Emission, Compliance, and Market Data
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The Acid Rain Program (ARP), established under Title IV of the 1990 Clean Air Act (CAA) Amendments, requires major emission reductions of SO2 and NOx, the primary precursors of acid rain, from the electric power industry. The SO2 program sets a permanent cap on the total amount of SO2 that may be emitted by electric generating units (EGUs) in the contiguous United States. The program is phased in, with the final 2010 SO2 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. Table 1 shows that between 2004 and 2008, SO2 and NOx emissions fell significantly, while heat input (a surrogate measure of electricity generation) increased slightly. Most of the recent reductions since 2005 are from early reduction incentives of the Clean Air Interstate Rule (CAIR) covering most eastern states.
Over the next several months, EPA will release a series of reports summarizing progress under the ARP. This first report presents 2008 data on emission reductions, compliance results, and SO2 allowance prices. Future reports will evaluate progress under the ARP in 2008 by analyzing emission reductions, reviewing compliance results and market activity, and comparing changes in emissions to changes in acid deposition and surface water chemistry. For more information on the ARP, please visit the program’s website.
At a Glance: ARP Results in 2008
SO2 Emissions: 7.6 million tons
SO2 Compliance: 100%
SO2 Allowances: Banked allowances increased by almost 2 million from 2007 levels
SO2 Allowance Prices: Nominal allowance prices
declined sharply during the year, from a monthly average of $509/ton in January to $179/ton in December
NOx Emissions: 3.0 million tons
NOx Compliance: 100%
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Table 1: SO2, NOx, and Heat Input Trends in Acid Rain Program Units, by Fuel Type
SO2 Emission Reductions
The SO2 requirements under the ARP apply to EGUs, fossil fuel-fired combustors that serve a generator that provides electricity for sale. The vast majority of ARP SO2 emissions result from coal-fired EGUs, although the program also applies to oil and gas units. As Figure 1 shows, ARP units have reduced annual SO2 emissions by 56 percent compared with 1980 levels and 52 percent compared with 1990 levels. Sources emitted 7.6 million tons of SO2 in 2008, well below the current annual emission cap of 9.5 million tons, and already below the statutory annual cap set for compliance in 2010. Reductions in SO2 emissions from other sources not affected by the ARP (including industrial and commercial boilers and the metals and refining industries) and use of cleaner fuels in residential and commercial burners contributed to a similar overall decline (56 percent) in annual SO2 emissions from all sources since 1980. National SO2 emissions from all sources have fallen from nearly 26 million tons in 1980 to about 11.4 million tons in 2008 (see data available at the National Emissions Inventory (NEI) Air Pollutant Emissions Trends website).
Figure 1: SO2 Emissions from Acid Rain Program Sources, 1980 – 2008
The states with the highest emitting sources in 1990 have generally seen the greatest SO2 reductions under the ARP (see Figure 2). Most of these states are upwind of the areas the ARP was designed to protect, and reductions have resulted in important environmental and health benefits over a large region. In addition, from 2007 to 2008, reductions in SO2 emissions from ARP units in 38 states totaled about 1.3 million tons, or about 15 percent for the year. Five states (Georgia, Indiana, North Carolina, Ohio, and Pennsylvania) accounted for most of the one-year reductions from 2007 to 2008, ranging from 119,271 to 244,651 tons of SO2 in each of these states. From 1990 to 2008, annual SO2 emissions in 38 states and the District of Columbia fell by a total of approximately 8.2 million tons. In contrast, annual SO2 emissions increased by a total of 79,309 tons in 10 states from 1990 to 2008. The seven states with the greatest reductions in annual emissions since 1990 include Ohio, which decreased emissions by over 1.5 million tons, and Illinois, Indiana, Kentucky, Missouri, Tennessee, and West Virginia, each of which reduced total emissions during this time period by more than 500,000 tons.
Figure 2: State-by-State SO2 Emission Levels for Acid Rain Program Sources, 1990 – 2008
SO2 Program Compliance
For 2008, EPA allocated 9.5 million SO2 allowances under the ARP (see Table 2). Together with 6.7 million unused allowances carried over (or banked) from prior years, there were 16.2 million allowances available for use in 2008. ARP sources emitted approximately 7.6 million tons of SO2 in 2008, less than the allowances allocated for the year, and far less than the total allowances available (see Figure 3). In 2010, the total number of Title IV allowances allocated annually will drop to 8.95 million and remain statutorily fixed at that annual level.
