SERA
United States
Environmental Protection
Agency
Proqress Report
2011
S02 and N0X Emissions, Compliance, and
Market Analyses Report
Program Basics
Hie 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, requires
major emission reductions of S02 and NOxi 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 contigu-
ous 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 informa-
tion on the ARP, please visit the ARP website at
.
The NOx BudgetTrading Program (NBP) oper-
ated 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 BudgetTrading Program/NOx SIP Call web-
site at .
Photo credits (top and third from top):
S.J. Nelson and K. Strock, University of Maine
2011 ARP and CAIR at a Glance
CAIR and ARP Annual S02 Emissions:
4.5 million tons (56 percent below 2005)
CAIR Ozone Season NOx Emissions:
566 thousand tons (30 percent below 2005)
CAIR and ARP Annual NOx Emissions:
2.0 million tons (46 percent below 2005)
Near perfect compliance with the CAIR and
ARP programs
CAIR addresses regional interstate transport of
ozone and fine particle pollution. CAIR requires
certain eastern states to limit annual emissions of
NOx and SO which contribute to the formation
of smog (ground-level ozone) and soot (fine par-
ticulate matter). It also requires certain states to
limit ozone season NOx emissions, which contrib-
ute to the formation 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
NOx 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 (1WI gjj
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 .
S02 and NOx Emissions, Compliance, and Market Analyses
Clean Air Interstate Rule, Acid Rain Program
and Former NOx Budget Trading Program
-------
Figure 1: History of CAIR, ARP, CSAPR, and Former NBP
1990 - Clean Air Act
Amendments establish
Title IV Acid Rain
Program (ARP)
2005 - Clean Air
Interstate Rule (CAIR) is
finalized
2004 - NBP begins
for 11 additional states
1990
1995 2000
2000-ARP Phase 2
begins
1995-ARP Phase 1
begins
2008- NBP ends;
CAIR NOx programs
"training year"
2005
2007 - NBP begins
for 21st and final state
2010- Full
implementation of the
ARP; CAIR S02 annual
program begins
2011 - Cross-State Air Pollution Rule
(CSAPR) is finalized
December 2011- CSAPR is stayed
pending judicial review
1
2010
2003 - NOx Budget
Trading Program (NBP)
begins for nine states
2009-CAIR NO,
season and NOx
program begins;
CAIR S02 program
"training year"
ozone
annual
T
2015
October 2012 - U.S. Government files
a petition for rehearing en banc of the
August 2012 court decision
August 2012 - Court issues
decision to vacate CSAPR;
CAIR remains in place
January 2012 -
CSAPR scheduled to
begin replacing CAIR
Source: EPA, 2012
CSAPR and Litigation
The Cross-State Air Pollution Rule (CSAPR)
was promulgated to require 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 SO, annual
trading program. CSAPR was scheduled to replace
CAIR starting on January 1, 2012. However, on
Milestone Years for Measuring Progress under CAIR and ARP
1980: The Clean Air Act specified that annual SO, 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 monitoring. Units participating in the
two CAIR NOx trading programs were required to monitor and report their
emissions, but were not required to hold allowances for compliance
2009: First year of CAIR NOx annual and CAIR NOx ozone season programs
(Phase 1). Training year for CAIR SO, monitoring
2010: First year of CAIR SO, annual program (Phase 1)
December 30, 2011, the U.S. Court of Appeals
for the District of Columbia Circuit stayed
CSAPR pending judicial review and on August
21, 2012 the court decided to vacate the rule.
That judgment is not yet final and on October
5, 2012 the U.S. Government filed a petition
for rehearing en banc, asking the full court to
reconsider that decision. In the meantime, as the
court stated in its opinion, CAIR remains in place
and states and affected sources are expected to
comply with the rule. For more information on
CSAPR, please visit the CSAPR website at .
Figure 1 contains important milestones for CAIR,
ARP, CSAPR, and the former NBP.
2011 Progress Reports
Each year EPA releases reports summarizing
progress under both CAIR and the ARP. In the
2011 reports, EPA combines data for both CAIR
and the ARP into one report to more holistically
show reductions in power sector emissions of SO,
and NOx and the collective effect of these regional
programs on human health and the environment.
This report presents 2011 data on combined
emission reductions and compliance results for
CAIR and the ARP as well as some historic NBP
emissions data, and analyzes emission reductions
and market activity. A future report will evaluate
changes in a variety of human health and environ-
mental indicators.
2
S02 and NOx Emissions, Compliance, and Market Analyses
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CAIR, ARP, and NBP Affected States and Units Figure 2: CAIR, ARP, and NBP States
Affected States
The ARP is a nationwide program affecting large
fossil fuel-fired power plants across the country.
