«vEPA Clean Air Interstate Rule, Acid Rain Program,
and Former N0X Budget Trading Program
United States
Environmental Protection
Agency
S02 and NO, Emissions,
Compliance, and Market
Analyses
2012 ARP and CAIR at a Glance
CAIR and ARP Annual S02 Emissions
3.3 million tons
(68 percent below 2005)
CAIR Ozone Season N0X Emissions
514,000 tons
(37 percent below 2005)
CAIR and ARP Annual N0X Emissions
1.7 million tons
(53 percent below 2005)
Perfect compliance
for all facilities reporting to the
CAIR and ARP programs
Program Basics
The Clean Air Interstate Rule (CAIR) and the Acid Rain Program (ARP) are both cap and
trade programs designed to reduce emissions of sulfur dioxide (S02) and nitrogen oxides
(NOx) from power plants.
The ARP, established under Title IV of the 1990 Clean Air Act (CAA) Amendments, re-
quires major emission reductions of S02 and NOx, the primary precursors of acid rain,
from the power sector. The S02 program sets a permanent cap on the total amount of S02
that may be emitted by electric generating units (EGUs) in the contiguous United States.
The program is phased in, with the final 2010 S02 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 significant emission reductions. For more information on the ARP,
please visit the ARP website at .
The NOx Budget Trading Program (NBP) operated from 2003 to 2008. The NBP was a
cap and trade program that required NOx emission reductions from power plants and
industrial units in the eastern U.S. during the summer months. For more information on
the NBP, please visit the NOx Budget Trading Program/NOx SIP Call website at .
CAIR addresses regional interstate transport of ozone and fine particle pollution. CAIR re-
quires certain eastern states to limit annual emissions of NOx and S02, which contribute to
the formation of smog (ground-level ozone) and soot (fine particulate matter). It also re-
quires certain states to limit ozone season NOx emissions, which contribute to the forma-
tion of smog during the summer ozone season (May through September). CAIR includes
three separate cap and trade programs to achieve the required reductions: the CAIR NQX
ozone season trading program, the CAIR NOx annual trading program, and the CAIR
S02 annual trading program. The CAIR NOx ozone season and annual programs began
in 2009, while the CAIR S02 annual program began in 2010. The reduction in ozone and
fine particles (PM2 5) formation resulting from implementation of CAIR provides health
benefits as well as improved visibility in national parks and improvements in freshwater
aquatic ecosystems in the eastern U.S; For more information on CAIR, please visit the
CAIR website at .
SO; and NO, Emissions, Compliance, and Market Analyses
1
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Cross-State Air Pollution Rule and Litigation
EPA issued the Cross-State Air Pollution Rule (CSAPR) in July 2011, requiring 28 states in the
eastern half of the U.S. to significantly improve air quality by reducing power plant emissions
that cross state lines and contribute to ozone and fine particle pollution in other states. CSAPR
includes three separate cap and trade programs to achieve these reductions: the CSAPR NOx
ozone season trading program, the CSAPR NOx annual trading program, and the CSAPR
S02 annual trading program. The CSAPR trading programs were scheduled to replace the
CAIR trading programs starting on January 1, 2012. However, on December 30, 2011, the
U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court) stayed CSAPR
pending judicial review and on August 21, 2012 the court issued a decision vacating the rule.
The U.S. Supreme Court subsequently granted petitions from EPA and several environmental
and public health organizations to review the D.C. Circuit Courts decision. EPA anticipates
that the Supreme Court will issue its opinion in the first half of 2014. At this time, CAIR
remains in place and no immediate action from States or affected sources is expected. For
more information on CSAPR, please visit the CSAPR website at
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2012 Progress Reports
Each year EPA releases reports summarizing progress under both CAIR and the ARP. In these
2012 reports, EPA combines data for both CAIR and the ARP in a first report to show reduc-
tions in power sector emissions of S02 and NOx and a second report to assess the effect of
these regional programs on human health and the environment. This report presents 2012
data on combined emission reductions and compliance results for CAIR and the ARP as well
as some historic NBP emissions data; it also analyzes emission reductions and market activ-
ity. The second report will evaluate changes in a variety of human health and environmental
indicators.
