cid Rain Program

       \  Acid  Rain  Program
           2005  Progress Report

Summary	2

Origins of the Acid Rain Program	4

SO2 Emission Reductions	5

SO2 Program Compliance	7

SO2 Allowance Market	8

SO2 Compliance Options	10

NOX Emission Reductions and Compliance	11

Emission Monitoring and Reporting	13

Status and Trends in Air Quality, Acid Deposition, and Ecological Effects	14

Air Quality	17

Acid Deposition	20

Recovery of Acidified Lakes and Streams	22

Quantifying Costs and Benefits of the Acid Rain Program	24

Further National Controls to Protect Human Health and the Environment	26

Online Information, Data, and Resources	27

Endnotes..                                                   ...28
Clean Air Markets Division
Office of Air and Radiation
U.S. Environmental Protection Agency
October 2006

        he U.S. Environmental Protection Agency (EPA)
        publishes an annual report to update the public
        on compliance with the Acid Rain Program
(ARP), status of implementation, and progress toward
achieving environmental goals.
   The Add Rain Program 2005 Progress Report updates
Jata reported in previous years, specifically:
   •  Sulfur dioxide (SO2)  emissions, allowance market
      information, and program compliance.
      Nitrogen oxides (NOX) emissions and program
   •  Status and  trends in acid deposition, air quality, and
      ecological  effects.
   •  Future programs that build on the ARP to further
      address environmental quality.
   The Add Rain Program 2005 Progress Report includes
special sections on fuel switching, EPA's framework for
accountability, program costs and benefits, surface water
quality monitoring, impact assessment, environmental
justice, and new rules.
   For more information on the ARP, including addi-
tional information on SO2 and NOX emissions, acid
deposition monitoring, environmental  effects of acid
deposition, and detailed unit-level emissions data, please
visit EPA's Clean Air Markets Web site at
< www. epa. gov/airmarkets>.

2 <0" Acid Rain Program, 2005 Progress Report
    Sulfur dioxide (SO2) and nitrogen oxides (NOX)
are  the key pollutants in the formation of acid rain.
These pollutants also contribute to the formation of
fine particles (sulfates and nitrates) that are associat-
ed with significant human health effects and region-
al haze. 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 67 percent of
total U.S. SO2 emissions and 22 percent of total
U.S. NOX emissions from man-made sources.1
    The Acid Rain Program (ARP) was created
under Title IV of the 1990 Clean Air Act
Amendments to reduce the adverse effects of acid
deposition through reductions in  annual emissions
of SO2 and NOX. The act calls for SO2 reductions
of 10 million tons from 1980 emission levels, large-
ly achieved through a market-based cap and trade
program, which utilizes emission caps to perma-
nently limit the level of SO2 emissions from power
plants. NOX reductions are achieved through a
program closer to a more traditional, rate-based
regulatory system. The NOX program is designed to
achieve a 2 million ton reduction from what NOX
emission levels were projected to  be in the year
2000 without implementation ofTitle IV
    Since the start of the ARP in 1995, reductions
in SO2 and NOX  emissions from the power sector
have contributed to  significant air quality and
environmental and human health improvements.
The SO2 program affected 3,456 operating electric
generating units in 2005 (with most emissions pro-
duced by about 1,100 coal-fired units).The NOX
program applied to a subset of 982 operating coal-
fired units in 2005.
    The 2005 compliance year marked the
eleventh year of the program. During this period,
the ARP has:
•   Reduced SO2 emissions by more than 5.5 mil-
    lion tons from 1990 levels, or about 35 percent
    of total power sector emissions. Compared to
    1980 levels, SO2 emissions from power plants
    have dropped  by more than 7 million tons, or
    about 41 percent.
•   Cut NOX emissions by about 3 million tons
    from 1990 levels, so that emissions in 2005 were
    less than half the level anticipated without the
    program. Other efforts, such as the NOX Budget
    Trading Program in the eastern United States,
    also  contributed significantly to this reduction.

                                                            Acid Rain Program, 2005 Progress Report v- 3
•   Led to significant reductions in acid deposition.
    For example, between the 1989—1991 observa-
    tion period and the 2003—2005 observation
    period, wet sulfate deposition decreased 36 per-
    cent in the Northeast and 32 percent in the
    Midwest. These decreases have resulted in posi-
    tive changes in environmental indicators, includ-
    ing improved water quality in lakes and streams.
•   Provided the most complete and accurate
    emissions data ever developed and made  those
    data available and accessible  through  compre-
    hensive electronic data reporting and Web-
    based tools for agencies, researchers, affected
    sources, and the public.
•   Delivered pioneering e-gov-
    ernment results, automating
    administrative processes,
    reducing paper use, and pro-
    viding online systems for
    doing  business with EPA.
•   Achieved extremely high
    compliance levels. No units
    operating in the ARP during
    2005 were found out of com-
    pliance with  the allowance
    holding requirements.
•   Reduced implementation
    costs by allowing sources to
    choose cost-effective compli-
    ance strategies.
    After 11  years of implementation, monitoring,
and assessment, the ARP has proven to be an effec-
tive and efficient means of meeting emission  reduc-
tion goals  under the Clean Air Act. A 2005 study2
estimated the program's benefits at $122 billion
annually in 2010, while cost  estimates are around
$3 billion  annually (in 2000$). Despite the pro-
gram's historic and projected benefits, however,
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 pro-
tection. EPA recognized the  need for further SO2
and NOX  controls on the power industry to address
transport problems many states face in efforts to
attain National Ambient Air Quality Standards
(NAAQS) for ozone and fine particles. The success
of the ARP and NOX control programs, along with
the  need for further reductions, provided the impe-
tus for a suite of new rules promulgated in 2005:
the  Clean Air Interstate Rule (CAIR), the Clean
Air Visibility Rule (CAVR), and the Clean Air
Mercury Rule (CAMR).
   Building on the ARP model, EPA promulgated
CAIR in March 2005 to address transport of fine
particles and ozone  in the  eastern United States;
CAVR to improve visibility in national parks and
\vilderness areas; and CAMR to reduce nation-wide
                mercury  emissions from coal-
                fired power plants. Starting in
                2009 and 2010, CAIR establishes
                regional caps on SO2 and  NOX
                emissions for affected eastern
                states. Annual SO2 emissions are
                capped at 3.7 million tons in
                2010 and 2.6 million tons in
                2015. Annual NOX emissions are
                capped at 1.5 million tons in
                2009 and 1.3 million tons in
                2015. CAIR -will operate concur-
                rently with the ARP.
                    CAVR addresses SO2 and
                NOX emissions from non-CAIR
                states located in the West and
                parts of New England. Affected
                sources under CAVR must
reduce SO2 and NOX emissions impairing visibility
in national parks and -wilderness areas. Notably,
EPA has proposed to allow power plants and other
stationary sources to establish regional cap and
trade programs to accomplish these reductions.
    CAMR establishes a national cap on mercury
emissions beginning in 2010 and utilizes a market-
based cap and trade program. Additionally, new and
existing coal-fired power plants—the nation's
largest sources of mercury  emissions—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.

