&EPA
Roadmap for Incorporating Energy
Efficiency/Renewable Energy
Policies and Programs into State and Tribal
Implementation Plans
Appendix C: Existing EPA Energy
Efficiency/Renewable Energy Guidance
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EPA-456/D-12-001d
July 2012
Roadmap for Incorporating Energy Efficiency/Renewable Energy
Policies and Programs into State and Tribal Implementation Plans
Appendix C: Existing EPA Energy Efficiency/Renewable Energy Guidance
By:
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Outreach and Information Division
Research Triangle Park, North Carolina
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Outreach and Information Division
Research Triangle Park, North Carolina
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ACKNOWLEDGMENTS
We would like to acknowledge substantial contributions from members of an inter-office EPA
team that included the Office of Atmospheric Programs, the Office of Policy Analysis and
Review, the Office of General Counsel and Regions 1 and 6. This document also reflects
comments received from a number of stakeholders, including state and local air quality
agencies.
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Contents
SECTION C.I: INTRODUCTION C-4
SECTION C.2: EXISTING GUIDANCE ON BASELINE PATHWAY C-4
SECTION C.3: EXISTING GUIDANCE ON CONTROL STRATEGY PATHWAY C-5
Quantifiable C-5
Surplus C-5
Enforceable C-6
Permanent C-7
SECTION C.4: EXISTING GUIDANCE ON EMERGING/VOLUNTARY MEASURES PATHWAY C-7
How a State Can Receive SIP Approval for Emerging/Voluntary Measures C-8
Four Criteria for SIP Emerging/Voluntary Measures C-8
Quantifiable C-8
Surplus C-9
Enforceable C-9
Permanent C-10
Emission Reduction Credit C-10
Bundling Emerging/Voluntary Measures C-ll
SECTION C.5: EXISTING GUIDANCE ON WOE PATHWAY C-ll
REFERENCES C-12
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SECTION C.I: INTRODUCTION
This appendix provides brief information on existing U.S. Environmental Protection Agency
(EPA) guidance that relates to energy efficiency/renewable energy (EE/RE) and state
implementation plans (SIPs). It is organized by pathway. The EPA has issued five guidance
documents related to incorporating EE/RE programs in SIPs:
• Guidance on State Implementation Plan (SIP) Credits for Emission Reductions from
Electric-Sector Energy Efficiency and Renewable Energy Measures,
http://www.epa.gov/ttn/oarpg/tl/memoranda/ereseerem gd.pdf, August 2004
(referred to in this appendix as EE/RE Measures Guidance).
• Guidance on Incorporating Emerging and Voluntary Measures in a State Implementation
Plan (SIP),
http://dnr.mo.gov/env/apcp/sipworkgrp/control strategy wrkgrp/VoluntaryControlMe
asuresPolicyEPA.pdf, September 2004 (referred to in this appendix as
Emerging/Voluntary Measures Guidance).
• Guidance on Incorporating Bundled Measures in a State Implementation Plan,
http://www.epa.gov/ttn/oarpg/tl/memoranda/10885guideibminsip.pdf, August 2005
(referred to in this appendix as the Bundled Measures Guidance).
• Guidance on the Use of Models and Other Analyses for Demonstrating Attainment of Air
Quality Goals for Ozone, PM2.5, and Regional Haze,
http://www.epa.gov/scram001/guidance/guide/final-03-pm-rh-guidance.pdf, April 2007
(referred to in this appendix as the Modeling Guidance).
• Guidance on Emission Projections, Volume X,
(http://www.epa.gov/ttnchiel/eiip/techreport/volumelO/x01.pdf, 1999 (referred to in
this appendix as Emissions Projection Guidance).
The text included in this appendix consists mostly of direct excerpts from these documents. In
some cases, changes have been made to improve the readability of the text. In other cases,
corrections have been made to the text to ensure its accuracy.
SECTION C.2: EXISTING GUIDANCE ON BASELINE PATHWAY
Several guidance documents provide recommendations on how to estimate emissions for
future years. Among point source emissions, there are two major subsets: electric generating
utilities (EGUs) and non-EGUs. The Clean Air Markets Division (CAMD) of the EPA uses the
Integrated Planning Model (IPM)1 to model emissions trading programs and to predict future-
year emissions from EGUs. Other models and approaches may exist and could be used for
estimation of future-year emissions. (Appendix E provides more information on what factors
other approaches need to consider for the baseline pathway.) In addition, EPA Emissions
Projection Guidance has general information on emission projections, which provides
important factors that state, tribal and local agencies should consider when projecting
emissions results for future attainment years.