Figure 2: CAIR, ARP, and NBP States
CAIR, ARP, and NBP Affected States and Units
Affected States
The ARP is a nationwide program affecting large fossil fuel-fired power plants across the coun-
try. CAIR covers 27 eastern states and the District of Columbia (D.C.) and requires reductions
in annual emissions of S02 and NOx from 24 states and D.C. (to achieve improvements in fine
particle pollution in downwind areas) and emission reductions of NOx during the ozone sea-
son from 25 states and D.C. (to achieve improvements in ozone pollution in downwind areas).
The former NBP affected 20 eastern states and D.C. State coverage for CAIR, ARP, and NBP
is shown in Figure 2, above.
S02 and N0X Emissions, Compliance, and Market Analyses
3
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Affected Units
The CAIR S02 and NOx annual programs generally apply to large electric generating units
(EGUs) — boilers, turbines, and combined cycle units that primarily burn fossil fuels to gen-
erate electricity for sale. The CAIR NOx ozone season program includes EGUs as well as, in
some states, large industrial units that produce electricity or steam primarily for internal use
and that have been carried over from the NBR 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 include some steam plants at institutional settings such
as large universities or hospitals.
Table 1: Affected Units in CAIR and ARP, 2012
CAIR NOs and
ARP S02
ARP NOx
CAIRNOx Ozone
S02 Annual
Fuel
Program
Program
Season Program
Programs
Coal EGUs
1,003
885
812
869
Gas EGUs
2,430
11
1,719
2,009
Oil EGUs
187
0
514
427
Industrial Units
4
0
198
0
Unclassified EGUs
10
0
1
4
Other Fuel EGUs
18
4
29
27
Total Units
3,652
900
3,273
3,336
Notes:
• "Unclassified" units have not submitted a fuel type in their monitoring plan and did not
report emissions.
• "Other" fuel refers to units that burn waste, wood, petroleum coke, tire-derived fuel, etc.
Source: EPA, 2013
In 2012, there were 3,336 affected EGUs at 952 fa-
cilities in the CAIR S02 and NOx annual programs
and 3,273 EGUs and industrial facility units at 949
facilities in the CAIR NOx ozone season program
(see Table 1). The variation in the number of units
covered under the programs is due to the differ-
ence in states that are included in each program
(see Figure 2, above). EGUs in the CAIR programs
cover a range of unit types, including units that op-
erate year round to provide baseload power to the
electric grid as well as units that provide power on
peak demand days only and may not operate at all
during some years.
The S02 requirements under the ARP apply to the
3,652 fossil fuel-fired combustion units at 1,249
facilities across the country that serve a large gen-
erator (greater than 25 megawatts) that provides
electricity for sale. The vast majority of ARP S02
emissions result from coal-fired EGUs, although
the program also applies to oil and gas units. Of
the 3,336 units in the CAIR S02 program, 2,624
(79 percent) were also covered by the ARP in 2012.
The other units are largely fossil fuel generation
units that entered S02 control under the broader
applicability requirements of CAIR.
The ARP also requires MOx emission reductions
for older, large coal-fired EGUs by limiting their
NOx emission rate (expressed in pounds of emis-
sions per million British thermal units, or lb/
mmBtu). The goal of the NOx program is to limit
NOx emission levels from affected coal-fired boil-
ers so that their emissions are at least two mil-
lion tons less than the projected level for the year
2000 without implementation of Title IV. In 2012,
900 units at 368 facilities were subject to the ARP
NOx program.
Photo: EPA, 2005
4
S02 and NO, Emissions, Compliance, and Market Analyses
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Emission Reductions
Overall Trends
Table 2 on page 6 shows a large reduction in annual S02 and NOx emissions from CAIR and
ARP sources between 2005 and 2012. Tons of S02 emitted fell 68 percent from the 2005 level,
and annual NOx emissions dropped 53 percent. During this same period, ozone season NOx
emissions from CAIR sources alone decreased by approximately 37 percent. These reduc-
tions occurred while electricity demand (measured as heat input) remained relatively stable,
indicating that the reduction in emissions was not driven by decreased electric generation.
Instead, there was a significant drop in emission rate for sources in all three programs: 65 per-
cent for S02 sources, 50 percent for annual NOx sources, and 31 percent for ozone season NOx
sources. A drop in emission rate represents an overall increase in the environmental efficiency
of these sources as power generators installed controls, ran their NOx controls year round,
switched to different fuels, or otherwise cut their S02 and NOx emissions while meeting rela-
tively steady demand for power. Most of the reductions since 2005 are from early reduction
incentives and stricter emission limits under CAIR.