CAIR covers 27 eastern states and the District
of Columbia (D.C.) and requires reductions in
annual emissions of SO5 and NOx from 24 states
and D.C. (to achieve improvements in fine par-
ticle pollution in downwind areas) and emission
reductions of NOx during the ozone season 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.
Affected Units
The CAIR SO5 and NOx annual programs gener-
ally apply to large EGUs boilers, turbines, and
combined cycle units that primarily burn fossil
fuels to generate 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 NBP.
Examples of these units are boilers and turbines at
heavy manufacturing facilities such as paper mills,
petroleum refineries, and iron and steel produc-
tion facilities. These units also include some steam
plants at institutional settings such as large univer-
sities or hospitals.
In 2011, there were 3,345 affected EGUs at
951 facilities in the CAIR SO5 and NOx annual
programs and 3,307 EGUs and industrial facil-
ity 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 difference 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 operate 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.
CAIR States controlled for
fine particles (annual S02 and NOx)
Q CAIR States controlled
for ozone (ozone season NOx)
CAIR States controlled for
both fine particles and ozone
(annual S02 and NOx, ozone
season NOx)
The ARP covers sources
in the lower 48 states.
Source: EPA, 2012
The SO, requirements under the ARP apply to the
3,640 fossil fuel-fired combustion units at 1,245
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 3,345 units in the CAIR SO5 program, 2,631
(79 percent) were also covered by the ARP in
2011. The other units are largely fossil fuel genera-
tion units that entered S02 control under the
broader applicability requirements of CAIR.
Table 1: Affected Units in CAIR and ARP, 2011
Fuel
ARP S02 Program
ARP N0X Program
CAIR N0X Ozone
Season Program
CAIR N0X and S02
Annual Programs
CoalEGUs
1,028
918
845
895
GasEGUs
2,381
8
1,685
1,969
Oil EGUs
200
0
543
451
Industrial Units
4
0
203
0
Unclassified EGUs
9
0
2
4
Other Fuel EGUs
18
4
29
26
Total Units 3,640 930 3,307 3,345
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, 2012
S02 and NOx Emissions, Compliance, and Market Analyses
3
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Figure 3: S02 Emissions from CAIR S02 Annual Program and ARP Sources,
1980-2011
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 2009 2010 2011
Note: For CAIR units not in
the ARP, the 2009 annual SO;
emissions were applied retroac-
tively for each pre-CAIRyear
following the year in which the
unit began operating.
Source: EPA, 2012
The ARP also requires NOx emission reductions
for older, large coal-fired EGUs by limiting their
NOx emission rate (expressed in lb/mmBtu). The
goal of the NOx program is to limit NOx emis-
sion levels from affected coal-fired boilers so that
their emissions are at least two million tons less
than the projected level for the year 2000 without
implementation ofTitle IV. In 2011, 930 units
at 375 facilities were subject to the ARP NOx
program.
Emission Reductions
Overall Trends
Table 2 on page 5 shows a large reduction in
annual S02 and NOx emissions from CAIR and
ARP sources between 2005 and 2011. Tons of
S02 emitted fell 56 percent from the 2005 level,
and annual NOx emissions dropped 46 percent.
During this same period, ozone season NOx
emissions from CAIR sources alone decreased
by approximately 30 percent. These reductions
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: 54 percent for SO^ sources, 43
percent for annual NOx sources, and 26 percent
for ozone season NOx sources. A drop in emission
rate represents an overall increase in the environ-
mental efficiency of these sources as power genera-
tors installed controls, ran their NOx controls year
round, switched to different fuels, or otherwise
cut their SO5 and NOx emissions while meeting
relatively steady demand for power. Most of the
reductions since 2005 are from early reduction in-
centives and stricter emission limits under CAIR.
Between 2010 and 2011, CAIR and ARP sources
continued to reduce their SO 2 emissions and
emission rate. Annual NOx emissions from CAIR
and ARP sources also fell. CAIR sources' ozone
season NOx emissions fell slightly (five percent),
and facilities were all below both the CAIR NOx
ozone season and CAIR NOx annual budgets for
the year.
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 SO, program
continues and complements the ARP's history of
SO2 emission reductions. In 2011, the second year
of operation of the CAIR S02 trading program,
sources in both the CAIR SO5 annual program
and the ARP together reduced SO5 emissions by
over 11 million tons (71 percent) from 1990 levels
(before implementation of the ARP), 6.7 million
tons (60 percent) from 2000 levels (ARP Phase
2), and 5.8 million tons (56 percent) from 2005
levels (before implementation of CAIR). All ARP
and CAIR sources together emitted a total of 4.54
million tons of S02 in 2011, well below the ARP's
statutory annual cap of 8.95 million tons.
