Clear Skies and Other Multi-Pollutant Bills

Sam Napolitano

Clean Air Markets Division

Presentation to Westar Business Meeting

September 18, 2003

Outlook for the West

• Smog and fine particles associated with lung and heart effects, including:

– Premature death

– Bronchitis

– Asthma attacks

Despite Progress, Air Quality Problems Persist

Regional Haze

Air Toxics, Especially Mercury Deposition

Acid Rain and Nitrogen Deposition

Power Plants Are Significant Contributors to These Public Health and Environmental Challenges

Sulfur Dioxide Nitrogen Oxides

* Other stationary combustion includes residential and commercial sources.

Mercury

Electric Power (63%)

Electric Power (22%)

Electric Power (37%)

Transportation

Miscellaneous

Electric power

Other stationarycombustion *

Industrial Processing

Current Clean Air Act Requirements for Power Sector

Phase IIAcid Rain

Compliance

MercuryDetermination

ProposedUtilityMACT

New Fine PM NAAQSImplementation Plans

Designate Areasfor Fine PM NAAQS

Ozone

Acid Rain, PM2.5, Haze, Toxics

1-hr Severe Area

Attainment Date

Compliance for BART Sources

NSR Permits for new sources & modifications that increase emissions

99 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

OTC NOx Trading

1-hr Serious Area Attainment

Date

NOx

SIPs Due

Designate areas for8-hr Ozone NAAQS

NOx

SIP CallRed-uc-tions

00 18

FinalUtilityMACT

Compliancewith Utility MACT

Assess Effectiveness of Regional Ozone Strategies

Regional Haze SIPs due

Latest attainmentdate for Fine PM

NAAQS 3

Compliance for BART sources under the Trading Program

Second Regional Haze SIPs due

Marg-inal 8-hr Ozone NAAQS Attain-ment Date Possible

Regional NOx Reductions ?(SIP call II)1

Interstate Transport Rule to Address SO2/ NOx Emissions for Fine PM NAAQS and Regional Haze

Note: Dotted lines indicate a range of possible dates.

1 Further action on ozone would be considered based on the 2007 assessment.

2 The SIP-submittal and attainment dates are keyed off the date of designation; for example, if PM or ozone are designated in 2004, the first attainment date is 2009

EPA is required to update the new source performance standards (NSPS) for boilers and turbines every 8 years

Serious 8-hr Ozone NAAQS attainment

Date

Moderate 8-hr Ozone NAAQS AttainmentDate

8-hrOzone Attain-mentDemon-stration SIPs due

In developing the timeline of current CAA requirements, it was necessary for EPA to make assumptions about rulemakings that have not been completed or, in some case, not even started. EPA’s rulemakings will be conducted through the usual notice-and-comment process, and the conclusions may vary from these assumptions.

Further progress under the Clean Air Act is complex, burdensome and uncertain

• Air quality has improved, but our best science says health and environmental problems persist.

• Current path to improved air quality is complex.

• Multi-Pollutant approach addresses power industry pollution with a proven approach – emissions cap and trade:– Simpler and more certain -- for regulators, industry, and

citizens.– More flexible and cost effective -- allows for strategic planning

of capital (i.e., avoided stranded investment) and cobenefits from control technologies (i.e., mercury removal).

– Greater environmental improvement sooner via faster emission reductions than under current CAA regulations.

• For good reasons, Clear Skies remains one of the highest environmental priorities of the President.

Why Multi-Pollutant Legislation?

Many Issues Addressed Along the Way

• Program Elements– What to Control

– Timing

– Level

– Type of Control

• Program Objectives– Air Quality Improvement

• Attainment• Public Health• Environment

– Reasonable Impacts• Production Cost• Fuel Use

– Effective Implementation• Installation Pace• Technology Improvement

• What Can Pass?

Aim: To Strike the Right Balance…

Why Is Multi-Pollutant Legislation Important to the West?