Between 2011 and 2012, CAIR and ARP sources continued to reduce their S02 emissions and
emission rate. Annual and ozone season NOx emissions from CAIR and ARP sources also fell
in the last year. Overall, facilities were below budgets for all three programs.
Visit EPA's Quarterly Emissions Tracking site at
for the most up-to-date emissions and control data for sources in CAIR and the ARP.
S02 Emission Reductions
Figure 3 shows that the CAIR S02 program continues and complements the ARP s history of
S02 emission reductions. In 2012, the third year of operation of the CAIR S02 trading program,
sources in both the CAIR S02 annual program and the ARP together reduced S02 emissions
by 12.4 million tons (79 percent) from
1990 levels (before implementation of
the ARP), 8.0 million tons (71 percent)
from 2000 levels (ARP Phase 2), and 7.0
million tons (68 percent) from 2005 lev-
els (before implementation of CAIR).
All ARP and CAIR sources together
emitted a total of 3.3 million tons of S02
in 2012, well below the ARPs statutory
annual cap of 8.95 million tons.
Milestone Years for Measuring
Progress under CAIR and ARP
1980: The Clean Air Act specified that an-
nual S02 emissions be cut to 10 million
tons below the 1980 level
1990: Baseline emission levels for the ARP
1995: First year of the ARP (Phase 1)
2000: Phase 2 of the ARP
2005: Baseline emission levels for CAIR
2008: Training year for CAIR NOx moni-
toring. Units participating in the two
CAIR NOx trading programs were re-
quired to monitor and report their emis-
sions, but were not required to hold al-
lowances for compliance
2009: First year of CAIR NOx annual
and CAIR NOx ozone season programs
(Phase 1). Training year for CAIR S02
monitoring
2010: First year of CAIR S02 annual pro-
gram (Phase 1)
Figure 3: S02 Emissions from CAIR S02 Annual Program and ARP Sources, 1980-2012
20.0
C/5
c
o
Annual S02 emissions from sources in
the CAIR S02 program alone fell from
9.1 million tons in 2005 to 2.8 million
tons in 2012, a 69 percent reduction.
Between 2011 and 2012, S02 emissions
fell 1.1 million tons (28 percent).
Units in the ARP emitted 3.3 million
tons of S02 in 2012, so ARP sources
reduced emissions by 12.4 million tons
(79 percent) from 1990 levels and 14
million tons (81 percent) from 1980
levels.
C/5
c
o
E
LU
O
(1.1
CAIR S02 units not in the ARP
All ARP units, including
future CAIR S02 units
also in the ARP
ARP units not covered by
the CAIR S02 program
ARP units covered by the
CAIR S02 Program
¦ ARP budget
CAIR S02 program
budget
1980 1990 1995 2000 2005 2010 2011 2012
Note: For CAIR units not in the ARP, the 2009 annual S02 emissions were ap-
plied retroactively for each pre-CAIR year following the year in which the unit
began operating.
Source: EPA, 2013
S02 and N0X Emissions, Compliance, and Market Analyses
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Table 2: Comparison of Emissions, Emission Rates, and Heat Input for CAIR and ARP Sources, 2000-2012
CAIR and ARP Annual S02 Trends
CAIR and ARP Annual N0X Trends
CAIR Ozone Season N0X Trends
Notes:
• The data shown here for the annual programs reflect totals for those facilities required to comply with each program in each respective year. This
means that CAIR NOx annual program facilities are not included in the annual NOx data for 2000 and 2005, and CAIR S02 annual program facili-
ties are not included in the annual S02 data for 2000, 2005, or 2009.
• The CAIR ozone season NOx table includes emissions and heat input data for 2000 and 2005 that were reported under other programs. For facili-
ties that were not covered by another program and did not report 2005 emissions, their reported emissions for 2008 were substituted.
• 2009 was a monitoring and reporting training year for facilities covered by the CAIR S02 annual program.
• Fuel type represents primary fuel type; units might combust more than one fuel.
• Totals may not reflect the sum of individual rows due to rounding.
• Each year's total emission rate does not equal the arithmetic mean of the four fuel-specific rates, as each facility influences the annual emission rate
in proportion to its heat input, and heat input is unevenly distributed across the fuel categories.
• EPA data in these tables and used elsewhere in this report are current as of June 2013, and may differ from past or future reports as a result of
resubmissions by sources and ongoing data quality assurance activities.
