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CAIR-CAMR: Annual Reconciliation

CAIR-CAMR: Annual Reconciliation. EPA Region 7 Workshop Kansas City August 16, 2007 Mary Shellabarger. Where do Allowances Come From?. CAIR NOx and CAMR Region-wide cap divided into State budgets Distributed within State based on SIP/SP or FIP/FP Plus opt-in allocations (CAIR only)

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CAIR-CAMR: Annual Reconciliation

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  1. CAIR-CAMR:Annual Reconciliation EPA Region 7 Workshop Kansas City August 16, 2007 Mary Shellabarger

  2. Where do Allowances Come From? • CAIR NOx and CAMR • Region-wide cap divided into State budgets • Distributed within State based on SIP/SP or FIP/FP • Plus opt-in allocations (CAIR only) • Plus CSP (CAIR NOx Annual only) • CAIR SO2 • Utilizes already existing Acid Rain allowances • Plus opt-in allocations

  3. State Budgets: Initial Allocations • Most sources receive a set amount of allowances for each control period (ozone season/calendar year) at least three years in advance • determined by a methodology specific to each SIP/State Plan or FIP/Federal Plan • total of initial allocations must be within State trading budget • initial allocation period varies by SIP/SP, FIP/FP

  4. State Budgets: Set-Aside Allocations • Sources may receive allowances from State set-aside accounts • new units • energy efficiency • timing determined by effective rule • usually once a year within control period

  5. Compliance Supplement Pool • Sources may receive CSP allowances in the NOx annual program only • One time allocation of total of 200,000 allowances distributed among States • Allocations will be made at end of 2009 • Determined by SIP/FIP • Early reductions in 2007 or 2008 • Electric reliability concerns

  6. Opt-In Allocations under CAIR • Not all States adopting opt-in provisions • Opt-in is program specific • Opt-in sources will receive allowances each year • determined by opt-in methodology • takes into account previous year’s operations

  7. Allowances • Specific to each program in CAIR/CAMR • Identified by 12 digit serial number • first four digits are the compliance use date (aka “vintage”) • last eight digits are sequential • cannot use allowance for compliance prior to its vintage year • Reported in blocks • example: 201000123400 - 201000123499 • represents block of 100 allowances

  8. Private Allowance Transfers • Negotiate the trade of allowances • Transferor (seller) notifies EPA of transfer • Log on to CAMD Business System (CBS) and perform transfer instantaneously • e-mail confirmation to both parties • Fill out and mail a paper form to EPA • written confirmation to both parties via US mail

  9. Annual Reconciliation • Annual process of deducting allowances to account for the control period emissions • Separate process for each program* • CAIR NOx annual • CAIR NOx ozone • CAMR • *CAIR SO2 combined with Acid Rain

  10. Annual Reconciliation -- Eligible Allowances • Allowances used for compliance • only allowances of a “vintage” for the current year or an earlier year may be used • Allowance transfer freeze • the date after which allowances that may be used for compliance cannot be transferred into or out of a unit or overdraft account

  11. Annual Reconciliation Deadlines • Ozone Season program: • Nov 30 allowance transfer freeze • final allowance transfers must be complete • Annual programs: • March 1 allowance transfer freeze • final allowance transfers must be complete

  12. Process at EPA • A few days before the allowance transfer freeze, EPA compares preliminary emissions data with allowance account holdings • EPA makes courtesy calls to alert DR of potential problem • Emissions data received from sources and quality-assured • Final allowance transfers received from sources and processed

  13. Process, cont. • Emissions and allowances compared by Allowance Management System and deductions are processed • Currently we do this on one day for everyone • New reporting system will allow us to do this on a source-by-source basis when emissions data are received • Excess emissions penalties calculated (if necessary)

  14. Deductions for CAIR NOx and CAMR • Emissions determined at monitoring level • Unit or stack • Conventional rounding to whole number • Emissions summed to source total • Source emissions total compared to allowance holdings in source account • Deductions made at 1 : 1 ratio • One allowance per ton (NOx) or ounce (Hg)

  15. CAIR NOx and CAMR: Excess Emissions • When there are not enough allowances to cover emissions in the source account • Allowances are deducted from following year’s allocation at 3:1 rate • 3 allowances for each ton (NOx) or ounce (Hg) of excess • Other enforcement action possible

  16. CAIR SO2Annual Reconciliation EPA Region 7 Workshop Kansas City August 16, 2007 Mary Shellabarger

  17. Deductions for CAIR SO2 • Compliance is determined in 2 steps to meet the continuing requirements of title IV and new requirements of CAIR. • Step 1: all Acid Rain deductions are made • Step 2: any additional deductions to complete CAIR compliance are done

