[Senate Report 107-347]
[From the U.S. Government Publishing Office]




107th Congress                                                   Report
                                 SENATE
 2d Session                                                     107-347
_______________________________________________________________________


                                                       Calendar No. 768

                            CLEAN POWER ACT

                                OF 2002

                               __________

                              R E P O R T

                                 of the

                              COMMITTEE ON

                      ENVIRONMENT AND PUBLIC WORKS

                          UNITED STATES SENATE

                              to accompany

                                 S. 556

                             together with

                             MINORITY VIEWS

                                     


                                     

               November 19, 2002.--Ordered to be printed.

                                     
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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      one hundred seventh congress

                  JAMES M. JEFFORDS, Vermont, Chairman
MAX BAUCUS, Montana                  BOB SMITH, New Hampshire
HARRY REID, Nevada                   JOHN W. WARNER, Virginia
BOB GRAHAM, Florida                  JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut     CHRISTOPHER S. BOND, Missouri
BARBARA BOXER, California            GEORGE V. VOINOVICH, Ohio
RON WYDEN, Oregon                    MICHAEL D. CRAPO, Idaho
THOMAS R. CARPER, Delaware           LINCOLN CHAFEE, Rhode Island
HILLARY RODHAM CLINTON, New York     ARLEN SPECTER, Pennsylvania
JON S. CORZINE, New Jersey           PETE V. DOMENICI, New Mexico
                 Ken Connolly, Majority Staff Director
                 Dave Conover, Minority Staff Director

                                  (ii)

  


                            C O N T E N T S

                               __________
                                                                   Page
General statement................................................     1
    Necessary Additional Emission Reductions from Fossil Fuel 
      Power Plants...............................................     6
    Fossil Fuel Electricity Generation Related Pollution.........     8
    Public Health and Environmental Effects of Electricity-
      Generation-Related Pollution...............................    12
        Fine Particulate Matter (PM2.5) from Sulfur 
          Dioxide and Nitrogen Oxides Emissions..................    12
        Ozone from Nitrogen Oxide Emissions......................    13
        Health and Welfare Effects of Mercury....................    14
        Global Warming and Climate Change from Carbon Dioxide 
          Emissions..............................................    15
        Acid Rain from Sulfur Dioxide and Nitrogen Oxide 
          Emissions..............................................    19
        Acid Rain Impacts--Ecosystem Indicators..................    21
        Visibility Impairment from Sulfur Dioxide and Nitrogen 
          Oxide Emissions........................................    22
    Federal Actions and Authorities to Reduce Pollution without 
      Changing the Clean Air Act.................................    23
        NAAQS for PM2.5 and Ozone.....................    24
        Nitrogen Oxides Reductions--SIP Call and Interstate 
          Transport Rules........................................    24
        Hazardous Air Pollutants--Maximum Achievable Control 
          Technology.............................................    25
        Visibility--Regional Haze and BART.......................    26
        New Source Performance Standards--New Source Review......    27
        The United Nations Framework Convention on Climate Change    30
    State Actions to Reduce Pollution from Power Plants..........    31
Summary and Discussion of the Bill's Provisions..................    32
    Section 1. Short title.......................................    32
    Sec. 2. Electric Energy Generation Emission Reductions.......    32
        Sec. 701. Findings.......................................    32
        Sec. 702. Purposes.......................................    32
        Sec. 703. Definitions....................................    32
        Sec. 704. Emission Limitations...........................    32
        Sec. 705. Emission Allowances............................    36
        Sec. 706. Permitting and Trading of Emission Allowances..    38
        Sec. 707. Emission Allowance Allocation..................    38
        Sec. 708. Mercury Emission Limitations...................    44
        Sec. 709. Other Hazardous Air Pollutants.................    45
        Sec. 710. Effect of Failure to Promulgate Regulations....    45
        Sec. 711. Prohibitions...................................    46
        Sec. 712. Modernization of Electricity-Generating 
          Facilities.............................................    46
        Sec. 713. Relationship to Other Law......................    47
    Sec. 3. Savings Clause.......................................    47
    Sec. 4. Acid Precipitation Research Program..................    47
    Sec. 5. Authorization of Appropriation for Deposition 
      Monitoring.................................................    47
Hearings.........................................................    47
Legislative History..............................................    52
Rollcall Votes...................................................    53
Regulatory Impact Statement......................................    53
Mandates Assessment..............................................    54
Cost of Legislation..............................................    55
Appendix I, National Air Quality Standards.......................    70
Appendix II, Bibliography of Research on Health Impacts of 
  PM2.5...............................................    70
Appendix III, Estimate of Distribution and Value of State 
  Emission Allowances............................................    75
Appendix III, Part II, GAO Emission Allowance Tables.............    78
Minority Views of Senator Smith..................................    83
Minority Views of Senator Voinovich..............................    88
Changes to Existing Law..........................................   106
                                                       Calendar No. 768
107th Congress                                                   Report
                                 SENATE
 2d Session                                                     107-347

======================================================================



 
                        CLEAN POWER ACT OF 2002

                                _______
                                

               November 19, 2002.--Ordered to be printed

                                _______
                                

   Mr. Jeffords, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [to accompany S. 556]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Environment and Public Works, to which was 
referred the bill (S. 556) to amend the Clean Air Act to reduce 
emissions from electric powerplants, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill, as amended, do pass.

                           General Statement

    The Clean Air Act is one of the most comprehensive 
environmental statutes yet enacted. In general, its main goals 
are to assure that Americans can breathe ambient air that meets 
health-based standards, to decrease emissions of toxic 
pollutants, and to protect the environment and the public's 
health and welfare from air quality degradation and harmful 
emissions.
    The modern Act was established in 1970 to combat growing 
air pollution-related public health and environmental damage, 
particularly the effects caused by pollution from vehicles and 
large stationary sources. The 1977 Amendments extended 
deadlines for achieving national ambient air quality standards 
(NAAQS) and articulated a more detailed framework and 
authorities for States to regulate stationary sources, 
depending on whether an area had ``clean'' or ``dirty'' air. 
The 1990 Amendments specified attainment deadlines and 
performance criteria for Federal and State programs to be 
implemented and significantly expanded the scope of federally 
regulated pollutants, including explicit control of hazardous 
air pollutants and ozone depleting substances, and instituted a 
market-based, cap-and-trade mechanism for controlling sulfur 
dioxide emissions from electric generating units. The latter 
was created because of the environmental damage caused by acid 
deposition. The 1990 Amendments also differentiated the control 
requirements for nonattainment areas depending on severity of 
air quality problems.
    The Clean Air Act is a complex statute with many interwoven 
and integral parts intended to significantly reduce health 
risks to the public, reverse and prevent ecological damage, and 
improve rural and urban visibility. The Act also serves to 
discourage and limit the use of the atmosphere as a free 
dumping ground for waste and pollution. The success of the cap-
and-trade system of the acid rain title of the 1990 Amendments 
showed that a carefully constructed, market-based system could 
help clarify the value of the atmosphere to the public and 
industry and effectively lower the burden of acid pollutants 
nationally. That system, combined with other critical programs 
and requirements designed to protect local and regional air 
quality from market vagaries and interstate transboundary 
pollution, such as new source performance (section 111), 
interstate pollution abatement (section 126), maximum 
achievable control technology for hazardous air pollutants 
(section 112) , and visibility protection (section 169), has 
produced some significant benefits. Indeed, the benefits of the 
cap-and-trade program have far exceeded its costs. The U.S. 
Environmental Protection Agency (EPA) has estimated that the 
monetized health benefits of that program, due primarily to 
PM2.5 (fine particulate matter smaller than 2.5 
micrometers) reductions and avoided mortality, will exceed $150 
billion annually in 2010. Control costs for sulfur dioxide 
turned out to be $1-2 billion annually, rather than the $4.1-
$7.8 billion projected by industry (Rob Brenner, St. Louis 
University Public Law Review, Vol. 20:7, July 2001).
    Emissions of most pollutants are generally down from 1990, 
since Congress last substantially amended the Clean Air Act 
(CAA). And, substantial new reductions are expected upon full 
implementation of the Amendments of 1990, according to the EPA 
report on the Benefits and Costs of the Clean Air Act 1990-2010 
(1999).


