EPA
Acid Rain
Program

2002 Progress
Report
CLEANAIR
MARKET PROGRAMS

November 2003

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This 2002 Progress Report updates the key Acid Rain Program data reported in the 2001 Progress Report.
This update includes:

*   Emission levels

*   Compliance with the SO2 and NOX components of the program

*   SO2 allowance market information

*   Status and trends in acid deposition and related air quality

A Progress Report is published annually by EPA to update the  public on compliance with the Acid Rain
Program, the status of implementation, and our progress toward achieving our environmental goals. Detailed
unit-level emissions data are  available on EPA's Clean Air Markets website at http://www.epa.gov/airmarkets/
2002emissions.pdf. A new query tool that provides easy access to a variety of EPA emissions data is available
at http://cfpub.epa.gov/gdm. For more  information on the Acid Rain Program, including information on SO2 and
NOX emissions, acid deposition monitoring, and the environmental effects of acid deposition, please visit EPA's
Clean Air Markets website at  http://www.epa.gov/airmarkets.
                                     EPAAcid Rain Program
                                     2002 Progress Report
                                       EPA-430-R-03-011

                                   Clean Air Markets Division
                                   Office of Air and Radiation
                             U.S. Environmental Protection Agency

                                         November 2003
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                                                   MARKET PROGRAMS

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The Acid  Rain  Program:  Overview
      Acid deposition, more commonly known as acid rain, occurs when emissions of sulfur dioxide (SO2) and
      nitrogen oxides (NOX) react in the atmosphere (with water, oxygen, and oxidants) to form various acidic com-
      pounds. Prevailing winds transport the acidic compounds hundreds of miles, often across state and nation-
al borders. These acidic compounds then fall to earth in either a wet form (rain, snow, and fog) or a dry form (gases
and particles). The acidic compounds (including small particles such as sulfates and nitrates) cause many serious
health and environmental effects.  These pollutants impair air quality and damage public health, acidify lakes and
streams, harm sensitive forest  and coastal ecosystems, degrade visibility, and accelerate the decay of building
materials, paints, and cultural artifacts such as buildings, statues, and sculptures nationwide.

The pollutants that cause acid rain often cause human health and environmental impacts far away from where they
are emitted. This long-range transport makes it critical to reduce emissions that occur over large geographic areas.

The Acid Rain Program was established under  Title IV of the 1990 Clean Air Act  amendments. The  program
requires major reductions of SO2  and  NOX emissions, the pollutants that cause acid rain. Using a market-based
"cap and trade" mechanism, the program sets a  permanent cap on the total  amount of SO2 that may be emitted
by electric power plants nationwide. The cap is set at about one-half of the amount of SO2 these sources emitted
in 1980,  and the trading component allows flexibility for individual combustion units to select their own methods of
compliance. The program also  sets NOX emission limitations for certain  coal-fired electric utility boilers with the
objective of achieving and maintaining a 2 million ton reduction  from  projected NOX emission levels that would
have been emitted in 2000 without implementation of Title IV. The Acid Rain Program is comprised of two phases:
Phase I applied primarily to the  largest coal-fired sources from 1995 through 1999 for SO2 and from 1996 through
1999 for NOX. Phase II for both  pollutants began in 2000 and applies to thousands of combustion units generating
electricity nationwide.

The Acid Rain Program's ultimate objective is to protect the environment and improve human health by reducing SO2
and NOX emissions from power generation sources. These emission reductions benefit the nation by:

*   Improving air quality and protecting public health

*   Restoring acidified lakes and streams so they can once again support fish and other aquatic life

*   Improving visibility, especially at scenic vistas  in National Parks

*   Reducing damage to sensitive forests, such  as those in the Appalachian Mountains and in certain high-
    elevation Western regions

*   Reducing damage to nitrogen-sensitive coastal waters along the East and Gulf Coasts

*   Protecting historic buildings and monuments from degradation

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SO2  Emission Reductions

There were 3,208 electric generating
units1  that were subject to the SO2 pro-
visions  of  the  Acid  Rain Program  in
2002, the third year of Phase  II. Acid
Rain Program sources achieved a total
reduction in SO2 emissions of approxi-
mately 41% compared  to 1980 levels
(35%  compared to 1990 levels). Com-
pared to 2001  levels,  these sources
reduced their SO2 emissions by almost
400,000  tons.  Figure 1  shows the
trend  in SO2 emissions since 1980  for
all affected sources.
         1980  1985  1990  1995  1996  1997   1998  1999  2000  2001  2002
            Phase I sources
           D Phase II sources
 D all sources
 i allowances allocated for that year
The electric power generation industry
is  by  far  the  largest  single  source
of SO2 emissions in the U.S., account-
ing for approximately 69% of total SO2
emissions nation-wide  (National Emis-
sion   Inventory  2001   www.epa.gov/ttn/chief/trends/
index.html). Emissions from each individual unit, as well
as an additional 273 units which were retired or not yet
operating, are listed in Appendix A of this Report, avail-
able  on  EPA's Clean  Air  Markets website  at  www.
epa.gov/airmarkets/cmprpt/arp02/index.html.

