Clean Air Markets
Program Basics Figures
Last updated: 05/2016
Acid Rain Program (ARP)
- The ARP covers fossil fuel-fired power plants across the contiguous United States and sets annual emission requirements for SO₂ and NOₓ, the primary precursors of acid rain.
- The market-based SO₂ cap and trade program sets a permanent cap on the cumulative amount of SO₂ that may be emitted by electricity generating units (EGUs). The final annual SO₂ cap is 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 rate-based approach that applies to a subset of coal-fired EGUs.
NOₓ Budget Trading Program (NBP)
- The NBP was a cap and trade program that operated from 2003 to 2008, requiring NOₓ emission reductions from affected power plants and industrial units in 21 eastern states (20 states plus Washington D.C.) during the ozone season.
- In 2009, the CAIR NOₓ ozone season program replaced the NBP to continue ozone season NOₓ emission reductions from the power sector.
Clean Air Interstate Rule (CAIR)
- CAIR required 28 eastern states (27 states plus Washington, D.C.) to reduce power sector SO₂ and/or NOx emissions to address regional interstate transport for the 1997 fine particle pollution (PM₂.₅) and ozone NAAQS. CAIR required reductions in annual emissions of SO₂ and NOₓ from power plants in 25 eastern states (24 states plus Washington, D.C.) and reductions of NOₓ emissions during the ozone season from 26 eastern states (25 states plus Washington, D.C.).
- CAIR included three separate cap and trade programs to achieve the required reductions: the CAIR SO₂ trading program, the CAIR NOₓ annual trading program, and the CAIR NOₓ ozone season trading program.
- A December 2008 court decision kept the requirements of CAIR in place temporarily but directed EPA to issue a new rule to address interstate transport. The CSAPR replaced CAIR starting on January 1, 2015.
Cross-State Air Pollution Rule (CSAPR)
- The CSAPR was developed in response to the December 2008 court decision on CAIR and replaced CAIR starting on January 1, 2015.
- The CSAPR addresses regional interstate transport of fine particle and ozone pollution for the 1997 ozone and PM₂.₅ NAAQS and the 2006 PM₂.₅ NAAQS. The CSAPR requires a total of 28 eastern states to reduce SO₂ emissions, annual NOₓ emissions and/or ozone season NOₓ emissions.
- The CSAPR includes four separate cap and trade programs to achieve these reductions: the CSAPR NOₓ annual trading program, the CSAPR NOₓ ozone season trading program, and the CSAPR SO₂ Group 1 and Group 2 trading programs.
Cross-State Air Pollution Rule Update (CSAPR Update)
- On September 7, 2016, EPA finalized an update to the Cross-State Air Pollution Rule ozone season program by issuing the CSAPR Update.
- Starting in May 2017, the CSAPR Update will further reduce ozone season NOₓ emissions from power plants in 22 states in the eastern U.S.
- The CSAPR Update achieves these reductions through an ozone season NOₓ cap and trade program.
- The CSAPR Update responds to the July 2015 remand of certain CSAPR budgets and updates the CSAPR ozone season program to help downwind states and communities meet and maintain the 2008 ozone NAAQS.
Analysis and Background Information
Acid Rain Program
Title IV of the 1990 Clean Air Act (CAA) Amendments established the ARP to address acid deposition nationwide by reducing SO₂ and annual NOₓ emissions from coal-fired power plants to address acid deposition nationwide. In contrast to traditional command and control regulatory methods that establish specific emissions limitations, the ARP SO₂ program introduced a novel allowance trading system that harnessed the incentives of the market to reduce pollution. This market-based cap and trade program was implemented in two phases. Phase I began in 1995 and affected the most polluting coal-burning units in 21 eastern and Midwestern states. Phase II began in 2000 and expanded the program to include other units fired by coal, oil, and gas. Under Phase II, EPA also tightened the annual SO₂ emissions cap, with a permanent annual cap set at 8.95 million allowances, starting in 2010. The NOₓ program has a similar results-oriented approach and ensures program integrity through measurement and reporting. However, it does not cap NOₓ emissions as the SO₂ program does, nor does it utilize an allowance trading system. Instead, the ARP NOₓ program provisions apply boiler-specific NOₓ emission limits—or rates—in pounds per million British thermal units (lb/mmBtu) on certain coal-fired boilers.
