Acid Rain and Related Programs
  2009 Emission, Compliance, and Market Analyses
       The Acid Rain Program (ARP), established under Title
       IV of the 1990 Clean Air Act (CAA) Amendments, re-
       quires major emission reductions of sulfur dioxide
  (S02) and nitrogen oxides (NOX), the primary precursors
  of acid rain, from the electric power industry. The SC>2 pro-
  gram sets a permanent cap on the total amount of SC>2 that
  may be emitted by electric generating units (EGUs) in the
  contiguous United States. The program is phased in, with
  the final 2010 SC>2 cap set at 8.95 million tons, a level of
  about one-half of the emissions from the power sector in
  1980. NOX reductions under the ARP are achieved through
  a program that applies to a subset of coal-fired EGUs and is
  closer to a traditional, rate-based regulatory system.  Since
  the program began in 1995, the ARP has achieved signifi-
  cant emission reductions. As Figure 1 shows, these reduc-
  tions have occurred as electricity generation has increased
  overall.
                                                        At a Glance: ARP Results in 2009

                                               S02 Emissions: 5.7 million tons

                                               S02 Compliance: 100%

                                               S02 Allowances: Banked allowances increased by nearly
                                               4 million from 2008 levels.

                                               S02 Allowance Prices: In 2009 allowance prices fell from
                                               $187 per ton to $61 per ton.

                                               NOX Emissions: 2.0 million tons

                                               NOX Compliance: 100%
  Figure 1: Trends in Electricity Generation, Fossil Energy Use, Prices, and Emissions from the Electric Power Industry, 1990-2009
     60%
     40%
    -80%
       1990        1992

         Electricity Generation*
                1994       1996

                   Heat Input
   1998

SC>2 Emissions
2000        2002

  NOX Emissions
  2004       2006       2008

 Average Retail Price of Electricity**
  * Generation from fossil fuel-fired plants.
  ** Constant year 2000 dollars adjusted for inflation.
  Source: Energy Information Administration (electricity generation, retail price); EPA (heat input and emissions, representing all affected
  ARP units), 2010. EIA data are preliminary.
&EFK
United States
Environmental Protection
Agency
                                                                                              September 2010

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  Acid Rain and Related Programs: 2009 Emission, Compliance, and Market Analyses
Figure 2: S02 Emissions from Acid Rain Program Sources, 1980 - 2009
        1980   1985   1990   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009

           Phase I (1995-1999) Sources      Phase II (2000 on) Sources      All Affected Sources       Allowances Allocated

Source: EPA, 2010
EPA is releasing a series of reports summarizing progress
under the ARP. A previous online report presented 2009
data on SC>2 and NOX emission reductions and compliance
results under the ARP. This second report analyzes 2009
data on emission reductions, reviews compliance results,
and summarizes market activity. A future report will com-
pare changes in emissions to changes in acid deposition
and surface water chemistry. For more information on the
ARP,  please visit .

S02

S(>2 Emission Reductions

The SC>2 requirements under the ARP apply to EGUs, fossil
fuel-fired combustors that serve a generator that provides
electricity for sale, with an output greater than 25 mega-
watts. The vast majority of ARP SC>2 emissions result from
coal-fired  EGUs, although the program also applies to oil
and gas units.  As  Figure 2 shows, ARP units have reduced
annual SC>2 emissions by 67 percent compared with 1980
levels and 64 percent compared with 1990 levels. Sources
emitted 5.7 million tons of SC>2 in 2009, well below the cur-
rent annual emission cap of 9.5 million tons, and already
below the statutory  annual cap of 8.95 million tons set for
compliance in 2010.

The states with the highest emitting sources in 1990 have
generally seen the greatest SC>2 reductions under the ARP
[see Figure 3). Most of these states are upwind of the ar-
eas the ARP was designed to protect, and reductions have
resulted in important environmental and health benefits
over a large region. In addition, from 2008 to 2009, reduc-
tions in SC>2 emissions from ARP units in 45 states totaled
about 1.89 million tons, or about 25 percent for the year.
Six states (Georgia, Indiana, North Carolina, Ohio, Pennsyl-
vania, and West Virginia) accounted for most of the one-
year reductions from 2008 to 2009, with reductions rang-
ing from 108,758 to 258,296 tons of S02 in each of these
states.