Figure 3: SO2 Emissions and the Allowance Bank, 1995 – 2008
Table 2 explains in more detail the origin of the allowances that were available in 2008, and Table 3 shows how those allowances were used. Approximately 7.6 million allowances were deducted from sources' accounts in 2008 to cover emissions. From 2007 to 2008, the number of banked allowances increased by nearly two million allowances to 8.6 million, a 28 percent increase. In 2008, all ARP facilities complied with the requirement to hold enough allowances to cover SO2 emissions.
Table 2: Origin of 2008 Allowable SO2 Emission Levels
|Type of Allowance Allocation||Number of Allowances||Explanation of Allowance Allocation Type|
|Initial Allocation||9,191,897||Initial allocation is the number of allowances granted to EGUs based on the product of their historical utilization and emission rates specified in the Clean Air Act.|
|Allowance Auction||250,000||The allowance auction provides allowances to the market that were set aside in a Special Allowance Reserve when the initial allowance allocation was made.|
|Opt-in Allowances||106,497||Opt-in allowances are provided to units entering the program voluntarily. There were 20 opt-in units in 2008.|
|Total 2008 Allocation||9,548,394|
|Total Banked Allowances||6,678,688||Banked allowances are those allowances accrued in a facility’s account from previous years, which can be used for compliance in 2008 or any future year.|
|Total 2008 Allowable Emissions||16,227,082|
Table 3: SO2 Allowance Reconciliation Summary, 2008
|Total Allowances Held (1995 – 2008 vintages)||16,227,082|
|Affected Facility Accounts||12,210,477|
|Other (General and Non-Affected Facility Accounts)||4,016,605|
|Penalty Allowance Deductions ( 2009 Vintage)||0|
|Affected Facility Accounts||4,607,784|
|Other (General and Non-Affected Facility Accounts)||4,016,605|
2008 SO2 Allowance Market
In 2008, the SO2 allowance market experienced a 65% price decline; the monthly average price fell from $509 per ton in January to $179 per ton by December (see Figure 4). That decline has continued in 2009, falling to $71/ton by May. ARP reports released in the coming months will analyze allowance market activity in more detail.
Figure 4: Average Monthly SO2 Allowance Price, August 1994 – May 2009
NOx Emission Reductions
Title IV requires NOx emission reductions for certain coal-fired EGUs by limiting the NOx emission rate (expressed in lb/mmBtu). Congress applied these rate-based emission limits based on a unit's boiler type (see Table 4). The goal of the NOx program is to limit NOx emission levels from the affected coal-fired boilers so that their emissions are at least 2 million tons less than the projected level for the year 2000 without implementation of Title IV.
Table 4: NOx-Affected Title IV Units by Boiler Type and NOx Emission Limit
|Coal-Fired Boiler Type||Title IV Standard NOx Emission Limits (lb/mmBtu)||Number of Units|
|Phase I Group 1 Tangentially Fired||0.45||133|
|Phase I Group 1 Dry Bottom, Wall-fired||0.50||107|
|Phase II Group 1 Tangentially Fired||0.40||300|
|Phase II Group 1 Dry Bottom, Wall-fired||0.46||294|
|Cyclones > 155 MW||0.86||54|
|Wet Bottom > 65 MW||0.84||20|
|Total All Units||969|
Figure 5 shows that NOx emissions from all ARP sources were 3.0 million tons in 2008. This level is 5.1 million tons less than the projected level in 2000 without the ARP, or more than double the Title IV NOx emission reduction objective. While the ARP was responsible for a large portion of these annual NOx reductions, other programs — such as the Ozone Transport Commission (OTC), the NOx Budget Program under EPA's NOx State Implementation Plan (SIP) Call, and other regional and state NOx emission control programs — also contributed significantly to the NOx reductions achieved by sources in 2008.
Figure 5: NOx Emission Trends for All Acid Rain Program Units, 1990 – 2008
From 1995 to 2008, annual NOx emissions from ARP units dropped by about 3.1 million tons, a net decrease of 51 percent. Forty-two states and the District of Columbia reduced NOx emissions during this period versus six states that accounted for only about 15,600 tons of increased NOx emissions during the same period (see Figure 6).
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 emission rate averaging plan. These options provide affected sources with the flexibility to meet the NOx emission reduction requirements in the most cost-effective manner. In 2008, all 969 units that were subject to the ARP NOx Program achieved compliance.