AAEA Clean Air Allowance Trading Program

-- Environmental Justice Allowance Reserve --
EJAR  

Federally Mandated Program

 
AAEA supports the Clear Skies Initiative (CSI) but it will need to be amended to address environmental justice concerns related to the perception that emission trading programs cause disproportionate pollution from older, dirtier plants to negatively impact low-income and minority communities.  AAEA is recommending an Environmental Justice Allowance Reserve (EJAR) to address the Racial Hot Spots (RHS) issue.  The amendment to the Clear Skies Act of 2003, which will provide bonus allowances, will assure the public that all communities are being equally protected from air pollution.
EJAR allowances will come from a special reserve, similar to the current Acid Rain Program Renewable Energy and Conservation Reserve, when the initial allowance allocation is made. The EJAR account will be created by taking two percent of the total allocation of allowances for each pollutant for each year of the program. They will be awarded to utilities that undertake environmental justice practices and programs designed to increase the installation of pollution control equipment, promote community education and enhance health-related activities.  Utilities can choose to work with organizations and businesses that conduct environmental justice activities related to reductions in emissions of sulfur dioxide, nitrogen oxides and mercury.
Voluntary Program
As an alternative to legislation and as an insurance policy in case Clear Skies does not pass, AAEA has developed a voluntary EJAR Program that provides a platform for utilities and communities to address and influence the Hot Spots issue. Any utility can: sell to, donate or purchase compliance allowances from, the voluntary AAEA-EJAR or otherwise support the EJAR program.  The voluntary AAEA-EJAR program is administered through the current EPA Acid Rain Program.
AAEA is currently meeting with interested stakeholders to develop EJAR projects. The AAEA EJAR program will leverage allowances and resources to promote environmental justice practices and projects designed to:

1. Increase the installation of pollution control equipment,
2. Promote community education and
3. Enhance health-related activities.

AAEA will alert businesses, mayors, states, civil rights groups, environmental justice organizations, the Congressional Black Caucus and the general public about innovative methods for participating in this program, enhancing electricity production and protecting constituent communities.
Allowances are fully marketable commodities. Once allocated, allowances may be bought, sold, traded, or banked for use in future years. Allowances may not be used for compliance prior to the calendar year for which they are allocated.
Participation in the EJAR will clearly show that a utility is exceeding emission compliance and is willing to include AAEA in the emission trading market.
 
Significant participation in the EJAR will indicate that a utility's units are not racial hot spot plants. The emissions reduction targets included in the Clear Skies Initiative should lead to early and aggressive participation in the EJAR program if the legislation is passed.  Participation in our voluntary EJAR program is available now.  Utilities should feel free to transfer allowances to AAEA without prior notice. AAEA will publicize the utility EJAR participant list and projects. 
One important reason AAEA promotes cap and trade is because the 1990 Clean Air Act Amendments Acid Rain Program worked.  The emission reductions achieved under this cap and trade program included:
·        SO2 emissions from power plants in 2001 were 10.6 million tons, 33% lower than 1990 emissions and 5% lower than 2000 emissions.
·        NOx emissions from power plants were 4.10 million tons in 2001, 25% lower than 1990 emissions and 8% lower than 2000 emissions.
These reductions were achieved without significant litigation and with enthusiasm from the utility sector.  Unfortunately, current New Source Review regulations pit environmental and agency litigators against utility lawyers in a war over whether modifications are major or minor.  This process has slowed or stopped previous emissions reductions under this program.
How EJAR Works
Federal EJAR Program
EJAR allowances, under amended Clear Skies Initiative legislation, will come from a special reserve established when the initial allowance allocation is made, or in the case of AAEA’s current voluntary program, from utilities willing to allocate allowances to the reserve.  Just as current Clear Skies legislation includes a Conservation and Renewable Energy Reserve that allocates allowances based on avoided emissions tonnages, the EJAR will work the same way.  Just as an allowance authorizes a unit within a utility or industrial source to emit one ton of SO2 during a given year or any year thereafter, an