Source: EPA, 2013
6 S02 and N0X Emissions, Compliance, and Market Analyses
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The states with the highest emitting sources in 1990 have generally seen the greatest S02 re-
ductions under the ARP, and this trend continues under CAIR (see Figure 4). Most of these
states are upwind of the areas the ARP and CAIR were designed to protect, and reductions
have resulted in important environmental and health benefits over a large region.
From 1990 to 2012, annual S02 emissions in the nationwide ARP and the regional CAIR S02
program dropped in 43 states and D.C. by a total of approximately 12 million tons. In contrast,
annual S02 emissions increased by a total of only 25,696 tons in five states (Arkansas, Idaho,
Nebraska, Oregon, and Vermont) from 1990 to 2012.
In 2012, the total S02 emissions from participating sources were about 855,000 tons below
the regional CAIR emission budget. Seventeen states and DC had emissions below their al-
lowance budgets, collectively by about 956,000 tons. Another seven states exceeded their 2012
budgets by a total of about 101,000 tons, indicating that, on an aggregate basis, sources within
those states covered a portion of their emissions with allowances banked from earlier years,
transferred from an out-of-state account, or purchased from the market.
Figure 4: State-by-State Annual S02 Emission Levels for CAIR and ARP Sources, 1990-2012
S02 and N0X Emissions, Compliance, and Market Analyses
7
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Figure 5: Ozone Season NOx Emissions from CAIR and NBP Sources, 1990-2012
NOx Emission Reductions
c 2.0
8 0.5
CAIR N0X ozone season units
not in the NBP
All NBP units, including future
CAIR NOx ozone season units
also in the NBP
NBP units that did not become
CAIR NOx ozone season units
NBP units later included in CAIR
NOx ozone season
CAIR NOx ozone season units,
including former NBP units
¦ CAIR NOx ozone season budget
1990 2000 2005 2008 2009 2010 2011 2012
Note: For CAIR units not in the NBP, the 2008 NOx emissions were applied retroactively to
1990 and 2000 if the unit operated in the previous year's ozone season.
Source: EPA, 2013
Figure 6: State-by-State Ozone Season N0X Emission Levels from CAIR
Sources, 2000-2012
Largest bar refers to
Ohio, 2000: 154,471 tons NOx
CAIR States controlled for ozone
Note: The 2000 and 2005 ozone season values reflect data that were reported under other
programs (ARP and NBP). For facilities that were not covered by another program and did
not report 2000 or 2005 emissions, their reported emissions for the earliest subsequent year
(usually the 2008 training year) were substituted.
Source: EPA, 2013
Ozone Season NOx Reductions
Figure 5 shows ozone season NOx emissions from
1990 to 2012 for CAIR and NBP sources. In 2012,
the fourth year of the CAIR NOx ozone season
program, sources from both CAIR and the for-
mer NBP, together with a small number of sources
that were previously in the NBP but did not en-
ter CAIR, reduced their overall NOx emissions
from 819,000 tons in 2005 (before implementation
of CAIR) to 519,000 tons in 2012, a decrease of
37 percent. NOx emissions were 1.6 million tons
lower (75 percent) than in 1990 and 940,000 tons
lower (64 percent) than in 2000 (before implemen-
tation of the NBP).
Between 2005 and 2012, ozone season NOx emis-
sions from sources in the CAIR program alone
have fallen 298,000 tons, a decrease of 37 percent.
From 2011 to 2012, ozone season emissions from
sources in the CAIR NOx ozone season program
decreased by 52,000 tons (9 percent). Ozone sea-
son NOx emissions totaled 514,000 tons in 2012,
9 percent below the regional emission budget of
567,744 tons.
In addition to the CAIR NOx ozone season pro-
gram and the former NBP, current regional and
state NOx emission control programs have also
contributed significantly to the ozone season NOx
reductions achieved by sources in 2012.
Between 2005 and 2012, ozone season NOx emis-
sions from CAIR and former NBP sources fell in
every state participating in the CAIR NOx ozone
season program except Arkansas and Pennsylva-
nia (see Figure 6), where emissions increased by a
total of 14,000 tons. In the 2012 ozone season, the
total emissions from participating sources were
about 111,000 tons below the regional emission
budget. Eighteen states and D.C. had emissions be-
low their allowance budgets, collectively by about
95,000 tons. Another seven states exceeded their
2012 budgets by a total of about 41,000 tons, indi-
cating that, on an aggregate basis, sources within
those states covered a portion of their emissions
with allowances banked from earlier years, trans-
ferred from an out-of-state account, or purchased
from the market.