Under the  Acid Rain Program,  allowances  (i.e.,
authorizations to emit SO2)  allocated in  a particular
           D Allowances allocated that year
            Unused allowances from previous year (Bank)
          ^ Emissions from affected sources
  Figure 2. SO2 Allowance Bank, 1995 through 2002.
 Source: EPA
Figure 1. SO2 Emissions from Acid Rain Sources, 1980 through 2002.
Source: EPA
              year to each unit are determined by several provisions
              of the Clean Air Act. For the year 2002, a total of 9.54
              million  allowances were  allocated.  Adding  these
              allowances to the unused allowances carried over (or
              banked) from  prior years,  a total  of 18.84  million
              allowances were  available for use in  2002.  Sources
              emitted 10.2 million tons in 2002, 650,000 tons more
              than the allowances granted in 2002 but far less than
              the total allowable level. For the third year in a row the
              number of allowances in the bank declined. As  shown
                    in Figure 2,  the bank was reduced by 650,000
                    allowances in 2002. Over  time the  bank  is
                    expected to continue to be depleted as sources
                    use  banked  allowances to  continue to comply
                    with  the  stringent Phase  II requirements. Fig-
                    ure  3  explains in more detail the origin of the
                    allowances that were available for use in 2002.

                    In addition  to the  significant reductions from the
                    electric power generation sector under the Acid
                    Rain Program,  reductions in  SO2 emissions
                    from other  sources, including smelters and sul-
                    furic acid manufacturing plants, and use of clean-
                    er fuels in  residential and  commercial burners,
                    have also contributed to the 39% decline  of SO2
                    emissions from all sources since 1980 (National
                    Emission  Inventory  www.epa.gov/ttn/chief/
                    trends/index.html).
  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
  SO2 emissions affected by the program come from coal-fired generation units, but oil and natural gas units are also included in the program.

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  Type of
  Allowance Allocation
Number of
Allowances
Explanation of Allowance Allocation Type
  Initial Allocation
9,190,3651
Initial Allocation is the number of allowances granted to
units based on the product of their historic utilization and
emissions rates (performance standards) specified in the
Clean Air Act and other provisions of the Act.	
  Allowances for
  Substitution Units
2,925
A lawsuit settlement allowed for a small amount of
allowances to be allocated for Substitution Units in 2002
instead of an earlier year during Phase I.	
  Allowance Auctions
250,000
Allowance Auctions provide allowances to the market that
were set aside in a Special Allowance Reserve when the
initial allowance  allocation was made.
  Opt-in Allowances
99,188
Opt-in Allowances are provided to units entering the
program voluntarily. There were 11 opt-in units in 2002.
  Total 2002 Allocation
9,542,478
  Banked Allowances
9,300,138
Banked Allowances are those held over from 1995 through
2001, which can be used for compliance in 2002 or any
future year.
  Total 2002 Allowable
18,842,616
  1 Note: The total year 2002 initial allocation was 9,191,897. 1,532 allowances were deducted as offsets for year 2001 reconciliation,
  and for other reasons, such as surrenders due to enforcement actions prior to the 2002 reconciliation.
 Figure 3. Origin of 2002 Allowable SO2 Emission Levels. Source: EPA
NOV Emission Reductions
Title IV of the 1990 Clean Air Act amendments
authorizes NOX emission reduction requirements
only for  coal-fired Acid Rain Program affected
units and they are to be set as annual emission-
rate limitations for different types of utility boilers.
The performance objective for the NOX program
component has been to achieve and maintain a 2
million ton reduction from these  sources relative
to the NOX emission levels projected  to occur in
2000 absent the Acid Rain Program. (This objec-
tive is consistent with guidelines  in  the statute
and legislative history on the total NOX emissions
reduction intended by Congress under Title IV.2)
The goal was achieved in 2000: total  NOX mass
emissions for coal-fired electric utility units affect-
ed  by the  NOX  program  component had been
reduced to 4.5 million tons (2.9 million  tons below
program projections,  or 2.2 million   below an early
forecast). Total NOX mass emissions for all Acid Rain
Program affected units were  3 million tons below the
projected level without implementation of Title IV (see
                               1990
                                NOX Program affected sources
                               D Title IV sources not affected by NOX
                                Projected emissions without Title IV
                      Figure 4. NOX Emissions from Acid Rain Sources, 1990
                      through 2002. Source: EPA
                           Figure 4). Emissions  from those sources in  2002
                           were even less - 2.2 million tons (or 33%) below 1990
                           emissions levels, due to some degree to added state
                           controls primarily in the Northeast
  See discussion and emission reduction projections in preamble to the final Phase II Acid Rain NOX Emission Reduction Rule (61 FR 67120,
  December 19, 1996) and supporting Regulatory Impact Analysis (Docket A-95-28, V-B-1, October 24, 1996).

