity (such as ANC) to reductions in
                                      acid deposition resulting from  CAIR implementation.
 48

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 Figure 31: Simulated Responses in 2020 and 2050 of Adirondack Lakes to Changes
 in Acid Deposition (Baseline Conditions versus CAIR Scenarios)
   a;  100
   (0
  ^   75 J
   ^   50  \
   0)
   3
   E
   3
   U
25 .

0
                        2020
              Base Scenario      CAIR Scenario
-50     0    50    100   150   200

          2020 Lake ANC (ueq/L)
                                      250
                                             a; 100
                                             (0
                                             ^  75 J
                                             ^  50 \
                                             0)
E
3
U
                                               25 -

                                               0
                                                                   2050
                                                        Base Scenario      CAIR Scenario
-50     0    50    100   150   200   250

          2050 Lake ANC (ueq/L)
                                          27
            Acute   Elevated Moderate   Low
           Concern  Concern  Concern   Concern
                     2020 Lake Status
                                                                                          30
                                                      Acute   Elevated Moderate    Low
                                                     Concern  Concern  Concern  Concern
                                                               2050 Lake Status
Note: Baseline results are shown in red while CAIR results are shown in green - values rounded. The wide range of ANC values within these categories
makes it likely that substantial improvements in ANC may occur without changing the categorization of a given lake.
Source: EPA, 2007
The improvements in ANC predicted for lakes in
the Adirondacks are depicted in the cumulative
distribution plots in Figure 31. The cumulative
distribution plots provide information about the
change in ANC for all lakes and show that ANC under
CAIR is consistently higher than without CAIR. For
example in 2020, 59 percent of lakes under CAIR
and 56 percent of lakes without CAIR have ANC
greater than 50. The bar graphs in Figure 31  show
                                            the change in ecosystem status categories for lakes
                                            in the Adirondacks between the baseline and CAIR
                                            conditions. On average, MAGIC projects that ANC
                                            will increase by 7.5 ueq/L in 2020 and 12 ueq/L in
                                            2050 with CAIR. This analysis clearly indicates that
                                            improvements in aquatic ecosystem status for the
                                            lakes in the Adirondacks should occur as a result of
                                            reductions in acid deposition attributable to CAIR
                                            emission reductions.
                                                                                              !49]

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The availability and transparency of data, from
emission measurement to allowance trading to
deposition monitoring, is a cornerstone of effective
cap and trade programs. The Clean Air Markets
Division (CAMD), in the Office of Air and Radiation's
Office of Atmospheric Programs, develops and
manages programs for collecting these data
and assessing the effectiveness of cap  and trade
programs,  including the ARR

The CAMD Web site provides a public  resource for
general information on how market-based  programs
work and what they have accomplished, along with
the processes, information, and tools necessary to
participate in any of these market-based programs.

For information about EPA's air emissions trading
programs, see: .

For information about the ARR see:

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1. See  (Total emissions are preliminary projections, based on 2002 National Emissions Inventory).

2. Chestnut, L. G., Mills, D. M. (2005, November). A fresh look at the benefits and costs of the U.S. Acid Rain Program. Journal
  of Environmental Management, Vol. 77, Issue 3, 252-256.

3. For the statutory provisions on allowance allocations, see Section 403 of the CAA, as amended in 1990.
  See .

4. See .

5. Detailed emissions and allowance data for ARP sources are available on the Data and Maps portion of EPA's Clean Air Markets
  Web site, see .

6. Allowance transfers are posted and updated daily on .

7. See  for further information. The S02 data team includes researchers
  from a number of locations, including the Goddard Earth Sciences and Technology Center at the University of Maryland
  Baltimore County; the Joint Center for Earth Systems Technology at the University of Maryland Baltimore County; the National
  Aeronautics and Space Administration, Goddard Space Flight Center; and the Royal Netherlands Meteorological  Institute
  (KNMI).

8. Kim, S.W., et al. "Satellite-observed U.S. power plant NOX emission reductions and their impact on air quality."  Geophysical
  Research Letters, Vol. 33, No. 22, L22812, doi:  10.1029/2006GL027749, 29 November 2006.

9. Borrell, P., Burrows, J., Platt, U., & Zehner, C. (2001). Determining tropospheric concentrations of trace gases from space. ESA
  Bulletin, 107,72-81.

10.  It should be noted that there has not been a violation of the S02 standard at any U.S.  monitoring site since 2000.

11.  See the EPA Office of Transportation and Air Quality Web site < www.epa.gov/otaq> for information on recent rules
    to reduce NOX emissions from mobile sources. Additional  NOX  reductions are occurring as a result of the NBP See EPA's
    September 2007 report, NOX Budget Trading Program: 2006 Program Compliance and Environmental Results, at , which discusses these NOX reduction efforts.

12.  National Research Council (2004). Air Quality Management in the United States. National Academies Press, Washington, DC.

13.  Clean Air Act Advisory Committee, Air Quality Management Work Group (2005). "Recommendations to the Clean Air Act
    Advisory Committee:  Phase 1 and  Next Steps."

14.  The data used to compute trends for the Southern Appalachians include a significant update (over five years of new data),
    resulting in a substantial change in  the magnitude and direction of the trends shown  in the 2005 Acid Rain Progress Report.
    The trends shown here should be regarded as more accurate estimates of long-term patterns for this region.

15.  CAIR (see ), CAMR (see ), CAVR (see ).
                                                                                                                  53

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              United States
              Environmental Protection Agency
              Office of Air and Radiation
              Clean Air Markets Division
              1200 Pennsylvania Ave, NW (6204)
              Washington, DC 20460

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