Clean Air Markets
CAIR Frequent Questions – Model Rules
Q: Are there specific requirements for the CAIR and CAMR permit applications? For example, our State currently has a generic permit application that involves check boxes for the type of permit the facility is requesting. Would it be sufficient to include a CAIR/CAMR check box or do we need a separate application process?
A: Yes, each of the model trading rules addresses permit applications. In part 96, subpart CC §§ 96.120-124 addresses the CAIR annual NOx trading program permit requirements; subpart CCC §§ 96.220-224 addresses the CAIR SO2 trading program permit requirements; subpart CCCC §§ 96.320-324 addresses the CAIR NOx ozone season trading program permit requirements. For CAMR, permit requirements are in Part 60, §§ 60.4120 - 4124. For the initial CAIR and CAMR permits, a separate application process will be required. However, permit renewal should be integrated into the State's existing permit renewal process. EPA will work with individual States to determine how to integrate the CAIR and CAMR permit renewal process with the Title V permit renewal process.
Q: How do the Annual NOx and the Ozone Season NOx programs interact? And will EPA administer both?
A: EPA would administer both programs. Upon operation of the CAIR ozone-season NOx program, EPA would stop administering the NOx SIP Call trading program. The CAIR annual and ozone-season NOx programs would be completely separate -- using separate allowances and conducting separate compliance. Note that the NOx SIP Call allowances may be used for compliance in the CAIR ozone-season NOx program and not in the annual program. Also the CAIR CSP is comprised of CAIR annual NOx allowances. Because some States are not affected for both, those States may participate in either the annual or ozone-season NOx programs as appropriate.
Q: There is a voluntary opt-in provision in the model program. Could a state require a class of sources to opt in as long as there emissions were well monitored?
A: States may allow sources to voluntarily opt-in to the regional trading programs using the provisions in the model trading rules. However, a State may not require a source or class of sources to opt-in.
Q: Why was the definition of "unit" changed from the NOx SIP Call definition? EPA added to the unit definition: " .... other stationary, fossil fuel-fired combustion device." How does this affect, for example, large furnaces (not boilers) at Weirton Steel?
A: Only fossil-fuel fired boilers and turbines are required to be covered by the CAIR trading programs. Fossil-fuel fired combustion devices (including, but not limited to, boilers and turbines) may opt-in if the State adopts the opt-in provisions in the model trading rules. The term "combustion device" was added to the definition of "unit" to reflect the broader range of types of sources that may become opt-in units. Units that are not boilers or turbines are not subject to the trading programs unless they opt-in voluntarily.
Q: Can non-EGUs participate in the annual CAIR trading program? If so, how?
A: Non-EGUs may participate in the annual CAIR trading program through the opt-in provisions in §§ 96.180-96.188 and §§ 96.280-96.288, provided their State chooses to allow sources to opt-in. If a State chooses to allow opt-ins, the model rule opt-in provisions must be used.
Q: Does EPA have any available errata on the final CAIR rules? Are there any necessary tweaks/corrections/additions/omissions for the final CAIR language?
A: The final CAIR preamble and regulatory language are published in the May 12, 2005, Federal Register and are available on the CAIR Web site. States can obtain a working copy of the CAIR model trading rules from their EPA Regional CAIR contacts. The working files contain some additional technical corrections. Further, EPA has proposed revisions to the CAIR model trading rule language to clarify the rules and facilitate their interaction with the CAIR FIP trading rules. The proposed language is also on the CAIR web site in the rulemaking package that includes the proposed CAIR FIP.
Q: Can EPA explain how the application process for new unit set-aside allowances works and will some owner/operators have to purchase allowances for first year operation?
A: If a State adopts the model rule new unit allocation provisions (for the NOx ozone season or annual programs), then the owners/operators will have to obtain allowances for the first year of operation. After the year in which the unit starts up, the unit may apply for allowances from the new unit reserve, requesting an amount equal to its tons of emissions in the previous year. If the State's reserve is not oversubscribed, the unit will receive its requested allocation. If the reserve is oversubscribed, the State will need to prorate all of the allocation requests. See §§96.142(c) and 96.342(c). After the unit accumulates 5 years of quality assured data, the unit will receive an allocation based on its baseline heat input. See §§96.142(a) and (b) and §96.342(a) and (b). It should be noted that States can design a different allocation methodology; the one described here is the sample methodology in the CAIR model trading rules.
Q: The mercury model rule uses a conversion factor equal to 3413 Btu/kWh. The CAIR model rule uses a conversion factor equal to 3414 Btu/kWh to convert electrical energy output to heat input. What is the correct conversion factor?
A: The correct value is 3,413 Btu/kWh. This is consistent with the value used in the Acid Rain Program. The CAIR model rules have a typographical error in §§96.142 and 96.342, but have the correct value in the definition of "potential electrical output capacity" in §§ 96.102, 96.202, and 96.302. The rulemaking package that includes the proposed CAIR FIP proposes to correct the error.
Q: EPA allows flexibility in regards to allowance allocation methodology. Does this flexibility apply to how states calculate baseline heat inputs? For example, for existing units (commencing operation before January 1, 2001) the model rule uses a factor equal to 7900 Btu/kWh to convert gross electrical output to heat input. Also, for co-generation units which are boilers, the model rule divides the total heat energy in the steam by 0.8. Can states use different conversion factors?
A: States may develop any approach to allocating the CAIR NOx annual or ozone season allowances so long as it meets the basic requirements in §51.123(o)(2) and (aa)(2). For example, a State may develop a different methodology for calculating baseline heat input. It should be noted that the example approach referred to in the question is the "modified output" approach which in the model rule was designed for new rather than existing units.
Q: Is there a two-year life span for the Compliance Supplement Pool allowances in CAIR as there was in the NOx SIP Call? If not, why not?
A: There are no restrictions on the use of the CAIR annual NOx allowances issued under the compliance supplement pool. See 70 FR 25285-6 for a discussion of the CSP, its distribution, and the reasons for not restricting the use of CSP allowances.
Q: Why was flow control eliminated from the final CAIR? It was used in the NOx SIP Call and did not seem overly burdensome.
A: See 70 FR 25282-3 for a discussion of progressive flow control with regard to CAIR.
Q: Will EPA administer a state's trading program if it includes opt-in sources, such as municipal waste combustors (MWCs) pursuant to the opt-in approach finalized in CAIR?
A: If States choose to they may allow sources to opt in to the CAIR trading programs in accordance with the CAIR model rule language for opt-ins. (See discussion beginning on 70 FR 25286 and 51.123(o)(2)(i), 51.123(aa)(2)(ii) and 51.124(o)(2).)
Q: Could a state or group of states require flow control, and if so, would EPA administer the program or would the states have to administer it?
A: If a state or group of states require flow control, then the trading program would not be administered by EPA. (This would be an emissions trading program that “differs substantively” from the model rule. See 51.123 paragraphs (o)(4) and (aa)(4) and 51.124(o)(4).)