4 -v* Acid Rain Program, 2005 Progress Report
Origins of the Acid   Rain   Program
   Acid deposition, more com-
monly known as acid rain, occurs
when emissions of sulfur dioxide
(SO2) and nitrogen oxides (NOX)
react with water, oxygen, and oxi-
dants in the atmosphere to form
various acidic compounds.
Prevailing winds transport these
compounds hundreds of miles,
often across state and national bor-
ders, 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, requires major
reductions of SO2 and NOX emis-
sions from the electric power
industry. The  SO2 program sets a permanent cap
on the total amount of SO2 that may be emitted
by electric  generating units in the contiguous
United States. The program is phased in, with the
final 2010 SO2 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 SO2 and
NOX have  dropped markedly under  the ARP
while combustion of fossil fuel, measured as "heat
input," for electricity generation has  increased sig-
   Using a market-based cap and trade mecha-
nism to reduce SO2 emissions allows flexibility for
individual combustion units to select their own
methods of compliance. Currently, one allowance
provides a regulated unit limited authorization to
emit one ton of SO2.The Clean Air Act allocates
allowances to regulated units based on historic
fuel consumption and specific emission  rates prior
Figure 1: Trends in Electricity Generation,* Fossil Energy Use,
Prices,** and Emissions from the Electric Power Industry

* Generation from fossil fuel-fired plants.
** Constant year 2000 dollars adjusted for inflation.
Source: Energy Information Administration, Annual Energy Review, 2005 (electricity genera-
tion, retail price); EPA (heat input, emissions), 2005
            to the start of the program. The total allowances
            allocated for each year equal the SO2 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 has closer to a traditional approach
            to achieve NOX emission reductions. Rate-based
            limits apply to most of the coal-fired electric utility
            boilers subject to the ARP.
                The ARP is composed of two phases for SO2
            and NOX. Phase I applied primarily to the largest
            coal-fired electric generation sources from 1995
            through 1999 for SO2 and from 1996 through
            1999 for NOX.  Phase II for both pollutants began
            in 2000. In 2005, the SO2 Phase II requirements
            applied to 3,456 operating units; the Phase II NOX
            requirements applied to 982  of those operating
            units that are >25 megawatts and burned coal
            between 1990 and 1995.

                                                           Acid Rain Program, 2005 Progress Report v- 5
 SO2 Emission  Reductions
     Electric power generation is by far the largest single source of
 SO2 emissions in the United States, accounting for approximately
 67 percent of total SO2 emissions nation-wide.3
        As shown in Figure 2, Acid Rain Program (ARP) sources
 have reduced annual SO2 emissions by 41 percent compared to
 1980 levels and 35 percent compared to 1990 levels. Reductions
 in SO2 emissions from other sources not affected by the ARP
 (including industrial and commercial boilers and the metals and

 Figure 2: SO2 Emissions from Acid Rain Program Sources
 O   8.0

.2   6.0
in    2-°
                      I All Affected Sources       "Phase I (1 99S-1 999) Sources

                      I Phase II (2000 on) Sources     Allowances Allocated
                           13.0 13.1
                       12.5 ,        12.5
                                 7.0 •7.0
                                             9.6 • 9.5 Mg.5
       1980 1985 1990 1995 1996 1997 1998 1999  2000  2001  2002  2003  2004  2005
 Source: EPA, 2006
 Figure 3: SO2 Emissions and the Allowance Bank, 1995-2005
             | Allowances Allocated that Year
             | Unused Allowances from
              Previous Year (bank)
              Actual Emissions from Affected Sources
 C  20

.2  10
d 5
         1995  1996 1997  1998 1999  2000 2001  2002 2003  2004 2005

 Source: EPA, 2006                  Year
SO2 Emission
from Acid Rain
Program  Sources:
4- In 1995, the first
   year of implementa-
   tion, SO2 emissions
   decreased by 24
   4 million tons—from
   1990 levels.
•v" During the past
   decade, SO2 emis-
   sions dropped an
   additional 14 percent
   from 1995 levels
   despite a 24 percent
   increase  in power
   generation (based on
   heat input).
^> In 2005, SO2 emis-
   sions from all ARP
   units totaled  10.2
   million tons, a 35
   percent decrease
   from 1990 levels
   (15.7 million tons).
•0" Until SO2 allowance
   prices began to
   increase in 2004 in
   anticipation of EPA's
   2005 Clean Air
   Interstate Rule
   (CAIR), prices gener-
   ally remained under
   $200/ton, well below
   expected control costs
   for the program.

6 •v' Acid Rain Program, 2005 Progress Report
refining industries) and use of cleaner fuels in resi-
dential and commercial burners have contributed
to a similar overall decline (42 percent) in annual
SO2 emissions from all sources since 1980. National
SO2 emissions have fallen from 25.9 million tons in
1980  to an estimated 15 million tons in 2005 (see
    For 2005, EPA allocated approximately 9.5
million SO2  allowances under the ARE Together
with more than 6.8 million unused allowances car-
ried over  (or banked) from prior years, there were
nearly 16.4 million allowances available for use in
2005. Sources emitted  10.2 million tons of SO2 in
2005, somewhat more  than the allowances allocat-
ed for the year, but far less than the total
allowances available (see Figure 3).4
    The number of banked allowances dropped from
6.8 million available for 2005 compliance to 6.2 mil-
lion available  for 2006 and future years, a 10 percent
reduction of the total bank. In the next several years,
industry anticipation of stringent emission require-
ments under  the Clean Air Interstate Rule (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 will lead to depletion of the bank
and further emission reductions. In 2010, the total
number of Title  IV allowances allocated annually
drops to 8.95 million (about half of the emissions
from the power industry in 1980) and remains statu-
torily fixed at that annual level permanently. Table 1
explains in more detail the origin of the allowances
that were  available for use in 2005, and Table 2 on
page 7 shows how those allowances were used.
    The states with the highest emitting sources in
1990  have seen the greatest SO2 reductions during
the ARP  (see Figure 4). 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
regional scale. In addition, the states that reduced
emissions from 1990 to 2005 had total annual reduc-
tions of approximately 6 million tons, while the
states  that increased emissions—krgely attributable to
growth and not increases in emission rates—had
much smaller annual increases of approximately
Table 1: Origin of 2005 Allowances
  Type of
Number      Explanation
  Allowance     ofSO-
              of Allowance
  Allocation     Allowances   Allocation Type
Initial allocation is the
number of allowances
granted to units*
based on the product
of their historic uti-
lization and  emission
rates specified in the
Clean Air Act.
The allowance auc-
tion provides
allowances to the
market that were set
aside  in a Special
Allowance Reserve
when  the  initial
allowance allocation
was made.
 Total 2005     9,539,575
Opt-in allowances are
provided to units
entering the program
voluntarily. There
were eight opt-in
units in 2005.
Banked allowances
are those allowances
accrued in accounts
from previous years,
which can be used for
compliance  in 2005
or any future year.
  Total 2005    16,385,052
Source: EPA, 2006
*ln this report, the term "unit" means a fossil fuel-fired combustor that
serves a generator that provides electricity for sale. The vast majority of
SO2 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 2004 Progress Report to
account for additional deductions made for electronic data reporting
(EDR) resubmissions after 2004 reconciliation was completed.

                                                              Acid Rain Program, 2005 Progress Report
470,000 tons. For 32 states and
the District of Columbia, annu-
al SO2 emissions in 2005 were
lower than 1990 emissions.
Among these states, 13
decreased their annual emissions
by more than 100,000 tons
between 1990 and 2005:
Florida, Georgia, Illinois,
Indiana, Kentucky,
Massachusetts, Missouri, New
York, Ohio, Pennsylvania,
Tennessee, West Virginia, and
Wisconsin. The states with the
greatest annual reductions were
in the Midwest and include
Ohio (1.1 million tons
reduced), Illinois, Indiana,
Missouri, Tennessee, and West
Virginia, each of which  reduced
over 500,000 tons per year.
Figure 4: State-by-State SO2 Emission Levels, 1990-2005
 • SO2 Emissions in 1990
 I  I SO2 Emissions in 1995
 I  I SO2 Emissions in 2000
 I  I SO2 Emissions in 2005
 Scale: Largest bar equals
 2.2 million tons of SO2
 emissions in Ohio, 1990
SO2  Program  Compliance
    Approximately 10.2 million
allowances were deducted from
sources' accounts in 2005 to cover
emissions. Table 2 displays these
allowance deductions, as well as the
remaining banked allowances from
1995  through 2005. In 2005, all Acid
Rain  Program (ARP) units were in
compliance with the  allowance hold-
ing requirements and no excess emis-
sions  penalties were paid.5 Title IV
set a penalty of $2,000 per ton in
1990, which is adjusted annually for
inflation. The 2005 penalty  level was
set at $3,042 per excess ton, but no
penalties were levied. 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 avail-
able. Since the program's inception,
the compliance rate has consistently
been  extraordinarily high.
   Table 2: SO2 Allowance Reconciliation Summary, 2005
     TOTAL HELD ON MARCH 1, 2006*                 16,385,052
          Unit Accounts Subject to Reconciliation         1 3,102,070
                               Other Accounts**
Penalties (2006 Vintage)
          Unit Accounts Subject to Reconciliation
                                Other Accounts
   Source: EPA, 2006

   *  March 1, 2006, is the allowance transfer deadline, the point in time at which unit
      accounts were frozen and after which no transfers of 1 995 through 2005 allowances were
      recorded. The freeze on these accounts was removed when annual reconciliation was
   ** Other accounts include general accounts and unit accounts that are not subject to recon-
      ciliation. General accounts can be established in the Allowance Tracking System (ATS) by
      any utility, individual, or other organization.
   *** Includes 310 allowances deducted from opt-m sources for reduced utilization.

