Clean Air Markets
Program Basics Figures
Last updated: 05/2017
Acid Rain Program (ARP)
- The ARP began in 1995 and observed its twentieth anniversary during the 2015 reporting year.
- The ARP covers fossil fuel-fired power plants across the contiguous United States and is designed to reduce SO₂ and NOₓ emissions, the primary precursors of acid rain.
- The ARP’s market-based SO₂ cap and trade program sets an annual cap on the total amount of SO₂ that may be emitted by electricity generating units (EGUs). The final annual SO₂ emissions cap was set at 8.95 million tons in 2010, 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 jurisdictions (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 implementation began in 2009 (for the annual and ozone season NOₓ programs) and 2010 (for the SO₂ program) and ended on December 31, 2014. CAIR required 28 eastern jurisdictions (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 air quality standards (known as the National Ambient Air Quality Standard, or NAAQS).
- 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.
- Two 2008 court decisions kept the requirements of CAIR in place temporarily but directed EPA to issue a new rule to replace it.
Cross-State Air Pollution Rule (CSAPR)
- CSAPR was developed in response to the 2008 court decisions on CAIR and replaced CAIR starting on January 1, 2015.
- 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. In 2015, CSAPR required a total of 28 eastern states to reduce SO₂ emissions, annual NOₓ emissions and/or ozone season NOₓ emissions. CSAPR requires reductions in annual emissions of SO₂ and NOₓ from power plants in 23 eastern states and reductions of NOₓ emissions during the ozone season from 25 eastern states.
- CSAPR includes four separate cap and trade programs to achieve these reductions: CSAPR SO₂ Group 1 and Group 2 trading programs, CSAPR NOₓ annual trading program, and CSAPR NOₓ ozone season trading program.
- A July 2015 court decision kept the requirements of CSAPR in place but remanded certain emission budgets to the EPA for reconsideration.
- In each of the four trading programs, the total emissions allowed in each compliance period under CSAPR equals the sum of the affected state emission budgets in program. The budgets for each program in 2015 were as follows:
- SO₂ Group 1 – 2.55 million tons
- SO₂ Group 2 – 917,787 tons
- Annual NOₓ – 1.27 million tons
- Ozone Season NOₓ – 628,392 tons
Cross-State Air Pollution Rule Update (CSAPR Update)
- The CSAPR Update was developed to address regional interstate transport for the 2008 ozone NAAQS.
- The Update replaces original reporting obligations under the CSAPR ozone season trading program for 22 states and responds to the July 2015 court remand of certain CSAPR ozone season budgets.
- Starting in May 2017, the CSAPR Update began reducing ozone season NOₓ emissions further 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 total CSAPR Update budget equals the sum of the individual state budgets for those states included in the program. The combined state emission budgets in CSAPR Update program equal 316,464 tons of ozone season NOₓ emissions in 2017 and 313,626 tons of emissions for 2018 and later years.
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 fossil fuel-fired power plants. 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 economic 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 throughout the contiguous United States. 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 ozone in the eastern United States. The program, which operated during the ozone season from 2003 to 2008, was a central component of the NOₓ State Implementation Plan (SIP) Call, promulgated in 1998, to help states meet the 1979 ozone NAAQS. All 21 jurisdictions (20 states plus Washington, D.C.) covered by the NOₓ SIP Call participated in the NBP. 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 jurisdictions (27 states plus Washington, D.C.) to make reductions in SO₂ and NOₓ emissions that cross state lines and contribute to unhealthy levels of fine particulate matter and ozone pollution in downwind areas. CAIR required 25 eastern jurisdictions (24 states plus Washington, D.C.) to limit annual power sector emissions of SO₂ and NOₓ to address regional interstate transport of air pollution that contributes to the formation of fine particulates. It also required 26 jurisdiction (25 states plus Washington, D.C.) to limit power sector ozone season NOₓ emissions to address regional interstate 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.
EPA issued CAIR on May 12, 2005 and the CAIR federal implementation plans (FIPs) on April 26, 2006. In 2008, the U.S. Court of Appeals for the DC Circuit remanded CAIR to the Agency, leaving existing CAIR programs in place while directing EPA to replace them as rapidly as possible with a new rule consistent with the Clean Air Act. The CAIR NOₓ ozone season and NOₓ annual programs began in 2009, while the CAIR SO₂ program began in 2010.
CSAPR replaced CAIR starting on January 1, 2015.
Cross-State Air Pollution Rule
EPA issued 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. 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 were required to reduce ozone season NOₓ emissions to help downwind areas attain the 1997 8-hour ozone NAAQS. 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.
CSAPR was scheduled to replace CAIR starting on January 1, 2012. However, the timing of CSAPR's implementation was affected by D.C. Circuit actions that stayed and then vacated 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 CSAPR compliance deadlines by three years. Accordingly, CSAPR Phase I implementation began January 1, 2015 and Phase II began January 1, 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 began reducing ozone season NOₓ emissions further 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. However, the CSAPR Update only partially resolves covered states’ interstate ozone transport obligations for the 2008 ozone NAAQS. States and EPA will need to determine whether additional actions are needed to fully address interstate ozone transport for this NAAQS. Additionally, states are required by the Clean Air Act to develop and submit interstate ozone transport SIPs by no later than three years after EPA promulgates a NAAQS. Pursuant to the statute, and because EPA promulgated a newer ozone NAAQS in October 2015, states would be expected to submit interstate ozone transport SIPs by October 2018.
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 be addressed in a timely fashion using the 4-step transport framework that has evolved through more than 20 years of state and federal regulatory actions and was applied most recently in the CSAPR Update. In December 2016, the agency provided preliminary air quality data and information regarding the early analytical steps of the transport framework for the 2015 NAAQS as part of a Notice of Data Availability (NODA).
- Acid Rain Program (ARP)
- Cross-State Air Pollution Rule (CSAPR)
- Cross-State Air Pollution Update Rule (CSAPR Update)
- Clean Air Interstate Rule (CAIR)
- NOₓ Budget Trading Program (NBP) / NOₓ SIP Call
- National Ambient Air Quality Standards (NAAQS)
- Learn more about EPA's Clean Air Market Programs
- Learn more about emissions trading