Annual SO5 emissions from sources in the CAIR
SO, program alone fell from 9 million tons in
2005 to 3.9 million tons in 2011, a 57 percent
reduction. Between 2010 and 2011, S02 emis-
sions fell 543,000 tons (12 percent). However,
the 2011 emissions total is higher than the CAIR
SOj program's state budget total of 3.6 million
tons, indicating that affected sources used banked
allowances carried over from the ARP for compli-
ance with CAIR (see Table 3 on page 10).
ARP units alone emitted 4.50 million tons of S02
in 2011, meaning that ARP sources reduced emis-
sions by 11.2 million tons (71 percent) from 1990
levels and 12.8 million tons (73 percent) from
1980 levels.
4
S02 and NOx Emissions, Compliance, and Market Analyses
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Table 2: Comparison of Emissions, Emission Rates, and Heat Input for CAIR and ARP Sources, 2000-2011
CAIR and ARP Annual S02 Trends
S02 Emissions (thousand tons) S02 Rate (Ib/mmBtu) Heat Input (billion mmBtu)
Primary Fuel
2000
2005
2009
2010
2011
2000
2005
2009
2010
2011
2000
2005
2009
2010
2011
Coal
10,708
9,835
5,653
5,090
4,508
1.04
0.95
0.63
0.53
0.50
20.67
20.77
18.02
19.30
18.18
Gas
28
36
6
7
5
0.02
0.01
0.00
0.00
0.00
3.71
5.35
6.51
7.19
7.37
Oil
464
347
54
44
14
0.76
0.71
0.29
0.21
0.08
1.22
0.98
0.37
0.41
0.33
Other
1
4
8
26
17
0.23
0.27
0.27
0.53
0.28
0.01
0.03
0.06
0.10
0.12
Total
11,201
10,223
5,722
5,168
4,544
0.88
0.75
0.46
0.38
0.35
25.61
27.13
24.95
27.00
26.00
CAIR and ARP Annual N0X Trends
N0X Emissions (thousand tons)
N0X Rate (Ib/mmBtu)
Heat Input (billion mmBtu)
Primary Fuel
2000
2005
2009
2010
2011
2000
2005
2009
2010
2011
2000
2005
2009
2010
2011
Coal
4,587
3,356
1,847
1,923
1,806
0.44
0.32
0.20
0.20
0.20
20.67
20.77
18.27
19.30
18.19
Gas
321
142
133
140
140
0.17
0.05
0.04
0.04
0.04
3.71
5.35
6.71
7.19
7.37
Oil
195
129
34
34
23
0.32
0.26
0.18
0.17
0.14
1.22
0.98
0.38
0.41
0.33
Other
2
6
5
7
8
0.26
0.42
0.12
0.13
0.13
0.01
0.03
0.09
0.10
0.12
Total
5,104
3,633
2,020
2,103
1,976
0.40
0.27
0.16
0.16
0.15
25.61
27.13
25.45
27.00
26.00
CAIR Ozone Season N0X Trends
N0X Emissions (thousand tons) N0X Rate (Ib/mmBtu) Heat Input (billion mmBtu)
Primary Fuel
2000
2005
2009
2010
2011
2000
2005
2009
2010
2011
2000
2005
2009
2010
2011
Coal
1,398
695
442
527
511
0.45
0.22
0.17
0.18
0.18
6.19
6.31
5.21
5.85
5.58
Gas
62
43
33
42
39
0.15
0.06
0.04
0.04
0.04
0.84
1.47
1.53
1.97
2.01
Oil
83
72
19
22
14
0.29
0.27
0.18
0.16
0.13
0.57
0.53
0.21
0.27
0.20
Other
1
2
2
2
3
0.15
0.17
0.14
0.12
0.11
0.02
0.02
0.02
0.04
0.05
Total
1,545
812
495
594
566
0.41
0.20
0.14
0.15
0.14
7.62
8.33
6.98
8.13
7.84
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 CAIRNOx annual program facilities are not included in the annual NOx data for 2000 and 2005, and CAIR S02 annual program facilities 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 facilities 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 years 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.
EPA data in these tables and used elsewhere in this report are current as of June 2012, and may differ from past or future reports as a result of resubmis-
sions by sources and ongoing data quality assurance activities.
Source: EPA, 2012
S02 and NOx Emissions, Compliance, and Market Analyses
5
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Figure 4: State-by-State Annual S02 Emission Levels for CAIR and ARP Sources, 1990-2011
.1990
2000
2005
2011
Largest bar represents
Ohio, 1990: 2.2 million tons
^ CAIR States controlled for fine particles
Note: a detailed interactive version of this map is available online at
Source: EPA, 2012
The states with the highest emitting sources in
1990 have generally seen the greatest S02 reduc-
tions 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 2011, annual S02 emissions in the
nationwide ARP and the regional CAIR S02 pro-
gram dropped in 42 states and D.C. by a total of
approximately 11 million tons. In contrast, annual
SO5 emissions increased by a total of only 33,300
tons in six states (Arkansas, Idaho, Nebraska,
Oregon, Rhode Island, Vermont) from 1990 to
2011.