The West Will Continue to Grow...• Population is projected to grow more than

20% from current levels by 2020• Electricity demand is expected to grow more

than the national average• More than 10% over national

average in the Pacific States • More than 30% over national

average in the Mountain States

...While the Environment Is Protected• Legislation would protect air quality by

lowering or halting increases in air emissions throughout the West from today’s levels:

– Prevent degradation of visibility in parks.

– Help counties remain in attainment with health-based air quality standards, reducing the burden on state and local governments.

– Ensure nitrogen deposition does not increase and reduce mercury deposition.

69%15 (2018)

26 (2010)

48Mercury (tons)

67%1.7 million (2018)

2.1 million (2008)

5 millionNOx (tons)

73%3 million (2018)

4.5 million (2010)

11 millionSO2 (tons)

Reductions at Full

Implementation

Phase 2 CapPhase 1 CapCurrent

Emissions

Clear Skies’ Caps and Timing

Recognition of Western Programs and Concerns

• Clear Skies Act (CSA) supports and codifies the Western SO2 emission target established by the Western Regional Air Partnership (WRAP).

• Clear Skies creates two trading zones for NOx:– States in Zone 1 have ozone/PM2.5 non-

attainment issues or contribute to other States’ problems.

– Zone 2 includes:• WRAP States:

AZ, CA, CO, ID, MT, NM, ND, OR, SD, UT, WA, WY.• NV,OK, KS, and NE• Western portion of TX

Zone 1Zone 2

WRAP States included in SO2 Emissions Target

SO2 Emissions Reductions under Clear Skies in 2020

Note: The base case in IPM includes Title IV, the NOx SIP Call, NSR settlements, and state-specific caps in CT, MA, MO, NC, NH, TX, and WI. It does not include mercury MACT in 2007 or any other potential future regulations to implement the current Clean Air Act. Base case emissions in 2020 will likely be lower due to state and federal regulatory actions that have not yet been promulgated. Emissions projected for new units in 2020 are not reflected.

NOx Emissions Reductions under Clear Skies in 2020

Note: The base case in IPM includes Title IV, the NOx SIP Call, NSR settlements, and state-specific caps in CT, MA, MO, NC, NH, TX, and WI. It does not include mercury MACT in 2007 or any other potential future regulations to implement the current Clean Air Act. Base case emissions in 2020 will likely be lower due to state and federal regulatory actions that have not yet been promulgated. Emissions projected for new units in 2020 are not reflected.

Western Impacts of Clear Skies*

• Costs & Other Impacts– Annual cost of $1.2 billion– Electricity price increases of:

• Rocky Mountain, Pacific NW and TX: 1%

• CA: .4%• OK and KS: 2.1%• Northern Tier and Plains States:

3.5%

– Two coal-fired units at different plants may close

– Coal production at 2000 levels with new mix in the West

– Small natural gas impacts

• Benefits– Quantifiable benefits of about $9.5

billion ($8.6 billion for health)– Additional unquantified health &

environmental benefits– Flexibility and certainty– Fuel diversity preserved– Room for growth

*Includes states in Clear Skies Zone 2 for NOx:-- ND, SD, NE, KS, OK, TX, MT, WY, CO, NM, AZ, NV, UT, ID, WA, OR, and CA.

2020 At-A-Glance

National Picture: CSA Controls and their Economic Impact

2010

-

1,000

2,000

3,000

4,000

5,000

6,000

Base Case Clear Skies

TW

h

Coal Oil/Gas Nuclear Other Hydro

2020

-

1,000

2,000

3,000

4,000

5,000

6,000

Base Case Clear Skies

TW

h

Coal Oil/Gas Nuclear Other Hydro

Shift Occurs in Coal Production

Small Changes in Generation Mix

Coal- Fired Capacity with ACTss Ssmall (GW)

Coal- Fire Capacity with Scrubbers Increases(GW)

Coal- Fire Capacity with SCR Increases (GW)

