are affected by both programs). States
are free to adopt the model trading program, with the allowance program administered by EPA, or to develop state-specific
rules that achieve the reductions mandated by the state budget.
The Concept of Opting In
Joining emission-trading programs
voluntarily is known as ‘opting in.’ As it
did under the Acid Rain Program and
the subsequent NOx Budget Program,
the EPA is offering opt-in opportunities
for CAIR. There are two opt-in alternatives available for owners under the
trading programs in CAIR:
Base Opt-in: Sources are given emission levels 30 percent lower than
their baseline emissions for NOx and
SO2 indefinitely starting in 2009/2010
and may leave the program after five
years.
Alternative Opt-in: Sources are given
emission levels at current emissions
from 2009 to 2014 and then in 2015
allocation assumes 90 percent SO2
control from baseline and 0.15
lb/MMBtu for NOx. The alternative
opt-in program does not allow for
sources to leave the program.
A source interested in opting in to
CAIR is free to select either of the opt-in
options, but then cannot switch between
them. Both opt-in programs are open to
boilers, turbines and other fossil fuel-fired combustion devices that vent all
emissions through a stack and satisfy
the CEMS monitoring requirements. A
source can opt in at any time for NOx,
SO2 or both. If the source is already
affected under the ozone season NOx
Budget Program, it has the option to opt
in to the CAIR annual NOx program; the
source’s compliance obligations for the
ozone season will not change.
Baseline heat input and emissions
for the opt-in source are determined
based on data collected by a CEMS. The
CEMS must be certified under the requirements of the EPA’s “Part 75” for the years
that monitoring system has maintained
at least a 90 percent monitor availability.
The entire control period must be reported
before a source enters the trading program
and can include up to three control periods, with the results being averaged. This
means that sources interested in opting
in prior to 2009 must have a Part 75 CEMS
installed and collecting certified data no
less than one-year prior to the effective
date of the opt-in permit.
Allowances are issued by the
state and are based on heat
input multiplied by the baseline
emission level.
Allowances are issued by the state
and are based on heat input multiplied
by the baseline emission level. Heat input
for allowance distribution purposes is the
lesser of the baseline heat input or the
heat input measured during the period
immediately previous to the control period (except for the first control period).
The emission rate is based on the lesser
of the baseline (adjusted according to
rules for the opt-in approach chosen) or
the most stringent limit applying to the
control period.
Why Choose To Opt In?
While on the surface, it would appear
to be nothing short of crazy to volunteer
to be regulated by a program requiring
the alphabet soup of CEMS, DAHS, RATAs
and EDRs, there are reasons that a facility
might consider taking on these challenges
in exchange for the flexibility of a trading
program. As an example, sources that
installed NOx controls for compliance with
NOx state implementation plans and only
operate pollution controls during the
ozone season may be able to generate
non-ozone season credits for sale if they
opt in to the annual NOx program and
operate the controls year-round. (The
ozone season is considered the period
during which conditions for formation
of ozone are most feasible.) Additionally,
sources may be able to install SO2
controls to generate excess credits, then
sell the credits.
Along with the potential for revenue
generation by selling excess allowances,
there is potential regulatory relief for
sources opting into CAIR, particularly
those choosing the alternative opt-in,
since it is stringent and binding. Though
the EPA did not offer explicit regulatory
relief in the CAIR preamble to opt-ins,
EPA has stated in the recently finalized
Best Available Retrofit Technology (BART)
rule that the CAIR requirements placed
upon affected electric generating units
are “better than BART.”
Supported by CAIR’s preamble and
rule language, state regulatory agencies
and those sources not CAIR-affected, but
interested in the opt-in program, have a
unique opportunity during the development of state rules. The rules can be
crafted to implement CAIR with flexible
opt-in programs that benefit both the
source’s capital planning process – by
offering certainty and flexibility – and
the environment – by requiring deep
emissions reductions.
For example, if state regulatory
agencies consider the CAIR alternative
opt-in to be BART-equivalent, this lessens
the regulatory burden on older facilities
that are not scheduled for retirement. In
addition to the possibility of regulatory
relief for the source, CAIR’s preamble
encourages the concept of repowering
older coal–fired units with clean coal
technologies, such as coal gasification or
boilers employing modern combustion
technologies, like circulating fluidized-bed
boilers. The repowering language lays the
groundwork for discussions between
interested sources and state regulatory
agencies about ways to make the alternative opt-in more attractive to encourage of replacement of high-emission,
older units.
CAIR’s preamble encourages
the concept of repowering
older coal–fired units with
clean coal technologies…
Next Steps
The CAIR program is driven by the
states, which are obligated to prepare
and submit state implementation plans,
or rules, to the EPA to demonstrate that
their program satisfies EPA’s minimum
requirements. Each of the CAIR states
must decide whether to include the opt-in program in their state implementation plan. If they do, the opt-in program
must follow EPA’s model rules.