From 1990 to 2009, total annual SC>2 emissions in 41 states
and  the District  of Columbia declined by  approximately
10 million tons. In contrast, total annual SC>2 emissions in
the remaining seven states increased by a total of 39,521
tons from 1990 to 2009. The seven states with the greatest
reductions in annual emissions since 1990 include Ohio,
which decreased emissions by over 1.5 million tons, Indi-
ana,  which reduced its emissions by over 1 million tons,
and Illinois, Kentucky, Pennsylvania, Tennessee, and West
Virginia, each of which reduced total emissions during this
time by more than 500,000 tons. To view emission data in
an interactive format using Google Earth or a similar three-
dimensional platform,  go to .

Why S02 Emissions Decreased in 2009

The 25 percent reduction in S02 emissions in 2009, the larg-
est year-over-year emission drop in the program's history
was  caused in part by lower demand for power. Evidence
of this is the 7.5  percent  drop in heat input, a surrogate
measure of electricity generation  (see Table 1). Had the
overall S02 emission rate (the amount of S02 emitted per
unit  of heat input, shown in Table 2) remained unchanged

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                                Acid Rain and Related Programs: 2009 Emission, Compliance, and Market Analyses
Figure 3: State-by-State S02 Emission Levels for Acid Rain Program Sources, 1990 - 2009
                                                                                           1990 Emissions
                                                                                          D 1995 Emissions
                                                                                           2000 Emissions
                                                                                           2005 Emissions
                                                                                           2009 Emissions
Note: States shaded in blue are in the CAIR Annual NOX and SC>2 programs.
Scale:  Largest bar equals 2.2 million tons of SC>2 emissions in Ohio, 1990.
Source: EPA, 2010
from 2008 to 2009, the overall drop in demand would have
resulted in  a reduction of approximately  580,000 tons,
only 30 percent of the actual reduction . The remaining 1.3
million tons of reduced SC>2 emissions can be explained by
other factors such as the installation of SC>2 control tech-
nologies and fuel switching.

Thirty seven units installed SC>2 controls in 2009, reduc-
ing their collective SC>2 emission rate from 1.83 Ib/MMBtu
in January to 0.24 Ib/MMBtu in December. The remaining
sources in the ARP reported a steady annual  SC>2 rate of
0.43 Ib/MMBtu (see Figure 4). Had these newly-controlled
units maintained  their collective annual  2008  emission
rate of 1.7 Ib/MMBtu through 2009, their estimated emis-
sions would have fallen by only 17 percent from 2008 due
to reduced heat input. In actuality, the thirty seven units re-
duced their 2009 emissions by 50 percent by adding scrub-
bers, contributing over half a million tons in reductions to
Table 1: S02, NOX, and Heat Input Trends in Acid Rain Program Units, by Fuel Type
  Fuel Type
Coal
Gas
Oil
Other
Total
9,835
34
350
4
10,223
3,356
142
129
6
3,633
20.77
5.35
0.99
0.03
27.14
9,243
7
135
7
9,393
3,208
131
63
7
3,409
20.44
5.7
0.58
0.05
26.77
8,767
10
149
7
8,934
3,069
141
68
5
3,284
20.75
6.33
0.61
0.06
27.74
7,517
7
84
9
7,616
2,817
129
46
5
2,997
20.25
6.21
0.48
0.06
27.01
5,656
5
55
8
5,724
1,824
125
32
3
1,984
18.03
6.51
0.37
0.06
24.97
Notes: Emissions are in thousand tons, and heat input data are in quadrillion Btu (Quads). Totals may not reflect the sum of individual rows
due to rounding. Fuel type represents primary fuel type; many electric generation units might combust more than one fuel.
EPA data in Table 1 and used elsewhere in this report are current as of June 9,2010, and may differ from past or future reports as a result of
resubmissions by sources and ongoing data quality assurance activities.
Source: EPA, 2010