In 2011, the total S02 emissions from participat-
ing sources were about 252,000 tons above the
regional CAIR emission budget. Nine states had
emissions below their allowance budgets, collec-
tively by about 555,000 tons. Another 15 states
and Washington, D.C. exceeded their 2011 bud-
gets by a total of about 807,000 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.
Newly Installed Control Devices
Fifteen ARP units installed S02 controls in 2011.
Twelve of these units were analyzed and shown
to have reduced their collective S02 emission
6
S02 and NOx Emissions, Compliance, and Market Analyses
-------
rate from 1.25 lb/mmBtu in January to 0.08 lb/
mmBtu in December. The remaining sources in
the ARP reported a steady annual SO5 rate around
0.34 lb/mmBtu (see Figure 5). Had these twelve
newly-controlled units maintained their collec-
tive annual 2010 emission rate of 1.18 lb/mmBtu
through 2011, their estimated emissions would
have remained around 146,000 thousand tons. In
actuality, the twelve units emitted 50 percent less
SO2 in 2011 than in 2010 by adding scrubbers,
contributing about eleven percent of the total
ARP-wide reduction of 617,000 tons between
2010 and 2011. Because the new controls were
installed at different times throughout 2011, the
annual reduction reflects only partial operation,
and the overall benefits of the new systems could
be even greater in 2012.
NOx Emission Reductions
Ozone Season NOx Reductions
Figure 6 shows ozone season NOx emissions from
1990 to the present for CAIR and NBP sources.
In 2011, the third year of the CAIR NOx ozone
season program, sources from both CAIR and
the former NBP, together with a small number of
sources that were previously in the NBP but did
not enter CAIR, reduced their overall NOx emis-
sions from 819,000 tons in 2005 (before imple-
mentation of CAIR) to 572,000 tons in 2011, a
decrease of 30 percent. NOx emissions were 1.5
million tons lower (73 percent) than in 1990 and
887,000 tons lower (61 percent) than in 2000
(before implementation of the NBP).
Figure 5: Monthly S02 Emission Rates, 2011
Units with New Controls Installed
Jan
All Other Units
2.0
1.6
1.2
0.8
0.4
0.0
2010
ZU 1 1
Jan
Apr
Jul
Between 2005 and 2011, ozone season NOx
emissions from sources in the CAIR program
alone have fallen 246,000 tons, a decrease of 30
percent. From 2010 to 2011, ozone season NOx
emissions from sources in the CAIR NOx ozone
season program decreased by 28,000 tons (five
percent), reversing a one-year increase in emissions
from 2009 to 2010. Ozone season NCL emissions
Oct
Note: a total of 15 ARP units
added controls in 2011. Three
are excluded from this chart due
to the use of substitute data dur-
ing the transition period.
Source: EPA, 2012
Figure 6: Ozone Season N0X Emissions from CAIR and NBP Sources, 1990-2011
2.5
LU
o
Z
c
o
-------
Figure 7: State-by-State Ozone Season NOx Emission Levels from CAIR Sources, 2000-2011
totaled 566,000 tons in 2011, nine percent below
the regional emission budget of 624,698 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 2011.
Notes:
The 2000 and 2005 ozone season values reflect data that were reported under other pro-
grams (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.
A detailed interactive version of this map is available online at
Source: EPA, 2012
Figure 8: Annual N0X Emissions from CAIR and ARP Sources, 1990-2011
7.0
5 5.0
LU
ox
2.0
1.0
0.0
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 NOxannual program
- CAIR NOx annual program budget
1990 2000 2005 2008 2009 2010 2011
Note: For CAIR units not in the ARP in 1990, 2000, and 2005, the 2008 annual NOx emis-
sions were applied retroactively for each pre-CAIRyear following the year in which the unit
began operating.
Source: EPA, 2012
Between 2005 and 2011, ozone season NOx emis-
sions from CAIR and former NBP sources fell in
every state participating in the CAIR NOx ozone
season program except Pennsylvania, Arkansas,
and Kentucky (see Figure 7), where emissions
increased by a total of 22,000 tons. In the 2011
ozone season, the total emissions from participat-
ing sources were about 59,000 tons below the
regional emission budget. Seventeen states had
emissions below their allowance budgets, collec-
tively by about 108,000 tons. Another eight states
and Washington, D.C. exceeded their 2011 bud-
gets by a total of about 49,500 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.
