The NOX Budget Trading Program:
2008 Emission, Compliance, and Market Data
The NOX Budget Trading Program (NBP) was a mar-
ket-based cap and trade program created to reduce
the regional transport of emissions of nitrogen
oxides (NOX) from power plants and other large combus-
tion sources that contribute to ozone nonattainment in
the eastern United States. NOX is a major precursor to the
formation of ground-level ozone, a pervasive air pollution
problem in many areas in the East. The NBP was designed
to reduce NOX emissions during the warm summer months,
referred to as the ozone season, when ground-level ozone
concentrations are highest.
Over the next several months, EPA will release a series of re-
ports summarizing progress under the NBP. This first report
presents 2008 data on emission reductions, compliance re-
sults, and NOX allowance prices. Future reports will evalu-
ate progress under the NBP in 2008 by analyzing emission
reductions, reviewing compliance results and market activ-
ity, and comparing changes in emissions to changes in ozone
concentrations. For more information on the NBP, please vis-
it: .
Emission Reductions
Ozone Season NOX Reductions under the NBP
In 2008, NBP sources emitted 481,420 tons of NOX during
the summer ozone season, an overall decrease of 24,880
tons from 2007. Emissions in 2008 were 62 percent below
2000 levels, 75 percent below 1990 levels, and 9 percent
below the 2008 cap. Figure 1 shows the total ozone sea-
son NOX emissions for all affected sources in the NBP re-
gion in 2008 compared to pre-NBP baseline years (1990
and 2000) and prior NBP compliance years (2003 through
2007). It also presents the allowances allocated for 2008,
which comprised the cap (the sum of the state budgets) for
the program (528,453 tons).
Due to litigation, sources in states affected by the NBP had
three different compliance dates: May 1, 2003 for Ozone
Transport Commission (OTC) states; May 31, 2004 for
non-OTC states; and May 1, 2007 for Missouri. To com-
pare emissions year-to-year, the data presented in this re-
port generally include full ozone season emissions for all
At a Glance: NBP Results in 2008
Ozone Season Emissions: 481,420 tons
9% below 2008 cap
62% lower than in 2000 [before implementation of
the NBP)
75% lower than in 1990 [before implementation of
the 1990 Clean Air Act Amendments)
Compliance: Nearly 100%only 2 units out of compli-
ance [out of a total 2,568 units)
Allowances: 275,367 unused NBP allowances transferred
for future use under the Clean Air Interstate Rule [CAIR)
Allowance Prices: 28% decline in 2008, from $825/ton
to $592/ton
Figure 1: Ozone Season NOX Emissions from All NBP Sources
2,200
2,000
1990 2000 2003
2004 2005
Ozone Season
2006 2007 2008
Ozone Season NOX Emissions
Total State Trad ing Budgets
Notes:
Data reflect full ozone season emissions in all years for all states.
The year 2000 baseline value has been adjusted to correct a mis-
print in Figure 5 of the 2007 NBP report.
The 2008 total state trading budgets include opt-in allowances,
where applicable [New York, Ohio, and West Virginia).
Source: EPA, 2009
United States
Environmental Protection
Agency
-------
The NOX Budget Trading Program: 2008 Emission, Compliance, and Market Data
states, rather than "compliance only" emissions based on
these various compliance deadlines. This approach allows
for a consistent comparison across all states and all years.
All data for 2003-2008 in this report were gathered from
EPA's data systems as of April 1, 2009.
demand (as measured by heat input) remained essentially
flat during the same period. Table 1 shows that emission
reductions have occurred because the overall average
ozone season NOX emission rate has declined significantly,
by about 45 percent, since the NBP began in 2003.
Affected Units
There were 2,568 affected units under the NBP in 2008,
including some units that may not have operated nor had
emissions during the 2008 ozone season. For example,
some units provide electricity only on peak demand days,
and may not operate every year.
Most of the units in the NBP were electric generating units
(EGUs)large boilers, turbines, and combined cycle units
used to generate electricity for sale. Figure 2 shows that
EGUs constituted 88 percent of all regulated NBP units.
The program also applied to large industrial units that
produced electricity or steam primarily for internal use.
Examples of these units are boilers and turbines at heavy
manufacturing facilities, such as paper mills, petroleum
refineries, and iron and steel production facilities. These
units also included steam plants at institutional settings,
such as large universities or hospitals. Some states includ-
ed other types of units, such as petroleum refinery process
heaters and cement kilns.
Ozone season NOX emissions decreased substantially, by
43 percent, between 2003 and 2008, even while energy
Figure 2: Number of Units in the NBP by Type in 2008
Unclassified EGUs
Industrial Units
319(12%)
Notes:
The three "unclassified" units represent units in long-term shut-
down or other non-operating status that remained identified as
affected units under the NBP and that had not retired prior to the
2008 ozone season.