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  Total Allowances Held in Accounts as of 3/1/2003
  (1995 through 2002 Vintages)1	
18,847,494
      Unit Accounts
14,080,907
      General Accounts2
4,766,587
  Allowances Deducted for Emissions
  (1995 through 2002)	
10,193,684
  2003 Penalty Allowances Deducted
33
  Banked Allowances
8,653,843
      Unit Accounts
3,887,256
      General Accounts3
4,766,587
  'The number of allowances held in the Allowance Tracking System (ATS) accounts equals the num-
  ber of 2002 allowances allocated (see Figure 3) plus the number of banked allowances. March 1,
  2003 represents the Allowance Transfer Deadline, the point in time at which unit accounts are frozen
  and after which no transfers of 1995 through 2002 allowances will be recorded. The freeze on these
  accounts is removed when annual reconciliation is complete.
  includes 40 allowances deducted from Opt-in sources for reduced utilization.
  3General accounts can be established in the ATS by any utility, individual or other organization.
 Figure 5. SO2 Allowance Reconciliation Summary, 2002. source: EPA
Inventory, www.epa.gov/ttn/chief/trends/
index.html).

SO2 Program Compliance

As in previous years, compliance with
the Acid Rain Program continues to be
extraordinarily high - nearly 100%. A
total of 10.19 million allowances were
deducted from sources' accounts in
2002 to cover emissions. A single unit
was short a total  of 33  allowances to
cover its emissions for the 2002 com-
pliance  year.  Thirty-three year 2003
allowances were  taken  from this  unit
as "offsets" and  are included  in the
total number of used allowances  for
2002. In addition to the offsets, the
operator of this unit was assessed an
automatic  monetary  penalty totaling
over $90,000.3 Figure 5 displays these
allowance deductions, as well as the
remaining bank of 1995 through 2002
allowances.
These reductions have been achieved while the amount
of fuel burned to produce electricity, as measured by
heat input, increased  30% since 1990. Without further
reductions in emissions  rates or institution of a cap on
NOX emissions,  however, NOX emissions from power
plants may rise with increased use of fossil fuels in some
areas of the country.

NOX emissions come from a wide variety of sources
including those  affected by the Acid  Rain  Program.
NOX emissions from electric power generation account
for approximately 22%  of NOX  emissions  from all
sources.  NOX emissions from  transportation sources
are 55% of all NOX emissions. Nationally, total  NOX
emissions have decreased 12% from  1990  through
2001.  NOX emissions  from  transportation  sources
decreased 14%, but NOX emissions from heavy  duty
vehicles  increased by 10%. The  emission decreases
from electric power generation and other fuel combus-
tion sources are due in part to a variety of federal and
state emission reduction  programs (including  the  Acid
Rain Program, the Ozone Transport Commission  NOX
Budget Trading Program, and anticipation of the NOX SIP
call) and federal enforcement actions (National Emissions
Under the Acid Rain Program,  units are required to
measure and record emissions using Continuous Emis-
sions Monitoring Systems (GEMS) or an approved alter-
native measurement method.

One important  measure of accuracy of a GEMS is the
relative accuracy test audit, and all units continued to
operate with high levels of accuracy in 2002. Addition-
ally,  the  percent monitor data  availability  (PMA)
exceeded 99% for coal-fired units  and approximately
98%  for oil and gas-fired  units. PMA is a method to
determine GEMS reliability - both accuracy and relia-
bility measures ensure that the actual amount of emis-
sions is being captured. And in 2002, for the third  con-
secutive year, 100% of affected sources were reporting
hourly emissions electronically.

New in  2003, the Acid Rain Program is employing an
electronic audit capability.  Since the program's incep-
tion in 1995, the emissions data - continuously report-
ed  by sources, verified and recorded by  EPA,   and
posted  for public consumption on  the  Internet -  has
been among the  most complete  and  accurate  data
ever collected  by EPA. New audit capabilities include
 A source that does not hold enough allowances in its unit account to cover its annual SO2 emissions has "excess emissions" and must pay
 a $2,000 per ton automatic penalty in 1990 dollars. The $2,000 per ton penalty is adjusted annually for inflation, so the year 2002 penalty
 was $2,849 per ton.