8 &  Acid Rain Program, 2005 Progress Report
SO2  Allowance  Market
   The allowance trading mechanism enables Acid
Rain Program (ARP) sources to pursue a variety
of compliance options, while the cap on SO2
emissions ensures that reductions are achieved and
maintained over time. Some sources have opted to
reduce their SO2 emissions below the level of their
allowance allocation in order to bank their
allowances for use in future years or to sell them.
Other sources have been able to postpone or
reduce expenditures for control by purchasing
allowances from sources that controlled below
their allowance allocation level. The allowance
prices ultimately reflect
these flexible compliance
decisions. Economists refer
to this as the marginal cost
of compliance—the cost of
reducing the next ton of
SO2 emitted from the
power sector.
   The cost of emission
allowances was initially
projected to be between
$250 and $500 per ton
during Phase I (1995 to
1999) and $500 to $1,000
per ton in Phase II (beyond 2000). As  shown in
Figure 5, actual allowance prices were  in the $100
to $200 range, with a low of $65 in 1996. Even as
the more stringent Phase II requirements became
effective in 2000, prices were generally below the
$200 per allowance mark until they started to rise
at the end of 2003. Market observers believe  that
the lower than expected prices early in the pro-
gram were due primarily to reduced compliance
costs. The availability of low-cost, low-Sulfur
coal resulted in larger than expected emission
reductions, which increased the supply of
allowances and put downward pressure on the
market. In addition, technological innovation
reduced the expected marginal costs of scrubbers
by over 40 percent from original estimates. These
cost and emission reductions led to a large bank of
allowances from Phase I that were available for
compliance in Phase II, contributing to the lower
than anticipated prices.
    In 2004, the market started to react to the like-
lihood of future emission reduction requirements
that went beyond the existing caps of the ARP.
The price of SO2 allowances continued to rise
during 2005, ending the year at about $1,550  after
beginning the year at about $700. Market
observers believe this price run-up occurred due
to initial uncertainty as  EPA finalized the Clean
Air Interstate Rule (CAIR). CAIR requires fur-
ther SO2 reductions from sources in many eastern
states beginning in  2010. These additional reduc-
                      tions cause an increase in
                      the expected marginal
                      cost of compliance in
                      future years. Because
                      allowances are bankable
                      today for use in future
                      years, estimates of future
                      control costs impact the
                      current market price  of
                      allowances. However, an
                      apparent overly conserva-
                      tive reaction by buyers,
                      who wanted assurance
                      that they could cover cur-
                      rent and future allowance
needs, caused market prices to exceed EPA's esti-
mate of future control costs. In the first half of
2006, however, allowance prices have fallen sharply,
and were just over $600 per ton at the end of June
2006.This price level is  more consistent with
where EPA has expected allowances to  be today,
given estimates of the marginal cost of reducing
SO2 emissions under CAIR. EPA has seen
temporary run-ups in the allowance markets
before, with appropriate downward adjustments as
buyers  and sellers more  completely assess market
fundamentals. For instance, at the beginning of
compliance with the NOX Budget Program,
EPA observed a similar  pattern of market run-up
followed by  a self-correction.
    In fact, current  SO2 allowance  market condi-
tions (as of September 2006) track closely with
EPA's estimates. The current SO2 allowance market

                                                               Acid Rain Program, 2005 Progress Report    9
has factored the costs of com-
pliance with the new suite of
regulatory programs into its
pricing decisions. As can be
seen in Figure 6, EPA has pro-
jected that pre-2010 vintage
allowances would be worth
$721 per allowance in 2010,
and that 2010-2014 vintage
allowances would be worth
approximately $360 per
allowance due to the 2:1 retire-
ment ratio that applies to those
vintage allowances for sources
in the CAIR region.
    July 2006 spot  market prices
show that prices for the earlier
vintage are trading for $610 to
$740 per ton, and the later vin-
tages (2010-2014)  are trading for
$308 to $390 per ton.
    In 2005, nearly 5,700 private
allowance transfers (moving
roughly 19.9 million allowances
of past, current, and future vin-
tages) were recorded in the
EPA Allowance Tracking System
(ATS). About 10 million
(50 percent) were transferred in
economically significant transac-
tions (i.e., between economically
unrelated par ties). Transfers
between economically unrelated
parties  are a better indicator of a
vibrant market than are transac-
tions among the various units of
a given company. In the majority
of these transfers, allowances
were acquired by power compa-
nies. Figure 7 shows the annual
volume of SO2 allowances trans-
ferred under the ARP (exclud-
ing allocations, retirements, and
other transfers by EPA) since
official recording of transfers
began in  1994.
 Figure 5: SO2 Allowance Prices for Current Vintage
Source: Cantor Fitzgerald Market Price Index, 2006
 Figure 6: Actual and Forecast Allowance Prices
   EPA Projected Allowance Price
     in 2010 (in 2006 Dollars)
   Up to 2010 Vintage  2010-2014 Vintage   2006 Vintage
 July 2006 Spot
Market Price Range*
                                         2010 Vintage
 EPA analysis suggests that 2006 vintage allowances should be selling for about
    per allowance and 2010 allowances should be about $300 per allowance.
Source: EPA, 2006, and Evolution Markets, LLC, 2006
 Figure 7: SO2 Allowances Transferred under the
 Acid Rain  Program
  1994 1995  1996  1997 1998  1999  2000 2001  2002 2003  2004  2005

  Between economically unrelated organizations (significant transfers).
  Between economically related organizations.
                                             Source: EPA, 2006

10 -0" Acid Rain Program, 2005 Progress Report
    Figure 8 shows the cumulative volume of
SO2 allowances transferred under the ARE The
figure differentiates between allowances trans-
ferred 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 com-
pliance strategy. Of the nearly 300 million
allowances transferred since 1994, about 63 per-
cent were traded in private transactions. In
December 2001, parties began to  use a system
developed by EPA to allow online allowance
transfers. In 2005, account holders registered
about 98 percent of all private allowance  transfers
through EPA's  online transfer system.6
                           Figure 8: Cumulative SO2 Allowances
                           Transferred through 2005





                                  EPA Transfers to Account
                                 I Private Transactions
                           1994 1995 1996 1997 199S 1999 2000 2001 2002 2003 2004 2005