Percentages add up to more than 100 due to rounding.
Source: EPA, 2009
Table 1: Comparison of Ozone Season NOX Emissions, Heat Input, and NOX Emission Rates for All NBP Sources, 2003-2008
Ozone Season NOX Mass Emissions Ozone Season Heat Input Ozone Season NOX Emission Rate
(thousand tons) (billion mmBtu) (Ib/mmBtu)
Units by 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Fuel Type 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008
Coal
800
564
494
475
475
456
4.91
4.91
5.10
5.06
5.15
4.93
0.32
0.23
0.19
0.19
0.18
0.18
Oil
26
25
32
14
13
0.27
0.25
0.31
0.17
0.17
0.13
0.19
0.20
0.20
0.16
0.15
0.14
Gas
24
20
23
19
19
16
0.59
0.70
0.85
0.87
0.99
0.85
0.08
0.06
0.05
0.04
0.04
0.04
Total
849
609
549
508
506
481
5.77
5.86
6.27
6.10
6.30
5.91
0.29
0.21
0.18
0.17
0.16
0.16
Notes:
Tons are rounded to the nearest 1,000, and the heat input values are rounded to the nearest 10 million mmBtus. Totals in final row may not
equal the sum of individual rows due to rounding.
The average emission rate is based on dividing total reported ozone season NOX emissions for each fuel category by the total ozone season
heat input reported for that category, and then rounding the emission rate to the nearest 0.01 Ib/mmBtu. The average emission rate ex-
pressed for the total uses total NOX mass divided by total heat input to represent the heat input-weighted average for the three fuel catego-
ries.
Fuel type, as shown here, is based on the monitoring plan primary fuel designation submitted to EPA; however, many units burn multiple
fuels. Also, one primary wood-fired boiler is classified with the coal-fired units based on its secondary fuel.
Source: EPA, 2009
-------
The NOX Budget Trading Program: 2008 Emission, Compliance, and Market Data
State-by-State NOX Reductions
Ozone season NOX emissions have decreased from lev-
els in baseline years in all states participating in the NBP.
EPA projects that the Clean Air Interstate Rule (CAIR) NOX
ozone season program, which started this year, will bring a
continued decline in emissions across the region (as shown
in Figure 3).
Figure 3: State-level Ozone Season NOX Emissions from NBP to
CAIR, 1990-2010
1990 Emissions
2000 Emissions
2008 Emissions
2010 Projection
Scale: Largest bar equals 241,000 tons of NOX emissions in Ohio,
1990.
Note: Projected emissions in 2010 represent estimated reductions
due to the implementation of CAIR.
Source: EPA, 2009
In the 2008 ozone season, the total emissions from NBP
sources were 47,033 tons (9 percent) below the regional
emission cap. Fourteen states and the District of Columbia
had emissions below their allowance budgets, collectively
by 70,960 tons. Another six states (Alabama, Indiana, Ken-
tucky, Michigan, Ohio, and Pennsylvania) exceeded their
2008 budgets by a total of 23,927 allowances, indicating
that some sources within those states covered a portion of
their emissions with allowances banked from earlier years
or purchased from the market.
In any given year, emission control programs experience
variation in emissions from individual units due to a wide
range of conditions, including weather, grid demand,
transmission constraints, fuel costs, and compliance
strategy. See Appendix A at the end of this document for
individual state emission and budget data. Subsequent 2008
reports will analyze these state-specific results in further
detail. In addition, detailed unit-level data are available
in Appendix 1, online at . To view emission
data in an interactive file format using Google Earth or a
similar three-dimensional platform, go to
-------
The NOX Budget Trading Program: 2008 Emission, Compliance, and Market Data
Banking in 2008
Figure 4 shows the allowances allocated each year, the
allowances banked from the previous year, and the total
ozone season emissions subject to allowance holding re-
quirements for NBP sources from 2003 to 2008. The bank
has grown each year since the program began in 2003, with
this trend continuing through the NBP's final ozone sea-
son. After completion of the 2008 reconciliation process,
the bank increased to 273,208 NBP allowances, as shown
in Table 2. Additionally, 2008 marked the fifth of six com-
pliance years in which sources achieved more reductions
Figure 4: NOX Allowance Allocations and the Allowance Bank,
2003-2008
2003 2004 2005 2006 2007 2008
Banked Allowances from Previous Year
Allowances Allocated for Current Year*
Ozone Season Emissions**
Notes:
* Allowances allocated may include those issued by states from base
budget, compliance supplement pool (CSP) (available only for the
first two years of compliance), and opt-in allowances. Not all bud-
geted allowances were necessarily issued by the states each year.
