The U.S. Environmental Protection Agency on March 15 issued a final rule that seeks to reduce nitrogen oxide emissions from power plants and industrial sources that contribute to problems attaining and maintain EPA’s 2015 Ozone National Ambient Air Quality Standards in downwind states.
The initial NOX reductions will begin in the 2023 ozone season (May 1 – September 30) prior to the August 3, 2024, attainment date for areas classified as moderate nonattainment. Additional reductions will be phased in at the beginning of the 2026 ozone season to align with the August 3, 2027, attainment date for serious nonattainment areas.
EPA estimates that the final “Good Neighbor Plan” will reduce ozone forming NOX emissions from the 23 significantly contributing upwind states by approximately 70,000 tons during the 2026 ozone season compared to a business-as-usual scenario.
According to EPA, about 25,000 tons will come from the power sector. EPA estimates that the net present value of this rule from 2023 to 2042, after taking into account compliance costs, is $200 billion.
EPA’s updated air quality modeling determines that 23 states must achieve additional NOx reductions to resolve their outstanding obligations for the 2025 Ozone NAAQS. EPA is expanding the Group 3 NOx allowance trading program to include the following states and Indian country with the boarders of the states: Alabama, Arkansas, Minnesota, Mississippi, Missouri, Nevada, Oklahoma, Texas, Utah and Wisconsin. Click here for a map of the covered 23 states.
EPA’s modeling removed Delaware from the program, as the state is not significantly contributing to downwind air quality problems. EPA is deferring action on including Tennessee and Wyoming pending further review of updated air quality modeling and contribution modeling and analysis.
Beginning in the 2023 ozone season the final rule will include 22 states in a revised Group 3 NOX allowance trading program. The initial control stringency of the program is based on operation of existing NOX controls installed at power plants.
In 2024, the budget will reflect the reduction from low NOX burners on certain units. In 2026, EPA will be folding in reduction from selective catalytic reduction and selective noncatalytic reduction for units in 19 states without those controls.
EPA has made changes to timing and phasing in the NOX trading program “enhancements” (i.e., dynamic budgeting, daily back stop NOX emission rate and allowance bank re-calibration) in response to comments from grid operators and power sector stakeholders. According to EPA this change will support grid operators and utilities’ ability to continue to deliver reliable electricity by providing greater flexibility and predictability of the program.
EPA plans to issue a supplemental rulemaking to seek input on an allowance market liquidity and potential impacts on electric reliability.
Backstop Daily NOx Emission Rate
EPA is finalizing its backstop daily NOx emission rate for coal fired EUGs greater than 100 MW. Starting in 2024, a 3 -for-1 allowance surrender ratio will be applied for EGUs with existing SCR controls that exceed the daily back stop rate of 0.14 lb/mmBTu by more than 50 tons of emissions. However, for uncontrol units the backstop rate will take effect beginning in 2027, but no later than 2030. EPA is not applying the backstop daily NOX emission rate to large gas-fired EGUs.
This change is directly in response to comments regarding situation during startup, shutdown when even well controlled units couldn’t meet the daily NOX emission rate. EPA believe this change provides an additional degree of flexibility with regards to the implementation of the daily back stop rate.
Allowance bank
The final rule, beginning in 2023 through 2029 EPA will establish a preset limit on the size of the emission bank at 21 percent of the overall state budget. In 2030 and beyond the overall bank will adjust to 10.5 percent. EPA believes that these revisions to the budget setting process will improve the ability of emission budgets to keep pace with changes in the EGU fleet.