Annual NOx Reductions
Figure 8 shows that from 1990 to 2011, an-
nual NOx emissions from CAIR and ARP units
together dropped by about 4.4 million tons to 2
million tons, a decrease of 60 percent. In 2011,
the third year of the CAIR NOx annual program,
NOx emissions from all ARP and CAIR units were
1.7 million tons lower (46 percent) than in 2005
and 3.2 million tons lower (62 percent) than in
2000.
Emissions from CAIR NOx annual program
sources alone were 1.35 million tons in 2011,
146,000 tons (10 percent) below the 2011 CAIR
NOx annual program's regional budget of 1.5 mil-
lion tons. Annual NOx emissions were 1.3 million
tons lower (49 percent) than in 2005, and 74,000
tons lower (5 percent) than in 2010.
All ARP sources emitted 1.9 million tons of NOx
in 2011. This level is over 6 million tons less than
2000
2005
I.
2011
Largest bar refers to
Ohio, 2000: 154,471 tons NOx
CAIR States controlled for ozone
8
S02 and NOx Emissions, Compliance, and Market Analyses
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Figure 9: State-by-State Annual N0X Emission Levels for CAIR and ARP Sources, 1990-2011
Largest bar represents
Ohio, 1990: 534,054 tons
| CAIR States controlled for fine particles
Note: a detailed interactive version of this map is available online at
Source: EPA, 2012
the projected level in 2000 without the ARP, and
over three times the Title IV NOx emission reduc-
tion objective.
Although the ARP and CAIR NOx programs
were responsible for a large portion of these an-
nual 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 2011.
From 1990 to 2011, all states participating in
the CAIR NOx annual program decreased their
emissions, as indicated in Figure 9. Comparing
2005 to 2011, all states in the CAIR region emit-
ted less NOx except Arkansas, which increased
its NOx emissions by 3,000 tons. The total NOx
emissions from participating sources in 2011 were
about 55,000 tons below the regional emission
budget of 1,490,264 tons. Twelve states and D.C.
exceeded their 2011 budgets by a total of about
174,000 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. Sixteen
states had emissions below their 2011 allowance
budgets, collectively by about 275,000 tons.
S02 and NOx Emissions, Compliance, and Market Analyses
9
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CAIR and ARP Program Compliance
S02 Programs
Because SO5 allowances from the ARP are used
by sources to comply with the CAIR SO 2 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 were in
compliance with both programs in 2011 and held
enough allowances to cover their SO5 emissions.
2011 was the second year for compliance with the
CAIR SO2 program. Under this program, allow-
ances are used to cover emissions based on the vin-
tage year of the allowances, with pre2010 vintage
allowances used at 1 allowance for 1 ton of SO5
emissions, and 2010 and 2011 vintage allowances
used at 2 allowances for 1 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 SO2 program are made. The additional
deductions under CAIR could be to cover the 2
for 1 use of 2010 and 2011 allowances or to cover
emissions for units that are subject to CAIR, but
not the ARP.
In 2011, over 24 million SO2 allowances were avail-
able for compliance under both programs (9 million
vintage 2011 and over 15 million banked from
prior years). Just over 4.5 million allowances were
deducted for ARP compliance and an additional
2 million allowances were deducted to complete
reconciliation for CAIR. After reconciliation for
both programs, over 17.7 million ARP SO, allow-
ances were banked and carried forward to the 2012
compliance year.
Compliance Results
As of June 21, 2012, the reported 2011 S02
emissions by CAIR and ARP sources totaled
4,544,208 tons. Because of variation in round-
ing conventions, changes due to resubmissions
by sources, and allowance compliance issues at
certain units, this number is lower than the sums
of emissions used for reconciliation purposes
shown in Table 3. Therefore, the allowance totals
deducted for actual emissions in Table 3 differ
from the number of emissions shown elsewhere
in this report.
CAIR and ARPS02 Programs
Reported emissions (tons)
Compliance issues, rounding, and report
resubmission adjustments (tons)
Emissions not covered by allowances
(tons)
Additional vintage 2010 and 2011
allowances deducted for CAIR
Total allowances deducted for emissions
(includes some 2 for 1 CAIR deductions)
4,544,208
-44,460
+2,052,711
6,552,439
Table 3: CAIR and ARP S02 Allowance Reconciliation Summary, 2011
Total Allowances Held (1995-2011 Vintage) 24,275,585
Held by Affected Facility Accounts 17,042,402
Held by Other Accounts (General and 7 m
Non-Affected Facilities) /,L33',ai
Allowances Deducted for Acid Rain Compliance*
-4,507,630
Penalty Allowance Deductions (2012 Vintage)
0
Held by Affected Facility Accounts
12,534,772
Banked Allowances (after ARP Compliance)
19,767,955
Held by Other Accounts (General and
Non-Affected Facilities)
7,233,183
Acid Rain Program Allowances Deducted for CAIR S02
Compliance
-2,052,711
Banked Allowances (After ARP and CAIR S02
Compliance)
Held by Affected Facility Accounts
10,482,061
17,715,244
Held by Other Accounts (General and
Non-Affected Facilities)
7,233,183
^Includes 7,902 allowances deducted from opt-ins for reduced utilization.