EJAR allowance authorizes a unit in a quantified RHS to receive an extra allowance for avoiding one ton of SO2 during a given year. The unit gets its regular allowance banking value for reducing emissions and an additional allowance for implementing an RHS mitigation program.  The EJAR allowance is a bonus allowance.
The EJAR Program is available to individuals, communities, utilities, government agencies and organizations.  If emissions from a particular electric generating plant or other industrial facility regulated under the Clean Air Act are designated as creating a disproportionate pollution impact upon a minority community or communities, any individual or entity may utilize the EJAR as an instrument for mitigation.  A utility may opt-in to a federal program, if and when the Clear Skies legislation is amended to include an EJAR Program.  The EPA would then allocate allowances to a utility opting into the program based on installed pollution control equipment capacity to avoid emissions.  Air pollution control equipment financed with aggregated allowance amounts (current market price) would be eligible for expensing under the federal program.  The intent of these incentives is to accelerate the installation of pollution control equipment and the mitigation of disproportionate pollution impacts on vulnerable communities.
Individuals and other nonutility entities interested in utilizing the EJAR Program will have to quantify that they are victims of environmental injustice.  Such quantification would have to be endorsed by EPA to formally trigger the EJAR process.  The current methods for such quantification have been Title VI and Title VII Civil Rights Act complaints and litigation based on disproportionate environmental impacts.   Complainants should be aware that of the 130 environmental justice complaints filed by minority communities across the nation between 1992 and 2002, only four (4) have been fully investigated and EPA has ruled against all of those complaints.  And even if EPA ruled in favor of such complainants for an environmental civil rights violation, the agency would be powerless to provide any relief to the complaining community.  The EJAR Program provides an alternative method for resolving air pollution complaints from specific stationary sources.  It also provides a platform for utilities and communities to work together in achieving air pollution reductions.  Of course, complainants and utilities could chose to utilize the EJAR to voluntarily resolve issues.
Voluntary EJAR Program It will take a cooperative effort among utilities to implement a successful voluntary EJAR program.  The proposed federal program will include allocated bonus allowances and expensing of EJAR-financed pollution control equipment.  The voluntary program does not have these provisions.  Thus, utilities would have to assist each other in addressing the RHS issue. 
AAEA has registered with the EPA’s Acid Rain Program to facilitate this process.  Utilities should voluntarily donate allowances to the EJAR.  A plant or a utility targeted as causing a RHS should make requests to other utilities that have accumulated allowances due to meeting their reductions requirements to assist them by allocating allowances to the EJAR Program.  AAEA will sell that allowance back to the donating utility for the fair market value; calculate the emission avoidance based on the planned pollution control equipment and remit payment to the RHS-designated plant or utility for amortization of projected control equipment.  The utility can take a tax deduction for the fair market value of the allowances donated to AAEA. In this manner, the RHS utility can purchase allowances to meet cap and trade requirements and receive additional pollution control equipment financing through leveraging projected avoided emissions EJAR allowances.
AAEA will retain a 10 percent share of the fair market value of the donated allowances to promote the other components of the EJAR Program.  The other components of the EJAR include promoting community education andenhancing health-related activities.  This would include activities to educate communities about air pollution and pollution control equipment.  AAEA will distribute brochures, speak at community events, and provide Internet information services for additional information dissemination.  AAEA will study the racial hot spots issue and publish a report on its findings.  AAEA will also encourage EPA to conduct a study of the racial hot spots issue and publish its findings.
Health Related Activities To the extent practicable, AAEA will subsidize the purchase of asthma inhalers and nebulizers in low-income and minority communities.  These subsidies will be delivered in the form of payments to hospitals, doctors, clinics and pharmacies to reduce the cost of asthma control medications to low-income people.  Participating individuals and institutions will provide AAEA with an accounting of the number of people assisted in the program.