                           Source: EPA, 2006.
SO2  Compliance  Options
    Since 1995, the majority of units affected by
the Acid Rain Program (ARP) have chosen to
comply with the emission reduction requirements
by using or blending low-sulfur coal, installing
SO2 and NOX  controls such as scrubbers and
low-NOx burners, or purchasing allowances from
the market or using  banked allowances.
    According to the Energy Information
Administration, the 1987 repeal of the Power
Plant and Industrial Fuel Use Act prohibiting the
use of natural gas by new electric generating units
led to a large increase in natural gas generating
capacity through 2000.7 Additional factors
                   contributing to this increase were low natural gas
                   prices through the 1990s, the availability of
                   increasingly efficient natural gas technology in the
                   form of advanced combined cycle units, the short
                   construction-to-operation time to build new com-
                   bined cycle units, and the  attractiveness of
                   natural gas as a trace SO2-emitting fuel source.
                       However, coal-fired generation grew from
                   1990 to 2004, taking advantage of the excess
                   capacity available at existing plants. Today, coal
                   remains the largest single fuel used for  generating
                   electricity in the United States, at 50 percent of
                   net generation in 2005 (see  Figure 9).
      Figure 9: Net Electric Generation
      by Energy Source
                  Other Renewables
Natural Gas
             Figure 10: Comparison of Electric Generation Costs in 1995 of
             Base Load Coal-fired and Gas-fired Electric Generation Units*
V?  s
w  4.5
                                              C- 3
              Q- 1.:
      • Capital costs  "Variable O & M
      • Fuel costs    Q Fixed O & M
                                                       I   I   ,   I—I   ,  I    I   ,  M   ,  M
                                                      coal plant
                                                     with SCR and
                              coal plant
                             w/o SCRand
coal plant
with BACT
                                  cycle plant
                                   with BACT
coal plant
w/o BACT
      Source: EPA, 2006
                  *Unit sizes used in this analysis are around 325 megawatts.
                  Source: EPA, 2006
cycle plant
w/o BACT

                                                        Acid Rain Program, 2005 Progress Report & 11
Figure 11: Distribution of Natural Gas Generation, 1990-2004
:? 300,000,000
| 250,000,000
= 200,000,000
g 150,000,000
£ 100,000,000
-jj 50,000,000
i 	 n
D 1990
n 1995
n 2000
• 2004

_ ~~L_ rT~B

Source: Energy Information Administration, 2006
   These factors contributed to an economic situ-
ation where it became more economical in many
regions of the country to retrofit existing baseload
coal  plants with scrubbers than to build new coal-
fired capacity to enhance existing load or to build
new  coal-fired capacity where excess coal capacity
was available at existing plants. Where excess coal-
fired capacity was not an alternative, building new
combined cycle units was the cheapest alternative
to meet new load requirements (see Figure 10).
                              Finally, most of the new natural
                           gas capacity built in the last 15 years
                           has been in three particular Census
                           regions: West South Central (Arkansas,
                           Louisiana, Oklahoma,Texas); Pacific
                           Contiguous (California, Oregon,
                           Washington); and South Atlantic
                           (Washington DC, Delaware, Florida,
                           Georgia, Maryland, North Carolina,
                o^         South Carolina,Virginia, West
               '           Virginia). For  the most part, these
                           areas have been, and continue to be,
                           comparatively high users of natural gas
                           and oil and have the infrastructure to
                           support natural gas-fired electric gen-
                eration. In particular, the West South Central and
                Pacific Contiguous regions, which contribute
                over half of the electricity generated by natural
                gas in the United States, have a long history of
                oil and gas  generation that precedes the imple-
                mentation of the ARP in 1995 (see Figure 11).
                Additionally, the West South Central and Pacific
                Contiguous regions have  not traditionally been
                heavily affected by the requirements of the ARP.
NOX  Emission  Reductions and  Compliance
   Title IV of the 1990 Clean
Air Act Amendments requires
NOX emission reductions for
certain coal-fired electric gener-
ating units. Unlike the SO2 pro-
gram, Congress applied
rate-based emission limits based
on a unit's boiler type to achieve
NOX reductions (see Table 3).
The NOX emission limit is
expressed as pounds of NOX per
unit of heat input (Ibs/million
British thermal units [mmBtu])
for each boiler subject to a NOX
limit. Owners can meet the
NOX limits for each individual
unit or meet group NOX limits
through averaging plans for
groups of units that share a
common owner and designated
Table 3: Number of NOX-Affected Title IV Units by Boiler Type
and NOX Emission Limit
  Coal-Fired Boiler Type
Title IV Standard
 Emission Limits
Number of
Phase 1 Group 1 Tangentially Fired
Phase I Group 1 Dry Bottom,
Phase II Group 1 Tangentially Fired
Phase II Group 1 Dry Bottom,
Cell Burners
Cyclones > 155 MW
Wet Bottom >65 MW
Vertically Fired
Total n/a 982
                                Source: EPA, 2006

12 & Acid Rain Program, 2005 Progress Report
representative. In 2005, all
sources met their emission limit
requirements under the Acid
Rain NCX program.
                                Figure 12: NOX Emission Trends for Acid Rain Program Units,
   The NOX program seeks to
attain a 2 million ton annual
reduction from all Acid Rain
Program (ARP) sources relative
to the NOX emission levels that
were projected to occur in
2000 absent the ARP (8.1 mil-
lion tons).This goal was first
achieved in 2000 and has been
met every year thereafter,
including 2005. Figure  12
shows that NOX emissions from
all ARP sources were 3.6 mil-
lion tons in 2005.This  level is
4.5 million tons less than the
projected level in 2000 without
the ARP, or more than double
the Title IV NOX emission
reduction objective. These
reductions have been achieved
while the amount of fuel burned
to produce electricity at all ARP
units in  2005, as measured by
heat input, has increased 38 per-
cent since 1990. While  the ARP
was responsible for a large por-
tion of these  annual NOX reduc-
tions, other programs (such as
the Ozone Transport
Commission's NOX Budget
Program, EPA's NOX State
Implementation Plan (SIP) Call,
and regional  NOX emission con-
trol programs) also contributed
significantly to the NOX reduc-
tions achieved by sources in
   As with SO2, the states with the highest
NOx-emitting sources  in 1990 tended to see the
greatest  power plant  NOX emission reductions
(see Figure 13). The sum of reductions in the 39
states and the District of Columbia that had lower
I   III   II
                                    NOX Program Affected Sources
                                    Title IV Sources Not Affected by NOX Program
                 Source: EPA, 2006
                               Figure 13: State-by-State NOX Emission Levels for Acid Rain
                               Program Sources, 1990-2005
                                                                          Source: EPA, 2006
                                                annual NOX emissions in 2005 than in 1990 was
                                                approximately 2.8 million tons, while the sum of
                                                increases in the  nine states that had higher annual
                                                NOX emissions  in 2005 than in 1990 was much
                                                smaller, about 61,000 tons. Eight of the 11 states
                                                with NOX emission decreases of more than
                                                100,000 tons were in the Ohio River Basin.

                                                        Acid Rain Program, 2005 Progress Report -0- 13
Emission  Monitoring and  Reporting
                                Source: EPA, 2006
   The Acid Rain Program
(ARP) requires program partic-
ipants to measure, record, and
report emissions using continu-
ous emission monitoring sys-
tems (GEMS) or an approved
alternative measurement
method.The vast majority of
emissions are  monitored with
GEMS while the alternatives
provide an efficient means of
monitoring emissions from the
large universe of units with
lower overall mass emission
levels (see Figures 14  and 15).
   Since the  program's incep-
tion in 1995, emissions have
been continuously monitored
and reported, verified, and
recorded by EPA, and provided
to the public through EPA's
Web site. Hourly emissions data
are reported for all affected
sources in quarterly electronic      Source: EPA, 2006
reports, and EPA conducts
automated software audits that
perform rigorous checks to ensure the complete-
ness, quality, and integrity of the emissions data.
GEMS and approved  alternatives are a cornerstone
of the ARP's accountability and transparency. All
emissions data are available to the public at EPA's
Clean Air Markets Data and Maps Web site at
.The site also pro-
vides access to a variety of 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.
                                 Figure 14: Monitoring Methodology for the Acid Rain Program,
                                                       Number of Units
                                                 D Coal Units w/CEMS  BWaste Units w/CEMS • Oil Units w/ CEMS
                                                 DOil Units w/oCEMS  D Gas Units w/o CEMS D Gas Units w/CEMS
                                 Figure 15: Monitoring Methodology for the Acid Rain Program,
                                                        Total SO2 Mass
                                                     <0.1% 1% <0.1% 2% <0.3%
                                                D Coal Units w/CEMS
                                                DOil Units w/o CEMS
• Waste Units w/CEMS
D Gas Units w/o CEMS
• Oil Units w/ CEMS
D Gas Units w/CEMS
                                                    The emission monitoring requirements for the
                                                ARP are found in 40 CFR Part 75.These provi-
                                                sions are also required for participation in the NOX
                                                Budget Trading Program, a NOX summer season
                                                trading program implemented by many eastern
                                                states in response to EPA's  1998 NOX SIP Call.
                                                The Part 75 requirements will also be used in the
                                                future to implement the Clean Air Interstate Rule
                                                (CAIR) and the Clean Air Mercury Rule

