Jump to main content.

Opt-in Program Fact Sheet

The Opt-in Program expands EPA's Acid Rain Program to include additional sulfur dioxide (SO2) emitting sources. Recognizing that there are additional emission reduction opportunities in the industrial sector, Congress established the Opt-in Program under section 410 of the Clean Air Act Amendments of 1990. The Opt-in Program allows sources not required to participate in the Acid Rain Program the opportunity to enter the program on a voluntary basis and receive their own acid rain allowances.

The participation of these additional sources will reduce the cost of achieving the 10 million ton reduction in SO2 emissions mandated under the Clean Air Act. As participating sources reduce their SO2 emissions at a relatively low cost, their reductions—in the form of allowances—can be transferred to electric utilities where emission reductions are more expensive.

The Opt-in Program offers a combustion source a financial incentive to voluntarily reduce its SO2 emissions. By reducing emissions below its allowance allocation, an opt-in source will have unused allowances, which it can sell in the SO2 allowance market. Opting in will be profitable if the revenue from allowances exceeds the combined cost of the emissions reduction and the cost of participating in the Opt-in Program.

An opt-in source must comply with the same provisions as utility units affected under the Acid Rain Program. These provisions relate to allowance trading, permitting, excess emissions, monitoring, end-of-year compliance and enforcement. Most basic to the program is the requirement that each year the opt-in source must hold enough allowances to cover its annual SO2 emissions.

Frequently Asked Questions about the Opt-in Program


Who Can Opt-in?

Any operating stationary combustion sources that emit SO2 but is not otherwise required to meet the mandatory SO2 emissions limitations of Title IV is eligible to opt into the Acid Rain Program. Combustion sources are defined as fossil fuel-fired boilers, turbines or internal combustion engines.

Examples of Eligible Combustion Sources

Examples of Ineligible Sources

The Clean Air Markets Division has published a guidance document to help sources determine whether or not they are affected by the Acid Rain Program (see "Do the Acid Rain SO2 Regulations Apply to You?", Document #EPA 430-R-94-002).

Top of Page

How Does A Source Opt-in?

In order to enter the Opt-in Program, a combustion source must submit an opt-in permit application and monitoring plan to its permitting authority, receive an opt-in permit, and install and certify its emission monitors.

After receipt of a complete opt-in permit application and after the monitoring plan is determined to be sufficient, the permitting authority, will issue a draft opt-in permit for the source to review. The draft permit is then made available for public comment and eventually issued or denied within 18 months of receipt of a complete application. The opt-in source must renew the opt-in permit before it expires, and, in most cases, the permit will last for 5 years.

The opt-in permit application must clearly identify the combustion source and contain all of the information needed to calculate the combustion source's allowance allocation, including its fuel input and emissions data as well as historic and current emission limits.

The certification of monitoring systems for the combustion source will follow the same procedures and requirements as for affected units in the mandatory utility program (see 40 CFR part 75 for more specific requirements). However, there will be no provisional, nor automatic, certification of monitoring systems for combustion sources. In addition, an approved opt-in permit for an applying combustion source will expire if the combustion source fails to complete the certification of its monitoring systems within 180 days after the permit's approval.

Renewal for an opt-in permit must be requested at least 18 months prior to the expiration of the existing opt-in permit. The opt-in permit renewal procedure is simpler than the initial opt-in permit application procedure because the allowance allocation has been established with the initial opt-in permit and cannot be altered in the renewal.

Top of Page

How is the Number of Opt-in Allowances Calculated?

Opt-in allowances are allocated upon entry into the Opt-in Program. The number of allowances an opt-in source receives is based on the product of its average heat input for all fuel consumed during 1985 - 1987 (known as its "baseline") and the lesser of three emissions rates: its 1985 actual emissions rate, its 1985 allowable emissions rate, and its allowable emissions rate at the time the combustion source submits an opt-in permit application.

If the source began operating after 1985, then EPA will accept an "alternative baseline" which is the average heat input for all fuel consumed during the first three consecutive calendar years for which the combustion source operated after December 31, 1985. The emissions rates used for the allowance calculation will be the actual and allowable emissions rate for the first year of this three year period as well as the combustion source's current allowable SO2 emissions rate.

Annual Opt-in Allowances = Baseline x the lesser of (The 1985 Acutal S02 Emissions Rate, The 1985 Allowable S02 Emissions Rate, The current allowable S02 Emissions Rate)

Top of Page

Are There Restrictions on Opt-in Allowances?