Annual Costs Gradually RiseAnnual Costs Gradually Rise

National Electricity Price Increases Modestly National Electricity Price Increases Modestly Natural Gas & Coal Prices Do Not Change Much

National Picture: Air Quality, Health, & Environmental Gains

2020 Control PM2.5 Nonattainment Counties (18 Counties)

Hawaii Alaska

Remaining Counties Likely to Exceed the Annual Fine Particle Standard with Clear Skies in 2020

2020 Control 8-Hr Ozone Nonattainment Counties (27 Counties)

Hawaii Alaska

2020 Benefits that EPA Can Value in Dollars:

•Health benefits are approximately $110 billion annually .

•An alternative estimate is $21 billion.

Each year, there are:

•14,100 fewer premature deaths;

• An alternative estimate: 8,400 fewer premature deaths.

•8,800 fewer cases of chronic bronchitis;

•23,000 fewer non-fatal heart attacks;

•30,000 fewer hospitalizations/emergency room visits for cardiovascular & respiratory symptoms;

• includes 15,000 fewer hospital and emergency room visits for asthma.

•12.5 million fewer days with respiratory illnesses and symptoms,

•includes work loss days (1.6 million), restricted activity days (10.3 million), and school absences (200,000).

• Includes hundreds of thousands fewer respiratory symptoms and 180,000 fewer asthma attacks.

•Annual visibility benefits of $3 billion in selected Natl Parks and Wilderness areas.

•Significant decreases in fine particles and ozone occur before the existing Clean Air Act can provide them.

•Many benefits are not valued in dollars, but are important:

-Other visibility improvements

- Mercury deposition reduction

- Sulfur deposition reduction

- Nitrogen deposition reduction

- Other health improvements

Counties likely to Exceed the Annual Ozone standard with Clear Skies in 2020

Visibility ImprovesSulfur Deposition Drops

Nitrogen Deposition Drops Mercury Deposition Drops

Comparison of Caps and Timing: Clean Air Planning Act, Clear Skies Act, and Clean Power Act

Senator Carper

Clean Air Planning Act

Presidents' Bill

Clear Skies Act

Senator Jeffords

Clean Power Act.

SO2

2009: 4.5 million tons. 2013: 3.5 million tons. 2016: 2.25 million tons.

2010: 4.5 million tons. 2018: 3.0 million tons.

2009: 2.25 million tons. (1.975 m tons in the East and 275,000 tons in WRAP + MT/WA).

NOx

2009: 1.87 million tons. 2013: 1.7 million tons.

2008: 2.1 million tons. (Separate trading zones for the E/W). 2018: 1.7 million tons. (Separate trading zones for the E/W).

2009: 1.51 million tons.

Hg

2009: 24 tons, plus a 50% source-specific reduction from Hg in coal. 2013: 10 tons, plus a 70% source-specific reduction from Hg in coal.

2010: 26 tons. 2018: 15 tons.

2009: 5 tons. (Aggregate cap is based on a limit on the emissions rate from each unit, which cannot exceed 2.48 grams of Hg/1000 MW hrs and cannot differentiate among coal types).

CO2

2009: 2006 levels (2.551 billion short tons, or 631.2 MMTCE) 2013: 2001 levels (2.472 billion short tons, or 611.6 MMTCE).

GHG offsets are available.

Does not include emission constraint.

Projected emissions are:

2010: 2.60 billion short tons

(or 645.7 MMTCE)

2020: 2.80 billion short tons

(or 695.0 MMTCE)

2008: 2.05 billion short tons.