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  Compliance Option
Number of Units
  Standard Emission
  Limitation
             150
  Early Election
            273
  Emissions Averaging
            631
  Alternative Emission Limitation
              26
  Total
          1.0801
  The total does not equal 1,048 because 25 units have both early election and
  emissions averaging compliance plans, and 7 units have both AEL and emissions
  averaging compliance plans.
 Figure 6. Compliance Actions in the NOX Program, 2002.
 Source: EPA
software that performs hourly checks to catch errors,
miscalculations,  and  oversights  in  monitoring  and
reporting systems, thereby helping to ensure the com-
pleteness, high quality, and integrity of the emissions
data. The electronic audit highlights a greater number
of potential 'red flags' that require  additional verifica-
tion - some  units may need to surrender  additional
allowances for periods when monitors were not pro-
viding fully-validated data. These conservative 'miss-
ing data' procedures help ensure that  emissions are
never understated. The result is an improved body of
information about emissions.

To date, 80% of the total cumulative SO2 emissions data
for Acid  Rain units was electronically audited. This audit
included comprehensive checks for relative accuracy, lin-
earity, and bias adjustment.

NOX Program Compliance

In 2002, 1,048 of all Acid  Rain Program  units were
required  to meet  NOX emissions limitations. Of these
coal-fired units, 1,047 NOX units met their  NOX emis-
sions  limits through compliance with their respective
NOX compliance plans.  Only one unit failed  to meet  its
NOX emissions limit in 2002. That unit had excess NOX
emissions of  47  tons  and was  assessed a monetary
penalty of $134,000 (47 tons x $2,849 per ton penalty).
Detailed compliance information by unit can be found in
Appendices B1 and B2.  These appendices are available
on EPA's Clean Air Markets  website at www.epa.gov/
airmarkets/cmprpt/arp02/index.  Figure 6 summarizes
the compliance options chosen for NOx-affected units in
       2002. Averaging was the most widely chosen
       compliance option; 55 averaging plans involving
       631 units were in place in 2002.

       SO2 Allowance  Market

       The flexibility provided  by the Acid  Rain  Pro-
       gram  enabled the  3,208 units subject to the
       SO2 requirements in 2002 to pursue a variety
       of compliance options. Sources have met  their
       SO2 reduction obligations by options including
       installing scrubbers, switching fuels, changing
       practices or procedures to improve energy effi-
       ciency, and buying allowances. The presence
       of the  allowance  market  has  given some
       sources the incentive to reduce their SO2 emis-
       sions below the level of their allowance alloca-
       tion in order to bank their allowances for use in
       future years or to sell them to other sources.
Other sources have been able to postpone  or reduce
expenditures  for control by  purchasing allowances
from sources that controlled below their allowance  allo-
cation  level.  The flexibility in  compliance options  is
possible because strict monitoring requirements for all
affected units ensure one  allowance  is surrendered
for every ton  of SO2  emitted. The program's flexibility
significantly reduces the cost of achieving these emis-
sions reductions as compared to the cost of a techno-
logical  mandate or fixed emission rate.

The marginal cost of compliance - the cost of reducing
the next ton of SO2 emitted from the power sector - is
reflected in the price of an allowance.  Emission reduc-
tions continue to cost less than anticipated  when the
Clean Air Act Amendments were enacted and this is
reflected in the price of allowances.

Allowance  prices for 2002 continued the downward
trend that started in  the second half of  2001. Prices
hovered in the $170/ton range early in 2002  and de-
creased slightly during the summer  months, ending
the year in the  $130/ton range. Prices  stabilized  at
historical averages in 2002 after the  more  stringent
limits in Phase  II  resulted in  higher average prices
in  2001  (See  Figure 7).  Some market observers
believe lower-than-expected allowance prices during
the first several years of the program were due prima-
rily to lower than expected  compliance costs and  larg-
er than   expected  emissions  reductions,  which
increased the supply of allowances and put downward
pressure on prices.

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   $250
   $200
   $150
   $100
    $50
     $0
      1/95    1/96    1/97    1/98    1/99    1/00    1/01    1/02   1/03
  Figure 7. SO2 Allowance Price Index. Source: Monthly Price Reports
  from Cantor Fitzgerald Environmental Brokerage Services
        those trades submitted by authorized account
        representatives for private accounts. In Decem-
        ber 2001,  parties began to  use the On-line
        Allowance Tracking System (OATS) developed
        by EPA to allow transfers to occur online. Dur-
        ing 2002, OATS recorded 4,654 transfers elec-
        tronically over the Internet.