  18. Deductions for CAIR SO2, cont. • “CAIR SO2 Allowance” definition specifies different values based upon vintage years • Retirement ratios do not apply to title IV sources outside the CAIR region. Vintage year…Authorizes…Implementing a ratio of… Pre-2010 SO2 allowance 1.00 tons of SO2 emissions 2010 – 2014 SO2 allowance 0.50 tons of SO2 emissions 2.00 - to - 1 2015 and Beyond SO2 allowance 0.35 tons of SO2 emissions 2.86 - to - 1

  19. Deductions for CAIR SO2: Example 1 • Source W has 100 tons of SO2 emissions in 2012 • It is holding 70 vintage 2009 allowances and 70 vintage 2012 allowances • For Acid Rain: • 70 vintage 2009 allowances and 30 vintage 2012 allowances are deducted: compliance complete • For CAIR: • the tonnage equivalent of the above deductions is 85 tons • ( 70 1-to-1 and 30 2-to-1= 70+15=85) • 30 more vintage 2012 allowances are deducted at 2-to-1 (a tonnage equivalent 15 tons) = 100 tons accounted for: compliance complete

  20. Deductions for CAIR SO2: Example 2 • Source W has 100 tons of SO2 emissions in 2012 • It is holding 70 vintage 2009 allowances and 50 vintage 2012 allowances • For Acid Rain: • 70 vintage 2009 allowances and 30 vintage 2012 allowances are deducted: compliance complete • For CAIR: • the tonnage equivalent of the above deductions is 85 tons (70 1-to-1 and 30 2-to-1= 70+15=85) • the remaining 20 vintage 2012 allowances are deducted at 2-to-1 (a tonnage equivalent 10 tons) = 95 tons accounted for = 5 tons excess emissions

  21. Deductions for CAIR SO2 Example 2: Excess Emissions • Allowances are deducted at 3 times: • (CAIR excess emissions – Acid Rain allowance penalty) • from following year’s allocation, utilizing tonnage equivalent • 3 x (CAIR excess emissions – Acid Rain allowance penalty) • 3 x (5 – 0) = 15 ton penalty • Penalty deduction is made from 2013 allocation • Each 2013 allowance is worth 0.5 tons • Penalty is 2 x 15 tons = 30 vintage 2013 allowances • Other enforcement action possible

  22. Deductions for CAIR SO2: Example 3 • Source W has 100 tons of SO2 emissions in 2012 • It is holding 70 vintage 2009 allowances and no other compliance allowances • For Acid Rain: • 70 vintage 2009 allowances are deducted • source has 30 tons of excess emissions • Allowances are deducted from following year’s allocation at 1:1 rate -- plus monetary penalty • 30 allowances deducted from 2013 allocation

  23. Deductions for CAIR SO2: Example 3, cont. • For CAIR: • the tonnage equivalent of the Acid Rain deductions is 70 tons (70 1-to-1) • Source has 30 tons excess emissions for CAIR • Allowances are deducted at 3 times: • (CAIR excess emissions – Acid Rain allowance penalty) • from following year’s allocation, utilizing tonnage equivalent • 3 x (30 tons CAIR excess emissions – 30 allowance Acid Rain penalty) = 0 deduction

  24. Deductions for CAIR SO2: Example 4 • Source W has 100 tons of SO2 emissions in 2012 • It is holding 70 vintage 2009 allowances and 10 vintage 2010 allowances • For Acid Rain: • 70 vintage 2009 and 10 vintage 2010 allowances are deducted • source has 20 tons excess emissions for Acid Rain • Allowances are deducted from following year’s allocation at 1:1 rate -- plus monetary penalty • 20 allowances deducted from 2013 allocation

  25. Deductions for CAIR SO2: Example 4, cont. • For CAIR: • the tonnage equivalent of the Acid Rain deductions is 75 tons (70 1-to-1 and 10 2-to1 = 70 + 5 = 75) • Source has 25 tons excess emissions for CAIR • Allowances are deducted at 3 times: • (CAIR excess emissions – Acid Rain allowance penalty) • from following year’s allocation, utilizing tonnage equivalent • 3 x (25 tons CAIR excess emissions – 20 allowance Acid Rain penalty) = 3 x 5 = 15 tondeduction • Penalty deduction is made from 2013 allocation • Each 2013 allowance is worth 0.5 tons • Penalty is 2 x 15 tons = 30 vintage 2013 allowances

  26. Conclusions • Understand allowance management and CAIR SO2 compliance ratios • Don’t get caught short of allowances • Use our on-line systems to facilitate compliance • www.epa.gov/airmarkets

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