1 For more information on IPM, go to: http://www.epa.gov/airmarkets/progsregs/epa-ipm/index.html.
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SECTION C.3: EXISTING GUIDANCE ON CONTROL STRATEGY PATHWAY
The EPA's EE/RE Measures Guidance addresses the criteria needed for energy EE/RE measures
to be considered approvable as a SIP control measure:
• Quantifiable
• Surplus
• Enforceable
• Permanent
Quantifiable
The EE/RE Measures Guidance lists four steps to address when trying to quantify EE/RE
measures:
• Step 1: Estimate the energy savings that an energy efficiency measure will produce, or,
for a renewable energy project, the amount of energy generation that will occur.
• Step 2: Convert the energy impact in STEP 1 into an estimated emissions reduction.
• Step 3: Determine the impact from the estimated emission reduction on air quality in
the nonattainment area.
• Step 4: Provide a mechanism to validate or evaluate the effectiveness of the project or
initiative.
Thus, the guidance indicates that the emission reductions need to be quantifiable and include
procedures to evaluate and verify over time the level of emission reductions actually achieved.
The emission quantification approaches in this guidance may be used to address this criterion.
Evaluation and verification methods can be found in best practices materials on establishing
and implementing EE programs provided by the National Action Plan for Energy Efficiency
(NAPEE).2 However, since there can be many types of EE or RE programs covering many
different areas, alternative protocols may also be acceptable, and would be evaluated, as
necessary, on a case-by-case basis.
Surplus
The EE/RE Measures Guidance indicates that emission reductions are surplus as long as they
are not otherwise relied on to meet air quality attainment requirements in air quality programs
related to your SIP. In the event that the measures to reduce utility emissions are relied on in a
jurisdiction's plan to meet air quality-related program requirements, they are no longer surplus
and may not be used as an additional reduction to meet SIP emission reduction requirements,
such as the attainment demonstration or Reasonable Further Progress (RFP).
The importance of the surplus requirement in areas subject to a cap and trade program merits
particular focus. To illustrate, if an EE program causes several EGUs that are part of a cap and
trade program to scale back the amount of electricity they generate and, therefore, reduce
2 For more information on NAPEE, go to: http://www.epa.gov/cleanenergv/energy-
programs/suca/resources.html.
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overall emissions, then, absent additional limitations discussed below, it may be difficult to
show that these reductions meet the "surplus" criteria for crediting the measure. This is
because the units are still allowed to emit up to the same number of allowances in the program
even though the amount of electricity they need to generate has been reduced. The EE or RE
measure, in effect, allows the EGUs to comply with the cap and trade program with a slightly
higher average emission rate and a theoretically lower allowance price. Therefore, the
estimated emission reductions from the EE or RE measure would typically not be surplus, and
would essentially be double counted if EPA permitted the allowances that were freed up by the
measure to be used in the trading program and if EPA provided additional SIP credit for the EE
actions.
The presence of a cap and trade program, however, does not necessarily prohibit the use of EE
and RE measures by a state agency to achieve additional SIP reductions. One acceptable way of
achieving additional emission reductions from EE and RE measures in the presence of a cap and
trade program is through the retirement of allowances commensurate to the emissions
expected to be reduced by the EE measures. The retirement of allowances, which amounts to
lowering the cap, assures that the EE measures will achieve emission reductions that are
surplus to the emission reductions under the cap and trade program. Another way is to clearly
demonstrate that emissions will decrease in the area despite the cap and trade program and
the ability of plants to sell more electricity to other areas. This demonstration will likely entail a
detailed analysis of electricity dispatch and allowance markets to determine the specific impact
of the measures on the system.
Enforceable
The EE/RE Measures Guidance indicates that EE/RE measures may be:
• Enforceable directly against a source;
• Enforceable against another party responsible for the energy efficiency or renewable
energy activity; or
• Included under our voluntary measures policy where the state would be responsible for
assuring that the emission reductions credited in the SIP occur.