----------------------------------------------------------------------------------------------------------------
                                                                                     Estimated Percent Change in
                                                        Actual Percent Change in      Emissions Post-CAA, 1990-
                                                         Emissions, 1992-2001\1\                2010
----------------------------------------------------------------------------------------------------------------
Nitrogen Oxides (NOx)...............................                            -3                        \2\-39
Volatile Organic Compounds (VOCs)...................                            -8                           -35
Sulfur Dioxides (SOx)...............................                           -24                           -31
Particulate Matter (PM10)\3\........................                           -13                            -4
Particulate Matter (PM2.5)\3\.......................                           -10                            -4
Carbon Monoxide (CO)................................                            +6                           -23
Lead (Pb)...........................................                         \4\-5                        \4\<-5
----------------------------------------------------------------------------------------------------------------
\1\ EPA National Air Quality 2001 Status and Trends--six principal pollutants.
\2\ Includes NOx SIP Call, but it should be noted that while emissions of all criteria pollutants except lead
  are down since 1992, emissions of nitrogen oxides have increased by 15 percent since 1970, and 9 percent since
  1980 levels, based on the most current EPA inventory.
\3\ Includes only directly emitted particles.
\4\ Lead has dropped more than 95 percent since implementation of the Clean Air Act Amendments in 1977 banning
  lead in gasoline.

  
  
    However, despite progressively more stringent statutory 
objectives, and some success in controlling and limiting 
emissions of many pollutants, 150 million or more Americans are 
now living in areas with unhealthy air that does not meet the 
national ambient air quality standards (NAAQS) for one or more 
of the conventional or criteria pollutants (see Appendix I for 
NAAQS). There are currently more than 130 ozone nonattainment 
areas (for the 1-hour standard), but the Agency has not yet 
made designations regarding the revised ozone and 
PM2.5 standards as required by law (section 6101 of 
TEA-21--P.L. 106-377 section 427). Three years of data 
collection from air pollution monitors around the country have 
recently been compiled and suggest approximately 129 counties 
are in nonattainment of the PM2.5 standard. See 
ozone nonattainment map above.
    According to the EPA's latest air quality trends data 
(2001), almost 170 million tons of conventional pollutants are 
emitted annually. In addition, approximately 4.7 million tons 
of toxic air pollutants (1996--most recent data) are still 
emitted every year with 50 percent coming from mobile sources 
(excluding commercial diesel marine engines, locomotives and 
aircraft because of lack of data) and 50 percent from 
stationary sources. The highest ranking 20 percent of counties 
in terms of risk (622 counties) from air toxics exposure 
contain almost three-fourths of the U.S. population. Three air 
toxics (chromium, benzene, and formaldehyde) appear to pose the 
greatest nationwide carcinogenic risk (EPA National Air Toxic 
Assessment--NATA). However, that statement does not factor in 
the EPA's recent announcement indicating that long-term 
exposure to exhaust from diesel engines is likely to be a lung 
carcinogen hazard to humans, as well as have noncancer effects 
on the respiratory system. NATA also states that evidence for 
related exacerbation of existing allergies and asthma is 
emerging. These noncancer effects are similar to those seen 
with exposure to ambient particulate matter, specifically 
PM2.5.
    The largest change in the emissions inventory of criteria 
pollutants to date has come from the limitations placed on 
sulfur dioxide emissions from electricity generating units in 
Title IV of the 1990 Clean Air Act Amendments. That acid 
deposition control program, through a market-based cap-and-
trade system, required the reduction of approximately 10 
million tons of sulfur dioxide below 1980 levels to a cap of 
8.95 million tons and a 2 million ton reduction in nitrogen 
oxides by 2000. However, the use of allowances banked through 
early reductions under this program may result in higher 
emissions than 8.95 million tons for a few years beyond 2010, 
with no current statutory or regulatory driver to reduce 
emissions further.
    The CAA mobile source performance standards and fuel 
requirements, particularly reformulated gasoline, have resulted 
in major cuts in volatile organic compounds (VOCs). Additional 
regulations implementing Tier II requirements, including lower-
sulfur gasoline, and those affecting heavy-duty engines and 
sulfur in diesel fuel will further reduce nitrogen oxides and 
sulfate emissions, including fine particulate matter, from the 
mobile sector. The EPA estimates that over the next 30 years 
these new standards will significantly reduce emissions of 
nitrogen oxides from vehicles by about 74 percent. 
Nevertheless, the EPA also estimates that by 2005, the benefits 
gained from technological advances may not be enough to 
compensate for the increases in vehicle use. In addition, 
mobile sources will continue to be a major source of air toxics 
with approximately 262,000 tons of hazardous air pollutant 
emissions projected by the EPA in 2007 without further 
regulation.
    However, what is more important than total emissions, with 
respect to managing public health and environmental impacts, is 
the effect of each source's pollution on local and distant air 
quality, an area's attainment status, and involuntarily exposed 
individuals and ecosystems. This local impact concern is, of 
course, not applicable to carbon dioxide which contribute to 
global warming and climate change or to ozone depleting 
substances which contribute to stratospheric ozone destruction 
regardless of where they are emitted. The committee requested 
in July 2001 that the Agency provide information so the 
committee and the public may understand the contribution of 
criteria pollutant emissions from the various source categories 
to nonattainment in each area, especially for the ozone 
standard. The Agency has not yet completed providing this 
information.
    Despite the regulatory and statutory requirements of the 
Clean Air Act, which has promoted emissions reductions through 
significant improvements to the internal combustion engine, 
cleaner conventional vehicle fuels and technological innovation 
in end-of-pipe pollution control, current air pollution levels 
are creating significant observable harm to public health and 
the environment. The bulk of this pollution is directly 
attributable to fossil fuel combustion.


    The largest share of that pollution now comes and will 
continue to come from old, inefficient fossil fuel electric 
generating plants unless there is additional Federal or State 
action requiring further reductions. Without the adoption of 
substantially cleaner, and more efficient renewable electricity 
generating technologies, existing and projected levels of 
pollution will continue to degrade human health, reduce 
visibility, and harm ecosystems.

