Chicago, IllinoisChicago, Illinois

Proposed Illinois CAIRProposed Illinois CAIR

Clean Air Interstate Rule - CAIRClean Air Interstate Rule - CAIR

CAIRCAIRUSEPA published CAIR on May 12, 2005USEPA published CAIR on May 12, 2005

Regional Cap and Trade Program = Annual SORegional Cap and Trade Program = Annual SO22 & & NOx reductions in 23 states and District of NOx reductions in 23 states and District of Columbia; Ozone season NOx reductions in 25 Columbia; Ozone season NOx reductions in 25 states and District of Columbiastates and District of Columbia

Air Pollution can travel hundreds of miles and Air Pollution can travel hundreds of miles and cause health and environmental impacts on cause health and environmental impacts on regional or national scalesregional or national scales

Air Pollution must be addressed in recognition of Air Pollution must be addressed in recognition of interstate pollution transportinterstate pollution transport

OverviewOverview Reduces sulfur dioxide (SOReduces sulfur dioxide (SO22) and nitrogen oxide ) and nitrogen oxide

(NO(NOXX) emissions) emissions

Both Both SOSO22 && NOxNOx contribute to fine contribute to fine particulate pollution (particulate pollution (PMPM2.52.5))

NOxNOx contributes to ground level contributes to ground level OzoneOzone

Provides substantial human health and Provides substantial human health and environmental benefits.environmental benefits.

Affected States must comply with the federal CAIRAffected States must comply with the federal CAIR

CAIR TimelineCAIR Timeline

Phase 1Phase 1 - NOx - NOx 20092009

Phase 1Phase 1 - SO - SO22 20102010

Phase 2Phase 2 - NOx and SO - NOx and SO22 20152015

SOSO22 & NO & NOXX

Negative Environmental EffectsNegative Environmental Effects Air quality impairmentAir quality impairment Impact on public healthImpact on public health Acidification of lake & streamsAcidification of lake & streams Damage to forest ecosystemsDamage to forest ecosystems Visibility degradationVisibility degradation Acceleration of the decay of building Acceleration of the decay of building

materials and statuesmaterials and statues

Health EffectsHealth Effects Increased respiratory symptoms, such as Increased respiratory symptoms, such as

irritation of the airways (e.g., coughing or irritation of the airways (e.g., coughing or difficulty breathing)difficulty breathing)

Decreased lung functionDecreased lung function Aggravated asthmaAggravated asthma Development of chronic bronchitisDevelopment of chronic bronchitis Irregular heartbeatIrregular heartbeat Nonfatal heart attacksNonfatal heart attacks Premature death in people with heart and Premature death in people with heart and

lung diseaselung disease

Defining the Problem in Illinois Defining the Problem in Illinois

In Illinois, electric generating units (EGUs) In Illinois, electric generating units (EGUs) are largest source of SOare largest source of SO22 and one of and one of

largest sources of NOxlargest sources of NOx

59 coal-fired boilers and 170 oil/gas-fired 59 coal-fired boilers and 170 oil/gas-fired boilers and turbines affectedboilers and turbines affected

1.1. Illinois EGUs identified as significantly Illinois EGUs identified as significantly contributing to downwind States’ ability contributing to downwind States’ ability (or inability) to attain National Ambient Air (or inability) to attain National Ambient Air Quality Standards (NAAQS)Quality Standards (NAAQS)

2.2. Transported Illinois pollution interferes Transported Illinois pollution interferes with other States’ ability to maintain with other States’ ability to maintain compliance with NAAQScompliance with NAAQS

3.3. Substantial reductions in NOx and SOSubstantial reductions in NOx and SO22 needed in Illinois to attain the 8-hour and needed in Illinois to attain the 8-hour and PM2.5 NAAQSPM2.5 NAAQS

CAIR Helps Illinois and its NeighborsCAIR Helps Illinois and its Neighbors

Because air emissions travel across state boundaries, reducing the Because air emissions travel across state boundaries, reducing the emissions from sources in Illinois also will reduce fine particle emissions from sources in Illinois also will reduce fine particle pollution and ground-level ozone pollution in other areas of the pollution and ground-level ozone pollution in other areas of the country.country.

Illinois sources significantly contribute to fine particle pollution in Illinois sources significantly contribute to fine particle pollution in other states including:other states including:

Pennsylvania, Ohio, West Virginia, Indiana, Tennessee, Kentucky, Alabama & Michigan

Illinois sources significantly contribute to ground-level ozone Illinois sources significantly contribute to ground-level ozone pollution in other states including:pollution in other states including:        Ohio, Wisconsin & Michigan

Illinois’ fine particle air quality will improve because of reductions Illinois’ fine particle air quality will improve because of reductions of SO2 and NOx in:of SO2 and NOx in:        Illinois, Iowa, Kentucky, Michigan, Minnesota, Missouri, Ohio, Texas & Wisconsin

8-Hour Ozone Nonattainment Areas

Jersey, Madison, Monroe, St. Clair

Cook, DuPage, KaneLake, McHenry, Will,Grundy (partial),Kendall (partial)

PM2.5 Nonattainment Areas

Madison, Monroe, St. Clair, Randolph (partial)

Cook, DuPage, KaneLake, McHenry, Will,Grundy (partial),Kendall (partial)

USEPA EstimatesUSEPA Estimates CAIR Reduces Illinois’ EmissionsCAIR Reduces Illinois’ Emissions By 2015, CAIR will help Illinois sources reduce By 2015, CAIR will help Illinois sources reduce

emissions of SOemissions of SO22 by by 125,000 tons or 34%125,000 tons or 34% (tons/yr)(tons/yr) 20032003 20102010 20152015

SOSO22 without CAIR without CAIR 365,000365,000 402,000402,000 447,000447,000

SOSO22 with CAIR with CAIR -- 240,000240,000 240,000240,000

(tons/yr)(tons/yr) 20032003 20102010 20152015

NOx without CAIRNOx without CAIR 146,000146,000 146,000146,000 159,000159,000

NOx with CAIRNOx with CAIR -- 69,00069,000 65,00065,000

By 2015 CAIR will help Illinois sources reduce emissions of NOx byBy 2015 CAIR will help Illinois sources reduce emissions of NOx by 81,000 tons or 55%.81,000 tons or 55%.