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  Acid Rain and Related Programs: 2009 Emission, Compliance, and Market Analyses
            The Clean Air Interstate Rule (CAIR) was designed to reduce the amount of ozone and fine
            particulate matter (PM2.s) pollution that crosses state boundaries. To achieve these reductions
            CAIR uses three separate cap and trade programs to limit emissions of nitrogen oxides (NOX)
            and sulfur dioxide (SC^), which contribute to the formation of ozone and PM2.5- The CAIR NOX
            ozone season program controls ozone formation under a summer-only NOX reduction program,
            while the CAIR NOX annual and CAIR SC>2 annual programs control the formation of PM2.5 year
            round. The CAIR NOX ozone season and annual programs began in 2009, while required reduc-
            tions under the CAIR SC>2 annual program began in 2010.
Figure 4: Monthly S02 Emission Rates
        Units with New Controls Installed
 0)
 15
 OL

 .1   2.0
 E   , R
 LU   1-6
1.2

0.8

0.4

0.0
   Jan          Apr         Jul

   Units without New Controls Installed
                                          Oct
the total program-wide annual reduction of approximately
1.9 million tons. Because the new controls were installed
at different times throughout 2009, the annual reduction
reflects only partial operation, and the overall benefits of
the new systems will be even greater in 2010. Thirty four
of these units are in the Clean Air Interstate Rule (CAIR]
SC>2 program, suggesting that the controls were installed to
meet the emission reductions thatwill be required in 2010,
the CAIR SC>2 program's first compliance year.

In addition to the reductions from new controls on coal
plants and the overall reduction in heat input, a quarter

Table 2: S02 and NOX Emission Rates by Fuel Type
              2008
                                     2009
        Jan
Source: EPA, 2010
               Apr
                              Jul
                                          Oct
_ , 2005 2006 2007 2008 2009
Fuel 	 1 	 1 	 1 	 1 	 1 	
Type S02 NOX S02 NOX S02 NOX S02 NOX S02 NOX
Coal
Gas
Oil
Other
Total
0.95
0.01
0.70
0.27
0.75
0.32
0.05
0.26
0.42
0.27
0.90
<0.01
0.47
0.29
0.70
0.31
0.05
0.22
0.29
0.25
0.84
<0.01
0.49
0.26
0.64
0.30
0.04
0.22
0.20
0.24
0.74
<0.01
0.35
0.28
0.56
0.28
0.04
0.19
0.16
0.22
0.63
<0.01
0.30
0.27
0.46
0.20
0.04
0.17
0.11
0.16
                                                    Source: EPA, 2010
Figure 5: S02 Emissions and the Allowance Bank, 1995-2009
        1995    1996    1997    1998     1999    2000    2001    2002    2003    2004    2005    2006    2007    2008    2009

                Allowances Allocated        Unused Allowances from Previous Years      Actual Emissions from Affected Sources

Source: EPA, 2010

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                                Acid Rain and Related Programs: 2009 Emission, Compliance, and Market Analyses
million tons of SC>2 emissions were avoided by utilities'
switching generation from coal and oil to gas. Had coal and
oil remained at their respective 2008 levels of 75 percent
and 10 percent of heat input, overall SC>2 emissions would
have been 227,446 tons higher even with the emission rate
improvements.

S(>2 Program Compliance

All  3,572 units at ARP facilities complied in 2009 with
the requirement to hold enough allowances to cover SC>2
emissions. EPA allocated 9.5 million SC>2 allowances  under
the ARP for 2009. In addition to the 8.5 million unused al-
lowances carried over (or banked) from prior years, there
were 18 million allowances available for use in 2009 (see
Figure 5). ARP sources emitted approximately 5.7 million
tons of SC>2 in 2009, less than the allowances allocated for
the year, and far  less than the total allowances available.
As a result, between 2008 and 2009 the bank increased by
nearly four million allowances to 12.3 million allowances,
a 45 percent increase. In 2010, the total number of Title IV
allowances allocated annually will drop to 8.95 million and
remain statutorily fixed at that level.