 Necessary Additional Emission Reductions from Fossil Fuel Power Plants

    While the 1990 Clean Air Act Amendments are helping to slow 
or reverse the growth of public health risks and ecological 
damage in the United States, science clearly demonstrates that 
the sulfur dioxide reductions target in the 1990 Amendments, 
and reductions through other programs and regulations of 
nitrogen oxides, were not set stringently enough to help 
prevent millions of people from continuing to breathe unhealthy 
air or to fully reverse the damaging effects of air quality 
related values such as acidification of forests, lakes and 
streams. Studies indicate that tens of thousands of people are 
dying prematurely every year due to emissions of fine 
particulate matter (PM2.5). In much of the country, 
especially in areas east of the Mississippi River, the majority 
of this pollution is sulfur dioxides and nitrogen oxides 
emitted from burning coal.
    The Clean Air Act Amendments of 1990 set specific 
attainment deadlines for areas to achieve the health-based 
NAAQS. In general, the less polluted an area was at the time of 
passage in 1990, the fewer control measures that area had to 
adopt as part of its State Implementation Plan (SIP) to achieve 
attainment of the NAAQS. None of the areas designated as 
``serious'' ozone nonattainment (.160-.180 ppm), with 
approximately 31 million people, have met their 1999 attainment 
deadline. Nine of 31 ``moderate'' ozone nonattainment 
(.138-.160ppm) areas, with 6.5 million people, have not yet met 
their 1996 attainment deadline. This nonattainment situation 
has led, in part, to the EPA's promulgation of the NOx SIP 
Call, which requires States to adopt nitrogen oxides emissions 
control measures in their SIPs. The majority of these 
reductions will most likely come from electric generating units 
(EGUs), defined in the Act as units above 25 MW.
    Since 1990, growing scientific evidence suggests that 
adverse human health impacts result from even minor exposure to 
air pollutants, especially ozone and fine particulate matter. 
Both of these pollutants also have serious harmful impacts on 
children including neonatal mortality, lung growth retardation 
and adverse birth outcomes (Woodruff (1997), Ritz (2002), 
Gauderman, et al. (2000), and others). A linear dose-response 
relationship has been clearly demonstrated for PM2.5 
and premature mortality by the American Cancer Study (Pope, 
2002), Harvard Six Cities Study (Dockery et al. 1993) and the 
Health Effects Institute reanalysis (Krewski et al., 2000) 
study and others, and confirmed in testimony. Recent studies 
suggest a link between PM2.5 and heart rate 
variability and ultimately heart attacks (Peters et al., 1999).
    Significant data has been collected to show that many 
pollutants, including PM2.5, have much greater than 
expected local impacts, but they can also travel much further, 
even between continents, than initially thought and have 
worldwide effects. This transport effect is readily apparent in 
the Asian Brown Cloud phenomenon documented in the United 
Nations Environment Program Assessment Report (2002), and the 
identification of soot particles from Chinese sources in the 
Pacific Northwest of this country. The Ozone Transport 
Assessment Group has contributed substantially to the 
understanding of the ability of air currents to transport 
pollutant-laden, aged airmasses hundreds of miles. (Blumenthal 
et al., 1997; A Basis for Control of BART-Eligible Sources, 
Northeast States for Coordinated Air Use Management-(2001))
    The Federal Government has demonstrated that it can act 
swiftly and decisively to serious threats posed by air 
emissions. The Clean Air Act regulates some manmade global 
pollutants, such as chlorofluorocarbon (CFC), which act 
indirectly on human and environmental health. These substances 
have been largely phased out due to their potential to deplete 
the ozone layer and thereby allow harmful ultraviolet radiation 
to reach the Earth's surface. On scientists' advice, the 
international community, including the United States, swiftly 
committed to global reductions in CFCs and similar gases and 
the development of substitutes. These actions took place 
swiftly because CFCs and other similar gases continue to 
destroy ozone for decades once they reach the upper atmosphere.
    Man-made emissions of greenhouse gases, such as carbon 
dioxide and methane, are accumulating in the atmosphere and are 
causing the average surface air and subsurface ocean 
temperature of the Earth to increase, according to the National 
Academy of Sciences report Climate Change Science (2001) and 
the international scientific community. This warming is likely 
to cause more frequent severe weather, ecosystem elimination, 
sea-level rise, increases in tropical diseases, and other 
climate changes that will adversely effect human and 
environmental health. Greenhouse gases prevent infrared 
radiation (heat) from being radiated back into space from the 
Earth's surface. Temperatures are expected to rise about 5.4 
degrees Fahrenheit or more by the end of the century 
(International Panel on Climate Change (IPCC), Working Group 1 
Report 2001).
    Greenhouse gas concentrations have increased from 270 ppm 
prior to the Industrial Revolution to approximately 360 ppm 
today and are expected to double (550 ppm) by about 2060. Ice 
core data indicates that today's levels are already at their 
highest in the last 400,000 years. There is some paleoclimate 
research that suggests, if emissions continue on their current 
path, within a century the concentrations will be the highest 
level the Earth has seen in 20 million years. The United States 
is responsible for approximately 25 percent of the total 
greenhouse gases emitted globally every year, yet represents 
only 5 percent of the world's population.
    The committee finds it essential that additional and 
significant reductions in emissions must occur quickly for the 
sake of human and environmental health for today's population 
and generations to come. Progress has been made and continued 
reductions of conventional pollutants are underway in the 
transportation sector, particularly from passenger vehicles. 
However, there remain considerable challenges in reducing 
emissions for non-road and in-use diesel engines. Emissions of 
greenhouse gases from the transportation sector are climbing 
dramatically with no expected change.
    Stationary sources, and in particular fossil fuel electric 
generating facilities, also have a poor performance record in 
terms of greenhouse gases. Carbon dioxide emissions from those 
facilities are more than 26 percent above 1990 levels, and much 
deeper reductions in nitrogen oxides and sulfur dioxides are 
needed to modernize outdated plants that are responsible for 
most of the sulfur dioxide emissions in the Nation and much of 
the nitrogen oxides from electricity generation. Reductions in 
power sector criteria pollutants have lagged behind those from 
the transportation sector largely because, unlike the 
automobile fleet, turnover of the power plant fleet to new, 
cleaner generation has not occurred.
    The average efficiency of coal-fired plants hovers at 33 
percent or the same level as in 1960, and one-sixth of the 
plants have not applied any pollution control equipment and are 
responsible for more than one-third of the annual national 
Title IV sulfur dioxide emissions. Technologies exist today 
that could increase these plants' efficiency to 50-60 percent, 
and cut criteria pollutants by up to 90-95 percent. (See EPA, 
ORD November 2000, A Review of SO2 Control 
Technologies). However, fewer than 15 percent of power plants 
have installed basic sulfur dioxide removal technologies. While 
these emissions reductions opportunities exist, there is no 
assurance that such reductions will be achieved without the 
adoption of aggressive State or Federal multi-pollutant 
legislation. Major reductions from the electric generation 
sector are necessary, feasible and highly cost-effective, 
especially when market-based mechanisms are employed and a 
comprehensive view is taken of the long-term benefits.

          Fossil Fuel Electricity Generation Related Pollution

    According to the Energy Information Administration, there 
are 3,200 electric utility power plants in the United States. 
These plants are capable of generating approximately 639,143 
megawatt hours of electricity annually. In 1999, fossil fuel 
combustion accounted for 70 percent of that generation (coal--
45 percent, natural gas--19 percent and oil--6 percent), and 
the remainder was derived from nuclear and hydroelectric 
energy. In that year, fossil fuel power plants were the single 
greatest industrial source of four major pollutants of 
concern--sulfur dioxide, nitrogen oxides, mercury and carbon 
dioxide.
    In 2000, these fossil fuel power plants emitted significant 
quantities of those pollutants into the atmosphere: 11.4 
million tons of sulfur dioxide (SOx)--63 percent of the 
national total; 5.3 million tons of nitrogen oxides (NOx)--21 
percent of the total; 2.6 billion tons of carbon dioxide--40 
percent of the total; 52 tons of mercury--about 35 percent of 
the total, and approximately 394,000 tons of Toxic Release 
Inventory chemicals (from coal/oil combustion) or 41 percent of 
the total. The majority of these pollutants came from power 
plants that Congress expected would have been closed or 
substantially replaced by now with cleaner, more efficient 
generation. But, through life extension and modifications, 
these facilities continue to operate economically, though many 
of the largest emitters are more than 30 years old.
    As noted, the Clean Air Act has resulted in significant 
emission reductions of nitrogen oxides and sulfur dioxide from 
many electric utilities. Nitrogen oxides emissions from 
utilities rose from 4.9 million tons in 1970 to 7.024 million 
tons in 1980. Sulfur dioxide emissions rose only slightly in 
that same period from 17.4 million tons to 17.5 million tons. 
By 2000, compliance with Title IV of the Clean Air Act resulted 
in nitrogen oxide emissions dropping to 5.3 million tons and 
SOx emissions dropping to 11.4 million tons. Emissions of 
sulfur dioxide from coal-fired electric generating facilities 
in 2000 were estimated to total 10.7 million tons.
    The utilities covered by Title IV represented 67.2 percent 
of the total sulfate emissions in 1990. Phase 1 of that Title 
required the owners/operators of 111 electric generating 
facilities listed in the law larger than 100 megawatts to meet 
tonnage emission limitations by January 1, 1995. This reduced 
sulfur dioxide emission by about 3.5 million tons. Phase 2 
included facilities larger than 75 megawatts, with a deadline 
of January 1, 2000, and was designed to bring the sector down 
to 8.95 million tons and keep emissions from the approximately 
2,265 covered sources at that level. Electricity generation not 
covered by this Title is a growing segment of the total 
pollution inventory, according to the EPA. In 1999, industrial 
boilers (<250 mmBtu) were the greatest portion of this segment. 
They account for annual emissions of approximately 2 million 
tons of sulfur dioxides, 1 million tons of nitrogen oxides and 
5 tons of mercury, while supplying electricity or heat through 
fossil fuel combustion.