** This graph represents only those emissions from states who were
subject to compliance each year. Thus, the 2003 total ozone sea-
son emissions includes emissions only from OTC states. The 2004
total represents emissions from non-OTC states in the NBP (ex-
cept Missouri) during a shortened control period (May 31 to Sep-
tember 30) and OTC states during the full control period (May 1 to
September 30). The 2005 and 2006 emissions represent the full
ozone season for all participating NBP states, except Missouri. The
2007 data is the first year in which the ozone season emissions
represent all NBP states, including Missouri.
Source: EPA, 2009
than required under the NBP and were able to bank allow-
ances for use in future years.
In 2009, the NBP transitioned to the CAIR NOX ozone sea-
son program. As part of this process, EPA transferred NBP
banked allowances and some previously unallocated al-
lowances held by states to corresponding CAIR accounts.
In total, 275,367 allowances were transferred from the
NBP to the CAIR NOX ozone season program. In addition,
while the NBP flow control provisions resulted in 1,329
additional allowances being deducted from the allowance
bank as part of the 2008 reconciliation process (see Table
2), flow control no longer applies in 2009 and beyond with
the transition to CAIR. Thus, the transferred allowances
may be used under CAIR with no restrictions or time limits
on a straight 1:1 basis.
Market Activity
NOX Allowance Trading in 2008
The 2008 NOX allowance market experienced a 28 percent
price decline - beginning the year at $825 per ton in Janu-
ary and climbing as high as $1,400 during the middle of the
year before falling to a period-end closing price in Novem-
ber of $592 per ton (see Figure 5). NBP reports released
in the next few months will investigate allowance market
activity for 2008 in more detail.
Figure 5: NOX Allowance Spot Price (Prompt Vintage), January
2008-November2008
Jan Feb Mar
May Jun Jul Aug Sep Oct Nov
Date
Note: Prompt vintage is the vintage for the "current" compliance
year. For example, 2008 vintage allowances were considered the
prompt vintage until the true-up period closed at the end of Novem-
ber 2008.
Source: CantorC02e's Market Price Indicator (MPI), 2009; see
-------
The NOX Budget Trading Program: 2008 Emission, Compliance, and Market Data
Appendix A: Ozone Season NOX Emissions (Tons) from NBP Sources, 1990-2008, and 2008 State
Trading Budgets
2008
State 1990 2000 2003 2004 2005 2006 2007 2008 Budget
AL
CT
DC
DE
IL
IN
KY
MA
MD
Ml
MO
NC
NJ
NY
OH
PA
Rl
SC
TN
VA
WV
All NBP States
89,758
11,203
576
13,180
124,006
218,333
153,179
40,367
54,375
120,132
64,272
92,059
44,359
84,485
240,768
199,137
1,099
56,153
115,348
51,866
149,176
1,923,831
84,560
4,697
134
5,256
119,460
145,722
101,601
14,324
28,954
80,425
34,058
73,082
14,630
43,583
159,578
87,329
288
39,674
69,641
40,043
109,198
1,256,237
50,895
2,070
72
5,414
48,917
100,772
63,057
9,265
19,257
45,614
29,407
51,943
11,003
34,815
133,043
51,530
209
34,624
55,376
32,766
69,171
849,220
40,564
2,191
35
5,068
40,976
68,375
40,394
7,481
19,944
39,848
16,190
39,821
10,807
34,157
67,304
52,140
177
25,377
31,399
25,448
41,333
609,029
33,632
3,022
279
6,538
37,843
57,249
36,730
8,269
20,989
42,157
18,809
32,888
11,277
36,633
54,335
51,125
253
18,193
25,718
22,309
30,401
548,649
27,812
2,514
115
4,763
36,343
55,510
37,461
5,464
18,480
40,353
15,917
30,387
8,692
26,339
52,817
52,806
181
18,376
23,930
20,491
28,852
507,603
28,744
2,152
76
5,454
35,630
56,374
40,210
3,666
16,521
34,354
12,961
28,390
7,773
24,728
57,862
57,615
187
18,418
23,261
22,957
28,967
506,300
30,221
1,721
133
4,285
34,126
57,838
39,386
3,230
10,667
34,358
12,777
27,105
7,139
20,934
54,644
56,747
161
17,552
21,711
19,596
27,089
481,420
25,497
4,477
233
5,227
35,557
55,729
36,109
12,861
15,466
31,247
13,459
34,703
13,022
41,385
49,842
50,843
936
19,678
31,480
21,195
29,507
528,453
Notes:
Emissions for Alabama, Michigan, and Missouri are for units in the portion of the state that became subject to the NBP in 2004 (Alabama and
Michigan) and 2007 (Missouri).
The 2008 state budget values include opt-in allowances, where applicable (New York, Ohio, and West Virginia).
Emissions for prior years reflect emission resubmissions as of April 1, 2009, and may differ slightly from numbers that appear in previous
progress reports.
Source: EPA, 2009
------- |