NOₓ Budget Trading Program
The NBP was a market-based cap and trade program created to reduce NOₓ emissions from power plants and other large combustion sources during the summer ozone season to address regional air pollution transport that contributes to the formation of smog (ozone) in the eastern United States. The program was a central component of the NOₓ State Implementation Plan (SIP) Call, promulgated in 1998, to help states meet the 1997 ozone air quality standard (known as the National Ambient Air Quality Standard, or NAAQS). All 21 states (20 states plus Washington, D.C.) covered by the NOₓ SIP Call participated in the NBP, which operated during the ozone season from 2003 to 2008. In 2009, CAIR's NOₓ ozone season program began, effectively replacing the NBP to continue achieving ozone season NOₓ emission reductions from the power sector.
Clean Air Interstate Rule
CAIR required 28 eastern states (27 states plus Washington, D.C.) to make reductions in SO₂ and NOₓ emissions that contribute to unhealthy levels of fine particulate matter (soot) and ozone pollution in downwind states. CAIR required 25 eastern states (24 states plus Washington, D.C.) to limit annual power sector emissions of NOₓ and SO₂ to address regional transport that contributes to the formation of fine particulates. It also required 26 states (25 states plus Washington, D.C.) to limit power sector ozone season NOₓ emissions to address regional transport of air pollution that contributes to the formation of ozone during the ozone season. Similar to the ARP, CAIR used three separate market-based cap and trade programs to achieve emission reductions and to help states meet the 1997 ozone and fine particle NAAQS.
The CAIR NOₓ ozone season and annual programs began in 2009, while the CAIR SO₂ program began in 2010. The CSAPR replaced CAIR starting on January 1, 2015.
Cross-State Air Pollution Rule
EPA issued the CSAPR in July 2011, requiring 28 states in the eastern half of the United States to significantly improve air quality by reducing power plant emissions that cross state lines and contribute to fine particle and summertime ozone pollution in other states. The CSAPR requires 23 states to reduce annual SO₂ and NOₓ emissions to help downwind areas attain the 2006 24-hour and/or 1997 annual fine particle NAAQS. Twenty-five states are required to reduce ozone season NOₓ emissions to help downwind areas attain the 1997 8-hour ozone NAAQS. The final CSAPR divides the states required to reduce SO₂ emissions into two groups (Group 1 and Group 2). Both groups must reduce their SO₂ emissions in Phase I. Group 1 states must make additional reductions in SO₂ emissions for Phase II in order to eliminate their significant contribution to air quality problems in downwind areas.
The CSAPR was scheduled to replace CAIR starting on January 1, 2012. However, the timing of the CSAPR's implementation was affected by D.C. Circuit actions that stayed and then vacated the CSAPR before implementation. On April 29, 2014, the U.S. Supreme Court reversed the D.C. Circuit's vacatur, and on October 23, 2014, the D.C. Circuit granted EPA's motion to lift the stay and shift the CSAPR compliance deadlines by three years. Accordingly, CSAPR Phase I implementation began January 1, 2015, with Phase II to begin in 2017.
Cross-State Air Pollution Rule Update
On September 7, 2016, EPA finalized an update to the CSAPR ozone season program by issuing the CSAPR Update. This rule addresses the summertime transport of ozone pollution in the eastern U.S. that crosses state lines and will help downwind states and communities meet and maintain the 2008 ozone NAAQS. Starting in May 2017, the CSAPR Update will further reduce ozone season emissions of NOₓ from power plants in 22 states in the eastern U.S..
Next Steps to Address Interstate Air Pollution Transport
The final CSAPR Update will result in meaningful, near-term reductions in ozone pollution that crosses state lines. While the CSAPR Update is focused on the 2008 standard, emission reductions achieved under this final rule will also help states attain and maintain the strengthened 2015 ozone NAAQS. However, it is likely that, after implementation of this rule, some upwind states will need to make additional reductions to address transport of ozone pollution. The EPA will continue to look at the availability, cost-effectiveness, and timing of emissions reductions beyond 2017 for potential inclusion in a future transport rule.
In its 2015 ozone NAAQS implementation memo, the EPA noted that the Clean Air Act's "good neighbor" provision for the 2015 ozone NAAQS can also be addressed in a timely fashion using the 4-step CSAPR framework. The agency intends to provide information regarding the early analytical steps of the CSAPR framework for the 2015 NAAQS in fall of 2016. In addition, EPA will continue supporting efforts across the United States that reduce SO₂ and NOₓ emissions by implementing existing programs; finalizing pending rules; and working with regional, state, and local air quality planners to evaluate the need for complementary clean air actions.
- Acid Rain Program (ARP)
- Clean Air Interstate Rule (CAIR)
- NOₓ Budget Trading Program (NBP) / NOₓ SIP Call
- Cross-State Air Pollution Rule (CSAPR)
- Cross-State Air Pollution Update Rule
- National Ambient Air Quality Standards (NAAQS)
- Learn more about EPA's Clean Air Market Programs
- Learn more about emissions trading