Source: EPA, 2012
10
S02 and NOx Emissions, Compliance, and Market Analyses
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NOx Programs
CAIR NOx Compliance Results
Tables 4 and 5 show how NOx allowances were
used in 2011. All covered facilities were in compli-
ance with the CAIR NOx ozone season programs
in 2011 and held enough allowances to cover their
NOx emissions. Only one facility did not hold
enough allowances to cover its 2011 emissions
for the CAIR NOx annual program. That facil-
ity automatically surrendered a 3-for-l penalty
deduction.
Compliance Results
As of June 21, 2012, the reported 2011 ozone
season NOx emissions by CAIR sources totaled
566,049 tons, and annual emissions totaled
1,354,114 tons. Because of variation in round-
ing conventions, changes due to resubmissions
by sources, and allowance compliance issues
at certain units, these numbers are different
from the sums of emissions used for reconcili-
ation purposes shown in Table 4 (ozone season
reconciliation) and Table 5 (annual reconcilia-
tion). Therefore, the allowance totals deducted
for actual emissions in Tables 4 and 5 differ
from the number of emissions shown elsewhere
in this report.
CAIR N0X Ozone Season
Reported emissions (tons)
566,049
Compliance issues, rounding, and report
resubmission adjustments (tons)
+188
Emissions not covered by allowances (tons)
0
Total allowances deducted for emissions
566,237
CAIR N0X Annual Program
Reported emissions (tons)
1,354,114
Compliance issues, rounding, and report
resubmission adjustments (tons)
-1,708
Emissions not covered by allowances (tons)
-3
Total allowances deducted for emissions
1,352,403
ARP NOx Compliance Results
The ARP NOx Program does not impose a cap on
NOx emissions 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 emis-
sion rate averaging plan. These options provide af-
fected sources with the flexibility to meet the NOx
emission reduction requirements in a cost-effective
manner. Of the 930 units that were subject to
the ARP NOx Program in 2011, one facility faces
a monetary penalty for noncompliance with the
ARP NOx program.
Table 4: CAIR N0X Ozone Season Allowance Reconciliation Summary, 2011
Total Allowances Held
(2003-2011 Vintage)
Held by Affected Facility
Accounts
878,921
1,017/412
Allowances Held by Other
Accounts (General and Non-
Affected Facilities)
138,491
Allowances Deducted for CAIR N0X
Ozone Season Trading Program
-566,237
Penalty Allowance Deductions
(2012 Vintage)
0
Held by Affected Facility
Accounts
312,684
Banked Allowances
451,175
Held by Other Accounts
(General, State Holding,
and Non-Affected Facilities)
138,491
Source: EPA, 2012
Table 5: CAIR N0X Annual Allowance Reconciliation Summary, 2011
Total Allowances Held
(2009-2011 Vintage)
Held by Affected Facility
Accounts
1,723,690
1,882,226
Held by Other Accounts
(General, State Holding, and
Non-Affected Facilities)
158,536
Allowances Deducted for CAIR N0X Annual
Trading Program
-1,352,403
Penalty Allowance Deductions
-9
Held by Affected Facility
Accounts
371,278
Banked Allowances
529,814
Held by Other Accounts
(General, State Holding, and
Non-Affected Facilities)
158,536
Source: EPA, 2012
S02 and NOx Emissions, Compliance, and Market Analyses
11
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Controls and Monitoring
To meet the ARP and CAIR emission reduction
targets, some sources opt to install control tech-
nologies. 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 2011.
Table 6: S02 Controls in 2011 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
FGD
444
41%
61%
Other
44
4%
1%
Uncontrolled
593
55%
38%
Note: Due to rounding, percentages shown may not add up to 100%.
Source: EPA, 2012
Table 7: N0X Controls in 2011 CAIR N0X Ozone Season Program
N0X 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
421
38%
64
13%
Non-Controlled
112
2%
15
1%
Other Control
38
1%
87
5%
SCR
217
53%
348
82%
SNCR
121
6%
0
0%
Note: Due to rounding, percentages shown may not add up to 100%.
Source: EPA, 2012
Table 8: N0XControls in 2011 CAIR N0X Annual Program
N0X 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
411
38%
117
19%
Non-Controlled
91
2%
19
1%
Other Control
40
2%
85
4%
SCR
229
51%
403
76%
SNCR
120
7%
0
0%
Note: Due to rounding, percentages shown may not add up to 100%.