 Source: EPA Report to Congress on Benefits and Costs of the Clean Air 
                       Act 1990-2010, Nov. 1999.



    Note: the post-CAAA for electric utility generation does 
not include the imposition of a final MACT requirement for 
mercury emissions that a consent decree requires to be 
promulgated by 2005.



      Source: EPA Inventory of Greenhouse Gas Emissions 1990-2000

    Note: Tg (CO2 Eq) = Teragrams or 1 million 
metric tons of carbon dioxide equivalent = 1.1023 million short 
tons CO2. CO2 Eq. multiplied by \12/44\ 
equals carbon equivalent.

    However, though there has been progress since the 1990 
Amendments, growing electricity demand will stimulate new and 
greater levels of pollution. If there is no significant change 
in the nation's energy policy to modify that trend, electricity 
demand will increase by approximately 42 percent by 2020, or 5 
trillion kwh (355,000 MW of new capacity). According to EIA and 
GAO, 88 percent of this new demand will be satisfied by natural 
gas and another 9 percent by coal. (GAO-03-49). That new 
generation will increase carbon dioxide emissions by 
approximately 827 million tons, and mercury emissions by 2.8-
8.5 tons. Nitrogen oxide and sulfur dioxide emissions could 
decline by 41-104,000 tons and 2.1 million tons respectively, 
because of New Source Performance Standards and other Federal 
and State control programs.

   Public Health and Environmental Effects of Electricity-Generation-
                           Related Pollution

    The public health and environment damaged caused by fossil 
fueled power plants has been the subject of substantial 
scientific study. Because Congress was seeking to address 
primarily the negative effects of acid deposition, the Clean 
Air Act Amendments of 1990 reduced sulfur dioxide emissions 
from these plants by a significant amount, and required 
specific cuts in nitrogen oxides. Those Amendments also created 
a procedure for reducing hazardous air pollutants, such as 
mercury, from these plants, and reaffirmed the need and process 
for reducing transported pollution. However, testimony before 
the committee indicates that the cuts in these emissions were 
not deep enough to adequately protect public and environmental 
health and welfare and that the Act must also address global 
warming.

Fine Particulate Matter (PM2.5) from Sulfur Dioxide and 
        Nitrogen Oxides Emissions
    Since Congress last amended the Act, scientific progress 
has substantially advanced our understanding of the adverse 
impacts of pollution from the combustion of fossil fuel for 
energy, particularly on human health. Fossil fuel power plants 
are a major source of manmade fine particulate matter 
(PM2.5), emitted as sulfur dioxide and nitrogen 
oxides gas that are converted in the atmosphere to sulfates or 
nitrate particles. These particles penetrate deep into the 
lungs and cause cardiopulmonary and lung cancer morbidity and 
premature mortality.
    The seminal studies, the Harvard Six Cities Study and the 
American Cancer Society Study (2002) of Particulate Air 
Pollution Mortality, generally show that adverse health effects 
occur at levels commonly found in U.S. cities and that they 
increase with an increase in ambient concentrations of fine 
particulate matter. These studies were reanalyzed and validated 
by the Health Effects Institute in 2000 (Krewski). Scientists 
are still working on determining the exact mechanisms by which 
PM2.5 causes health damage. However, substantial 
epidemiological information accumulated to cause the 
Administrator of the EPA to establish the first health-based 
standard for PM2.5 in 1997 which was upheld by the 
Supreme Court in 2001 after lengthy litigation (American 
Trucking Association vs. EPA).
    Fine particulate matter pollution from all sources may be 
causing as many as 50,000-100,000 premature deaths nationwide 
every year (Wilson and Spengler, ``Particles in Our Air,'' 
Harvard (1996)). According to a report frequently cited in 
testimony (Abt Associates, October 2000) which uses the Krewski 
(2002) dose-response relationship and EPA pollution data, 
fossil fuel power plants are likely to be responsible every 
year for as many as 30,000 premature deaths, 20,000 
hospitalizations, 600,000 asthma attacks and 5,130,000 lost 
workdays due to illness.
    Further, recent work by researchers at the Harvard School 
of Public Health including research summarized in ``Risk in 
Perspective'', the journal of the Harvard Center for Risk
    Analysis, found that the risk from power plant pollution is 
not evenly distributed geographically. The risk was found to be 
greatest in relatively close proximity to the power plants: 
people living within 30 miles of a plant were found to face a 
risk of mortality from the plant's emissions 2-3 times greater 
than people living beyond 30 miles. (Levy, Spengler et al., 
2001)
    A bibliography of studies documenting these health effects 
is attached in Appendix II.

