AAEA Clean Air
Allowance Trading Program
-- Environmental Justice Allowance Reserve --
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
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.
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
As an alternative to legislation and as an insurance policy in
case Clear Skies does not pass, AAEA has developed a voluntary
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:
- Increase the
installation of pollution control equipment,
- Promote community
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
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:
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
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
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.
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.
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