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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF THE
CHIEF FINANCIAL OFFICER
JAN 1 1 2012
MEMORANDUM
SUBJECT: Environmental Financial Advisory Board (EFAB) Letter on Financing
Clean Air Technology
FROM: Barbara J. Bennett
Chief Financial Off]
TO: Gina McCarthy, Assistant Administrator
Office of Air and Radiation
I am pleased to transmit to you the attached letter on the Board's preliminary examination and findings
of financing incentives for consideration by industrial facilities to change to newer, cleaner technologies.
Since considerable time has elapsed from the initiation of EFAB's work while the promulgation of the
MACT rule has been worked through, we thought it important to provide this overview ofEFAB's work
to date, preliminary findings and observations, interim recommendations, and the Board's next steps.
The Board welcomes your review and feedback. If you have any questions or comments regarding the
letter, please contact me or have a member of your staff contact Joseph Dillon, Director, Center for
Environmental Finance at 564-9679.
Attachment
cc: Lisa P. Jackson, Administrator
Bob Perciascepe, Deputy Administrator
Michael Shapiro, EFAB Designated Federal Official
Internet Address (URL) * http //www epa gov
Recycled/Recyclable * Printed with Vegetable Oil Based Inks on 100% Postconsumer. Process Chlorine Free Recycled Paper
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Environmental
Financial Advisory Board
EFAB
Bradley Abelow
Chair
Michael Shapiro
Designated Federal
Official
Members
Helen Akparanta
Gavin Clarkson
William Cobb
Eric Draper
Donna Ducharme
Frances Dubrowski
James Gebhardt
Rick Giardina
Ann Grodnik
Scott Haskins
Philip Johnson
Thomas Liu
Debi Livesay
Mathilde McLean
Greg Mason
Karen Massey
Lindene Pattern
Sharon Dixon Peay
Tobias Rittner
Wayne Seaton
Blanca Surgeon
Leanne Tobias
Steve Thompson
Chiara Trabucchi
Cynthia Williams
Letter on Financing Incentives for
Replacing Boilers with Clean Air
Technology
This report has not been reviewed for approval by the U.S. Environmental Protection
Agency; and hence, the views and opinions expressed in the report
do not necessarily represent those of the Agency or any other
agencies in the Federal Government.
January 2012
Printed on Recycled Paper
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ENVIRONMENTAL FINANCIAL ADVISORY BOARD
Members
Bradley Abelow, Chair
Helen Akparanta
Gavin Clarkson
William Cobb
Eric Draper
Donna Ducharme
Frances Dubrowskl
James Gebhardt
Rick Glardlna
Ann Grodrtik
Scott Hasklns
Philip Johnson
Thomas Uu
Deborah Uvesay
Mathilda McLean
Greg Mason
Karen Massey
Undone Patton
Sharon Dixon Peay
Tobias Rittner
Wayne Seaton
Blanca Surgeon
Leanne Tobias
Steve Thompson
Chlara Trabucchi
Cynthia Williams
Michael Shapiro
Designated .
Federal Officer
JAN -4 ^
Honorable Gina McCarthy, Assistant Administrator
Office of Air and Radiation
U.S. Environmental Protection Agency
Washington, DC 20460
Dear Ms. McCarthy:
The Environmental Financial Advisory Board (EFAB) is pleased to
submit a preliminary report on its examination of financing issues related to the
promulgation of Maximum Achievable Control Technology (MACT) standards
for boilers and process heaters at major sources of hazardous air pollutants. In
particular, EFAB has been working to identify creative options that would
incentivize boiler facility owners to comply with the MACT standards by using
newer cleaner technologies rather than by retrofitting existing facilities using
traditional control technologies. This examination is proving to be both interesting
and challenging as you will see by the following review of EFAB's efforts.
EFAB Work To Date
Initially, in response to the Office of Air and Radiation's (OAR) request
for assistance on addressing this question, EFAB formed a project work group to
study the issue in depth and help the Board to develop findings and
recommendations for Agency use. The leadership of this new EFAB workgroup
quickly met with OAR to further delineate the scope of the project and to begin to
develop a plan of action.
As part of the project, EFAB has held numerous workgroup conference
calls, met on an on-going basis with relevant OAR staff and managers, reviewed
information generously provided by OAR from a number of sources, including
the Department of Energy, and solicited information, feedback, and analysis from
a range of sources, including a DOE speaker at its March 2011 Board meeting.
The workgroup also began an effort to collect, review, and analyze information on
the financial conditions of a number of EPA identified industries/corporations that
must comply with any new MACT standards.