Ozone from Nitrogen Oxide Emissions
    Power plants emit approximately 21 percent of total U.S. 
emissions of nitrogen oxides. As noted earlier, nitrogen oxides 
contribute to PM10 and PM2.5 loadings, 
but are also the chief pollutant driving the formation of 
ground-level ozone. They react with volatile organic compounds 
(VOCs) in the presence of sunlight to create ozone, also known 
as smog. Ground-level ozone is a strong oxidant and lung 
irritant. There has been a primary NAAQS for ozone more than 30 
years years largely because of its acute health effects which 
were thought to be primarily transitory in nature. However, new 
data suggests that regular exposure to ozone may cause 
permanent health damage, and have very serious health 
consequences for children. This information and multiple 
studies were the bases for a revision of the NAAQS for ozone in 
1997, which did not become fully enforceable until 2002, 
because of litigation by pollution control opponents.
    New studies now indicate that not only does ozone 
exacerbate asthma, but that new cases of asthma may be induced 
by ozone exposure particularly in otherwise healthy, exercising 
children. (McConnell et al. (2001)) According to testimony from 
the American Lung Association
      A study of college freshmen found that lifetime 
ozone exposure was linked to a reduced lung function;
      A 3-year study of 1,150 children suggests that 
long-term ambient ozone exposure might hinder the natural 
development of their lungs;
      A 10-year study of 3,300 school children found 
that girls with asthma, and boys who spent more time outdoors, 
suffered reduced ability to breathe in association with ozone.
    The study concluded that exposure to air pollution may lead 
to a reduction in maximal attained lung function, which occurs 
early in adult life, and ultimately to increased risk of 
chronic respiratory illness in adulthood.
    Some areas of the country without substantial population 
have regularly experienced unhealthy elevated levels of ozone. 
This is occurring, in part, because of nitrogen oxides emitted 
from and ozone caused by regional power plants. For example, in 
the worst case, the Great Smoky Mountains National Park, which 
is ringed by several coal-fired power plants, had 52 days 
during which the level of the 8-hour ozone standard was 
exceeded in 1999, equivalent to every other day in the summer. 
According to testimony from the National Parks Conservation 
Association, the Park has recorded the highest level of 
nitrogen deposition of any monitored site (urban or rural) in 
North America, and researchers there have documented at least 
30 different species of plants suffering foliar damage from 
ground-level ozone; an additional 60 species exhibit the same 
symptoms.
    Only recently has ground level ozone been acknowledged as a 
problem due to power plant pollution in the Midwest, the Ohio 
River Valley and increasingly in the West. There is a high 
correlation between ground level ozone and proximity to power 
plants--especially in the Midwest and Southeast. The Ohio 
Environmental Council, in collaboration with the University of 
Michigan and Harvard University, found that people in Ohio 
River Valley communities such as Cincinnati and Marietta, Ohio 
are often exposed to dangerous levels of ground level ozone as 
much as 75 percent more often than people in Boston and New 
York. Moreover, according to that recent study, Ohio River 
Valley ozone related hospital admission rates also track this 
pattern with admission rates higher in the Ohio Valley than in 
the East. In the Ohio Valley area studied, for example, 
emissions from coal-and oilfired power plants contribute nearly 
50 percent of elevated ozone levels in the Valley, enough by 
themselves to cause violations of the Federal health standard.
    In addition to human health, ozone also affects 
agricultural crops. There is strong scientific evidence showing 
that current levels of ground level ozone are reducing yields, 
particularly in sensitive species soybean, cotton, and peanuts 
from National Crop Loss Assessment Network (NCLAN) studies. 
Annual crop loss from ozone for soybeans alone in Illinois, 
Indiana and Ohio has been calculated to fall between 
$198,628,000-345,578,000. Ozone-induced growth and yield losses 
for the seven major commodity crops in the Southeast (sorghum, 
cotton, wheat barley, corn, peanuts and soybeans) are costing 
southeast farmers from $213-353 million annually.
Health and Welfare Effects of Mercury
    Power plants rank first in release of toxics to the air--
842 million pounds of chemical releases to the air in the 1999 
Toxics Release Inventory. This accounts for over 40 percent of 
the nation's total toxics emissions inventory. Coal-fired power 
plants are responsible for approximately one-third of all U.S. 
mercury emissions. As other sources such as incinerators 
continue to reduce their emissions, and coal-fired power plants 
increase generation, this proportion will increase.
    The National Research Council (2000) has found that mercury 
poses a serious risk to humans, particularly fetuses and 
children. Mercury can and does bioaccumulate in fish and animal 
tissue in a highly toxic form, methylmercury. Methylmercury 
exposure, especially when it occurs to a developing fetus 
through a mother's consumption of contaminated fish, and in 
early childhood, can cause serious neurological impairment. 
Forty-three States have fish advisories warning people against 
eating certain species of fish from more than 60 percent of all 
U.S. water bodies.
    The National Research Council concluded that each year 
about 60,000 children may be born in the U.S. at risk of 
neurological problems as a result of their mothers' consumption 
of large amounts of fish and seafood during pregnancy. A study 
by the Centers for Disease Control and Prevention, which 
examined mercury levels in blood and hair in the general 
population, suggests the number of at-risk children could be 
even higher--up to 390,000 children are at risk, with one in 10 
women of childbearing age exceeding the mercury body level 
considered safe by the EPA. According to the National 
Atmospheric Deposition Program 2000 Annual Summary, every State 
in the lower 48 States that monitors mercury deposition has had 
to issue fish consumption advisories to its citizens. The 6 
States without advisories do not monitor mercury.
    In EPA tests, 67 different HAPs were detected in the flue 
gases from coal fired power plants. Of these, 55 are known to 
be neurotoxic or developmental toxics (i.e., affect development 
of a child's brain, nervous system or body). Examples include 
cadmium, manganese and selenium. In addition, 24 are also 
known, probable or possible human carcinogens. Examples include 
arsenic, chromium, and beryllium. Electric utilities reported 
to the 2000 Toxic Release Inventory emissions of over 60 
different toxic chemicals and compounds.
Global Warming and Climate Change from Carbon Dioxide Emissions
    Fossil fuel power plants account for 40 percent of national 
carbon dioxide emissions and 10 percent of global carbon 
dioxide emissions. Carbon dioxide is largely a byproduct of 
fossil fuel combustion and a principal cause of global warming, 
but is not now explicitly regulated by the Clean Air Act, and 
does not have a direct impact on human health. However, 
concentrations of carbon dioxide and other greenhouse gases are 
increasing in the atmosphere due to human activity, and causing 
surface air temperatures and subsurface ocean temperatures to 
rise. This warming is expected to continue throughout the next 
century, with increases of 3.5 to 10 degrees Fahrenheit by 
2100, and is expected to have serious public health and 
environmental effects, including increased incidence of 
disease, such as tropical vector-borne illnesses like malaria, 
and heat-related deaths, and enhanced conditions for formation 
of ground-level ozone.
    This warming will interfere with the Earth's climatological 
system, increasing the probability of extreme weather events, 
including heat waves, floods, droughts and similar natural 
disasters, including higher ozone concentrations and increases 
in water-borne and insect-borne infectious diseases. The United 
States has an advanced public health system and adaptation will 
be less difficult here compared to developing countries, but 
adaptation to climate change will still come at a substantial 
cost domestically, especially if solutions are delayed. Some 
economists have projected net annual U.S. costs of all climate 
related impacts as approaching 1-3 percent of GDP by 2060 at 
which time a doubling of greenhouse gas concentrations will 
likely be reached. (Nordhaus (1991), Cline (1992), Titus 
(1992), Fankhauser (1995), and R.S.J. Tol (1995))
    The adverse impacts of increasing greenhouse gas 
concentrations include climate-related shifts in ecosystems. 
Human communities may be able to adapt on the rapid timescale 
of expected climate changes, but some biomes may not have that 
ability. The Administration's Climate Action Report to the U.N. 
Framework Convention on Climate Change for 2002 said:
    ``Some ecosystems that are already constrained by climate, 
such as alpine meadows in the Rocky Mountains, are likely to 
face extreme stress and disappear entirely in some places. . . 
. In the northeastern United States, both climate scenarios 
suggest changes mainly in the species composition of the 
forests, including the northward displacement of sugar maples, 
which could lead to loss in some areas. . . . Basically, 
changes in land cover were projected to occur, at least to some 
degree, in all locations, and these changes cannot generally be 
prevented if the climate changes and vegetation responds as 
much as projected.''
    The National Assessment on Climate Change (2000) and the 
regional assessments that have been completed indicate there 
are likely to be significant economic dislocations and specific 
regional impacts of global warming as well. Crop distributions 
will change, including the probable disappearance of the sugar 
maple from the Northeast. Decreased snowpack and/or earlier 
season melting will affect water availability and resource 
cycles and supply infrastructure. Existing outdoor recreation 
and tourism businesses will likely shift from traditional 
patterns. Fire seasonal severity rating will increase by 10-50 
percent over most of North America, translating into increased 
forest fire activity (Flannigan et al., 2000) and potential 
economic losses. In 2002, 6.5 million acres have burned in 
wildfires exacerbated by drought, nearly double the 10-year 
average (National Interagency Fire Center).
    The committee has also heard testimony that human community 
growth patterns are likely to increase the vulnerability of 
infrastructure to weather extremes, whatever their originating 
cause or enhancement. Fifty-three percent of the U.S. 
population lives within the coastal regions, along with 
trillions of dollars of infrastructure. These people and their 
property will be affected by the continued sea level rise that 
the Administration projects to be approximately 19 inches over 
the next century, though it may rise by as much as 36 inches.
    According to a report by the Pew Center on Global Climate 
Change, Sea-Level Rise and Global Climate Change (2000), 
``National assessments suggest that a one-meter rise in global 
sea levels could have significant impacts, including the 
inundation of about 35,000 square kilometers or 13,000 square 
miles, divided equally between wetlands and upland.'' And,``. . 
. the 100-year coastal flood plain could increase by 38 
percent, or at least 18,000 square kilometers.'' (FEMA, 1991)
    According to the EPA's global warming web page, 
``nationwide, a two foot rise in sea level could eliminate 17-
43 percent of US wetlands. . . . Including both the wetlands 
and dry land that would be lost to the sea, a two foot rise in 
sea level would eliminate approximately 10,000 square miles of 
land, an area equal to the combined size of Massachusetts and 
Delaware.'' (Source cited: Coastal Management 19:186-87, 199-
201 (1991))
    The majority of the analyses of the climatological effects 
from increasing greenhouse gas concentrations have assumed a 
gradual warming and related impacts. However, in a 2002 report, 
the National Academy of Sciences indicated that``. . . 
greenhouse gas warming and other human alterations of the earth 
system may increase the possibility of large, abrupt and 
unwelcome regional or global climatic events.'' Such events may 
be triggered in a switch-like fashion rather than gradually 
complicating adaptation responses. The Academy recommended that 
U.S. research priorities be directed toward an observation 
system that will detect early signs of ``threshold crossing,'' 
or the development of abrupt and persistent changes in the 
climate system that will have the greatest impact on human 
communities and ecosystems. The existing system and near-term 
improvements, as described by Administration witnesses before 
the committee, appear inadequate to ensure early detection of 
dangerous trends.