        All official allowance transactions, as well as
        data on account balances and ownership, are
        posted and updated  daily on  the Clean Air
        Markets Division's website (www.epa.gov/air-
        markets) in order to better inform trading par-
        ticipants of the status of the market. Cumula-
        tive  market statistics and analysis are also
        available.
In 2002,  over 5,700 allowance  transfers  affecting
roughly 21.4 million allowances (of past, current, and
future vintages) were recorded in the Allowance Trans-
fer System,  the accounting system developed by EPA
to track holdings  of  allowances.  Of the allowances
transferred,  11.6 million, or 54%, were transferred in
economically  significant transactions  (i.e.,  between
economically unrelated parties). The majority of  the
allowances  transferred  in  economically  significant
transactions were acquired by power companies. Fig-
ure 8 shows the volume of SO2 allowances transferred
under the Acid Rain Program since official recording of
transfers began in 1994. Figure 9 shows the cumula-
tive  trading volume  of  SO2  allowances transferred
under  the  Acid Rain Program.  Almost 224 million
allowances have been traded since 1994, with 70% of
                   ' Between Economically Related Organizations
                   1 Between Economically Unrelated Organizations
  Figure 8. SO2 Allowances Transferred under the Acid Rain Program.
 Source: EPA
        NOX Emissions Limits

 Instead  of using  a cap  with  allowance  trading to
 achieve NOX emissions reductions, the Acid Rain Pro-
 gram establishes NOX emission  limitations (Ib/mmBtu
 NOX) for coal-fired electric generation units.

 The Acid Rain Program NOX regulation  (40 CFR  part
 76), establishes NOX limits for Group 1 boilers  (dry bot-
 tom wall-fired and tangentially-fired boilers), as well as
 Group 2 boilers (cell burners, cyclones, vertically-fired,
 and wet bottom boilers). Figure 10 shows the number
 of NOX affected units by boiler type and the emissions
 limit for each boiler type.

 The owners and operators of the  1,048 units subject to
 NOX emissions limitations  in 2002 were required to
	  choose at least one  NOX compliance plan
            (described  below) to indicate how each
            unit will comply with its NOX limit:
            *   Standard Limitation. A unit with a stan-
                dard limit simply meets the applicable
                individual NOX limit prescribed for its
                boiler type  under 40 CFR 76.5, 76.6,
                or 76.7.

            *   Early  Election. Under this compliance
                option, a Phase II Group 1 NOX affect-
                ed unit  met a less stringent Phase  I
                NOX limit beginning in 1997, three years
                before it would normally be subject to
                an Acid Rain NOX limit.  In  return  for
                accepting a NOX  limit three years earli-
                er than would normally be required, an

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     early election unit does not become subject to
     the more stringent Phase II NOX limit until 2008.

*    Emissions Averaging. A company can meet its
     NOX emissions reduction  requirements  by
     choosing to  make  a group of NOX affected
     boilers  subject to  a group  NOX limit, rather
     than meeting individual  NOX  limits for each
     unit. The group limit is established at the end
     of each calendar year, and the group rate for
     the  units must be  less than or  equal to the
     Btu-weighted  rate  at which the  units would
     have been limited had each been  subject to
     an individual NOX limit.

*    Alternative Emission Limitation (AEL). A utility
     can  petition for a less stringent AEL if it proper-
     ly installs  and operates the  NOX  emissions
     reduction technology prescribed for that boiler,
     but  is unable  to meet its standard  limit.  EPA
     determines whether an AEL is  warranted
     based on analyses of emissions data and infor-
     mation about the NOX control equipment.
     1994   1995   1
                        By Quarter (Cumulative)
Figure 9. Cumulative SO2 Allowances Transferred through
the End of 2002.

Private Transfers: these transfers were submitted by authorized
account representatives for private accounts. (EPA does not attempt to
determine what constitutes an actual trade where money is
exchanged).

EPA/Market Transfers: most of these transfers involved movement of
allowances from EPA accounts to market accounts (e.g., auctions,
Phase I extension allowances, substitution allowances, etc.)
Status and Trends in Acid  Deposition and
Related Air Quality
The emission reductions achieved under the Acid Rain
Program have led to important environmental and pub-
lic health benefits. These  include improvements in air
quality with significant benefits to human health, reduc-
tions  in acid deposition,  the  beginnings  of recovery
Standard Emission Number
Coal-Fired Boiler Type Limit (Ib/mmBtu) of Units
Phase I Group 1 Tangentially-fired
Phase I Group 1 Dry Bottom Wall-fired
Phase II Group 1 Tangentially-fired
Phase II Group 1 Dry Bottom Wall-fired
Cell Burners
Cyclones > 155 MW
Wet Bottom > 65 MW
Vertically-fired
Total
0.45
0.50
0.40
0.46
0.68
0.86
0.84
0.80

135
130
306
312
37
56
31
41
1,048

Figure 10. Number of NOX Affected Units by Boiler Type.
Source: EPA

    from acidification  in  fresh water  lakes and streams,
    improvements in visibility, and reduced risk to forests,
    coastal waters, and materials and  structures.

    To evaluate the  impact of emissions reductions on the
    environment, scientists and policymakers use data col-
    lected from long-term  national monitoring networks such
    as the Clean Air  Status and Trends  Network (CASTNET)
                           and the National Atmospheric
                           Deposition  Program (NADP).
                           Deposition and air quality mon-
                           itoring  data from these  and
                           other air quality monitoring net-
                           works can be accessed on or
                           through the CASTNET website
                           at http://www.epa.gov/castnet.

