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Clean Air Interstate Rule (3/29/05)

On March 10, 2005, EPA released the Clean Air Interstate Rule (CAIR) designed to significantly reduce sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions using a cap and trade program. CAIR affects 28 eastern states (and the District of Columbia) and primarily targets electric generating units (EGUs). Electric utility sources outside of the CAIR region will continue to participate in the Acid Rain Program as is. The trading programs will be administered by the Clean Air Markets Division (CAMD) and CAMD will discontinue the administration of the current regional NOx Budget Program upon the CAIR effective date in 2009.

The rule does provide States with the flexibility of including non-EGUs in the CAIR NOx Budget Program. This is a key issue since CAIR does not supercede the current NOx SIP Call Rule (i.e., Subpart A, 40 CFR Part 96) which established the ongoing regional NOx Budget Program. States must still establish a mechanism for meeting the NOx reductions required under the NOx SIP Call Rule.

CAIR highlights include, but are not limited to:

  • CAIR introduces Subparts AA, AAA and AAAA of 40 CFR Part 96 which establish the model rules for implementing the annual NOx Budget Program, the annual SO2 Budget Program and the ozone season NOx Budget Program, respectively.
  • Affected States have the "flexibility" to achieve the emissions reduction in whatever manner they chose. However, if a State elects to participate in a CAIR program, the State must adopt the provisions of the applicable CAIR model rule.
  • The NOx and SO2 programs commence in 2009 and 2010, respectively.
  • Arkansas, Connecticut, Delaware, Massachusetts and New Jersey may participate in the ozone season NOx Budget Program only.
  • Georgia, Texas and Minnesota may participate in only the annual SO2 and NOx Budget Programs.
  • The remaining affected States and the District of Columbia may participate in all three trading programs.
  • Allowances are specific to each respective program. CAIR does not allow "inter-allowance" or "interpollutant" trading.
  • Pre-2009 banked NOx SIP Call allowances may be used in the CAIR ozone season NOx Budget Program. Vintage 2009 and beyond NOx SIP Call allowances may not be used in the CAIR program.
  • Pre-2010 banked SO2 allowances are exchanged on a 1-to-1 basis in the CAIR SO2 program.
  • Vintage 2010 – 2015 SO2 allowances are exchanged on a 2-to-1 basis and vintage 2015 and beyond SO2 allowances must be exchanged on a 2.86-to-1 basis.
  • Flow control will not be used in the CAIR trading programs.

A copy of CAIR is located in our FTP Library. For more information concerning CAIR, please contact Dru Sanders at (919) 791-3128.

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Last Revised: March 31, 2005