The EPA believes that most measures you may consider under the guidance would fall into the
second or third categories listed above. EE or RE measures are unlike traditional control
measures on stationary sources. There is typically a physical distance between where the
measure is implemented and where the emission reductions occur, as well as a geographic
distribution to the emission reductions. Since EGUs are interconnected in the electric grid, a
reduction in energy demand or generation from a renewable resource will likely affect the
operation and emissions of several fossil fired units in the system. The EE or RE measure itself
may be enforceable against the entities undertaking the activity even though they are not
responsible for the operation of the electric generators at which the emission reductions are
estimated for purposes of the SIP. For example, you could require certain entities to purchase
an amount of RE. If you rely upon such requirements within the SIP, then this measure could
be enforceable against those entities required to purchase the RE electricity or to reduce
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energy consumption, even if those entities are not responsible for the operation of the
electricity generating units at which the emission reductions are expected to occur.
If the reductions are "enforceable directly against the source" or are "enforceable against
another party responsible for the energy efficiency or renewable energy activity," then the
reductions are considered enforceable if:
• They are independently verifiable;
• Violations are defined;
• Those liable for violations can be identified;
• The state and EPA maintain the ability to apply penalties and secure appropriate
corrective actions where applicable;
• Citizens have access to all the emissions-related and activity information obtained from
the source;
• Citizens can file suits against the source or responsible party for violations; and
• They are practicably enforceable in accordance with EPA guidance on practicable
enforceability.3
Permanent
The EE/RE measure should be permanent throughout the term for which the credit is granted
unless it is replaced by another measure or the state demonstrates in a SIP revision that the
emission reductions from the measure are no longer needed to meet all applicable statutory
and regulatory requirements.
SECTION C.4: EXISTING GUIDANCE ON EMERGING/VOLUNTARY
MEASURES PATHWAY
The EPA's Emerging/Voluntary Measures Guidance describes an emerging measure as a new
emission reduction or pollutant reduction measure that is more difficult to accurately quantify
than traditional SIP emission reduction measures. The difficulty in quantifying the emission or
pollutant reductions may be due to scientific, technological, or informational uncertainty. The
ability to quantify reductions from emerging measures may necessitate development of a
protocol based on assumptions and/or modeling to estimate the reduction impacts of the
emerging measure.
A voluntary measure is an action by a source that will reduce emissions of a criteria pollutant or
a precursor to a criteria pollutant that the state could claim as an emission reduction in its SIP
for purposes of demonstrating attainment or maintenance of the National Ambient Air Quality
Standards (NAAQS), or RFP, but that is not directly enforceable against a source. The EPA's
guidance also describes how states can identify individual voluntary and emerging measures
and "bundle" them in a single SIP submission.
3 EPA (1989) and EPA (1992).
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How a State Can Receive SIP Approval for Emerging/Voluntary Measures
The SIP submitted by the state to EPA:
• Identifies and describes the measure;
• Contains projections of emission or pollutant reductions attributable to the program,
along with relevant technical support documentation:
o For emerging measures, a full discussion of the relevant best available science
supporting the measure;
• Enforceably commits the state to implement those parts of the measure for which the
state or local government is responsible;
• Enforceably commits the state to monitor, evaluate, and report at least every three
years to the public and EPA on the resulting emissions effect of the emission or
pollutant reduction measure;
• Enforceably commits the state to remedy any SIP credit shortfall in a timely manner, if
the program does not achieve projected emission reductions;
• Meets all other requirements for SIP revisions under sections 110 and 172, and any
other applicable sections, of the Clean Air Act (CAA); and
• Undergoes public notice and comment (like any other SIP revision).
Four Criteria for SIP Emerging/Voluntary Measures
The Emerging/Voluntary Measures Guidance addresses the criteria needed for energy EE/RE
measures to be considered approvable as emerging/voluntary measures:
• Quantifiable
• Surplus
• Enforceable
• Permanent
Quantifiable
Emissions and emission reductions attributed to the measure are quantifiable if someone can
reliably measure or determine them and replicate the results. Any uncertainty in the
quantification should be addressed by following the guidance contained in the Economic
Incentives Program4 in section 5.2 (b). A voluntary measure should meet this provision and, if
the measure is also an emerging measure, then it should meet the criteria for emerging
measures.