14 <  Acid Rain Program, 2005 Progress Report
  The National Acid
  Assessment Program
  The National Acid
  Precipitation Assessment
  Program (NAPAP)  2005
  Report concluded that
  Title IV has been quite suc-
  cessful in reducing
  emissions of SO2 and NOX
  from power generation.
  These reductions have
  improved air quality,
  visibility, and human
  health at a relatively low
  cost compared to the
  benefits generated.
  However, the report also
  noted that several scientific
  studies indicate that
  recovery of acid-sensitive
  ecosystems will require
  40 to 80 percent further
  emission reductions
  beyond those anticipated
  with full implementation of
  Title IV Power generation
  currently contributes
  approximately 67 percent
  of the SO2 emissions and
  22 percent of the NOX
  emissions nationwide. Even
  if all SO2 emissions from
  power plants were  elimi-
  nated, reductions from
  other source categories
  would be needed for
  full  protection of all acid-
  sensitive ecosystems affect-
  ed by acid deposition.
  To view the report, visit:
Status and Trends in  Air
Quality, Acid  Deposition,
and  Ecological  Effects
   The emission reductions achieved under the Acid Rain Program
(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 visi-
bility, and reduced risk to forests, materials, and structures. Table 4 shows
the regional changes in key air quality and atmospheric deposition
measurements linked to the ARP's SO2
                 and NOX emission reductions.
Table 4: Regional Changes in Air Quality and Deposition of
Sulfur and Nitrogen, 1989-1991 Versus 2003-2005
Unit Region
1989-1991 2003-2005
Wet Sulfate

Wet Sulfate

Ambient Sulfur

kg/ha Mid-Atlantic
mg/L Mid-Atlantic
M.g/m3 Mid-Atlantic
 Ambient Sulfate
 Wet Inorganic

 Wet Nitrate
 Ambient Nitrate
 Total Ambient
 Nitrate Concentra-
 tion (Nitrate +
 Nitric acid)








+ 17
Source: Clean Air Status and Trends Network (CASTNET) and the National Atmospheric
Deposition Program/National Trends Network (NADP/NTN)

* Percent change is estimated from raw measurement data, not rounded; some of the measure-
ment data used to calculate percentages may be at or below detection limits.

                                                   Acid Rain Program, 2005 Progress Report 0* 15
Framework for Accountability
EPA is expanding its capacity to track the effectiveness of programs to protect ecosystems
from air pollution and examine the effects of changes in deposition and air concentrations on
the health of sensitive receptor species in aquatic and forest ecosystems, human health, and
This effort stems from the recommendations in the 2004 National Academy of Sciences
(NAS) report, Air Quality Management in the United States, which recognized  the significant
reduction in air pollution achieved under the Clean Air Act, and recommended a course of
action to achieve further progress. For ecosystem protection, the recommendations include:
•v"  Improving monitoring and tracking of ecosystems and science to support secondary or
    alternative standards.
•v"  Taking an "airshed" approach.
•v"  Emphasizing results, accountability, and  dynamic, data-based program adjustment.
EPA's Clean Air Act Advisory Committee (CAAAC) expanded on the NAS  recommendations
with further ecosystem-related recommendations, including the establishment of:
•v"  A  framework for accountability
•v"  Benchmarks and measures of the ecological impacts of air pollution
•0"  Effects of multiple pollutants
•0"  Measures of ecosystem response
•0"  Collaborative integrated assessments
•0"  Critical loads and thresholds
Air Quality Management in the United States, National Academies Press:


16 < Acid Rain Program, 2005 Progress Report
  Understanding the Monitoring Networks
  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 5).
  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 nearly 90 sites across the United States. EPA's Office of Air and Radiation oper-
  ates most of the monitoring stations; the National Park Service (NPS) funds and operates
  approximately 30 stations in cooperation with EPA. Many CASTNET sites are approaching a
  continuous 20-year data record, reflecting EPA's commitment to long-term environmental moni-
  toring. Public access to CASTNET data is available at .
  EPA also uses data from other ambient monitoring networks, including the State and Local
  Ambient Monitoring and National Ambient Monitoring Systems (SLAMS/NAMS). These net-
  works are used to document attainment of National Ambient Air Quality Standards (NAAQS)
  and show trends in ambient air quality over time.
  NADP/NTN is a nationwide,  long-term network tracking the chemistry of precipitation.
  NADP/NTN offers data on hydrogen (acidity measured as pH), sulfate, nitrate, ammonium, chlo-
  ride, 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,  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.
  Table 5: Air Quality and Acid  Deposition Measurements
    hemicals  Cher
            Sulfate Ion
            Nitrates Ion
            Nitric Acid
                                                       : these measured by the netwo
                                                Primary precursor of wet and dry acid deposition; primary pre-
                                                cursor to fine particles in many regions.
                                                Major contributor to wet acid deposition; major component of
                                                fine particles in the Midwest and eastern regions; can be trans-
                                                ported over large distances; formed from reaction of sulfur
                                                dioxide in the atmosphere.
                                                Contributor to acid and nitrogen wet deposition; major com-
                                                ponent of fine particles in urban areas; formed from reaction
                                                of NOX in the atmosphere.
                                                Strong acid and major component of dry nitrogen deposition;
                                                formed as a secondary product from NOX in the atmosphere.
                     Contributor to wet and dry nitrogen deposition; major compo-
                     nent of fine particles; provides neutralizing role for acidic com-
                     pounds; formed from ammonia gas in the atmosphere.
                                                Indicator of acidity in precipitation; formed from reaction of
                                                sulfate and nitrate in water.
These base cations neutralize acidic compounds in precipita-
tion and the environment; also play a major role in plant nutri-
tion and soil productivity.

                                                          Acid Rain Program, 2005 Progress Report 0"  17
Air Quality
Sulfur Dioxide
     Figure 16: National SO2 Air Quality,
     1980-2005 (Based on Annual Arithmetic Average)
    Sulfur data collected from the State and Local
Air Monitoring Stations (SLAMS) and the National
Air Monitoring Stations (NAMS) monitoring net-
works show that the decline in SO2 emissions from
the power industry has improved air quality. In the
entire United States, there has not been a single
monitored violation of the SO2 ambient air quality
standard since 2000. Based on EPA's latest air quality
trends data located at ,
the national composite average of SO2 annual mean
ambient concentrations decreased 48 percent
between 1990 and 2005, as shown in Figure  16.
The largest single-year reduction (21  percent)
occurred in the first year of the Acid Rain Program
(ARP), between 1994 and 1995.
    These trends are consistent with the  ambient
trends observed in Clean Air Status and Trends
Network (CASTNET). During the late 1990s,
following implementation of Phase I of the ARP,
dramatic regional improvements in SO2  and
ambient sulfate concentrations were observed at

Figure 17a: Annual Mean Ambient Sulfur
Dioxide Concentration, 1989-1991*
    Source: EPA air emission trends, 

CASTNET sites throughout the eastern United
States due to the large reductions in SO2 emissions
from ARP sources. Three-year mean annual
concentrations of SO2 and sulfate from CAST-
NET long-term monitoring sites are compared
from 1989 through 1991 and 2003 through 2005
in both tabular form (see Table 4 on page 14) and
graphically in maps (see Figures 17a through 18b).

