1. Background
On September 14, 2004, Chairmen James M. Inhofe and George V. Voinovich requested that the Energy Information Administration (EIA) undertake an analysis of alternative proposals for regulating mercury emissions from coal-fired power plants.1 The proposals included the
Environmental Protection Agency’s (EPA) proposed cap and trade system, EPA’s proposed alternate maximum achievable control technology (MACT) approach, and a plant-by-plant 90percent control MACT approach.2 The senators specified that the analysis should assume the nitrogen oxide (NOx) and sulfur dioxide (SO2) emission caps in EPA’s proposed Clean Air Interstate Rule (CAIR). For mercury control, the senators specified that EIA only assume the use of “commercially demonstrated technology or technology where the vendor provides
financially backed guarantees indemnifying the purchaser for failure to control at expected levels.” This service report responds to Senators Inhofe and Voinovich’s request.3
EPA’s Proposed Cap and Trade System
Under the EPA cap and trade program, nationwide mercury emissions from electric generators
would be capped at a yet-unspecified level between 2010 and 2017 (Phase I) and at 15 tons
beginning in 2018 (Phase II). At this time, the Phase I cap has not been defined, and EPA has
requested comments from the public on an appropriate level for the Phase I cap.4 States would
be allocated specific amounts of mercury allowances, which would constitute an authorization to
emit a unit of mercury. Individual states would have the authority to allocate the allowances to
their electricity generating units. The cap and trade program applies to coal-fired electric
generators with capacities higher than 25 megawatts. The program also applies to combined heat
and power units that are larger than 25 megawatts and sell more than one-third of their potential
output to the grid.
A safety valve provision has been proposed that sets a maximum cost for mercury emissions reduction. Under this mechanism, the price of mercury allowances is capped. If allowance prices exceed the safety valve price, sources can borrow allowances from the following year’s allocation. EPA has proposed a safety valve price of $2,187.50 per ounce (or $35,000 per pound), which will be annually adjusted for inflation. If the safety valve option is utilized, mercury emissions will exceed the emission cap. Banking of allowances after the start of the mercury trading program would be allowed without any restrictions.
In addition to the overall emissions cap, new coal-fired generating units have to meet New Source Performance Standards (NSPS) for mercury. The NSPS applies to electric generators with capacities higher than 73 MW or with greater than 250 million Btu/hour of fossil fuel derived heat input. The NSPS standards also applies to combined heat and power units that are
larger than 25 MW and sell more than one-third of their potential output capacity to the grid.
New units are defined as those constructed, modified, or reconstructed after January 30, 2004.
New coal and oil-fired units are required to meet emissions limits as shown in Table 1.
Compliance will be determined based on a rolling 12-month average calculation. Mercury
emissions would be determined by continuously collecting mercury emissions data from each
affected unit by installing and operating a continuous emissions monitor or an equivalent
approach.
EPA’s Alternate Proposed Maximum Achievable Control Technology (MACT) Approach
EPA’s proposed MACT rule would also apply to electricity generating units larger than 25 MW and combined heat and power units larger than 25 MW that sell more than one-third of their potential output to the grid. Owners and operators of existing units will have the option of
complying with either input- or output-based limits. Owners and operators of new units will be subject to output-based limits only. The proposed limits for existing and new coal-fired units are shown in Table 2. A new unit is defined as one in which construction or reconstruction began after January 30, 2004. New units have to be in compliance upon startup or by the effective date of the final rule, whichever is later. Existing units have to be in compliance no later than 3 years after the effective date of the final rule or the date on which the final rule is published in the Federal Register. Assuming the final rule is published in early 2005, existing units will have to comply in 2008. The proposed rule would allow emissions averaging as a compliance option for existing coal-fired units located at a single contiguous plant.5 The emissions averaging approach can be applied to new coal-fired units as long as they meet the new unit limits in Table 2.
Plant-by-plant 90-Percent MACT approach
In this approach, it is assumed that all coal-fired power plants would be required to achieve 90 percent removal of the mercury in the coal they use beginning in 2008.
Tables 1 and 2
Notes
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