Air Pollution Trading Programs

1
Air Pollution Trading Programs

• Ira Domsky
• Arizona Department of Environmental Quality
• Pollution Trading as a Tool for Meeting TMDLs
• Scottsdale, Arizona
• March 14, 2001

2
Overview

• Purpose of trading programs
• Types of trading programs
• History of air pollution trading programs
• Examples
• Acid Rain
• WRAP Backstop Cap-and-Trade

3
Marginal Cost
Average Cost
4
Types of Trading Programs

• Command and Market
• Cap and Trade

5
History of Air Pollution Trading Programs

• Phase-out of Lead from Gasoline
• Southern California RECLAIM
• Clean Air Act Amendments of 1990
• Acid Rain
• Economic Incentives
• Other State and Local Programs

6
Issues in Air Pollution Trading

• Meeting emissions reduction goals
• Measurement
• Record keeping and reporting
• Allocating new property
• Emissions equivalence
• Volatile Organic Compounds
• Hazardous Air Pollutants
• Inter-pollutant trading
• Compliance and enforcement

7
The Federal Acid Rain Program

• Setting the baseline
• Distribution of credits
• Measurement issues
• Performance
• Emissions reduced nearly 50 from 1985
• Greatest impact in East
• Active market for credits
• Compliance costs less than predicted

8
Annex to the Grand Canyon Visibility Transport
Commission Report

• October 1, 2000

9
Western Regional Air Partnership

• Arizona, California, Colorado, Idaho,
  Montana, New Mexico, North Dakota, Oregon,
  South Dakota, Utah, Washington Wyoming
• EPA, U.S. Forest Service, National Park Service
• Grand Canyon Visibility Transport Commission
  states, excluding Nevada

10
Western Regional Air Partnership

• Pueblo of Acoma, Campo Band of Kumeyaay Indians,
  Cortina Indian Rancheria, Hopi Tribe, Hualapai
  Nation of the Grand Canyon, Jicarilla Apache
  Tribe, Northern Cheyenne Tribe, Salish and
  Kootenai Confederated Tribes, Pueblo of San
  Felipe, and Shoshone-Bannock Tribes of Fort Hall
• www.wrapair.org

11
WRAP Backstop Cap Trade

• Principles
• Emissions targets met through other means
• Equity All participants get what they need
  initially to operate if program is triggered
• No impediment to new, clean sources
• Achieve steady and continuing emissions
  reductions
• Provide flexibility up-front for greater
  back-end reductions

12
WRAP Backstop Cap Trade

• Allocations
• Based on actual emissions 1996 - 1999
• Floor defined by modern emissions limitations
• Rest of allocation reduced based on targets
• New source set-aside
• Tribal set-aside

13
Compliance with Milestones(hypothetical case)
14
WRAP Backstop Cap Trade

• Remaining Issues
• EPA review and approval
• State and Tribal option to participate
• Viability of the market critical mass
• Resolving the electricity shortage