Figure 17b: Annual Mean Ambient Sulfur
Dioxide Concentration, 2003-2005
                                                  Source: CASTNET
                            • '^                                                t -^
*Dots on all maps represent monitoring sites. Lack of shading for southern Florida on Figures 1 7a, 1 8a, and 1 9a indicates lack of monitoring coverage

18 -0- Acid Rain Program, 2005 Progress Report
Figure 18a: Annual Mean Ambient Sulfate
Concentration, 1989-1991
Figure 18b: Annual Mean Ambient Sulfate
Concentration, 2003-2005
                                                Source: CASTNET
Figure 19a: Annual Mean Total Ambient
Nitrate Concentration, 1989-1991
Figure 19b: Annual Mean Total Ambient
Nitrate Concentration, 2003-2005

                                                Source: CASTNET

                                                        Acid Rain Program, 2005 Progress Report 0" 19
   The map in Figure 17a shows that from 1989
through 1991, prior to implementation of Phase I
of the ARP, the highest ambient concentrations of
SO2 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.

   Also, in 1989 through 1991, the highest
ambient sulfate concentrations, greater than
7 micrograms per cubic meter ((ag/m3), were also
observed in 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 (ag/m3. Like
SO2 concentrations, ambient sulfate concentrations
have decreased since the ARP was implemented,
with average concentrations decreasing approxi-
mately 30 percent in all regions of the East. 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).
  Assessing Recent Monitoring Data—Sulfate
  Air quality monitoring networks such as the Clean Air Status and Trends Network (CASTNET),
  report air concentration data for both primary (sulfur dioxide) and secondary (sulfate) pollu-
  tants as an indication of changes in power plant emissions. Continuous emission monitors on
  fossil fuel-burning power plants at the unit or stack level provide the data for SO2 emissions,
  which show a national decrease from 2004 to  2005. Interestingly, ambient monitoring data from
  CASTNET for 2005 show an increase in  sulfate (SO42) concentrations—an  important constituent
  of fine particulate matter—across much  of the eastern United States. This  observed increase does
  not correlate with the relatively steady or declining emissions data from regional sources and is
  likely to be the result of year-to-year variations in meteorological conditions or other factors.
  Sulfate ion formation is the result of complex chemical and physical processes involving emis-
  sions from Acid Rain Program (ARP) sources, non-ARP sources (i.e., industrial processes, agri-
  culture and transportation), meteorological conditions, and other phenomena. EPA employs a
  range of analytical and assessment protocols to understand these processes, including modeling
  of source/receptor relationships, source apportionment, and atmospheric transport processes.
  Although the ARP has achieved significant reductions in SO2 from coal-burning power plants—over
  35 percent since 1990—sulfate deposition and concentrations vary from year to year. This illustrates
  the importance of long-term  monitoring and accounting for annual variability to determine status
                                             and trends over time. Another steep reduction
            Sulfate Concentrations            jn SO2 emissions is projected to be achieved by
                                             the Clean Air Interstate Rule (CAIR), which will
                                             cap eastern SO2 emissions at 2.6 million tons in
                                             2015, much lower than the ARP's toughest cap
                                             that starts  in 2010. As with the ARP, this program
                                             is expected to result in significant emission reduc-
                                             tions. These reductions may be followed by periodic
                                             fluctuations in regional and source-specific
                                             emissions as sources seek to comply with the cap,
                                             as well as fluctuating signals from the air quality
  Source: CASTNET                               and deposition monitoring networks.

20 v- Acid Rain Program, 2005 Progress Report
Nitrogen Oxides
    The ARP has met its NOX reduction targets,
and these reductions are correlated with decreases
in total ambient nitrate concentrations (the sum of
particulate nitrate and nitric acid) at CASTNET
sites. The ratio of these two components in the
atmosphere is dependent on emissions of NOX,
SO2, and other pollutants from electric  generation
and other sectors  (such as motor vehicles and
    In some areas, NOX levels can also be affected by
emissions transported via air currents over wide
regions. From 2003 to 2005, reduced NOX emissions
from power plants under the NOX Budget Trading
Program led to more significant region-specific
improvements in some indicators. For instance, mean
total annual ambient nitrate concentrations (nitric
acid plus particulate nitrate) for 2003 through 2005
decreased in the Midwest by about 12 percent from
the annual mean concentration in 1989 through
1991 (see Figures 19a and 19b).While the cause of
the reductions has not yet been determined conclu-
sively, these improvements may be partly attributed
to added NOX controls installed for compliance with
the NOX Budget Trading Program.
Acid  Deposition

    National Atmospheric Deposition Program/
National Trends Network (NADP/NTN) moni-
toring data show significant improvements in most
deposition indicators. For example, wet sulfate
deposition—sulfate that falls to the earth through
rain, snow, and fog—has
decreased  since the implemen-
tation of the Acid Rain
Program (ARP), particularly
throughout the early 1990s 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
in some areas of the Midwest.
Between the 1989-1991
and 2003-2005 observation
periods, average decreases in wet deposition of
sulfate ranged from 36  percent in the Northeast to
19 percent in the Southeast (see Table 4 on page
14 and Figures 20a and 20b). Along with wet sul-
fate deposition, wet sulfate concentrations have
also decreased significantly. Since 1991, average
levels decreased 40 percent in the Northeast, 33
percent in the Mid-Atlantic, and 30 percent in the
                 Midwest. A strong correlation
                 between large-scale SO2 emis-
                 sion reductions and large
                 reductions in sulfate concentra-
                 tions in precipitation has been
                 noted in the Northeast, one of
                 the areas most affected by acid
                     A reduction  in the long-
                 range transport of sulfate from
                 emission sources located in the
                 Ohio River Valley is a principal
                 reason for reduced concentra-
                 tions of sulfate in precipitation
                 in the Northeast. The reductions
                 in sulfate documented in the
                 Northeast, particularly across
                 New England and portions  of
                 New York, were  also affected
                 by SO2 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.

                                                            Acid Rain Program, 2005 Progress Report 0"  21
  Figure 20a: Annual Mean Wet Sulfate
  Deposition, 1989-1991
  Figure 20b: Annual Mean Wet Sulfate
  Deposition, 2003-2005
                                                                                                .„. , WetS042
                                                                                                 / (kg/ha)
Source: National Atmospheric Deposition Program

  Figure 21 a: Annual Mean Wet Inorganic
  Nitrogen Deposition, 1989-1991
    Source: National Atmospheric Deposition Program

  Figure 21 b: Annual Mean Wet Inorganic
  Nitrogen Deposition, 2003-2005
Source: National Atmospheric Deposition Program
    Source: National Atmospheric Deposition Program
    Reductions in nitrogen deposition recorded
since the early 1990s have been less dramatic
than those for sulfur. As noted earlier, emissions
from source categories other than ARP sources
significantly affect air concentrations and nitrogen
deposition. Inorganic nitrogen deposition decreased
in the Mid-Atlantic and Midwest (8 percent) and
more significantly in the Northeast (23 percent), but
remained virtually unchanged in the Southeast (see
Figures 21 a and 21b).

22 -0- Acid Rain Program, 2005 Progress Report
   Improvements in Surface Wat
   Long-term monitoring networks provide information on the
   chemistry of lakes and streams, which demonstrates how
   water bodies are responding to changes in emissions.9 The
   data presented in the figure below show regional trends in
   acidification from 1990 to 2004  in areas of the eastern United
   States. 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 thi
   trends calculated for each water  body, median regional
   changes were determined for  each recovery measure. A nega-
   tive 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 in the measurement.
   Movement toward recovery is indicated by positive trends in
   acid  neutralizing capacity (ANC) and negative trends in sul-

   ,  V       '  -_,	-figure 22: Regional Trends. Lakes and
   nvdrogen            °          °
                             Streams,  1990-2004
   i i^\ r-» —i f» /H                           '


So. Appalachians!
Adirondack Lakes
New England Lake

reams (n-65)


 i   i               I IVUIC £-£-, IVCVIWIIO-I lldllUO. L-dlXCD CLIIU
 hvdrosen            &          &
                           Streams, 1990-2004
 ion, and
 aluminum.         sulfate
"v i    -            
                                                            Acid Rain Program, 2005 Progress Report  > 23
Table 6: Results of Regional Trend Analyses on Lakes and Streams, 1990-2004
             Chemical Variable
New England     Adirondack    No. Appalachian  So. Appalachian
   Lakes          Lakes          Streams         Streams
  (n = 21)        (n = 49)         (n = 9)         (n = 65)
Sulfate (|jeq/L/yr)
Nitrate (|jeq/L/yr)
Acid Neutralizing Capacity (ueq/L/yr)
Base Cations (ueq/L/yr)
Hydrogen (ueq/L/yr)
Organic Acids (ueq/L/yr)
Aluminum (ug/L/yr)
Insufficient data
Insufficient data
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 signif-
icant are shown in bold.
Source: EPA, 2004