S02 and N0X Emissions, Compliance, and Market Analyses
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Annual N0X Reductions
Figure 7 shows that from 1990 to 2012, annual NOx emis-
sions from CAIR and ARP units together dropped by about
4.7 million tons to 1.7 million tons, a decrease of 73 percent.
In 2012, the fourth year of the CAIR NOx annual program,
NOx emissions from all ARP and CAIR units were 1.9 mil-
lion tons lower (53 percent) than in 2005 and 3.4 million tons
lower (67 percent) than in 2000.
Emissions from CAIR NOx annual program sources alone
were 1.17 million tons in 2012, 330,000 tons (22 percent) be-
low the 2012 CAIR NOx annual programs regional budget
of 1.5 million tons. Annual NOx emissions were 1.5 million
tons (56 percent) lower than in 2005, and 184,000 tons lower
(13 percent) than in 2011.
All ARP sources emitted 1.7 million tons ofNOxin 2012. This
level is 6.4 million tons less than the projected level in 2000
without the ARP, and over three times the Title IV NOx emis-
sion reduction objective.
Although the ARP and CAIR NOx programs were responsi-
ble for a large portion of these annual NOx reductions, other
programs—such as regional and state NOx emission control
programs—also contributed significantly to the annual NOx
reductions achieved by sources in 2012.
Figure 8: State-by-State Annual N0X Emission Levels for CAIR and ARP Sources, 1990-2012
Figure 7: Annual N0X Emissions from CAIR and ARP Sources, 1990-2012
CAIR NOx annual units
not in the ARP
All ARP units, including future
CAIR NOx annual units also in
the ARP
ARP units not covered by the
CAIR NOx annual program
ARP units covered by the
CAIR NOx annual program
CAIR NOx annual program
budget
1990 2000 2005 2008 2009 2010 2011 2012
Note: For CAIR units not in the ARP in 1990,2000, and 2005, the 2008 annual
NOx emissions were applied retroactively for each pre-CAIR year following the
year in which the unit began operating.
Source: EPA, 2013
I
199C
L 20C
I
i2
Largest bar represents
Ohio, 1990: 534,054 tons
CAIR States controlled
for fine particles
Source: EPA, 2013
S02 and N0X Emissions, Compliance, and Market Analyses
9
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From 1990 to 2012, all states participating in the CAIR NOx annual program decreased their
emissions, as indicated in Figure 8 on page 9. Comparing 2005 to 2012, all states in the CAIR
region emitted less NOx. The total NOx emissions from participating sources in 2012 were about
311,000 tons below the regional emission budget of 1,490,264 tons. Eighteen states and D.C. had
emissions below their 2012 allowance budgets, collectively by about 365,000 tons. Six states ex-
ceeded their 2012 budgets by a total of about 54,000 tons, indicating that, on an aggregate basis,
sources within those states covered a portion of their emissions with allowances banked from
earlier years, transferred from an out-of-state account, or purchased from the market.
CAIR and ARP Program Compliance
S02 Programs
Because S02 allowances from the ARP are used by sources to comply with the CAIR S02
annual program, compliance results for both programs are displayed together in this report.
Table 3 shows how ARP allowances are used for compliance under both programs. All ARP
and CAIR S02 facilities reporting were in compliance with both programs in 2012 and held
enough allowances to cover their S02 emissions.
2012 was the third year for compliance with the CAIR S02 program. Under this program,
allowances are used to cover emissions based on the vintage year of the allowances, with pre-
2010 vintage allowances used at one allowance for one ton of S02 emissions, and 2010-2012
vintage allowances used at two allowances for one ton. For facilities covered by both CAIR
and the ARP, reconciliation is a two-step process. First, ARP deductions are made. Then, any
additional deductions to comply with the CAIR S02 program are made. The additional deduc-
tions under CAIR could be to cover the two for one use of 2010-2012 allowances or to cover
emissions for units that are subject to CAIR, but not the ARP.
In 2012, over 26.6 million S02 allowances were available for compliance under both pro-
grams (9 million vintage 2012 and over 17.6 million banked from prior years). Almost 3.3 mil-
lion allowances were deducted for ARP compliance and approximately 2 million allowances
were deducted to complete reconciliation for CAIR. After reconciliation for both programs,
over 21.3 million ARP S02 allowances were banked and carried forward to the 2013 compli-
ance year.
