ALTERNATIVES TO BART -TRADING- Lily Wong USEPA – Region 9 September 1, 2005.

ALTERNATIVES TO BARTALTERNATIVES TO BART-TRADING--TRADING-

Lily WongLily Wong

USEPA – Region 9USEPA – Region 9

September 1, 2005September 1, 2005

Alternatives to BART - TradingAlternatives to BART - Trading

• Presentation Objective

• Background

• Proposed Rule - 309 and 308

• Approvability of 309/308 Trading Programs

Alternatives to BART - TradingAlternatives to BART - Trading

Objective:

Provide overview of EPA requirements for alternatives to source-by-source BART, focusing on the trading program requirements

Alternative to BART - TradingAlternative to BART - Trading

BACKGROUND

• Where this discussion fits in process

• Primary elements of WRAP S02 program

• Structure & relationship of 308 & 309

Source-by-source BART vs. Source-by-source BART vs. Trading / AlternativeTrading / Alternative

ID BART eligible sources

Analyze &Decide

source-by-sourceBART

[308(e)(1)]

trading or alternative to BART

[308(e)(2)]

BART determinationDecide 309 or 308

Demonstrate trading/alternative achievesgreater reasonable progress

Determine sourcessubject to BART

This PresentationThis Presentation

309 TradingProgram Requirements[40 CFR 51.309(d)(4)]

308(e)(2) TradingProgram Requirements

[40 CFR 51.308(e)(2)(vi)]

or

Primary Elements of 309Primary Elements of 309SO2 Backstop Trading ProgramSO2 Backstop Trading Program

• Regional SO2 milestones (emissions cap)

• If milestones not met voluntarily, triggers implementation of trading program

• “Pre-trigger” and “post-trigger” phases

• Backstop trading program is fully adopted

309 Proposed Rules309 Proposed Rules

• Reinstates essential elements of Annex

- SO2 pre-trigger phase requirements

- Process for implementing SO2 trading program

- Minimum requirements for the SO2 trading program

- Include some provisions unique to Western Backstop SO2 Trading Program

308 Proposed Rules308 Proposed Rules

• Applies to all states

• States can choose trading/alternative measure to BART [40 CFR 51.308(e)(2)]

• If alternative is cap & trade program, rule identifies essential elements of the cap and trade program which must be met

[40 CFR 51.308(e)(2)(vi)]

309 Program: 309 Program: Cross-references 308(e)(2)(vi)Cross-references 308(e)(2)(vi)

309 Western Backstop SO2 Trading Program

• Because backstop is cap & trade program, 309 rule at 40 CFR 51.309(d)(4)(v) requires compliance with 40 CFR 51.308(e)(2)(vi)

309

TRADING PROGRAM

40 CFR 51.309(d)(4)40 CFR 51.309(d)(4)

• Milestone

Milestones consistent with GCVTC goals

• Documentation of emission calculation methods

Document base year calculation methods and any changes in methodology

40 CFR 51.309(d)(4)40 CFR 51.309(d)(4)

• Pre-trigger Monitoring, Recordkeeping, Reporting- MRR sufficient to determine if milestone

achieved- Incl. 10 yr record retention

• Criteria & Procedures- Annual comparison of emissions to milestone

conducted within specified timeframes- Conduct program assessments in 2013 and

2018

40 CFR 51.309(d)(4)40 CFR 51.309(d)(4)

• Market Trading Program- Timeline to activate program if milestone

exceeded

- Source compliance as soon as practicable

- Program must be sufficient to achieve milestones

- Be consistent with 40 CFR 51.308(e)(2)(vi)

40 CFR 51.309(d)(4)40 CFR 51.309(d)(4)

• Provisions for 2018 Milestone- Until 2nd planning period SIP is approved, emissions

are prohibited from exceeding 2018 milestone

- 2nd planning period SIP shall not be less stringent than 2018 milestone, unless milestone replaced by different program that meets BART & reasonable progress, and is EPA approved

- Framework (incl. financial penalties for excess emissions) to ensure 2018 milestone will be met

40 CFR 51.309(d)(4)40 CFR 51.309(d)(4)

• Provisions for stationary source NOx and PM

- Plans must contain necessary long term strategies and BART requirements for stationary sources of NOx and PM

308

TRADING PROGRAM

40 CFR 51.308(e)(2)(vi)40 CFR 51.308(e)(2)(vi)

If states choose cap and trade program in lieu of BART:

Program must meet criteria in 40 CFR

51.308(e)(2)(vi) – essential elements of cap and trade programs

40 CFR 51.308(e)(2)(vi)40 CFR 51.308(e)(2)(vi)

• Applicability- Define sources subject to program- Address emission shifts from sources within

program to sources outside program

• Allowances- Total tonnage value of allowances allocated

do not exceed emissions cap

40 CFR 51.308(e)(2)(vi)40 CFR 51.308(e)(2)(vi)

• Monitoring- Consistent & accurate emissions

measurements (“a ton is a ton”)

- Those selling allowances:Boilers, combustion turbines, cement kilns: Part 75

Others source types: Part 75 equivalent (same precision, reliability, accessibility, timeliness)

40 CFR 51.308(e)(2)(vi)40 CFR 51.308(e)(2)(vi)

• Recordkeeping- Ensure enforceability- Those selling allowances: Meet Part 75

• Reporting- Timely reporting with sufficient frequency to

ensure enforceability, provide for audits- Sources selling allowances: comply with Part

75 or submit to TSA if EPA is not TSA

40 CFR 51.308(e)(2)(vi)40 CFR 51.308(e)(2)(vi)

• Tracking System- Publicly available, secure, centralized- Tracking in consistent manner

• Authorized Account Representative- Designate one individual authorized to represent

source

• Allowance Transfer- Uniform procedures for timely transfer & recording of

allowances

40 CFR 51.308(e)(2)(vi)40 CFR 51.308(e)(2)(vi)

• Compliance- Prohibit source from emitting more emissions

than source’s allowance holdings

• Penalty- Mandatory allowance deduction for excess

emissions- Allowance deduction shall be at least 3 to 1

40 CFR 51.308(e)(2)(vi)40 CFR 51.308(e)(2)(vi)

• Banking- If banking is allowed, specify any restrictions

• Program Assessment- Periodic program assessment to determine if

program is accomplishing goals, and determine if program modifications are needed

APPROVABILITY OF

TRADING PROGRAM

AS ALTERNATIVE

TO BART

Approvability of Trading ProgramApprovability of Trading Programas Alternative to BARTas Alternative to BART

• Address specific 308 or 309 trading provisions

• Demonstrate trading program achieves greater reasonable progress than source-by-source BART

• Trading program must include all necessary provisions to ensure emission reduction targets will be achieved

Approvability of Trading ProgramApprovability of Trading Programas Alternative to BARTas Alternative to BART

• Trading program must be enforceable

- Clearly written; explicit language to implement intent

- If trading program is regional, participating states must have essentially the same program to ensure program is practicably enforceable

Alternative to BART - TradingAlternative to BART - Trading

• Questions?

• Contact:- Lily Wong, EPA Region 9

(415) [email protected]

- Laurel Dygowski, EPA Region 8(303) [email protected]