CAIR Summary of Express Terms
6 NYCRR Part 243, CAIR NOx Ozone Season Trading Program, 6 NYCRR Part 244, CAIR NOx Annual Trading Program, 6 NYCRR Part 245, CAIR SO2 Trading Program, 6 NYCRR Part 200, General Provisions
Part 243 establishes the Clean Air Interstate Rule (CAIR) NOx Ozone Season Trading Program, Part 244 establishes the CAIR NOx Annual Trading Program and Part 245 establishes the CAIR SO2 Annual Trading Program. These programs are designed to reduce ozone and particulate matter with an aerodynamic diameter less than or equal to a nominal 2.5 micrometers (PM2.5) in New York State and downwind states by limiting emissions of NOx and SO2 year-round from fossil fuel-fired electricity generating units (EGUs) and limiting NOx during the ozone season (May 1 through September 30) from fossil fuel-fired electricity generating units, Portland cement kilns, and fossil fuel-fired non-electricity generating units.
Parts 243, 244, and 245 establish emission budgets for NOx and SO2, respectively. Parts 243, 244, and 245 establish trading programs by creating and allocating allowances that are limited authorizations to emit up to one ton of NOx or SO2 in the respective control periods or any control period thereafter. Affected units are required to hold allowances for compliance deduction, at the respective allowance transfer deadlines, the tonnage equivalent to the emissions at the unit for the control period immediately preceding such deadline.
Part 243 applies to units that serve an electrical generator with a nameplate capacity equal to or greater than 15 megawatts of electrical output and sells any amount of electricity, Portland cement kilns which have a maximum design heat input equal to or greater than 250 mmBtu/hr., and fossil fuel-fired non-electricity generating units, which have a maximum design heat input equal to or greater than 250 mmBtu/hr. For Part 243, the first control period commences on May 1, 2009 and concludes on September 30, 2009. Subsequent control periods begin on May 1 and conclude on September 30 of that calendar year.
Parts 244 and 245 apply to units that serve an electrical generator with a nameplate capacity equal to or greater than 25 megawatts of electrical output and sells any amount of electricity. The control period for Part 244 runs from January 1 to December 31 starting in 2009. The control period for Part 245 runs from January 1 to December 31 starting in 2010.
Parts 243 and 244 require each CAIR NOx unit to have a CAIR authorized account representative (AAR) who shall be responsible for, among other things, complying with the CAIR NOx permit requirements, the monitoring requirements, the allowance provisions, and the recordkeeping and reporting requirements. Similarly for Part 245, each CAIR SO2 unit needs to have a CAIR AAR designated to perform these duties. The owner and/or operator of the unit may also designate an alternate CAIR designated representative to perform the above duties.
For Parts 243, 244, and 245, the CAIR AAR shall submit a complete CAIR permit application to the New York State Department of Environmental Conservation (Department) by 12 months before the date on which the applicable CAIR NOx or CAIR SO2 unit commences operation.
The Statewide CAIR NOx Ozone Season Trading Program (Part 243) Budget is 31,091 tons for the control periods 2009 through 2014 and 27,652 tons for 2015 and beyond. The Statewide CAIR NOx Trading Program (Part 244) Budget is 45,617 tons for the control periods 2009 through 2014 and 38,014 tons for 2015 and beyond.
By September 30, 2007, the Department will submit to the Administrator, in a format prescribed by the Administrator the CAIR NOx allowance allocations (Part 243 and 244), for the 2009, 2010, and 2011 control periods. By October 31 of each year thereafter, the Department will allocate CAIR NOx allowances for the control period that commences in the year four years after the deadline for submission.
The Department will determine the number of CAIR NOx allowances to be allocated to each CAIR NOx unit by: (1) multiplying the greatest heat input (EGUs and non-EGUs) experienced by the unit or clinker production (Portland cement kilns) for any single control period among the three most recent control periods, for which data is available by the applicable pound per input unit rate (first round calculation); (2) determining the allocation factor by dividing 85 percent of the Statewide CAIR NOx budget by the sum of all the above first round calculations (second round calculation); (3) multiplying the allocation factor by each unit's first round calculation result (third round calculation); and, (4) allocating the lesser of the unit's control period potential to emit or the third round calculation plus the unit's proportional share of any additional allowances remaining in the 85 percent portion of the Statewide CAIR NOx budget.
The Statewide CAIR SO2 trading program budget is 135,139 tons for the 2010 through 2014 control periods and 94,597 tons for 2015 and beyond. SO2 allowances have already been allocated and received by sources under title IV of CAA Section 403. Pre-2010 title IV SO2 allowances can be used for compliance with CAIR. SO2 reductions are achieved by requiring sources to retire more than one allowance for each ton of SO2 emitted. The emission value of an SO2 allowance is independent of the year in which it is used, but is based upon its vintage. Each sulfur dioxide allowance of vintage 2009 and earlier offsets one ton of SO2 emissions. Vintages 2010 through 2014 offset 0.5 tons of emissions, this equates to a 50 percent emission reduction. Vintages 2015 and beyond offset 0.35 tons of emissions, this equates to a 65 percent emission reduction.
For Parts 243 and 244, new units will be allocated from set-aside accounts which consist of five percent of the Statewide CAIR NOx budgets. The CAIR AAR of the new unit may submit a written request to the Department to reserve for the new unit allowances in an amount no greater than the unit's control period potential to emit (CPPTE). For Part 243, the request must be made prior to May 1 of the control period for which the request is being made or prior to the date the unit commences operation, whichever is later. For Part 244, the request must be made prior to January 1 of the control period for which the request is being made or prior to the date the unit commences operation, whichever is later. For both Parts 243 and 244, the unit must have all of its required permits for the Department to consider these requests.