Source: EPA, 2012
S02 Controls in 2011
SO5 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 SO^. As discussed in detail on pages
67, 15 units in the ARP added new S02 controls
in 2011. Of those 15 units, 11 are in the CAIR
SO5 annual program. Across both programs the
share of generation, measured in megawatt hours
(MWh), at controlled units grew to 61 percent of
coal-fired generation in 2011 (see Table 6).
NOx Controls in 2011
Sources have a variety of options by which to
reduce NOx emissions. New selective catalytic re-
duction units (SCRs), the most efficient NOx con-
trols, were installed at 28 generation units under
the CAIR NOx ozone season program in 2011.
Units with add-on controls SCR or selective
non-catalytic reduction (SNCR) accounted for
59 percent of coal-fired generation and 82 percent
of generation at combined cycle units (gas- or
oil-fired). Although 112 coal-fired units and 15
combined cycle units remain uncontrolled, they
represent only two percent of coal-fired generation
and one percent of combined cycle generation
under the CAIR NOx ozone season program (see
Table 7).
Twenty-four units in the CAIR NOx annual pro-
gram installed add-on controls in 2011. The 349
coal-fired units with add-on controls (either SCRs
or SNCRs) generated 58 percent of annual gen-
eration, and the 403 combined cycle units with
SCRs generated 76 percent of annual generation
(see Table 8). Similar to the CAIR NOx ozone
season program, uncontrolled units represent two
percent of coal-fired generation and one percent of
combined cycle generation under the CAIR NOx
annual program.
12
S02 and NOx Emissions, Compliance, and Market Analyses
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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 emis-
sions 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 rela-
tive accuracy test audit. These tests ensure that
sources report accurate data and provide assurance
to market participants that a ton of emissions
measured at one facility is equivalent to a ton
measured at a different facility.
While many CAIR units with low levels of
emissions did not have to use CEMS, the vast
majority 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 NOxmass emissions.
Similarly, CEMS monitored over 99 percent of
SOj emissions from CAIR sources, including 100
percent from coal-fired units and 20 percent from
oil-fired units. The relatively low percentage 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.
Quality Assurance of Emissions Data
The quality of ARP and CAIR data rests on two
founding principles: reporting a complete data
record for every hour of operation and monitoring
key parameters using CEMS or an approved alter-
native. The implementation of a strong quality as-
surance/quality control (QA) program is essential
to ensuring that data are accurate and emission
reductions are real.
The QA program encompasses the entire process
of measuring pollutants, handling the data and
reporting results. Regulations specify that moni-
tors meet stringent standards to demonstrate their
precision and reporters must use EPA software to
validate and submit electronic reports. Standard-
ized and centralized electronic reporting allows the
Agency to efficiently track, process and validate
the large volume of data using automation. All
emissions are monitored and reported hourly
including emissions during start-up, shutdown,
and upset or uncontrolled conditions. This ensures
that the record is complete and that QA rests on a
solid statistical footing.
In 2009, EPA launched the Emissions Collection
and Monitoring Plan System (ECMPS) to reengi-
neer several applications onto a unified platform.
EPA provides the ECMPS client tool to the regu-
lated community. ECMPS uses an XML-based
data format to perform up to 6,000 QA checks on
the reports generated by CEMS data acquisition
systems. It provides an immediate feedback report
that allows the user to correct problems before
data submittal. ECMPS has cut resubmissions
significantly by consistently applying comprehen-
sive validation and verification. Making it easy for
reporters to submit clean data promotes efficiency
and focuses attention on what is important.
EPA performs two types of QA post-submission:
a repeat of the ECMPS checks to verify data ac-
curacy and completeness and electronic audits
including statistical analyses. Statistical and ad
hoc audits provide a test bed for developing new
QA procedures and are one of the key avenues by
which EPA continues to improve data collection.
QA is further supported by field audits, the Pro-
tocol Gas Verification Program and the Minimum
Competency Requirements for Air Emissions
Testing. Put together, these efforts ensure that the
programs are effective and comprehensive.
CAIR and ARP have achieved an unparalleled
level of performance with respect to the accuracy,
precision, and timeliness of emission reports.
These high levels of data quality and source com-
pliance were achieved through careful program
implementation and continuous improvement
while working closely with the regulated com-
munity.
S02 and NOx Emissions, Compliance, and Market Analyses
13
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Market Activity
In a cap and trade program, sources may consider
several emission reduction alternatives, and are al-
lowed to trade allowances as part of their compli-
ance 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,
and allowance trading allows those sources to ar-
range for the cheapest possible reductions among
covered sources to meet the overarching cap. A
market for emission allowances will emerge, and
the allowance price will reflect the marginal cost
of emission reductions. Emission control decisions
will be made based on the cost of control options
relative to the market price of allowances. The al-
lowance 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 abate-
ment costs.