  Source: Intergovernmental Panel on Climate Change Working Group I, 
                    Summary for Policymakers, p. 3.

    The main objective of the United Nations Framework 
Convention on Climate Change, ratified by the Senate in 1992, 
is to avoid such a situation by taking preventative actions:

    The ultimate objective of this Convention and any related 
legal instruments that the conference of the Parties may adopt 
is to achieve, in accordance with the relevant provisions of 
the Convention, stabilization of greenhouse gas concentrations 
in the atmosphere at a level that would prevent dangerous 
anthropogenic interference with the climate system. Such a 
level should be achieved within a time-frame sufficient to 
allow ecosystems to adapt naturally to climate change, to 
ensure that food production is not threatened and to enable 
economic development to proceed in a sustainable manner.

    In his February 14, 2002, climate policy speech, President 
Bush said: ``I reaffirm America's commitment to the United 
Nations Framework Convention and it's central goal, to 
stabilize atmospheric greenhouse gas concentrations at a level 
that will prevent dangerous human interference with the 
climate.'' Given that the Administration now projects in its 
Climate Action Report that it is likely that some ecosystems 
will disappear, as noted earlier, the country and the world may 
have already entered a zone of ``dangerous interference'' with 
the climate system.
Acid Rain from Sulfur Dioxide and Nitrogen Oxide Emissions
    Ecosystems are already under considerable stress from the 
enormous volume of currently emitted conventional pollutants 
such as sulfur dioxide and nitrogen oxide. Limitations and 
programs in the existing Clean Air Act have begun to reduce 
emissions of these pollutants substantially. But, sulfate and 
nitrate deposition, largely in the form of acid rain, has 
severely damaged and continues to damage the sustainability of 
the northeastern ecosystem, and accumulating data suggests that 
similar damage is occurring in the southeast part of the 
country.
    Approximately 41 percent of lakes in the Adirondacks and 15 
percent of lakes in New England still exhibit chronic and/or 
episodic acidification, and 83 percent of these impacted lakes 
are acidic due to atmospheric deposition. Other sensitive areas 
in the United States include the mid-Appalachians, southern 
Blue Ridge and high-elevation western lakes. Water bodies are 
affected not just by the chronic acidification that occurs from 
cumulative deposition but also by episodic acidification that 
occurs when pulses of highly acidic waters rush into lakes and 
streams during periods of snowmelt (acids have collected in the 
snow over the winter) and heavy downpours. As acidity climbs, 
the mean number of fish species falls dramatically.
    Comparison of fish data collected in the Allegheny Plateau 
and Ridge and Valley region 40 years ago to data collected in 
the mid-1990's found an overall decrease in species diversity, 
with the most dramatic declines occurring in five species of 
non-game, acid-sensitive fish. Streams that experienced a loss 
of species had greater increases in acidity and more episodic 
acidification than streams that either gained or had no change 
in species. In the same area, acid rain has been associated 
with poor sugar maple and red oak regeneration as well as 
deterioration of tree health and excessive mortality in mature 
trees of both species.
    The Hubbard Brook Research Foundation has determined that 
an 80 percent reduction in sulfur dioxide emissions from power 
plants will be necessary before biological recovery could begin 
by 2050 in the Northeast. A recent study (DeHayes, Hawley, 
Schaberg 2002) done at the University of Vermont indicates that 
the damage from acid rain may be far worse and more widespread 
than previously documented. The pollution may cause trees, as 
with immune compromised humans, to appear and function as if 
healthy, until exposed to even routine stresses or disease, 
then experience declines far more pronounced than would 
otherwise be expected.
    Acid rain saps calcium from the needles of trees, weakening 
the cell membranes and making the trees susceptible to damage 
from freezing in the winter and more vulnerable to diseases 
and/or insect outbreaks. Acid rain also depletes soil nutrients 
largely calcium and magnesium needed for healthy forest growth. 
The leaching of calcium from needles and soils makes aluminum 
in the soil more bioavailable to tree root system and in lakes 
and streams. Aluminum is harmful to the trees, but also 
interferes with fish reproduction and other benthic process.
    The U.S. Geological Survey has shown that calcium in forest 
soils has decreased at locations in the northeastern and 
southeastern U.S. forest soils, with acid rain as a major 
factor contributing to this depletion. Although most evidence 
shows that conifers tend to be more impacted than hardwood 
trees, acid rain is also hurting deciduous trees. Detection of 
patches of dead trees in northern hardwood forests of the 
Southern Appalachian National Forests has been attributed to 
the interactions of many stressors, including air quality. 
Analyses at forest sites in the southeastern United States 
suggest that within 80 to 150 years, soil calcium reserves will 
not be adequate to supply the nutrients needed to support the 
growth of merchantable timber. Model simulations in the 
Shenandoah Valley project that greater than 70 percent 
reduction in sulfate deposition (from 1991 levels) would be 
needed to change stream chemistry such that the number of 
streams suitable for brook trout viability would increase. But, 
a 70 percent reduction would simply prevent further increases 
in Virginia stream acidification.
    Power plant nitrogen emissions deposited on land and water 
sometimes at great distances from their original sources are an 
important contributor to declining water quality. Estuarine and 
coastal systems are especially vulnerable. Too much nitrogen 
serves as a fertilizer, causing excessive growth of seaweed and 
eutrophication. The result is visual impairment and loss of 
oxygen. With the loss of oxygen, many estuarine and marine 
species including fish cannot survive. The contribution of 
nitrogen from atmospheric deposition varies by watershed.
    In the Chesapeake Bay, power plant emissions account for 10 
percent of nitrogen entering the ecosystem. Nitrogen is also 
being deposited on ocean surfaces many, many miles away from 
land. Atmospheric nitrogen accounts for 46 to 57 percent of the 
total externally supplied (or new nitrogen) deposited in the 
North Atlantic Ocean Basin. This nitrogen input has significant 
ecological impacts, including loss of biological diversity, 
degradation of the marine habitat and die-offs of plants and 
animals. High nitrate concentrations in high elevation western 
lakes, from fossil fuel combustion and fertilizing activities, 
appear to be changing alpine biotic communities.
Acid Rain Impacts--Ecosystem Indicators



      Source of data for graphs--Hubbard Brook Research Foundation
      
Key: Reduction scenarios assume emissions reductions from electric 
    utilities only.
      
Title IV + 80 percent = Title IV SO2 reduction levels plus 
    an additional 80 percent reduction.
      
Title IV + 40 percent = Title IV SO2 reduction levels plus 
    an additional 40 percent reduction. . . . etc.
      