England. It should be noted, however, that decreas-
ing nitrate concentrations do not appear to be
related to the magnitude of changes in emissions
or deposition in these areas, but are likely a result
of ecosystem factors that are not yet fully under-
    As a result of declining sulfate (and to some
extent nitrate) concentrations, the acidity of lake
and stream water is decreasing in three of the four
regions. In the Adirondacks  and northern
Appalachians, acid neutralizing capacity (ANC, an
indicator of aquatic ecosystem recovery)  is increas-
ing. For example, 48 out of 49  monitored
Adirondack lakes showed reductions in sulfate con-
centrations that coincide with reductions in atmos-
pheric concentrations of sulfur. These decreases in
sulfate, as well as decreases in nitrate concentrations
that do not appear to be due to changes in atmos-
pheric nitrogen deposition, have resulted in
increased pH and ANC as well as decreases in the
amount of toxic inorganic aluminum in Adirondack
lakes. In New England, ANC appears to  be increas-
ing only slightly, and is not statistically significant,
but hydrogen ion concentrations  are declining.
Declining hydrogen ion concentrations represent an
increase in pH, which also is elevated by statistically
significant levels in the Adirondacks. In contrast,
increasing sulfate concentrations are evident in the
southern Appalachians. This regional increase  may
be explained in part by the region's soils, which can
store large amounts of sulfate delivered by deposi-
          tion. When large amounts of sulfate have accumu-
          lated in the soils over time, stream water sulfate con-
          centrations can also continue increasing over time.
          Thus, despite decreasing sulfate in atmospheric dep-
          osition, an increase in sulfate concentrations in-
          stream has been observed in that region.
             Base cations are important because they buffer
          the impact of sulfur and nitrogen deposition. Base
          cation concentrations in lakes and streams are
          expected to decrease when rates of atmospheric
          deposition decline, but if they decrease too much,
          they limit recovery in pH and ANC. While the
          high rates of base cation decline in the northern
          Appalachians may be of concern, they do not cur-
          rently seem to be preventing recovery. However,
          their behavior in the future will bear watching.
             Organic acids are natural forms of acidity.
          Lakes and streams vary widely in how much natu-
          ral acidity they have, and increases in organic  acids,
          like declining base cations, over time can limit
          recovery. Organic acid concentrations are currently
          increasing in many parts of the world, but the
          cause is still being debated. Of the regions moni-
          tored by EPA, only the Adirondacks are  showing
          significant increases in  organic acids, and their
          increase may be responsible for 10 to 15 percent
          less recovery (in ANC) than expected. In order to
          fully understand and assess response and recovery
          of sensitive ecosystems to emission reduction  pro-
          grams, this area may require further investigation.

24 -0" Acid Rain Program, 2005 Progress Report

  •v"  Preliminary estimates of annual benefits
      EPA can monetize are substantial.
  -v"  Benefits are driven by:
         Reduced  premature deaths.
         Lowering aggravation and
         incidence of heart and lung
         Visibility improvements in some parks.
  -v"  Many benefits are not included in
         Mercury reductions.
         Acid rain environmental benefits.
         Remaining visibility benefits from
         parks and urban areas.
      -   Others.
  ^  Benefits from CAIR/CAMR for Canada
      have not yet  been quantified.

                Figure 23: Combined
              Estimated Annual Benefits
             for ARP, CAIR, and CAMR
  Source: EPA, 2006, derived from Chestnut & Mills Analysis
  "A fresh look at the benefits and costs of the US acid rain
  program" (Oct. 1, 2004) and EPA's Multi-pollutant Regula
  Analysis: CAIR, CAVR, CAMR (Oct. 200S). Acid Rain 202C
  benefits extrapolated from 2010 estimates. Consumer
  Price Index-Urban was used to convert 1999 dollars and
   Most of the regions do not have sufficient
aluminum data to estimate trends. 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). As mentioned
earlier, the southern Appalachians are unusual in
both their physiography and response to changing
atmospheric deposition. Because sulfate concentra-
tions in streams are increasing strongly in this
region, many of the other chemical variables (e.g.,
ANC and pH) show trends typical of acidifying
conditions, rather than recovery.

Quantifying Costs and
Benefits  of the Acid
Rain  Program
   A 2005 analysis10 of the annual benefits and
costs of the Acid Rain Program (ARP) updated
those of the National Acid Protection Assessment
Program (NAPAP) 1990 Integrated Assessment
and a 1995 EPA report" by integrating scientific
knowledge that has emerged since the 1990s.
An expanded list of impacts has increased the
program's estimated benefits,  while newer imple-
mentation strategies—unforeseen in 1990—have
lowered estimated costs. The  estimated value of the
program's annual benefits in the year 2010 now
totals $122 billion (in 2000$).These benefits result
mostly from the prevention of health-related
impacts (such as premature deaths, illnesses, and
workdays missed due to illness), but also include
improved visibility in parks and other recreational
areas and ecosystem improvements. These benefits
stem from the substantial difference that the ARP is
expected to make in many areas meeting the
National Ambient Air Quality Standards (NAAQS)
by 2010 for fine particles less than 2.5 micrometers
in diameter (PM25) and ozone (see Figure 25).
Notably, some significant benefits are not quantified,
such as the 20 percent reduction in mercury emis-
sions from coal-fired power plants; improvements to

                                                        Acid Rain Program, 2005 Progress Report 0" 25
urban visibility, forest health, and surface water
quality; and increased longevity and reduced soiling
of painted and stone surfaces.
   The 2005 study finds that the estimated annual
cost of the ARP in 2010 will be $3 billion, with
the SO2 program accounting for about $2 billion.
These findings are generally consistent with other
recent independent findings and are far less than
the original NAPAP estimates.12 EPA expects
NOX costs to be no more than $1 billion annually,
and likely less, from the limited analysis that has
been completed in this area. This leads to a more
than 40:1  benefit-cost  ratio. Among the most
important factors in reducing SO2 program costs
were changes in transportation and production of
coal, which enabled sources to increase the use of
low-sulfur coal. The flexibility offered by the SO2
program also may have enabled technological
innovations that lowered compliance costs. For
instance, boiler adaptations and lower than expect-
ed installation and operation costs for flue gas
desulfurization systems (scrubbers) reduced costs
below original estimates.13 See Figure 23 on page
24 for the combined estimated benefits of the
ARP, Clean Air Interstate Rule (CAIR), and
Clean Air Mercury Rule (CAMR).
   Environmental Justice Analysis
   In September 2005, EPA published a staff report evaluating
   the public health benefits of the ARP, focusing on the
   changes in exposure of minority and  low-income popula-
   tions to ambient concentrations of PM2 5 as a result of
   the ARP. Analyses of SO2 and NOX emissions show that,
   in general, the areas with highest emissions prior to the
   program have also experienced the greatest emission
   reductions. However, since the ARP does not mandate
   reductions from specific sources, the exact effects of the
   ARP on specific populations or localities are harder to
   assess. To explore the potential environmental justice
   issues related to the ARP, EPA investigated how  trading
   SO2 emissions under the ARP might affect minority and
   low-income communities, and how trading SO2 emis-
   sions has impacted air quality at both regional and local
   levels. In formulating this analysis of the ARP,  EPA meas-
   ured exposure to PM2 5 concentrations in relation to region-
   al locations,  population size, race, and income levels. This
   investigation  led EPA to the following conclusions:
   0-  There is no evidence that the  cap and trade mechanism has led to increased human
      exposure  to air pollution.
   •0"  The ARP  improved air quality substantially  overall.
   0-  The ARP  improved air quality substantially  for all population groups.
   •v*  No disproportionately high and  adverse human health or environmental effects were found
      for minority or low-income groups.
   To view the complete report, visit .