Table 3: CAIR and ARP S02 Allowance Reconciliation Summary, 2012
Total Allowances Held (1995-2012 Vintage)
26,605,632
Held by Affected Facility Accounts
18,445,333
Held by Other Accounts (General
and Non-Affected Facilities)
8,160,299
Allowances Deducted for Acid Rain Compliance*
-3,289,425
Penalty Allowance Deductions (2012 Vintage)
0
Held by Affected Facility Accounts
15,155,908
Banked Allowances (after ARP Compliance)
23,316,207
Held by Other Accounts (General
and Non-Affected Facilities)
8,160,299
Acid Rain Program Allowances Deducted for CAIR S02 Compliance
-1,946,579
Held by Affected Facility Accounts
13,209,329
Banked Allowances (after ARP and CAIR S02 Compliance)
21,369,628
Held by Other Accounts (General
and Non-Affected Facilities)
8,160,299
"Includes 8,893 allowances deducted from opt-ins for reduced utilization.
Source: EPA, 2013
10 S02 and N0X Emissions, Compliance, and Market Analyses
Compliance Results
As of June 2013, the reported 2012 S02
emissions by CAIR and ARP sources to-
taled 3,281,981 tons. Because of variation
in rounding conventions, changes due to
resubmissions by sources, and allowance
compliance issues at certain units, this
number is lower than the sums of emis-
sions used for reconciliation purposes
shown in Table 3, below. Therefore, the
allowance totals deducted for actual emis-
sions in Table 3 differ from the number of
emissions shown elsewhere in this report.
CAIR and ARP S02 Programs
Reported emissions (tons):
3,281,981
Compliance issues, round-
ing, and report resubmission
adjustments (tons):
-1,449
Emissions not covered by
allowances (tons):
0
Additional vintage 2010 to
2012 allowances deducted for
CAIR:
+ 1,946,579
Total allowances deducted
for emissions (includes
some 2 for 1 CAIR deduc-
tions):
5,227,111
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NOx Programs
CAIR NOx Compliance Results
Tables 4 and 5 show how NOx allowances were used in 2012. All covered facilities reporting
were in compliance with the CAIR NOx ozone season and CAIR NOx annual programs in
2012 and held enough allowances to cover their NOx emissions.
ARP NOx Compliance Results
The ARP NOx Program does not impose a cap on NOx emissions and does not rely on allow-
ance 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 op-
tions provide affected sources with the flexibility to meet the NOx emission reduction require-
ments in a cost-effective manner. All 900 units subject to ARP NOx emissions limitations in
2012 were in compliance.
Table 4: CAIR N0X Ozone Season Allowance Reconciliation Summary, 2012
Total Allowances Held (2003-
Held by Affected Facility Accounts
885, lf4
1,058,492
2012 Vintage)
Held by Other Accounts (General
173,378
and Non-Affected Facilities)
Allowances Deducted for CAIR
NOx Ozone Season Trading -513,836
Program
Penalty Allowance Deductions
(2012 Vintage)
Held by Affected Facility Accounts
371,278
Banked Allowances
544,656
Held by Other Accounts (General,
State Holding, and Non-Affected
173,378
Facilities)
Source: EPA, 2013
Table 5: CAIR N0X Annual Allowance Reconciliation Summary, 2012
Held by Affected Facility Accounts
1,784,242
Total Allowances Held (2009-
2,009,111
2012 Vintage)
Held by Other Accounts (General
224,869
and Non-Affected Facilities)
Allowances Deducted for
CAIR NOx -1,169,534
Annual Trading Program
Penalty Allowance Deductions 0
Compliance Results
As of June 2013, the reported 2012 ozone
season NOx emissions by CAIR sources
totaled 513,813 tons, and annual emis-
sions totaled 1,170,282 tons. Because
of variation in rounding conventions,
changes due to resubmissions by sourc-
es, and allowance compliance issues at
certain units, these numbers are differ-
ent from the sums of emissions used for
reconciliation purposes shown in Table 4
(ozone season reconciliation) and Table 5
(annual reconciliation). Therefore, the al-
lowance totals deducted for actual emis-
sions in Tables 4 and 5 differ from the
number of emissions shown elsewhere in
this report.