Timeline periods: Background (pre-industrialization), industrialization 
    and increased human activity, 1970 Clean Air Act and some 
    ecological improvement, 4-scenario model for 50 years into the 
    future.
      
a) Sulfate Deposition: Amount of sulfate deposition from the atmosphere 
    as measured in kilograms per hectare. Demonstrates that controls in 
    emissions have positive impact on the ground, improving ecology. b) 
    Soil percent Base Saturation: Percentage of all soil that contains 
    base elements like calcium and magnesium that can buffer against 
    acid rain. Ideally, this should be at least 20 percent. This 
    changes very slowly because the soil has to regain calcium over 
    time. c) Stream SO4: Concentration of stream sulfate. There is no 
    threshold value here, but it declines (improves) over time as 
    emissions decline depending on the buffering capacity of nearby 
    soils. d) ANC: Shows the acid neutralizing capacity of a stream, 
    i.e., how many equivalents of acid can be neutralized in 1 liter of 
    stream water. The higher the ANC, the better. Preferably, this 
    number should be over 50, though HBEF's goal is to make it above 0. 
    ANC changes slowly over time. e) pH: Stream acid level. This is 
    logarithmic, meaning for every point change in pH there is a 10-
    fold difference in hydrogen ion content. In the HB region, the goal 
    is 6.0. At 6.0 ecosystem recovery is stimulated. f) Al: Total 
    concentration of stream aluminum. High aluminum levels are very 
    harmful to fish, worse even than high acid levels. The aluminum 
    target value is less than 2.

Visibility Impairment from Sulfur Dioxide and Nitrogen Oxide Emissions
    Throughout the United States, in National Parks, wilderness 
areas, and wildlife refuges experience significant manmade 
haze. There are none that are unaffected. Visibility--the 
distance, clarity, contrast and color in a scenic vista--has 
declined dramatically over the past half century, especially in 
the eastern United States. Visibility has begun to improve in 
some areas because of the Clean Air Act, yet a few are still 
deteriorating. In the East, annual mean visibility is commonly 
one quarter of natural conditions and as little as one-eighth 
in the summer.
    Taken together, sulfur dioxide and nitrogen oxide emissions 
are responsible for as much as 80 percent or more of this 
visibility impairment in the East, especially in the southern 
Appalachian Mountains. In the West, haze is a combination of 
sulfates and a larger share of nitrates as well as carbon 
aerosols. When these components are assessed for their 
contribution to the problem, electric power accounts for about 
\2/3\ of the emissions that lead to regional haze-related 
visibility impairment in the East, most of which is caused by 
sulfur dioxide emissions that become sulfates. In the West, 
some areas are dominated by nitrates, (e.g. Yosemite National 
Park). Notably, as sulfur dioxide emissions are reduce in the 
future, nitrates will play a larger role as more ammonium 
becomes available to form nitrate particles from nitrogen 
oxides. For this reason, sulfur dioxide and nitrogen oxides 
emissions reductions must occur simultaneously.
    The cuts in sulfur dioxide to date under the acid rain 
program have reduced sulfates and slightly reduced visibility 
impairment but have yet to result in perceptibly improved 
vistas. Research shows that visibility improves more rapidly 
with progressively deeper cuts in sulfate than have occurred. 
According to the EPA, average visual range in most Eastern 
Class I areas is 15-25 miles, compared to estimated natural 
visibility of about 90 miles. In the West, average visual range 
is 35-90 miles for most Class I areas, compared to estimated 
natural visibility of about 140 miles. According to the 
Department of the Interior,'' Visibility impairment is the most 
ubiquitous air pollution-related problem in our national parks 
and refuges parks and refuges such as Grand Canyon, Cape 
Romain, and Great Smoky Mountains have evidenced declining 
visibility all areas monitored for visibility show frequent 
regional haze impairment.'' (EPA Docket No. A-2000-28)

 Federal Actions and Authorities to Reduce Pollution without Changing 
                           the Clean Air Act

    As mentioned above, the Clean Air Act does not rely on any 
single program to address the problems created by pollution 
from fossil fuel power plants. There are a variety of 
requirements that can and will be applied to these large 
sources of pollution to ensure that there is continued progress 
in emissions reductions, without the need for additional 
statutory changes. (See EPA graphic below) These may occur in 
the form of implementation of existing Federal regulations, new 
rules, or enforcement.
    Implementation of measures to achieve many of these 
reductions--for example, reductions in the many new areas that 
will fail to meet the 8-hour NAAQS for ozone--has already been 
substantially delayed by litigation. Due to the Federal cap-
and-trade allowance program used for sulfur dioxide emissions 
in the acid rain title, reductions at a given facility do not 
necessarily reduce the total national level of emissions unless 
the allowances representing those emission reductions are 
retired or unused. The committee has repeatedly and 
unsuccessfully sought to obtain from the Administration its 
official estimate of the future emissions reductions that are 
necessary or likely from power plants through full 
implementation of the Clean Air Act in the coming years. The 
Agency's 2001 unofficial straw proposal, ``A Comprehensive 
Approach to Clean Power,'' projects large reductions in 
mercury, nitrogen oxides, and sulfur dioxides, required under 
``business-as-usual'' implementation with concomitant benefits 
of greater than $154 billion by 2020.



NAAQS for PM2.5 and Ozone
    In 2001, the Supreme Court upheld the constitutionality of 
the Administrator's decision to promulgate the new NAAQS for 
ozone and fine particulate matter (Whitman v. American Trucking 
Ass'ns, Inc., 531 U.S. 457 (2001); on remand sub nom. American 
Trucking Ass'ns, Inc. v. EPA, 283 F.3d 355 (D.C. Cir. 2002)). 
Once the Agency makes nonattainment designations of areas based 
on those standards, according to the schedule laid out in Title 
VI of the Transportation Equity Act for the 21st Century (TEA-
21) and section 427 of P.L. 106-377 and as prescribed by the 
Clean Air Act, the States will then be required to develop 
implementation plans (SIPs) and adopt control measures to 
achieve those standards.
    The Agency is substantially behind the timeline laid out by 
Congress, which dictates that designations occur no later than 
June 2001 for the new ozone standard. For PM2.5, 
designations must begin in late 2004 for areas with 3 years of 
data and conclude no later than the end of 2005. The design 
values required for these designations were published by the 
EPA in September 2002, thereby starting the 2 year period by 
the end of which designations must be complete. In addition, 
the EPA has not yet issued an implementation strategy for the 
ozone standard, as remanded to the Agency in the 2002 D.C. 
Court of Appeals decision rejecting any remaining challenges.
    The EPA has declined to respond comprehensively to 
committee inquiries to estimate what emissions reductions might 
be expected from power plants to achieve attainment with the 
ozone and PM2.5 standards. The Agency indicates 
there is no way to project how States will decide to revise 
their SIPs to achieve attainment. However, in August 2001, the 
EPA enumerated to industry the various control requirements and 
the potential costs and probable timeline for the imposition of 
the requirements. This presentation and the Regulatory Impact 
Analysis that accompanied the ozone/PM2.5 standards 
indicated that those new standards could require a reduction of 
at least 60 percent in sulfur dioxide emissions from currently 
required levels under Title IV of the Act to assist in 
achieving cost-effective attainment. This would bring power 
plant sulfur dioxide emissions down to approximately 3.6 
million tons by the approximate attainment date of 2010-2012 or 
earlier, assuming States adopt the most cost-effective control 
measures, i.e. power plant reductions, as part of their SIPs.

