CAIRCAMR: Annual Reconciliation


1
CAIR-CAMRAnnual 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 200000
  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 years 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 years
  allocation at 31 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 701585)
• 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 701585)
• 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 years 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 years
  allocation at 11 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 years 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 years
  allocation at 11 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 years allocation utilizing
  tonnage equivalent
• 3 x (25 tons CAIR excess emissions 20 allowance
  Acid Rain penalty) 3 x 5 15 ton deduction
• 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
• Dont get caught short of allowances
• Use our on-line systems to facilitate compliance
• www.epa.gov/airmarkets