CAIR N0X Ozone Season
Reported emissions (tons)
5f3,8f3
Compliance issues, round-
ing, and report resubmis-
sion adjustments (tons)
+23
Emissions not covered by
allowances (tons)
0
Total allowances deducted
for emissions
CAIR N0X Annual Pro
Reported emissions (tons)
513,836
gram
U70.282
Compliance issues, round-
ing, and report resubmis-
sion adjustments (tons)
-748
Emissions not covered by
allowances (tons)
0
Total allowances deducted
for emissions
1,169,534
Held by Affected Facility Accounts
614,708
Banked Allowances
839,577
Held by Other Accounts (General,
State Holding, and Non-Affected
224,869
Facilities)
Source: EPA, 20f3
S02 and N0X Emissions, Compliance, and Market Analyses
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Photo: EPA, 2010
Controls mi Monitoring
To meet the ARP and CAIR emission reduction targets, some sources opt to install control
technologies. A wide set of controls are available to help reduce emissions. The following is
an analysis of controls on ARP and CAIR program coal-fired units and CAIR NOx program
combined cycle units in 2012.
S02 Controls in 2012
S02 control options available to sources include switching to low sulfur coal, employing vari-
ous types of flue gas desulfurization (FGDs), or utilizing fluidized bed limestone units. FGDs
on coal-fired generators are the principal means of controlling S02. The share of coal-fired
generation, measured in megawatt hours (MWh), at controlled units in the ARP and the
CAIR S02 annual program grew to 66 percent in 2012 (see Table 6).
Table 6: S02 Controls in 2012 on Coal-Fired Units in the ARP and CAIR Annual S02 Program
S02 Control Type
Number of Units
Share of Units
Share of MWh Generation
PGD
468
44%
66%
Other
43
4%
1%
Uncontrolled
545
52%
33%
Note: Due to rounding, percentages shown may not add up to 100%.
Source: EPA, 2013
NOx Controls in 2012
NOx Ozone Season Program
Sources have a variety of options by which to reduce NOx emissions; Units with add-on con-
trols—selective catalytic reduction (SCR) or selective non-catalytic reduction (SNCR)—ac-
counted for 64 percent of coal-fired generation and 84 percent of generation at combined
cycle units (gas- or oil-fired). Although 91 coal-fired units and 15 combined cycle units re-
main uncontrolled, they represent only one percent of coal-fired generation and one percent
of combined cycle generation under the CAIR NOx ozone season program (see Table 7).
Table 7: N0X Controls in 2012 CAIR N0X Ozone Season Program
NOx Control Type
Number of
Coal-Fired
Units
Share of
Coal-Fired
MWh Generation
Number of
Combined Cycle Units
(Gas- or Oil-Fired)
Share of Combined Cycle
(Gas- or Oil-Fired)
MWh Generation
Combustion
385
33%
63
10%
Non-Controlled
91
1%
15
1%
Other Control
34
1%
94
5%
SCR
225
57%
363
84%
SNCR
138
7%
0
0%
Note: Due to rounding, percentages shown may not add up to 100%.
Source: EPA, 2013
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S02 and NO, Emissions, Compliance, and Market Analyses
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N0X Annual Program
The 373 coal-fired units with add-on controls (either SCRs or SNCRs) generated 62 percent of
annual generation, and the 425 combined cycle units with SCRs generated 78 percent of an-
nual generation (see Table 8). Similar to the CAIR NOx ozone season program, uncontrolled
units represent one percent of coal-fired generation and one percent of combined cycle gen-
eration under the CAIR NOx annual program.
Table 8: N0X Controls in 2012 CAIR N0X Annual Program
NOx Control Type
Number of
Coal-Fired
Units
Share of
Coal-Fired
MWh Generation
Number of
Combined Cycle Units
(Gas- or Oil-Fired)
Share of Combined Cycle
(Gas- or Oil-Fired)
MWh Generation
Combustion
385
34%
121
17%
Non-Controlled
72
1%
19
1%
Other Control
39
2%
91
4%
SCR
241
54%
425
78%
SNCR
132
8%
0
0%
Note: Due to rounding, percentages shown may not add up to 100%.
Source: EPA, 2013
Continuous Emission Monitoring Systems
Accurate and consistent emissions monitoring is the foundation of a cap and trade system.
EPA has developed detailed procedures (40 CFR Part 75) to ensure that sources monitor and
report emissions with a high degree of precision, accuracy, reliability, and consistency. Sources
use continuous emission monitoring systems (CEMS) or other approved methods. Part 75
requires sources to conduct stringent quality assurance tests of their monitoring systems, such
as daily and quarterly calibration tests and a semiannual or annual relative accuracy test audit.