2009 S02 Allowance Market

Figure 6 shows the cumulative volume of SC>2 allowances
transferred under the ARP. The figure  differentiates be-
tween allowances transferred in private transactions and
those  annually allocated and  transferred to  source ac-
counts by EPA.

Private transactions are indicative of both market interest
and use of allowances  as a compliance strategy. Approxi-
 Figure 7: S02 Allowances Transferred under the ARP
mately 67 percent of the nearly 406 million  allowances
transferred since 1994 have been traded in private trans-
actions. Beginning in December 2001, parties had access
to a system developed by EPA to allow online allowance
transfers. By 2008, account holders were registering over
99 percent of all private allowance transfers through EPA's
online transfer system. Allowance transfers are posted and
updated daily on .

In 2009, 2,716 private allowance transfers involving ap-
proximately 15.1 million allowances of past, current, and
future vintages  were recorded in EPA's Allowance Man-
agement System. About 4 million allowances (26 percent]
were transferred in economically significant transactions

Figure 6: Cumulative S02 Allowances Transferred under the
ARP (through 2009)
     1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

         Private Transactions     EPA Transfers to Account Holders
                                                          Source: EPA, 2010
.2
1
8  15
<  10
        1994    1995    1996    1997    1998    1999    2000    2001    2002

                   Trades Between Distinct Entities (significant transfers)
        2003    2004   2005    2006   2007

          Trades Between Related Entities
                                                                                                   2008
                                                                                                         2009
 Source: EPA, 2010

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  Acid Rain and Related Programs: 2009 Emission, Compliance, and Market Analyses
[i.e., between economically unrelated parties). Transfers
between economically unrelated parties are "arm's length"
transactions and are considered a better indicator of an ac-
tive, functioning market than are transactions among the
various facility and general accounts associated with a giv-
en company. In the majority of all private transfers, allow-
ances were acquired by power companies. Figure 7 shows
the annual volume of SC>2 allowances transferred under the

Table 3: S02 Allowance Market in Brief (close of 2009)
Total Value of the S02 Allowance Market
Year-End Price
Total Allowance Volume (Allowable Emissions)
2009 Private Transactions
$1.1 billion
$61 per ton
18,017,192
2,71 6 transactions moving 15.1 mil-
lion allowances
26 percent of allowances transferred
between economically unrelated
parties
 Note: Total value of allowance market is a snapshot based on the
 average nominal price as of December 2009 ($61/ton) and total
 allowance volume available for 2009 compliance.
 Source: EPA, 2010 and CantorC02e Market Price Index, 2010
ARP (excluding allocations, retirements, and other trans-
fers by EPA) since official recording of transfers began in
1994.

Over the first decade of the ARP, allowance prices were sta-
ble and significantly lower than projected. When CAIR was
proposed in late 2003, allowance prices were influenced
by the more stringent CAIR SC>2 cap and the new compli-
ance deadlines. The Acid Rain SC>2 market essentially had
become the CAIR SC>2 market.
    During 2009, the SC>2 allowance market experienced a 67
    percent price decline; the monthly average price fell from
    $187 per ton in January to $61 per ton in December. That
    decline has continued in 2010, with the monthly average
    price falling to $40 per ton by May. See Table 3 for a sum-
    mary of the 2009 SC>2 allowance market.

    NOX

    NOX Emission Reductions

    Title IV requires NOX emission reductions for certain coal-
    fired EGUs by limiting the NOX emission rate (expressed in
    Ib/MMBtu). Congress applied these rate-based emission
    limits according to a unit's boiler type.  The goal of the NOX
    program is to limit NOX emission  levels from the affected
    coal-fired boilers so  that their emissions are at least two
    million tons less than the projected level for 2000 without
    implementation of Title IV.

