U.S. EPA Call for State Implementation Plans (SIPs) for Nitrogen Oxides
(NOx) Emission Reductions to Reduce Ground
Level Ozone
Cleaner and Greener Principles for Establishing a Energy
Efficiency / Renewable Energy Allowance Set-Aside
As part of a new rule to mitigate ground level ozone, eastern states have a
unique opportunity to reduce greenhouse gas emissions while lowering the cost of
compliance with air quality standards, creating jobs, and providing other
economic and environmental benefits. States can take advantage of this
opportunity by establishing a set-aside of allowances for energy efficiency and
renewable energy in the NOx Budget Trading Program.
In 1998, EPA issued a set of rules, commonly called the NOx SIP Call, that
requires 22 eastern states and the District of Columbia to submit State
Implementation Plans (SIPs) for reducing emissions of nitrogen oxides (NOx), a
key ingredient in the formation of ground-level ozone. EPA developed the NOx SIP
Call after a number of eastern states concluded that NOx emissions from sources
in upwind states were making it difficult for them to attain ozone standards.
The NOx SIP Call sets seasonal (summertime) NOx emissions limits for each state.
The NOx SIP Call also established an optional NOx Budget Trading Program,
under which states can allocate tradable NOx emissions allowances as they see
fit. One of the trading program's innovative features is that it lets states set
aside a portion of their budget—typically 5 to 15 percent—to be met through
energy efficiency and renewable energy (EE/RE) projects that reduce or displace
electricity generation during the summer ozone season. This allows states to include rewards for energy efficiency and renewable energy in their State
Implementation Plans.
Leonardo Academy's Cleaner and Greenersm Program
has developed Cleaner and Greenersm
Principles that spell out how to include rewards for energy efficiency and renewable
energy in emission reduction plans for NOx and other air pollutants. Including
rewards for energy efficiency and renewable energy in emission reduction plans for NOx and
other air pollutants will reduce pollution reduction costs by bringing these additional
sources of emissions reduction into the pool of emission reduction options. Including
energy efficiency and renewable energy in emission reduction plans will also increase the
environmental benefits by reducing other types of pollution as well as NOx.
The allowances within the set-aside are made available to eligible energy
efficiency or renewable project operators rather than being allocated directly
to NOx Budget Sources. It is important to note that a set-aside is not
equivalent to lowering the budget because the allowances usually remain in the
market. The recipients of the set-aside allowances are free to hold, sell, or
retire the allowances as they see fit. It is likely that they would offer to
sell the allowances in the market in order to realize a financial benefit. As a
result, the energy efficiency and renewable energy sources have an additional
source of funding for their projects, existing sources have a pool of allowances
they can purchase if needed to meet their requirements, and the total amount of
emissions remains at the budgeted amount.
The set-aside is an attractive alternative to conventional emissions control
options because energy efficiency and renewable energy have many benefits beyond
reducing NOx. EPA estimates that if all states in the NOx SIP Call area set
aside 5 percent of their NOx allowances for energy efficiency or renewable
energy projects, the region could see annual savings of $5 billion in consumers'
energy bills and $150 million in air quality compliance costs, along with the
creation of approximately 20,000 new jobs.
Emissions of hazardous air pollutants, greenhouse gases, and criteria air
pollutants also would be reduced (Source: U.S EPA, What
Is a NOx EE/RE Set-Aside, Exactly?).
EE/RE set-asides can help states address multiple environmental and economic
goals simultaneously. By promoting the use of energy efficiency and renewable
energy to help meet clean air objectives, states also can reduce hazardous air
pollutants and greenhouse gas emissions cost-effectively. EPA is working with
states to encourage the use of EE/RE set-asides.
Massachusetts, New Hampshire, New Jersey, and New York have established EE/RE
set-asides, and Indiana has a program under development. Maryland has created an
analogous set-aside for "clean air projects."
Rewards for energy efficiency and renewable energy will only be included in state
emission reduction plans for NOx if there is support for this action from businesses,
citizens, and environmental organizations and consumer organizations. It is important
that the states receive support and encouragement to develop plans that are best for the
environment and the public.
Nitrogen Oxides Emissions Pages
Cleaner and Greenersm Program Web Site
The Cleaner and Greenersm Program of Leonardo Academy has developed
principles for developing State Implementation Plans for NOx.
Cleaner and Greenersm Principles
States with EE/RE NOx Set-Aside Programs
Massachusetts
Department of Environmental Protection
New Hampshire Department
of Environmental Services
New Jersey
Department of Environmental Protection
New York
Department of Environmental Conservation
U.S. EPA Web Site
U.S. EPA NOx Reduction Rule
U.S. EPA Information on the Process Used to
Develop the EPA NOx Reduction Rule
U.S. EPA Guidance on Including Energy
Efficiency and Renewables Set-Asides in NOx SIPs
Volume 1: Establishing an
Energy Efficiency and Renewable Energy (EE/RE) Set-Aside in the NOx Budget
Trading Program, March 1999
Volume 2: Designing the
Administrative and Quantitative Elements of an Energy Efficiency and Renewable
Energy Set-Aside
If you would like additional information or want to help support the development of
state implementation plans for nitrogen oxides emissions reduction that include energy
efficiency and renewable energy, please contact us.
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