If more than one project requests allowances from the new unit set-aside and the number requested exceeds the number in the set-aside account, the Department will reserve allowances in the order in which approvable requests were submitted. Requests will be considered to be simultaneous if received in the same calendar quarter. Should approvable requests in excess of the set-aside be submitted in the same quarter, the Department will reserve allowances to each project in an amount proportional to the allowances requested. Unused set-aside allowances will flow back to the CAIR NOx units in proportion to their original allocation.
The CAIR NOx Trading Program Budgets are designed to allocate 10 percent of the emissions allowances to the Energy Efficiency and Renewable Energy Technology Account (the EERET Account). The EERET Account will be administered by the New York State Energy Research and Development Authority (NYSERDA) and the allowances in the account will be sold or distributed in order to help achieve the emissions reduction goals of the CAIR NOx Trading Programs by promoting or rewarding investments in energy efficiency and renewable technologies.
The EERET Account ensures that the value of the allowances is used to further the aims of the emissions reduction program through cost-effective energy efficiency and clean energy technologies, while simultaneously helping to reduce the cost of the CAIR NOx Trading Programs to consumers.1
The EERET Account will be administered by NYSERDA. NYSERDA would be required to promptly sell or distribute the allowances as part of a fair, open and transparent process. The proceeds of the allowance sales will be used to fund energy efficiency projects, renewable energy, or clean energy technology. NYSERDA currently administers similar energy efficiency and clean energy technology programs, and the addition of the EERET Account should be easily accomplished. If for any reason the EERET allowances are not sold or distributed by NYSERDA, the allowances would flow back to the Department and be redistributed to the affected units (similar to the flowback method for the new unit set-aside allocations).
The EERET represents a change from the current practice under Parts 204, 237 and 238 of awarding allowances for avoided emissions attributable to the implementation of energy efficiency/renewable energy (EE/RE) projects. The Department's experience is that few sponsors of EE/RE projects have sought the award of EE/RE allowances. This is due to the difficulty in demonstrating enough avoided emissions, even when aggregating projects, to qualify for a single EE/RE allowance. It requires a savings of approximately 1,333 MWh of electricity (at the current 1.5 lbs/MWh reward rate) to yield one NOx allowance. The value of one NOx allowance is approximately $2,000. The EE/RE allowances have not served as an incentive to undertake EE/RE projects to the extent originally anticipated by the Department. As the nominal NOx rate decreases with this regulation, the reward rate would likely also be decreased. This will make applying for these allowances even less desirable.
In addition, providers of renewable and other clean energy technologies have been somewhat reluctant to apply for NOx allowances under the structure of Parts 204, 237 and 238. This is largely because the crediting of NOx allowances for low or zero emissions technologies would effectively assign the avoided NOx allowances to this generation and, if these allowances are sold and used for compliance, this could reduce or eliminate the ability to sell the "green attributes" of this power. In order to more effectively provide economic incentives for energy efficiency and clean energy technologies, the Department believes that using the receipts of the allowance sales to provide financial incentives could result in an expansion in these types of projects.
The Department will establish one NOx and one SO2 compliance account for each CAIR NOx and CAIR SO2 source. Allocations will be made into compliance accounts and deductions of allowances for compliance purposes will be made from compliance accounts. Allowances may be held without discount until deducted for compliance. The CAIR AAR may specify the allowances by serial number to be deducted for compliance purposes in the compliance certification report or utilize the first in, first out protocols in the regulation. In order to meet the unit's budget emissions limitation for the control period immediately preceding, CAIR NOx Ozone Season allowances must be submitted for recordation in a source's compliance account by midnight of November 30, CAIR NOx Annual allowances must be submitted for recordation in a source's compliance account by midnight of March 1, and CAIR SO2 allowances must be submitted for recordation by midnight of March 1. After making the deductions for compliance, if a unit has excess emissions, the Department will deduct from the source's compliance account, allocated for a subsequent control period, allowances equal to three times the unit's excess emissions.
Parts 243, 244, and 245 rely on the provisions of Part 75 for emissions monitoring and reporting. Units that are in compliance with Title IV of the Clean Air Act and 6 NYCRR Parts 204, 237, and 238 provisions for emissions monitoring and reporting should be in compliance with Parts 243, 244, and 245.
Units that are not CAIR NOx or SO2 units may qualify to opt-in the programs. A unit may become a CAIR NOx opt-in unit or CAIR SO2 opt-in unit if it conforms to all of the permitting, monitoring, recordkeeping and reporting requirements of a CAIR NOx or SO2 unit. Opt-in units receive CAIR NOx Ozone Season allowance allocations by May 31 for each control period based on the lesser of its baseline heat input or heat input for the previous control period multiplied by the lesser of its baseline NOx emission rate or the most stringent applicable NOx emission limitation. Opt-in units receive CAIR NOx Annual or CAIR SO2 allowance allocations by January 1. Opt-in units may withdraw from the program.
Part 200 cites the portions of federal statute and regulations that are incorporated by reference into Parts 243, 244, and 245.
__________
1 Analyses conducted by NYSERDA for the Department demonstrate that investments in energy efficiency have the effect of reducing electricity demand and the overall cost of the Program. http://www.rggi.org/documents.htm.