There are restrictions on opt-in allowances that do not apply to allowances allocated to affected units under the Acid Rain Program. They are:

1. Only opt-in allowances dated for the current or previous years can be transferred to other accounts in the Allowance Tracking System.

2. Only opt-in allowances for past years may be offered for sale in the spot auction, and no opt-in allowances may be offered for sale in the advance auction.

3. Opt-in allowances must be surrendered to the EPA if the opt-in source experiences reduced utilization relative to its baseline. The number of allowances surrendered will be proportional to the reduction in the opt-in source's historic operations (i.e., its baseline). The only exception to the surrender of allowances for reduced utilization is known as the thermal energy exception.

Top of Page

Why is EPA Concerned with Reductions in Utilization?

Because participation in the opt-in program is voluntary and does not include all sources, the statute recognized that shifts in utilization from opt-in sources to sources not participating in the program would free up allowances without reducing emissions. EPA, in accordance with section 410(f)of the Act, will deduct allowances from an opt-in source when it shuts down or reduces utilization.

For most years, utilization is calculated as the three year rolling average of heat input for the opt-in source. An opt-in source is considered to have reduced its utilization if its average utilization is below its baseline (i.e., its average historic fuel input). If an opt-in source has reduced its utilization, EPA will deduct allowances from the opt-in source as described in the equation below.

EPA will consider documented claims of demand side efficiency improvements, as well as improvements in the efficiency of electricity or steam production at the opt-in source when determining reduced utilization. EPA will give credit and not deduct allowances for any portion of the opt-in source's reduced utilization provided by efficiency improvements.

Allowances Deducted for Reduced Utilization = Annual Opt-in Allowances multiplied by 1 ( 1 - Average Utilization divided by Baseline))

Top of Page

Questions About the Thermal Energy Exception

A thermal energy plan is entered into jointly by the opt-in source and its replacement units. The plan estimates the amount of thermal energy replaced and requires additional information on the operations of both the opt-in source and its replacement units while governed by the plan.

A thermal energy plan has a fixed duration and must be renewed. The term of the plan extends over full calendar years, so interested opt-in sources and replacement units could have a plan last as many as five years, if the opt-in permit is on a calendar year basis, or three years, if the opt-in permit begins on a date other than January 1.

The allowance transfer from the opt-in source to the replacement unit will take place annually. Such transfer will follow EPA's deduction of allowances to offset emissions for the previous compliance year and before any other allowance transfers are recorded in the Allowance Management System for that year. Since the number of allowances that will be transferred each year is contained in the approved thermal energy plan, the opt-in source and each replacement unit will know exactly how many allowances will be transferred.

At the end of each year, EPA will adjust this allowance transfer to reflect the actual thermal energy replaced. In the event that the amount of replacement is altered by an opt-in source's confirmation report, a report submitted after allowance reconciliation that documents efficiency improvements, the EPA will make adjustments in the following manner: EPA will consider the number of allowances transferred to replacement units fixed after the reconciliation process has ended. The Agency will rely on the opt-in source to surrender any additional allowances needed to make the accounting consistent with both the confirmed efficiency estimates and the number of opt-in allowances available for transfer.

When a thermal energy plan is terminated, the allowance transfer for the current year would be reversed, essentially restoring the opt-in source's original allocation for the current year. Future year opt-in source allowances would remain unchanged.

Allowances Transferred = (Thermal energy divided by efficiency constant) multiplied by Allowable S02 Emissions Rate at Replacement Unit divided by 2000

Retiring combustion sources seeking to become opt-in sources can receive an exemption from the Opt-in Program's monitoring requirements, consistent with 40 CFR part 75.67. The designated representative of such a source must petition the Administrator for such an exemption.

Top of Page

May a Source Withdraw From the Opt-In Program?

An opt-in source can withdraw from the program provided it meets certain conditions:

If the opt-in source does not meet these conditions to withdraw, the opt-in source shall remain in the Opt-in Program and remain subject to all requirements of the program.

Withdrawal will take effect on January 1. For opt-in sources that withdraw from the program, they cannot reapply to opt in until the year before the original opt-in permit expired.

Top of Page

Additional Information

Top of Page

Opt-in Forms

Visit forms for Clean Air Markets Programs.

Top of Page


Local Navigation

Jump to main content.