Clean Air Interstate Rule (CAIR)

1. Clean Air Interstate Rule (CAIR) Marilyn Powers December 8, 2006

2. Pollutants and Concerns • Nitrogen Oxides contribute to the formation of both PM2.5 and ground-level ozone. Sulfur Dioxide (SO2) contributes to formation of PM2.5. • Ozone and PM2.5 have been linked with premature death, serious illnesses such as chronic bronchitis and heart attacks, and respiratory illnesses such asthma exacerbations. • NOx and SO2are also linked with acid rain, eutrophication of water bodies including estuaries such as the Chesapeake Bay, and contribute to regional haze.

3. Electric Power Generation: A Major Source of Emissions SO2 Emissions NOx Emissions 10.9 Million Tons Power Sector 4.5 Million Tons 69% 5.0 Million Tons 16.3 Million Tons Other 31% Total: 20.8 Million Tons Total: 15.9 Million Tons Source: SO2 and NOx data is from EPA’s 2003 National Emissions Inventory. “Other” sources of pollutants include transportation and other mobile sources and industrial sources.

4. Previous Programs Regulating NOx and SO2 • In 1995, EPA began implementation of the acid rain program under Title IV of the CAA • In 1998, EPA issued the NOx SIP Call to 22 states and DC based on our finding that these states were significantly contributing to nonattainment of the 1 – hour ozone standard in downwind states. Region 3 states implemented the NOx SIP Call beginning in 2003.

5. Long-Range Transport of Air Pollution • Air pollution can travel hundreds of miles and cause multiple health and environmental problems on regionalor national scales. • Emissions contributing to PM2.5 and ozone nonattainment often travel across state lines, especially in the eastern U.S. • SO2 and NOx, and other pollutants, contribute to PM2.5 transport • NOx and other pollutants contribute to ozone transport. • Attaining national ambient air quality standards will require some combination of emission reductions from: • Sources located in or near nonattainment areas (such as mobile sources) and • Sources, such as power plants, located further from the nonattainment area.

6. Dealing with Transport Problems • Clean Air Act contains provisions for States and EPA to address interstate pollution transport. • The NOx SIP Call (and now, CAIR) is needed because states have not met the CAA requirements for transported emissions

7. Transport Contributes to Nonattainment of New Standards • In 1997, EPA established more protective standards for fine particulates (PM2.5), and the more stringent 8-hour ozone standard • In 2004, EPA designated 33 areas as nonattainment for ozone and 16 areas as nonattainment for PM2.5 • Nonattainment problems are caused by both regional and local emissions

8. Nonattainment areas for 8-hour ozone pollution only Nonattainment areas for fine particle pollution only Nonattainment areas for both 8-hour ozone and fine particle pollution Areas Designated Nonattainment for Ozone and PM2.5 NAAQS in 2004 126 ozone nonattainment areas with 474 counties 47 PM2.5 nonattainment areas with 224 counties

9. Redesignations in Region 3 • Originally designated as nonattainment, many areas in the region have since monitored attainment • This is largely because of reductions attributed to the NOx SIP Call • Proof that cap and trade programs are indeed having a significant air quality benefit

10. The Clean Air Interstate Rule • Finalized in March 2005. Applies to 28 Eastern states and DC • All Region 3 states were determined to have significant contribution to downwind nonattainment • At full implementation, 73% reduction of SO2 and 61% reduction of NOx.

11. Key Elements of CAIR • CAIR sets an emission reduction requirement (budget) for each State, based on capping power plant emissions at levels that EPA believes are highly cost-effective to achieve. • Provides an optional cap and trade program based on successful Acid Rain and NOx SIP Call programs as a method to implement the necessary reductions. • Two-phase program with declining emission caps

12. Key Elements of CAIR (cont.) • Allows States flexibility on how to achieve the required reductions, including which sources to control and whether to join the trading program. • Model rules that states can adopt.

13. Caps and Reductions under CAIR

14. National NOx and SO2 Power Plant Emissions:Historic and Projected with CAIR SO2 NOx Projected, w/ CAIR Source: EPA

15. Cap and Trade Programs - General • Each allowance equals 1 ton of pollutant • EPA administers the trading aspects of the program, including tracking of allowances • A source must have enough allowances to cover its emissions at the end of the year (or ozone season) • Excess allowances can be banked for future compliance or sold on the open market • Any person or entity may buy allowances

16. Cap and Trade Program under CAIR • 3 separate trading programs under CAIR: annual programs for SO2 and NOx, and an Ozone Season program for NOx • Set aside for new units • States may have a set aside for energy efficiency/renewable energy sources

17. CAIR Model Rules • States can participate in one or more of the EPA-administered cap and trade programs • Includes automatic penalties for noncompliance • Requires continuous monitoring • Unrestricted banking • Flexibilities for source allocations

18. Maryland - Reductions Under CAIR

19. CAIR Health and Environmental Benefits By 2015, CAIR will result in: $85-100 billion in health benefits each year, preventing: 17,000 premature deaths 22,000 non-fatal heart attacks 12,300 hospital admissions 1.7 million lost work days 500,000 lost school days. Almost $2 billion in improved visibility benefits each year. Other non-monetizable benefits – reductions of mercury emissions, acid rain, nitrification, eutrophication, and more. In 2015, CAIR will cost about $3.6 billion a year. Implementation beyond 2015 leads to higher annual benefits and costs.

20. CAIR Implementation in Maryland • Maryland is in the process of developing its CAIR rule • The CAIR rule will overlay Maryland’s Healthy Air Act, which establishes more stringent caps for large EGUs in the State • Maryland is also considering whether additional NOx and/or SO2 reductions are needed for attainment

21. Additional Information: www.epa.gov/CAIR/