                           Data  collected  from  these
                           networks   show  that  the
                           decline   in  SO2 emissions
                           from  the  power  industry has
                           decreased  acidic deposition
                           and improved air quality. The
                           decline in NOX emissions has
                           not  been as  large and the
                           environmental improvements
                           are not as widespread.

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  Figure 11. Mean Wet Sulfate Deposition 1989
  through 1991. Source: National Atmospheric Deposition
  Program
Note: Points on map represent location of monitoring sites
                                                                                               Wet SO42-
  Figure 12. Mean Wet Sulfate Deposition 2000
  through 2002. Source: National Atmospheric Deposition
  Program
This 2002 Progress Report highlights changes in dep-
osition and certain  air quality  parameters.  As data
become available, new information on ecosystems and
human health impacts will be included in subsequent
progress reports.

*    SO2  concentrations in  the atmosphere  have
     decreased since 1990. In 2002, concentrations in
     the Northeast and Mid-Atlantic were 6-12 micro-
     grams  per  cubic meter (ug/m3),  as much as 8
     ug/m3 lower than in 1990.

*    Sulfate concentrations  in the atmosphere have
     decreased since  1990 as well. In 2002, concentra-
     tions in most of the East were 3-5 ug/m3, as much
     as 4 ug/m3 lower than in 1990.

*    Wet sulfate deposition  has decreased significantly
     since  1990. In  2002,  deposition  in most of  the
     Northeast and Midwest was 10-20 kilograms  per
     hectare per year (kg/ha/yr), as much as 12 kg/ha/yr
     lower than it was in 1990.

*    Wet  nitrate deposition  has decreased regionally
     although nitrate concentrations in precipitation have
     remained unchanged or increased in some areas.

Scientists have documented that both wet and dry sulfur
deposition (and the actual acidity of rain) have declined
with  reductions of SO2 emissions over a large portion of
the eastern U.S. following implementation of Title IV. A
strong, near linear correlation, between large scale SO2
emissions reductions and large reductions in sulfate con-
centrations in precipitation has been noted for the North-
east, one of the areas most affected by acid deposition.
Some of the greatest reductions in wet sulfate deposition
occurred in the Mid-Appalachian region, including Mary-
land,  New York, West Virginia, Virginia,  and most of
Pennsylvania (see Figures 11 and 12). Wet sulfate dep-
osition decreased more than 8 kg/ha from rates observed
throughout the early 1990s in much of the Ohio River Val-
ley and Northeastern U.S. Other less dramatic reductions
were observed across  much of New England, portions of
the Southern Appalachian Mountains and in the Midwest,
most notably Indiana and Illinois.

Figures 11 and 12 show the mean wet sulfate deposition
in  the continental U.S. between 1989 through 1991 and
2000 through 2002. The highest rates of sulfur deposition
have been observed in the areas containing  the highest
SO2 emissions -  the Midwest and the East. Most areas in
the East have had reductions  in sulfate deposition since
1989 through 1991.

A main reason for reduced  concentrations of sulfate in
precipitation in the  Northeast  is a reduction in the long-
range transport of sulfate from emission sources locat-
ed in  the  Ohio River  Valley. The  reductions in sulfate
documented in the  Northeast, particularly across New
England and portions of New York  State,  were also
affected by SO2  emission reductions in eastern Cana-
da. Concurrent with these sulfate reductions were sim-
ilar reductions  in  precipitation  acidity, expressed as
hydrogen  ion (H+)  in concentrations (NADP).

For ambient sulfate  concentrations, both the size of the
affected region and magnitude of the highest concentra-
tions were dramatically reduced following implementation
of Title  IV Sulfate  concentrations  decreased up to 3
ug/m3 in the eastern U.S. from the levels of 5-8 ug/m3

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  Figure 13. Mean Sulfate Concentration 1989 through
  1991. Source: CASTNET
  Figure 14. Mean Sulfate Concentration 2000 through
  2002. Source: CASTNET
observed in the early 1990s (see Figures 13 and 14.).
The  largest decreases were observed  along the Ohio
River Valley.

Analyses of regional monitoring data from CASTNET
show the geographic pattern of SO2 and airborne sulfate
in the eastern U.S. Three-year mean annual concentra-
tions of SO2 and sulfate from a set of 34 CASTNET long-
term monitoring sites were compared from 1989 through
1991 and 2000 through 2002. In 1989 through 1991, prior
to implementation of Phase I of Title IV, the highest ambi-
ent concentrations of SO2 in the East were observed in
western Pennsylvania, and along the Ohio River Valley.
The highest ambient sulfate concentrations, greater than
7 ug/m3, were observed  in this area and in northern
Alabama. Most of the eastern U.S. experienced annual
ambient sulfate concentrations greater than 5 ug/m3.
During the  late 1990s, following  implementation  of
Phase I of the Acid Rain Program, dramatic regional
improvements in SO2 and sulfate ambient concentra-
tions were observed at CASTNET sites throughout the
eastern U.S.