    Figure 8 shows that  NOX emissions from all ARP sources
    were 2.0 million tons in 2009. This level is 6.1 million tons
    less than the projected level in 2000 without the ARP, or
    more than triple the Title IV NOX emission reduction objec-
    tive. Although the ARP was responsible for a large portion
    of these annual NOX reductions, other programs  such
    as CAIR, the NOX Budget Program under EPA's NOX State
    Implementation Plan (SIP) Call, the Ozone Transport Com-
    mission (OTC), and other regional and state NOX emission
    control programs  contributed  significantly to the NOX
    reductions achieved  by  sources in 2009. The significant
    drop from 2008 to 2009 is the largest single year decline
    in the history of the program. Lower demand for electric-
    ity contributed to reduced NOX emissions, but ARP sources
    reduced their NOx emission rate  from 0.22 Ib/MMBtu in
    2008 to 0.16 Ib/MMBtu in 2009.  This large reduction in
Figure 8: NOX Emission Trends for All Acid Rain Program Units, 1990-2009
  O  2
         1990    1995    1996   1997   1998    1999    2000

                        NOX Program Affected Sources
2001   2002   2003    2004    2005

 Title IV Sources Not Affected for NO,
                                                                                   2006
                                                                                         2007
                                                                                                2008
                                                                                                      2009
Source: EPA, 2010

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                               Acid Rain and Related Programs: 2009 Emission, Compliance, and Market Analyses
Figure 9: State-by-State NOX Emission Levels for All Acid Rain Program Sources, 1990-2009
       1990 Emissions
      D 1995 Emissions
       2000 Emissions
       2005 Emissions
       2009 Emissions
D CAIR States controlled for both fine particles and ozone
D CAIR States controlled for ozone
D CAIR States controlled for fine particles
Scale: Largest bar equals 500,000 tons of NOX emissions in Ohio, 1990.
Source: EPA, 2010

emissions is primarily attributable to compliance with the
annual and ozone season CAIR NOX programs beginning in
2009.

From  1995 to 2009, annual NOX emissions from ARP units
dropped by about  4.1 million tons, a net decrease of 67
percent.  Forty-four states and the District of Columbia re-
duced NOX emissions between 1995 and 2009, while the
remaining six states accounted for only 5,542 tons of in-
creased NOX emissions during this period (see Figure 9).

Seasonal NOX Control Programs

States subject to EPAs 1998 NOX SIP Call have significantly
reduced  ozone season NOX emissions since the baseline
years  1990 and 2000. All of these states have achieved re-
ductions since 1990 as a result of programs implemented
under the 1990 CAA Amendments, with many of them re-
ducing their emissions by more than half in this period. A
significant percentage of decreases in NOX emissions has
                                   occurred since 2000. This has been largely a result of re-
                                   ductions under ozone season NOX trading programs imple-
                                   mented by the OTC, from 1999-2002, under the NOX SIP
                                   Call, from 2003-2008, and under CAIR in 2009. For reports
                                   about these programs, see EPAs Clean Air Markets Prog-
                                   ress Reports page at .

                                   NOX Compliance

                                   The ARP NOX Program does not impose a cap on NOX emis-
                                   sions and does not rely on allowance trading. The program
                                   allows affected sources to comply either by meeting a unit-
                                   specific emission rate or by  including two or more units
                                   in an emission rate averaging plan. These options provide
                                   affected sources with the flexibility to meet the  NOX emis-
                                   sion reduction requirements  in a cost-effective manner.  In
                                   2009, all 960 units that were subject to the ARP NOX Pro-
                                   gram achieved compliance.

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  Acid Rain and Related Programs: 2009 Emission, Compliance, and Market Analyses
            Sources Achieved 100 Percent
       NOx Compliance in 2009, Using a Variety
           of NOx Compliance Plan Options

   Standard Limitation. A unit with a standard limit meets
   the applicable individual NOX limit prescribed for its
   boiler type under 40 CFR Parts 76.5, 76.6, or 76.7 [297
   units used this option in 2009).