This work has been impacted by a series of events over the past six
months, of which you are all too aware. These include EPA finalizing emission
standards for boilers and incinerators in February; EPA allowing time for
additional public input and review of new industry information; and EPA setting a
Providing Advice on "How to Pay" for Environmental Protection
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new schedule for updating the standards in June. In addition to these regulatory actions, industry
and others have filed numerous legal actions to compel, stop, speed up or slow EPA's work on
the standards. As a result of all of this, active EFAB work on the project has slowed to adjust to
changes and to allow the various legal considerations to be worked through.
Since considerable time has elapsed while all of this occurred, we thought it was
important to provide this overview of EFAB's work to date as well as the following preliminary
findings, observations, and recommendations.
EFAB's Preliminary Findings
EFAB's preliminary findings regarding the financial condition of boiler owners, the costs of
technologies, and their energy efficiency include:
• The financial condition information of boiler owners varies widely from industry to
industry, firm to firm, and even plant to plant.
• Boiler owners oppose the new rules because they require costly capital expenditures. This
is true for the existing retrofit technologies as well as the new, more environmentally
desirable technologies.
• The new technologies are, on the whole, more expensive.
• Many of the new technologies are not particularly energy efficient. They do not produce
any financial payback of the investment.
• The newer technologies may be less energy efficient than the older retrofit technologies.
To help address the cost challenges, EFAB has been searching for financial incentives that would
help industry pay for the more costly new technologies. The Board has not yet identified any
existing financial incentives for encouraging these investments so it has begun to look for other
incentives/reasons for making them. EFAB is exploring areas such as the value of improved
corporate image and better environmental responsibility credentials. In addition, EFAB would
like to review with OAR the financial implications of the whole suite of future air rules. If any of
them might require boiler owners to update to the newer technologies, then EFAB could examine
the costs of upgrading now versus the costs of retrofitting now and upgrading later.
As the boiler MACT process continues, the Board preliminarily recommends that:
1) Agency coordinate federal resources around the state and local efforts to move companies
toward cleaner technologies;
2) the Administrator work across agencies, including the Departments of Energy and
Commerce, to promote coordinated assistance to boiler owners by industry;
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3) the Administrator encourage redoubled intra-agency cooperation to examine and promote
regional success stories in the use of innovative cleaner technologies throughout the
country; and
4) the Agency review its discretionary grant authority in any programs where boiler owners
and the most polluting facilities might be helped to move to cleaner technologies.
Future Thoughts/Next Steps
The Board still believes that the new MACT rules provide an unprecedented opportunity to
involve boiler owners in proactively contributing to improving the quality of our environment. If
efforts to promote the use of cleaner technologies are successful, and they are widely adopted,
they will make a significant reduction in air pollution across the country.
EFAB will continue to expand its financial analysis of boiler owners. This work will include a
discussion of opportunities and challenges which vary based on the particular industry, the size,
nature and capitalization of the individual firm, and the location of the specific facility.
Among the financing techniques that EFAB will further explore are:
• long-term financing - matched with the useful life of cleaner technologies. Securing
loans through a variety of methods using boiler owner's real property, the actual assets or
streams of payments, as well as reductions in operating costs. Inducing boiler owners to
factor in lower operating costs in the out years in their decision making process;
• public and private sources and mechanisms for coordinating local government finances
with federal programs;
• inducement to banks to offer much lower interest rates; and
• opening up federal and state sources to possible taxable as well as tax-exempt
obligations.
The Board wishes to note the invaluable assistance of Ellen Kurlansky during this time and we
look forward to continuing this important work with your office.
Sincerely,
Michael Shapiro
Designated Federal Official
EPA-190-S-12-002
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C 20460
*< PRO<«-0
MAR 2 6 2012
OFFICE OF
AiR AND RAI ' '. '•••
MEMORANDUM
SUBJECT:
FROM:
TO:
Environmental Financial Advisory Board (EFAB) Letter on Financing Clean Air
Technology
Gina McCarthy
Assistant Adrtnnfs/rator
j' \l
Barbara J. Bennett
Chief Financial Officer
Thank you for your memorandum of January 11, 2012 forwarding the Environmental Financial
Advisory Board's preliminary report on its examination of financing incentives for industrial and
institutional boiler owners for the installation of new cleaner technologies. We are especially
interested in encouraging the use of combined heat and power as an alternative to retrofitting
older boilers with pollution controls. I appreciate that there is no easy or obvious solution to
financing that kind of investment. At the same time, improvements would be more energy
efficient and could have a financial payback. We will continue to explore this area and I am
grateful that the Board will as well.
Again, thank you for the opportunity to comment on the preliminary report and I look forward to
their findings as we move to finalize the regulation and provide assistance to companies working
together with the Department of Energy. If you have any questions or comments, please contact
me or have a member of your staff contact Ellen Kurlansky in the Office of Policy Analysis and
Review at (202) 564-1669.
Internet Address (URLi • nitp J/wwwepa gov
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