(or 570.0 MMTCE)

Comparison of Other Provisions:Clear Air Planning Act, Clear Skies Act, and Clean Power Act

Senator Carper

Clean Air Planning Act

President’s Bill

Clear Skies

Senator Jeffords

Clean Power Act

Trading Program •Cap-and trade for NOx , SO2, Hg and CO2 Initially requires facility-specific Hg reductions.•National trading of all pollutants•Largely uses existing Acid Rain Program ground rules•WRAP recognition•No Opt-In

•Cap-and trade for NOx, SO2, and Hg

•National trading of SO2 and Hg; East/West Zones for NOx

•Refined ground rules of Acid Rain Program•Safety valve•Excess emission penalties•WRAP recognition•Opt-In for Industrial Boilers and Turbines

•Cap-and trade for NOx, SO2, and CO2

•Hg MACT

•National NOx and Carbon Program; East/West SO2 trading

•Details to be developed in rules•No safety valve•No WRAP recognition•Special ozone “targeted” weighted trading for NOx

•No Opt-In

Allocation & Allowances •Allocation of NOx, Hg and CO2 on updating “output-based” based methodology of “recent” energy use

•SO2 has similar approach as Acid Rain Program

•NOx allowances to all fossil units; Hg allowances to coal units, and CO2 allowances to all generation units•New unit set aside

•Initial allocations to owners of fossil units on an “input basis”

- SO2 : Existing ARP approach

NOx: East/West Zones use historical fossil energy use to divide up allowances proportionately

Hg: Coal only; historical coal generation weighted by differences in difficulty of pollution control •Phase in a total auction of allowances over 52 years•No new source set aside

•Allocation of most allowances to harmed groups, existing sources, renewables, biological carbon sequestration, geological sequestration, and households (via agent) •Small declining share of allowances goes to “affected” sources•Offset program for Carbon

Comparison of Other Provisions:Clean Air Planning, Clear Skies Act, and Clean Power Act (cont.)

Senator Carper

Clean Air Planning Act

President’s Bill

Clear Skies Act

Senator Jeffords

Clean Power Act

Applicability •Units greater than 25 MW selling power

•Units greater than 25 MW selling power; cogenerator selling more than one-third of capacity

•Units greater than 15 MW selling power

Interactions with other CAA Provisions

•NSR/NSPS/visibility rule exemption for 20 years•Hg MACT exemption•NSR covers new units and boiler replacement where hourly emission rate increase occurs•Grandfathering provisions that apply performance standards in 2020 to units operating before August 1971•No NSR offsets

•Creation of “transitional” areas for SIP Compliance •Interstate transport petition decisions are not effective before 2012•Exemption from Hg MACT; evaluation of other HAPS; oil-based units address nickel emissions•Narrower NSR coverage of units in trading programs•BART exemption•Revised NSPS

•Codifies NOx SIP Call and converts it to annual program in 2008•No “grandfathering” provision

•Hg MACT in effect in 2009; other HAPS addressed in rules by 2006

•Retains NSR, NSPS NOx SIP Call, BART, and visibility requirements•Add grandfathering provision applying BACT to units over 40 years old or by 2014

Other •Secretary of Commerce issues air quality forecasts and warnings

•Mid-Course correction study; ends NAPAP

•Expands NAPAP; includes acid deposition study and rule to protect sensitive positions•EPA has facility – specific override of trading programs to prevent impact

Graphic Comparison of Proposed Multi-Pollutant Control Levels: Sulfur Dioxide

Graphic Comparison of Proposed Multi-Pollutant Control Levels: Nitrogen Oxides

Hg Emissions Reductions Based on Proposed Nationwide Caps

0.00

10.00

20.00

30.00

40.00

50.00

60.00

To

ns

Clear Skies (S. 485)

Jeffords (S. 366)

Carper (S. 843)

2000 baseline emissions

Graphic Comparison of Proposed Multi-Pollutant Control Levels: Mercury

The Opportunity before Us

• Enactment of the Clear Skies Act has many advantages to all stakeholders:– Immediate and long-term health and environmental benefits

– Less burden on State and local governments

– Lower costs for industry and consumers

• The 108th Congress has a unique opportunity to reduce the electric power industry’s emissions and improve the cost-effectiveness of environmental policy.

• The Administration is committed to working with Congress to pass the Clear Skies Act.

For Additional Information See

Clear Skies Websitewww.epa.gov/clearskies