   Emissions Averaging. Many companies meet their NOX
   emission reduction requirements by choosing to become
   subject to a group NOX limit, rather than by meeting
   individual NOX limits for each unit. The group limit is es-
   tablished at the end of each calendar year. The group rate
   must be less than or equal to the Btu-weighted group rate
   units would have had if each had emitted at their standard
   limit rate [660 units used this option in 2009).

   Alternative Emission Limit (AEL). A utility can petition
   for a less stringent AEL if it properly installs and oper-
   ates the NOX emission 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 emission data and information about the NOX
   control equipment [three units used this option in 2009).

   Note: Unit counts do not include those with a retired unit
   exemption.
 Table 4: Units and S02 Emissions Covered by Monitoring
 Method for the Acid Rain Program in 2009
Emission Monitoring and Reporting

The ARP requires regulated sources to measure, record, and
report emissions  using  continuous  emission monitoring
systems (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 emissions. Table 4 shows the number
of units with and without SC>2 GEMS for various  fuel types,
as well as the amount of SC>2  emissions monitored using
GEMS. Although only 31 percent of units use GEMS, over 99
percent of all SC>2 emissions from ARP sources  are moni-
tored in this fashion.

GEMS and approved alternatives are a cornerstone of the
ARP's accountability and transparency. Since the program's
inception  in  1995,  affected sources have met stringent
quality assurance and control requirements for monitoring
found in 40 CFR Part 75. These provisions apply as well to
sources participating in the CAIR trading programs. Since
1999, affected sources have reported hourly emission data
in quarterly electronic reports to EPA. Using automated
software audits, EPA rigorously  checks the completeness,
quality, and integrity of these data. All emission data are
available to the public on the Data and Maps website main-
tained by EPA's Clean Air Markets Division (CAMD) at
Number of Percentage Percentage of S02
Units of Units Emissions
Coal
Gas
Oil
Other
CEMS
CEMS
Non-CEMS
CEMS
Non-CEMS
CEMS
Non-CEMS
1,044
14
2,277
43
158
13
1
29.4
0.4
64.1
1.2
4.5
0.4
<0.1
98.80
0.03
0.06
0.16
0.80
0.15
<0.01
 Note: The table excludes affected units that did not operate in 2009.
 "Other fuel units" include units that in 2009 combusted primarily
 wood, waste, or other nonfossil fuel.
 Source: EPA, 2010
. The site also provides ac-
cess to other data associated with emission trading programs,
including reports, queries, maps, charts, and  file downloads
covering source information, emissions, allowances, program
compliance,  and air quality.

ECMPS

Sources use the Emissions Collection and Monitoring Plan Sys-
tem (ECMPS) to evaluate and report their quarterly emissions
data, along with monitoring plans and quality assurance data,
to EPA.  ECMPS is a desktop tool provided by EPA to the regu-
lated community; authorized users are able to use  tools and
procedures in ECMPS to quality assure their data prior to sub-
mission. The data validation checks in ECMPS are  easily ex-
panded, and assist EPA in implementing improved auditing as
sources comply with new CAMD programs.

Overall Progress Lowering Emissions

Figures 1, 2, 3, and 8 provide a sense of the emission reductions
of SC>2 and NOX that have resulted from the electric power in-
dustry under the Acid Rain Program and related programs over
time. Another useful measure is the improvement in emission
rates of the fossil generation fleet over time. Table 5 provides
this information for S02 and NOX from 1990 through 2009. For
this time period, the SC>2 rate has dropped 71 percent and the
NOX rate has dropped 77 percent.

Table 5: S02 and NOX Emission Rates, 1990 - 2009
1 1990 1 1995 1 2000 1 2005 1 2006 1 2007 1 2008 1 2009
S02
NOX
1.60
0.68
1.09
0.56
0.88
0.40
0.75
0.27
0.70
0.26
0.64
0.24
0.56
0.22
0.46
0.16
 Source: EPA, 2010

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