Table 9: Characteristics of the S02 Allowance Market after Compliance
(close of 2011)
Pre-CAIR
Vintages
CAIR Vintages
Total
Total Value of the Banked ARP Allowances Remaining
after Compliance
$19.3 million
$14.9 million
$34.2 million
Year-End Price (per Allowance)
$2.50
$1.50
n/a
Total Allowance Volume after Compliance
7,708,272
9,933,598
n/a
Note: Total value of allowance market is a snapshot based on the 2011 year-end nominal
prices and total allowance volume available after 2011 compliance and surrender of allowanc-
es required by EPA enforcement consent decrees. For 2011, CAIR compliance required the
surrender of two CAIR ARP allowances or 1 Pre-CAIR ARP allowance for each ton emitted.
Source: EPA, 2012 and BGC Environmental Brokerage Services Market Price Index, 2012
S02 Allowance Market in 2011
ARP allowance prices declined over the course of
2011 and prices continued to be significantly low-
er than prices projected as part of the final CAIR
rulemaking.1 In this second year of CAIR S02
compliance, prices for pre-CAIR and CAIR ARP
allowance vintages were below $5.00 per ton for
all or part of the year. Total emissions decreased
by 543,000 tons and were 4.41 million tons below
the ARP cap, but emissions exceeded the CAIR
cap by about 940,000 tons. Sources were able
to use banked ARP allowances for compliance
above the cap. After 2011 compliance surrenders,
about 7.7 million pre-CAIR ARP allowances and
9.9 million CAIR ARP allowances were banked
for possible future use. The availability of these
banked allowances put downward pressure on
allowance prices in both markets. See Table 9 for a
summary of the S02 allowance market at the close
of 2011.
NOx Allowance Markets in 2011
The 2011 CAIR NOx Ozone Season allowance
market continued its price decline from the previ-
ous year closing at the end of December at $9 per
ton (see Figure 10). The NOx Annual allowance
price followed the same trend, declining to around
$74 per ton by the end of the year.
In 2011, the third year of the CAIR Ozone
Season and Annual NOx programs, CAIR sources
emitted about 566,000 tons of NOx during the
ozone season (May through September), below
the overall budget and a 5 percent decrease from
2010 levels. CAIR sources emitted about 59,000
tons less than their overall ozone season budget,
thereby increasing the CAIR ozone season NOx al-
lowance bank to reach about 451,000 allowances.
Not surprisingly, the downward tendency of ozone
season allowance prices continued through most
of 2011. Emissions of CAIR Annual NOx were
1.35 million tons, about 146,000 tons less than
the overall budget. The CAIR Annual NOx bank
grew to more than 529,000 allowances. Current
annual and ozone-season CAIR NOx allowance
prices are well below the marginal cost for NOx
reductions projected at the time of the final rule,
and are in part subject to downward pressure from
the available banks of allowances.2
1 U.S. EPA, Regulatory Impact Analysis for the Final Clean Air Interstate Rule, Docket No. EPA-HQ-
OAR-2003-0053-2158, 7-9.
2 Ibid.
14
S02 and NOx Emissions, Compliance, and Market Analyses
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Figure 10: NOx Annual and Ozone Season Allowance Spot Price (Prompt Vintage), January-December 2011
$350
$300
$250
$200
O
-t¦
g_ $150
$100
$50
$0
Note: Prompt vintage is the vintage for the "current" compliance year.
Source: BGC Environmental Brokerage Services Market Price Index, 2012
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 include
transfers due to allowance retirements. Private
transactions include all transfers initiated by au-
thorized account representatives for any compli-
ance or general account purposes.
To help better understand the trends in market
performance and transfer history, EPA classifies
private transfers of allowance transactions into
two categories:
Transfers between separate and distinct econom-
ic entities, which may include companies with
contractual relationships 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 ownership interest in the
unit).
. .
n
Annual
1 i
Ozone Season
i
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
While all transactions are important to proper
market operation, EPA follows trends in the dis-
tinct transaction category with particular interest
because these transactions represent an actual ex-
change of assets between unaffiliated participants.
In 2011, about a third of each program's traded
allowances were exchanged between unrelated par-
ties, often with a broker facilitating the trade (see
Table 10). This proportion is similar to what was
seen in 2010.
Table 10:2011 Allowance Transfers under CAIR and ARP
Allowances
Transferred
Share of Program's
2011 Transfers
CAIR N0X Ozone Season Program
Distinct organizations
Related organizations
80,634
216,383
27%
73%
CAIR N0X Annual Program
Distinct organizations
Related organizations
337,949
423,289
44%
56%
ARP and CAIR S02 Annual Program
Distinct organizations
Related organizations
3,109,777
5,320,041
37%
63%
Source: EPA, 2012
S02 and NOx Emissions, Compliance, and Market Analyses
15
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