26 -0" Acid Rain Program, 2005 Progress Report
Further  National  Controls to  Protect  Human
Health and  the  Environment
   A combination of existing
programs and future regulations
that address the interstate trans-
port of ozone and fine particles
and mercury deposition will
help ensure further improve-
ments in human health and
environmental protection. With
the Acid Rain Program (ARP),
the NOX SIP Call in the eastern
United States, and mobile source
rules covering new cars, trucks,
buses, and nonroad equipment,
states have critical controls to
help achieve ozone and fine
particle National Ambient Air
Quality Standards (NAAQS).
   In the spring of 2005, EPA
promulgated a suite of air quality
rules designed to achieve addi-
tional reductions of SO2, NOX,
and mercury from power plants.
These rules include Clean Air
Interstate Rule (CAIR), Clean
Air Mercury Rule (CAMR),
and Clean Air Visibility Rule
(CAVR).14 See Figure 27 for an
implementation timeline.
   EPA expects that the air
quality impacts of these regula-
tions, coupled with recent rules
to reduce fine particles and NOX
from motor vehicles, will be
extensive. Figures 24-26 show
areas projected to attain the
NAAQS in 2010 and 2020 with
these regulations, compared to
today. Figure 24 shows ozone
and PM2 5 nonattainment areas
primarily occurring in eastern
states and California. As the new
rules are implemented, nonat-
tainment is expected to  decline
steadily, with 92 fewer areas by
Figure 24: Ozone and Fine Particle Nonattainment Areas, April 2006
                                                Source: EPA, 2006
Note: 1 29 areas currently designated as nonattainment for PMn 5 and/or 8-hour ozone.

Figure 25: Projected Nonattainment Areas in 2010 After
Reductions From CAIR and  Existing Clean Air Act Programs
                                                    Both PM and Ozone
                                                    N o nattai n ment
                                                    PM Only
                                                    N o nattai n ment
                                                    N o nattai n ment
                                                    Nonattainment Areas
                                                    Projected to Attain
                                                 Source: EPA, 2006
Note: Areas forecast to remain in nonattainment may need to adopt additional local or regional controls
to attain the standards by dates set pursuant to the Clean Air Act. These additional local or regional
measures are not forecast here, and therefore this figure overstates the extent of expected nonattainment.

Figure 26: Projected Nonattainment Areas in 2020 After Reductions
From CAIR, CAVR, and Existing Clean Air Act Programs
                                                  Source: EPA, 2006
Note: Areas forecast to remain in nonattainment may need to adopt additional local or regional controls
to attain the standards by dates set pursuant to the Clean Air Act. These additional local or regional
measures are not forecast here, and therefore this figure overstates the extent of expected nonattainment.

                                                                Acid Rain Program, 2005 Progress Report -0-  27
2010 (see Figure 25), and
106 fewer areas by 2020 (see
Figure 26).

    As the maps indicate,
implementing these three
new regulations is an impor-
tant step toward improving
air quality in the United
States, protecting human
health and the  environment,
and helping states and local
communities meet NAAQS
for fine  particles and ozone.
Figure 27: CAIR, CAMR, CAVR Implementation Timeline
CSP Early Emission Reduc
(annual CAIR NOxp
(07 and 03)
(June 06
SIPs due
1,ep 06)

ion Period

© © © ©
» SP, Due „, ionl|
CAVR (No. 06) slp,Du,
J -S
AIR NOx Programs Early reductions for CAIR NOX ozone-season
eason and annual) program and CAIRSO2 program begin
/09) immediately because NOX SIP Call and Tide IV
allowances can be banked into CAIR.
Phase 1 : CAIR SO2 Program Phase " ; CAIR NOx and
,10, SO2 Programs Begin
/ (15)
© © 0 © © ©
Phase I : CAMR He Proeram
'o? (10)
(5 years after
© © © ©
Phase II : CAMR Hg Program
ontrols Required
*H SIPs approved)
   States develop SP:
                                      Source: EPA, 2006
                     CAM Rand CAVR
Online  Information,   Data,  and   Resources
About the Clean Air Markets Division
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 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 Acid
Rain Program (ARP).

Regulatory Information
To learn more about how emissions cap and trade
programs work, see:
Acid Rain Program
NOX Budget Trad ing Program
General  Cap and Trade Information

Also, See Recent Related Rulemakings:
Clean Air Interstate Rule (CAIR) R/index.htm
Clean Air Mercury Rule (CAMR)
Clean Air Visibility Rule (CAVR)
CAIR, CAMR, CAVR and NAAQS Attainment
                  Progress and Results
                  Several reports have assessed the progress and results, and projected
                  future impacts of the Acid Rain Program.
                  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.
                  2005 National Acid Precipitation Assessment Program Report to
                  U.S. Environmental Protection Agency, Office of Air and
                  Radiation, Clean Air Markets Division.  (2005, September).
                  The Acid Rain Program and Environmental Justice: Staff Analysis.
                  Banzhaf, S., Burtraw, D., Evans, D., and Krupnick, A. (2004,
                  September). Valuation of natural resource improvements in the
                  Adirondacks. Resources for the Future.
                  Jenkins,]., Roy, K., Driscoll, C.,  Beurkett, C. (2005, October).
                  Acid rain and the Adirondacks: A Research Summary. Adirondack
                  Lakes Survey Corporation.

                  Emissions, Allowances, and Environmental Data
                  For more information on emissions, allowances, and environmental
                  data, see:
                  EPA Clean Air Markets Data and Maps
                  Clean Air Status and Trends Network (CASTNET)
                  Atmosphere in Motion Results from the National Deposition
                  Monitoring Networks: 2005 Atlas
                  National Atmospheric Deposition  Program/
                  National Trends Network

28  <  Acid Rain Program, 2005 Progress Report
1    See:  (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    See: .
4    Detailed emissions data for ARP sources are available on the Data and Maps portion of EPA's Clean Air Markets Web site at
     . Allowance transfers are posted and updated daily on .
5    During 2005, EPA found that there were two small units at a plant that the Agency believes should have been in the ARP since 2000,
     and EPA is now working to resolve this legal issue.
6    Allowance transfers are posted and updated daily on .
7    Gruenspecht, Howard. (2006, February 9). Deputy Administrator of the Energy Information Administration, Department of Energy.
     Statement before the Subcommittee on Clean Air, Climate Change, and Nuclear Safety of the Committee on Environment and Public
     Works in the United States Senate, p.3.
8    Other programs such as the NOX SIP Call, the OTC NOX Budget Program, and state laws also contribute to reductions, especially
     after 2000.
9    Monitoring data from the Temporally Integrated Monitoring  of Ecosystems (TIME) and Long-Term Monitoring network.
10   Chestnut and Mills, 2005.
11   Human Health Benefits from Sulfate Reduction under Title IV of the 1990 Clean Air Act Amendments. EPA-430-R-95-010.
12   See, for example:
     Ellerman, D. (2003). Lessons from Phase 2 compliance with the U.S. Acid Rain Program. Cambridge, Massachusetts: MIT Center for Energy
     and Environmental Policy Research.
     Carlson, C.P., Burtraw, D, Cropper, M., and Palmer, K. SO2 control by electric utilities: What are the gains from trade? Journal of Political
     Economy,Vol. 108, No. 6:  1292-1326.
     Office of Management and Budget. (2003). Informing Regulatory Decisions: 2003 Report to Congress on the Costs and Benefits of Federal
     Regulations and Unfunded Mandates on State, Local, and Tribal Entities. Office of Information and Regulatory Affairs.
13   EPA estimates recognize that some switching to lower-sulfur coal (and accompanying emission reductions) would have occurred in the
     absence of Title IV as railroad deregulation lowered the cost of transporting coal from Wyoming's Powder River Basin electric power
     plants in the Midwest and as plant operators adapted boilers to different types of coal.
14   CAIR (see ), CAMR (see ), CAVR (see  ).



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

                             October 2006

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