Ambient concentrations of SO2 in 2000 through 2002
decreased  up to 8  ug/m3 in the Northeast and  Mid-
Atlantic regions compared to concentrations of 10-20
ug/m3 observed in the early 1990s (see Figures 15
and 16).  The largest decreases in ambient SO2  con-
centrations were noted in high  emissions and concen-
tration areas (e.g., vicinity of Chicago and throughout
Indiana, Ohio, Pennsylvania, Kentucky,  and West Vir-
ginia). The  highest SO2 concentrations observed in the
rural parts of the United States are now concentrated in
eastern Ohio and southwestern  Pennsylvania.
  Figure 15. Mean Sulfur Dioxide Concentration 1989
  through 1991. Source: CASTNET
  Figure 16. Mean Sulfur Dioxide Concentration 2000
  through 2002. Source: CASTNET
                                                                                                           9

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                                                  244 Sites

                                                  NAAQS
                90% of sites have concentrations below this line

                            / 10% of sites have concentrations below this line
             83 84 85 86 87 88 89 90 91  92 93 94 95 96 97
                          1983-02: 54% decrease
                          1993-02: 39% decrease
         Fig. 17. SO2 Annual Arithmetic Average 1983
         through 2002.
         Source: Latest Findings on National Air Quality 2002 Status
         and Trends, EPA
Nationally, average SO2 ambient concentrations have
decreased 54% from 1983  through 2002 and 39%
over the  more recent  10-year period  1993  through
2002 (see Figure 17 regarding National Ambient Air
Quality Standard). Reductions in SO2 concentrations
since 1990  are due,  in large part, to controls imple-
mented under EPA's Acid Rain Program.

Figures 18  and 19 show mean wet nitrate deposition
in  the  continental  U.S. between 1989  through 1991
and  2000 through  2002. Large reductions  in wet
nitrate deposition were observed  in the northeastern
U.S. and  Michigan.  Figures  20 and 21  show mean
wet  nitrate  concentrations  in  the  continental U.S.
between 1989 through  1991  and 2000  through 2002.
Wet nitrate concentrations across the U.S. have gen-
erally  remained the same,  or increased in some
regions. Unlike sulfate concentrations, sharp declines
         Fig. 18. Mean Wet Nitrate Deposition 1989 through
         1991. Source: National Atmospheric Deposition Program
 Fig. 19. Mean Wet Nitrate Deposition 2000 through
 2002. Source: National Atmospheric Deposition Program
         Fig. 20. Mean Wet Nitrate Concentrations 1989
         through 1991. Source: National Atmospheric Deposition Program
 Fig. 21. Mean Wet Nitrate Concentrations 2000
 through 2002. Source: National Atmospheric Deposition Program
10

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  Fig. 22. Mean Ambient Nitrate Concentrations 1989
  through 1991. Source: CASTNET
 Fig. 23. Mean Ambient Nitrate Concentrations 2000
 through 2002. Source: CASTNET
in wet nitrate concentrations have not been observed
in the Northeast, even though wet nitrate deposition
does  appear  to  be substantially  lower there.  The
decreases in wet nitrate deposition observed  in 2000
through 2002 appear related to lower precipitation lev-
els  over those same years. In addition, there are no
observable  broad-scale reductions  in total nitrogen
deposition (wet + dry) in the U.S. 1989 through 2002.*
The highest levels  of total nitrogen  deposition were
recorded  in  the  Midwest  and  Eastern U.S.  2000
through 2002, although several monitoring stations in
the west observed high levels of total nitrogen deposi-
tion. In the west, southern California in particular, dry
deposition makes up a greater percentage of the total.

Acid rain sources account for only 22% of nationwide
NOX emissions, so  emissions trends in other source
categories, especially agriculture and mobile sources,
also affect air concentrations and deposition of nitrogen.
Because NOX emissions from the power sector are not
capped  throughout the country annually these emis-
sions may grow as demand for electricity continues to
increase. However, an environmental signal is expected
over the next decade due to the implementation of the
OTC NOX Budget Trading  program, NOX SIP call and
several state programs such  as Texas, North Carolina
and  several mobile source NOX controls. Continued
monitoring of nitrogen deposition and air quality will be
particularly important to track and assess the magnitude
of the signal.