These tests ensure that sources report accurate data and provide assurance to market par-
ticipants that a ton of emissions measured at one facility is equivalent to a ton measured at a
different facility.
While some CAIR units with low levels of emissions do not have to use CEMS, the vast ma-
jority of NOx emissions—over 99 percent—were measured by CEMS. Coal-fired units were
required to use CEMS for NOx concentration and stack gas flow rate to calculate and record
their NOx mass emissions. Oil-fired and gas-fired units could use a NOx CEMS in conjunction
with a fuel flow meter to determine NOx mass emissions. Alternatively, for oil-fired and gas-
fired units that either operated infrequently or had very low NOx emissions, Part 75 provided
low-cost alternatives to conservatively estimate NOx mass emissions.
Similarly, CEMS monitored over 99 percent of S02 emissions from CAIR sources, including
100 percent from coal-fired units and 24 percent from oil-fired units. The relatively low per-
centage for oil-fired units is consistent with the decline in oil-fired heat input, as most of these
units were used infrequently and qualified for reduced monitoring.
S02 and N0X Emissions, Compliance, and Market Analyses
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Market Activity
In a cap and trade program, sources may consider several emission reduction alternatives,
and are allowed to trade allowances as part of their compliance strategy. Through trading,
the overall market can achieve emission targets at a lower cost than through a command and
control program because abatement costs are not the same for all sources. A market for emis-
sion allowances will emerge, and the allowance price will reflect the marginal cost of emission
reductions, allowing emission control decisions to be made based on the cost of control op-
tions relative to the market price of allowances. The allowance price motivates those who have
relatively low cost opportunities for emission reductions to make those investments and then
sell any surplus allowances to those with higher marginal abatement costs.
Allowance Market Price Trends in 2012
In this third year of CAIR S02 compliance, prices for pre-CAIR and CAIR ARP allowance
vintages were below S3 per ton. NOx allowance prices declined throughout the year, with an-
nual NOx prices staying below $80 per ton and ozone season NOx prices staying below $30 per
ton. Availability of banked allowances (see CAIR and ARP Program Compliance for banked
allowance volumes) along with decreases in emission levels put downward pressure on allow-
1 U.S. EPA, Regulatory Impact Analysis for ance prices. An overall trend of decreasing traded prices was evident in all markets. Current
the Final Clean Air Interstate Rule, Docket annual allowance prices are well below the marginal cost for reductions projected at the time
No. EPA-HQ-OAR-2003-0053-2158, 7-9. 0f the final rule.1
Transaction Types and Volumes
Allowance transfer activity includes two types of transfers: EPA transfers to accounts and private
transactions. EPA transfers to accounts include the initial allocation of allowances by states or
EPA, as well as transfers into accounts related to special set-asides. This category does not in-
clude transfers due to allowance retirements. Private transactions include all transfers initiated
by authorized account representatives for any compliance or general account purposes.
Table 9:2012 Allowance Transfers under CAIR and ARP
Transactions
Conducted
in 2012
Allowances
Transferred
in 2012
Share of Program's
2012 Allowances
Transferred
CAIR NOx Ozone
Season Program
1,095
318,299
Distinct
Organizations
27%
Related
Organizations
73%
CAIR NOx Annual
Program
1,514
758,588
Distinct
Organizations
26%
Related
Organizations
74%
ARP and CAIR S02
Annual Program
1,497
8,446,197
Distinct
Organizations
22%
Related
Organizations
78%
Notes:
• Most, but not all, of the transactions were characterized. The actual percent-
age shares may vary by less than 1% of the total allowances transferred for
each program.
• Percentages may not add up to 100% due to rounding.
Source: EPA, 2013
To help better understand the trends in market performance
and transfer history, EPA classifies private transfers of allow-
ance transactions into two categories:
• Transfers between separate and distinct economic enti-
ties, which may include companies with contractual rela-
tionships such as power purchase agreements, but excludes
parent-subsidiary types of relationships.
• Transfers within a company or between related entities
(e.g., holding company transfers between a unit compliance
account and any account held by a company with an owner-
ship interest in the unit).
While all transactions are important to proper market op-
eration, EPA follows trends in the distinct economic entities
transaction category with particular interest because these
transactions represent an actual exchange of assets between
unaffiliated participants. In 2012, about a quarter of each pro-
gram's traded allowances were exchanged between unrelated
parties, often with a broker facilitating the trade (see Table 9).
This proportion is smaller than in 2011.
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