FACT SHEET

Good Neighbor Plan for the 2015 Ozone NAAQS

Creation of an Additional Group 3 Allowance Bank for the 2023 Control Period

On March 15, 2023, the U.S. Environmental Protection Agency (EPA) issued its final Good Neighbor Plan,
locking in significant reductions in ozone-forming emissions of nitrogen oxides (NOx), and benefitting
millions of people living in downwind communities. The Good Neighbor Plan ensures that 23 states
meet the Clean Air Act's "Good Neighbor" requirements by reducing pollution that significantly
contributes to problems attaining and maintaining the 2015 Ozone National Ambient Air Quality
Standards (NAAQS) in downwind states. Beginning in the 2023 ozone season, EPA will include power
plant sources in 22 states in a revised and strengthened CSAPR NOx Ozone Season Group 3 Trading
Program.1 The 22 states include twelve states already covered by the Group 3 trading program, seven
states transitioning from the CSAPR NOx Ozone Season Group 2 trading program, and three states not
currently covered by any CSAPR trading program for seasonal NOx emissions.

To ensure that implementation of the Group 3 trading program will result in NOx emissions reductions
sufficient to address significant contribution by all states that would be participating in the trading
program, while also providing industry certainty (and obtaining an environmental benefit) through
continued recognition of the value of saving allowances through early reductions in emissions, the EPA
will convert allowances banked for control periods before 2023 under the Group 2 trading program into
allowances usable in the Group 3 trading program in control periods in 2023 and later years. The
conversion will apply to vintage 2017-2022 Group 2 allowances held in all compliance and all general
accounts, except for those held in the compliance accounts of sources in the three states remaining in
the Group 2 trading program.2 The EPA will execute the conversion as soon as practicable on or after
August 1, 2023.

The main elements of the creation of an additional Group 3 allowance bank are summarized below:3

•	The conversion ratio will be determined as of the conversion date and will be the ratio of the total
amount of vintage 2017-2022 Group 2 allowances held in the identified types of accounts prior to
the conversion to the total amount of Group 3 allowances being created.

•	The numerator of the conversion ratio (or the total amount of vintage 2017-2022 Group 2
allowances being converted) will be computed as the quantity of vintage 2017-2022 Group 2
allowances held in the following: (1) the facility accounts of all sources in the states transitioning
from the Group 2 trading program to the Group 3 trading program, (2) the facility accounts of all

1The 22 "Group 3 states" are Alabama, Arkansas, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan,
Minnesota, Mississippi, Missouri, Nevada, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Utah,
Virginia, West Virginia, and Wisconsin.

2	The three states whose sources will continue to be covered by the Group 2 trading program are Iowa, Kansas,
and Tennessee.

3	For a complete description of the creation of the additional Group 3 allowance bank, refer to section VI.B.12.b. of
the preamble for the final Good Neighbor Plan. For official regulatory text, refer to 40 CFR 97.826(e).

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sources in the states already participating in the Group 3 trading program, (3) the facility accounts of
all sources in any other states not covered by the Group 2 trading program that happen to hold
Group 2 allowances as of the conversion date, and (4) all general accounts.

•	The denominator of the conversion ratio (or the target amount of the Group 3 allowances that will
be created in the conversion process) will be computed as the sum of the minimum 21 percent
variability limits for the 2024 control period established for the 10 states being added to the Group 3
trading program. For a full ozone season, the target amount would be 23,094 Group 3 allowances.

•	The target amount will be prorated to reflect the portion of the 2023 control period occurring on
and after the effective date of the final rule. For example, if the effective date of the final rule is the
eleventh day of the 153-day 2023 ozone season, the full-season initial bank target amount of 23,094
allowances would be prorated to an initial bank target amount of 21,585 allowances.

•	The conversion ratio will be applied to each eligible account holding vintage 2017-2022 Group 2
allowances to determine the quantity of vintage 2023 Group 3 allowances to be recorded in each
eligible account.

•	After the rule is published in the Federal Register, the EPA will update this fact sheet with the
relevant values contingent on the rule's effective date.

For questions concerning the creation of an additional Group 3 allowance bank, please contact

csaprgepa.gov.

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