CAIR in IllinoisCAIR in Illinois** Illinois opting-in to federal cap and trade programsIllinois opting-in to federal cap and trade programs

* Capping emissions through three separate emissions * Capping emissions through three separate emissions trading programs:trading programs:

PM2.5PM2.5Annual SOAnnual SO22 Trading Program Trading Program

Annual NOAnnual NOXX Trading Program Trading Program

OzoneOzoneOzone Season NOOzone Season NOXX Trading Trading

ProgramProgram

CAIR in Illinois (cont.)CAIR in Illinois (cont.)

SOSO22 – follow USEPA’s “Model Rule” – follow USEPA’s “Model Rule”Cap & Trade based on Cap & Trade based on Acid Rain ProgramAcid Rain Program

NOxNOx – USEPA allows more flexibility – USEPA allows more flexibilityCap & Trade based on Cap & Trade based on NOx SIP CallNOx SIP CallSeasonal & Annual CapsSeasonal & Annual CapsFlexibility:Flexibility:

Allocation MethodologyAllocation MethodologySet-asidesSet-asides

CAIR in Illinois (cont.)CAIR in Illinois (cont.)

o Output based allocations Output based allocations (instead of using heat input)(instead of using heat input)

o Allocations occur 3 years in advance of date to Allocations occur 3 years in advance of date to be used be used (instead of 6 years in advance)(instead of 6 years in advance)

o Update allocation annually Update allocation annually (instead of establishing single, (instead of establishing single, continuing baseline)continuing baseline)

o Set-aside 5% of allowances for New Sources in Set-aside 5% of allowances for New Sources in both phases both phases (instead of reducing to 3% in phase 2)(instead of reducing to 3% in phase 2)

o Set-aside 25% of allowances for Clean Air Set-Set-aside 25% of allowances for Clean Air Set-Asides (CASA)Asides (CASA)

Use of NOx FlexibilityUse of NOx Flexibility

CASA - NOxCASA - NOxPurpose:Purpose: Encourage energy efficiency, renewable Encourage energy efficiency, renewable

energy, clean technology, and early controlenergy, clean technology, and early control

EE/RE (Energy Efficiency/Renewable Energy) EE/RE (Energy Efficiency/Renewable Energy) set-aside of set-aside of 12%12%

Clean Technology projects – Clean Technology projects – 11%11% Includes Clean Coal and Pollution Control Includes Clean Coal and Pollution Control

UpgradesUpgrades

Above related projects that commence Above related projects that commence operation early (Early Adopters) – before operation early (Early Adopters) – before 2012 – 2012 – 2%2%

CAIR in Illinois (cont.)CAIR in Illinois (cont.)

The more NOx reduced, the greater the The more NOx reduced, the greater the benefitsbenefits

The NOx CASA expected to result in The NOx CASA expected to result in additional NOx reductions through additional NOx reductions through promotion of EE/RE & clean technologypromotion of EE/RE & clean technology

Retirement of the NOx Compliance Retirement of the NOx Compliance Supplement Pool should result in additional Supplement Pool should result in additional NOx reductionsNOx reductions

USEPA modeling in support of CAIR shows USEPA modeling in support of CAIR shows that CAIR will not be sufficient for all of that CAIR will not be sufficient for all of Illinois to attain the PM2.5 & Ozone NAAQSIllinois to attain the PM2.5 & Ozone NAAQS

CAIR in Illinois (cont.)CAIR in Illinois (cont.)

Economic ModelingEconomic Modeling ICF Consulting modeled incremental impact of Illinois’ ICF Consulting modeled incremental impact of Illinois’

proposed CAIR with set-asides versus model federal proposed CAIR with set-asides versus model federal CAIRCAIR

Used conservative assumption that all 30% of set-asides Used conservative assumption that all 30% of set-asides were retired – which is not the casewere retired – which is not the case

Principal Findings include:Principal Findings include: ““Overall, the implementation of the NOx budget Overall, the implementation of the NOx budget

reduction policy has minimal effects, both in reduction policy has minimal effects, both in Illinois and across the nation…”Illinois and across the nation…”

““The retail electricity prices and costs across all The retail electricity prices and costs across all sectors (residential, industrial and commercial) sectors (residential, industrial and commercial) remain unchanged as a result of the NOx budget remain unchanged as a result of the NOx budget reduction.”reduction.”

CAIR in Illinois (cont.)CAIR in Illinois (cont.)

ResultsResults Cleaner air & improved health for Illinois and Cleaner air & improved health for Illinois and

other Statesother States

Meet federal requirements – including Meet federal requirements – including satisfaction of Illinois’ obligation under Section satisfaction of Illinois’ obligation under Section 110(a)(2)(D)(i) of CAA for transport110(a)(2)(D)(i) of CAA for transport

Assist Illinois and downwind states in Assist Illinois and downwind states in achieving and maintaining PM2.5 and 8 hour achieving and maintaining PM2.5 and 8 hour Ozone NAAQSOzone NAAQS

Provide incentives for EE/RE, clean Provide incentives for EE/RE, clean technology, and early controlstechnology, and early controls

CAIR in Illinois (cont.)CAIR in Illinois (cont.)