Figures 22  and 23 show  mean ambient nitrate con-
centrations  in the eastern half of the U.S. in  1989
through 1991  and 2000 through  2002,  respectively.
Data from CASTNET suggest ambient nitrate concen-
trations have  remained unchanged  and have  even
increased in some regions, with the  highest ambient
nitrate concentrations in 2000 through 2002 greater
than 4 ug/m3 recorded in the upper Midwest.
  Based on data compiled annually by National Atmospheric Deposition Program/National Trends Network (NADP/NTN)
  http://nadp.sws.uiuc.edu and Clean Air Status and Trends Network (CASTNET) www.epa.gov/castnet
                                                                                                             11

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                                    Did  you  know?
                 Environmental contamination from mercury and acidification are linked. While many questions
                 remain about how mercury moves from atmospheric deposition through the environment into
                 fish, for several years scientists have recognized one thing: often, mercury levels in fish cor-
            relate with the presence of sulfate in the ecosystem. The species of mercury that forms in the envi-
            ronment and bio-accumulates in fish - methylmercury - causes neurological and other problems in
            humans who consume those  fish. Sulfate is an indicator of acid deposition, one of the main ions
            whose presence in lakes and streams indicates that those waters are suffering from acidification.

            The amount of methylmercury in fish appears to depend in most environments on  two primary things:
            the amount of mercury entering the ecosystem and the rate of the processes that transform it into
            methylmercury. Mercury contamination and sulfur are linked in both these aspects. Coal-fired  power
            plants are a primary atmospheric source of both sulfur dioxide (the main precursor to sulfate) and mer-
            cury emissions,  and sulfate-reducing bacteria are responsible for much of the mercury methylation
            that happens in  the ecosystem. Therefore, the effects of mercury deposition are often closely  tied to
            the effects of acid  deposition. While there is still much more that scientists need to understand about
            how these pollutants interact, our current understanding offers hints of the complex and interdepen-
            dent behavior of these pollutants.
12

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Summary
In 2002, the third year of Phase II, the Acid Rain Program continued to be successful in substantially reducing
emissions of SO2 and NOX from electric power plants.

Sources continue to close in on the goal of reducing power plant SO2 emissions by 50% from 1980 levels to a cap
level of 8.95 million tons. Sources have also exceeded the goal of a two million-ton reduction in NOX emissions from
projected 2000 levels by over one million tons.

Sources in both  the cap and trade program for SO2 and the more conventional NOX program have demonstrated
a high level of compliance  with both the emissions monitoring and emission reduction requirements. These
efforts have achieved measurable  results. The flexibility for sources inherent in the cap and trade approach has
significantly reduced compliance costs.

In 2002, the Acid Rain Program achieved:

*    Dramatic Emission Reductions: In 2002, SO2 emissions from power plants were 9% lower than the year
     2000 and 41% lower than 1980. NOX emissions from power plants also continued a downward trend, post-
     ing a 13% reduction from 2000 and a 33% decline from 1990 emissions levels.

     - In 2002, the more than 3,000 units in the Acid Rain Program emitted 10.2 million tons of SO2, down from
      15.7 million tons in 1990. Emissions  of SO2 in 2002 were almost 400,000 tons less than they had been in
      2001. As  in 2001, sources drew down the bank of unused allowances in 2002, resulting in emission levels
      greater than the allowances allocated in 2002, but still lower than emissions during any  previous  year.

     - NOX emissions from all acid rain units have decreased steadily from 6 million tons in 1997 to 4.5  million
      tons in 2002. The subset of more than 1,000 units affected by the Acid Rain NOX Program emitted 4.0
      million tons in 2002, approximately 1.5 million tons (29%) less than they did in 1990.

*    Significant Air Quality Improvements: Air quality has notably improved, reducing human exposure to
     pollutants such as  SO2 and fine particles that are associated with chronic bronchitis, asthma attacks,
     hospitalizations for cardiac and respiratory diseases, and premature death.

     -Acid deposition (especially sulfate concentrations in wet and dry deposition) has been substantially
      reduced,  allowing lakes and streams in the Northeast to begin recovering from decades of acid rain.

     -Although  NOX emissions have been reduced under the Acid Rain Program, there are no clear long-term
      trends in  nitrogen deposition.

*    Better Information, Compliance and Flexibility: The Acid Rain Program's rigorous emissions monitoring
     and reporting requirements and new audit capability ensure complete accountability, resulting in a robust,
     transparent emissions inventory. The program has an extraordinary compliance level of nearly 100%.

*    Cost-Effectiveness: The cost of compliance is substantially lower than estimated in 1990. Achievement of
     the required SO2 emission reductions when the program is fully implemented in 2010 is now projected to
     cost just one quarter ($1 to $2 billion per year) of original EPA estimates.

For more information on the EPAAcid Rain Program, visit EPA's Clean Air Markets website at
http://www.epa.gov/airmarkets.

For additional detailed emissions data see http://www.epa.gov/airmarkets/emissions/index.

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Office of Air and Radiation
Clean Air Markets Division
EPA-430-R-03-011
1200 Pennsylvania Ave, NW
(6204N)
Washington, DC 20460
www.epa.gov/airmarkets
Fall 2003

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