For emerging measures, EPA's policy provides flexibility for the quantification requirement.
Some areas want to try new types of emission control or pollution reduction strategies. Some
of these new strategies have a substantial chance to be as effective (and possibly more
effective) than current measures in reducing criteria pollutant levels. The EPA supports and
wishes to promote the testing of new emissions and pollutant control strategies. This policy
provides a mechanism for states to receive provisional emission reduction credit in their SIP for
4 EPA (2001).
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new emission control and pollutant reduction strategies that have the potential to generate
additional emission reductions or air quality benefits. Provisional emission reductions or
pollutant reduction strategies can become permanent through a SIP revision when post-
implementation evaluations validate the amount of emission reductions achieved.
"Provisional" in this case means the state may use particular emission reductions for RFP or
other purposes before the quantification procedure has been fully validated. Even though EPA
believes that these emission reductions can be used to fulfill CAA emission reduction
requirements, if post implementation evaluations do not show that all the projected emission
reductions have occurred, the state would need to reconcile the difference between the
projected and actual emission reductions. In order to encourage emerging new programs with
which EPA and the states do not have significant experience, but which are technically and
scientifically sound, the Agency believes it is appropriate to allow quantification based on best
available science or information where direct, empirically verified data are not available. In
these circumstances, the state should quantify the pollution reduction based on the best
knowledge currently available for the measure being considered. The state should develop a
protocol based on a carefully considered determination of the activities that it is committing to
undertake and the activities' projected impact on pollution. The estimates may be based on
modeling, on extrapolated experience for similar types of projects, or on another approach that
is likely to yield a reasonable estimate of pollution reduction.
Surplus
Emission reductions used to meet air quality attainment requirements are surplus as long as
they are not otherwise relied on in air quality-related programs relating to a SIP. For voluntary
and emerging measures, EPA believes these reductions should also be surplus to adopted state
air quality programs, even those programs that are not in the SIP, such as a consent decree and
federal rules that focus on reducing criteria pollutants or their precursors. For emission
reductions used for attainment, RFP, maintenance or general conformity, the emission
reductions cannot already be assumed for the same requirement, where the requirements are
cumulative. An emission reduction may be used for more than one of these requirements. For
example, emission reductions used to meet the RFP requirement may also be used for the
attainment demonstration. However, emission reductions are not surplus if they have already
been assumed in a program. In other words, states cannot claim emission reductions that are
already assumed in the existing SIP, or that result from any other emission reduction or
limitation of a criteria pollutant or precursor that the state is required to have to attain or
maintain a NAAQS or to satisfy other CAA requirements. In the event that emission reductions
relied on from a measure are subsequently required by a new air quality related program, such
as those listed above, those emission reductions would no longer be surplus for this purpose.
Enforceable
While EPA has already stated that voluntary measures are not enforceable against the source,
the state would be responsible for ensuring that the emission reductions credited in the SIP do,
in fact, occur. The state would make an enforceable commitment to monitor, assess, and
report on the emission reductions resulting from the voluntary measures and to remedy any
shortfalls from forecasted emission reductions in a timely manner, as discussed below.
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Emission reductions and other mandatory state or local actions are enforceable against the
source if, for each source:
• The emission reductions are independently verifiable;
• Program violations are defined;
• Those responsible for the violations can be identified;
• For emerging measures, the state and the EPA maintain the ability to apply penalties
and secure appropriate corrective action where applicable;
• The emission reductions are enforceable in accordance with other EPA guidance on
practicable enforceability;
• For voluntary measures, the EPA maintains the ability to apply penalties and secure
appropriate corrective action from the state where applicable and the state maintains
the secure appropriate corrective action with respect to portions of the program that
are directly enforceable against the source;
• Citizens have access to all the emissions-related information obtained from the source;
and
• For emerging measures, citizens can file suits against sources for violations.
Permanent
The Emerging/Voluntary Measures Guidance indicates that an emission reduction strategy
needs to continue throughout the term that the credit is granted unless it is replaced by
another measure (through a SIP revision). Alternatively, the state can demonstrate in a SIP
revision that the emission reductions from the measure are no longer needed to meet the
criteria that apply to voluntary and emerging measures or any other CAA requirements.
Emission Reduction Credit
The EPA believes that it is appropriate to presumptively limit the amount of emission
reductions allowed for approval under this policy. Although EPA concludes that emerging
measures are consistent with the statute because all emerging measures will be accompanied
with an appropriate enforceable backstop commitment from the state as described in this
policy, EPA believes it is appropriate to limit these measures to a small portion of the SIP, given
the untested nature of the control mechanisms.
The presumptive limit is 6 percent of the total amount of emission reductions required for the
RFP, attainment, or maintenance demonstration purposes. The limit applies to the total
number of emission reductions that can be claimed from any combination of voluntary and/or
emerging measures, including those measures that are both voluntary and emerging. The limit
is presumptive in that EPA believes it may approve measures into a SIP in excess of the
presumptive 6 percent when a clear and convincing justification is made by the state as to why
a higher limit should apply in their case. Any request for a higher limit will be reviewed by EPA
on a case-by-case basis. Any approval of emerging measures under this policy will be conducted
through full notice-and-comment rulemaking in the context of a particular state SIP revision.
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Bundling Emerging/Voluntary Measures
As explained in EPA's Bundled Measures Guidance, emerging/voluntary measures can be
bundled together. The emission reductions for each measure in the bundle would be
quantified and, after applying an appropriate discount factor for uncertainty, the total
reductions would be summed together in the SIP submission. After SIP approval, each
individual measure would be implemented according to its schedule in the SIP. It is the
performance of the entire bundle (the sum of the emission reductions from all the measures in
the bundle) that is considered for SIP evaluation purposes, not the effectiveness of any
individual measure.
SECTION C.5: EXISTING GUIDANCE ON WOE PATHWAY
The EPA Modeling Guidance issued in 2007 addresses the weight-of-evidence (WOE) approach
for attainment demonstrations. The guidance indicates that states/tribes should always
perform complementary analyses of air quality, emissions and meteorological data, and
consider outputs of modeling other than the results of the attainment test. Such analyses are
instrumental in guiding the conduct of an air quality modeling application. Sometimes, the
results of corroboratory analyses may be used in a WOE determination to show that attainment
is likely despite modeled results (which may be inconclusive). The further the attainment test is
from being passed, the more compelling the contrary evidence produced by corroboratory
analyses would need to be to draw a conclusion different from that implied by the modeled
attainment test results. If a conclusion differs from the outcome of the modeled test, then the
need increases for subsequent, future review with more complete databases is increased. If
the test is failed by a wide margin (e.g., future design values are outside the recommended
range at an individual site or multiple sites/locations), it is far less likely that the more
qualitative arguments made in a weight of evidence determination would be sufficiently
convincing to conclude that the NAAQS will be attained.
In a WOE determination, states/tribes should review results from several diverse types of air
quality analyses, including results from the modeled attainment test. As a first step,
states/tribes should note whether the results of these analyses support a conclusion that the
proposed strategy will meet the air quality goal. Second, states/tribes should weigh each type
of analysis according to its credibility, as well as its ability to address the question being posed
(i.e., is the strategy adequate for meeting the NAAQS by a defined deadline?). The conclusions
derived in the two preceding steps are combined to make an overall assessment of the
likelihood of meeting the air quality goal. This last step is a qualitative one. If the conclusion is
that a strategy is inadequate to demonstrate attainment, then a new strategy is selected for
review, and the process is repeated. States and tribes should provide a written rationale
documenting the adequacy of the final selected strategy. Results obtained with air quality
models are an essential part of a weight of evidence determination and should ordinarily be
very influential in deciding whether the NAAQS will be met.
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REFERENCES
EPA (1989). Guidance on Limiting Potential to Emit in New Source Permitting. June 13, 1989. Available
online at .
EPA (1992). Use of Long Term Rolling Averages to Limit Potential to Emit. February 24, 1992. Available
online at
EPA (2001). Improving Air Quality with Economic Incentive Programs. January 2001. Available online at
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United States Office of Air Quality Planning and Standards Publication No. EPA-456/D-12-001d
Environmental Protection Outreach and Information Division July 2012
Agency Research Triangle Park, NC
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