Nitrogen Oxides Reductions--SIP Call and Interstate Transport Rules
    Various regulations with respect to nitrogen oxides, which 
contribute to ozone formation, should assist in attaining the 
8-hour ozone standard. In March 2001, the Supreme Court upheld 
the EPA's NOx SIP Call which should reduce approximately 1.14 
million tons of nitrogen oxide emissions annually by 2007. 
Under the authority of section 110(a)(2)(D), and backed up by 
the data collected through the multi-state Ozone Transport 
Assessment Group, the EPA required 19 States and D.C. to revise 
their SIPs to reduce nitrogen oxides emissions no later than 
June 2004. States are most likely to require these reductions 
come from the most cost-effective source, fossil fuel power 
plants.
    A group of 12 Northeastern States submitted petitions to 
EPA under section 126 of the Clean Air Act for controlling 
pollution coming from coal-fired power plants in the Mid-West 
and South, which are contributing to non-attainment in the 
downwind States. EPA granted those petitions and, after that 
decision was upheld by the D.C. Circuit Court of Appeals 
(Appalachian Power Co. v. EPA; May 2001), promulgated a 
requirement that specifies NOx allocations for 392 facilities 
in 12 States and the District of Columbia, and implemented 
through a cap-and-trade program. The court agreed with EPA's 
decisions to make the compliance deadline the same as that for 
the NOx SIP Call. The 126 petitions are expected to result in 
NOx reductions of approximately 660,000 tons from these plants 
during the ozone season. These reductions requirements may also 
be obtained by requirements imposed under the NOx SIP Call.
Hazardous Air Pollutants--Maximum Achievable Control Technology
    The Clean Air Act requires that sources of hazardous air 
pollutants (HAPs) apply maximum achievable control technology 
(MACT) if their emissions exceed certain levels. As noted 
earlier, coal-fired power plants are very large emitters of 
hazardous air pollutants, particularly mercury, chromium, 
nickel, arsenic, manganese, and others, and well above the 
thresholds that define major sources of HAPs. Under section 
112(n) of the Act, the EPA was to study the hazards to public 
health of these pollutants and report to Congress by 1994, and 
then determine whether regulation of these plants was necessary 
and appropriate. That report was submitted in 1998.
    In December 2000, based on that report to Congress, the 
Administrator made an affirmative determination (Federal 
Register, v. 65, no.245, 79826) to regulate HAPs emissions from 
coal-and oil-fired electric generating units. Pursuant to a 
consent decree entered into with the Natural Resources Defense 
Council, the Agency must promulgate a final rule to control 
mercury and other HAPs from fossil fuel power plants no later 
than December 15, 2004 (``Consent Decree''). Based on testimony 
before the committee, and EPA presentations to the industry and 
elsewhere, those control requirements are expected to require 
reductions of mercury emissions by 70-95 percent from all 
covered oil-and coal-fired electric generating units (>25MW) by 
2007. That will lower total sector emissions of mercury to 
somewhere between 13.5 tons and 2.25 tons annually by 2007. 
Control requirements are also expected for nickel emissions 
from oil-fired electric generating units. Though the Act 
requires it and EPA's study and determination identified non-
trivial public health risks from various HAPs emitted by these 
units (for example, arsenic, chromium, nickel, cadmium, 
dioxins, hydrogen chloride, and hydrogen fluoride), the EPA 
does not appear to have begun a process for setting emission 
standards for the other HAPs emitted by these units.
    Under the Clean Air Act, the EPA was to have promulgated 
MACT standards for all major HAPs emission source categories by 
November 15, 2000. No later than 18 months after that date, the 
States are required to develop MACT standards themselves for 
any categories that the EPA has failed to address. As of 
November 15, 2000, the Agency had failed to promulgate 
standards for 56 source categories covering 84,000 major 
emitting sources, including industrial and commercial boilers 
and many other fossil fuel combustion sources. Rather than 
enforce the law, the EPA has chosen to act in direct 
contradiction to the Act's statutory requirements and 
promulgated a rule providing itself and the States 
substantially more time before all the final Federal MACT 
standards will be issued. If the law is followed, pursuant to a 
consent decree or other settlement in Sierra Club v. EPA, No. 
02-1135 (D.C. Cir. Filed Apr. 25, 2002), significant reductions 
in HAPs from all sources, including fossil fuel combustion, 
should take place reasonably quickly.

Visibility--Regional Haze and BART
    In 1977, Congress established a national goal in section 
169 of the Clean Air Act--the prevention of any future, and the 
remedying of any existing impairment of visibility in mandatory 
Class I Federal areas which impairment results from manmade air 
pollution. Twenty-five years later, there has been little 
progress toward that goal. By November 1992, the EPA was to 
have promulgated regulations to assure reasonable progress 
toward this national goal. Those regulations were to provide 
guidance to the States on methods for achieving this goal, and 
to require SIPs to be revised to contain emission limits for 
major stationary sources which emit air pollutants which may 
reasonably be anticipated to cause or contribute to any 
impairment in any mandatory Federal area and require those 
sources to apply best available retrofit technology (BART).
    In 1999, the Agency promulgated the regional haze rule, 
which lays out a pathway to achieve the national goal set out 
in section 169 within 60 years. The implementation of those 
rules has also been delayed by litigation. Provisions of the 
rule, in particular BART, were litigated by industry (American 
Corn Growers Association v. EPA, D.C. Cir., No. 99-1348, May 
2002) and the rule was remanded to the EPA by the U.S. Court of 
Appeals. The committee expects the EPA to expeditiously respond 
to the Court's decision and act swiftly to implement the law. 
Based on previous EPA estimates that there are approximately 
600 electric generating units emitting 6 million tons of sulfur 
dioxide annually, and based on a feasible 90-95 percent control 
level under BART, then full implementation of this section of 
the Act could reduce those sources by 5.4-5.7 million tons by 
2013. Similar control levels are expected for nitrogen oxides, 
resulting in 1.5 million tons in reductions.
    Increasing demand for electricity, without substantial 
changes in the nation's energy policy that encourage 
conservation, efficiency and renewable sources, will increase 
carbon dioxide emissions, mercury and other HAPs, and perhaps 
nitrogen oxides emissions in the west. The national sulfur 
dioxide cap and the NOx SIP Call in the eastern part of the 
country will serve to limit growth in those pollutants in those 
areas. Additionally, section 111 of the Clean Air Act also 
requires that all new sources meet, at a minimum, New Source 
Performance Standards (NSPS).

New Source Performance Standards--New Source Review
    Under the Clean Air Act, electricity generating units 
(>25MW) built or modified after August 17, 1971, are required 
to comply with NSPS. Units built before that date, often 
referred to as ``grandfathered'' power plants, and those that 
have not undergone modifications that increase emissions, do 
not have to meet these minimum standards.
    The NSPS currently applicable to electric utility steam 
generating units are presented below. For each of the 
pollutants, there may be certain additional requirements for 
specific cases (e.g., anthracite coal, noncontinental area) but 
these limits are those that are most widely applicable. Section 
111(b)(1)(B) of the Act provides that the ``Administrator 
shall, at least every 8 years, review and, if applicable, 
revise such standards. . . .'' The Administrator need not 
review any NSPS ``if the Administrator determines that such 
review is not appropriate in light of readily available 
information on the efficacy of such standard.'' The date of 
last review of each of the standards is also shown in the 
table. Despite the statutory requirement to make a 
determination on information availability in lieu of reviewing 
and revising the NSPS, the EPA has not made any such 
determinations nor conducted any reviews on the particulate 
matter or sulfur dioxide NSPS.

      Electric Utility Steam Generating Units; 40 CFR Subpart D\1\
------------------------------------------------------------------------
          Pollutant                 Emission limit        Last reviewed
------------------------------------------------------------------------
Particulate matter:
    Solid, liquid, or         0.03 lb/MMBtu............  June 11, 1979
     gaseous fuel.
Sulfur dioxide:
    Solid fuel..............  1.2 lb/MMBtu and 90        June 11, 1979
                               percent reduction OR.
                               0.6 lb/MMBtu and 70
                               percent reduction\1\7.
    Liquid or gaseous fuel..  0.8 lb/MMBtu and 90        June 11, 1979
                               percent reduction OR.
                              0.6 lb/MMBtu\1\..........
Nitrogen oxides:
    Solid, liquid, or         0.15 lb/MMBtu\1\.........  September 16,
     gaseous fuel.                                        1998
------------------------------------------------------------------------
\1\ 30-day rolling average (Additional standards for steam units can be
  found in 40 CFR Subparts Da, Db, Dc, and GG).

                  MMBtu= million British Thermal Units

    Note: According to the Congressional Research Service--``In 
1998, EPA promulgated a new NOx NSPS for coal-fired facilities 
of 0.15 lb. of NOx per million Btu a standard more in line with 
available technology. However, this new standard was challenged 
in court. In September, 1999, the D.C. Court of Appeals vacated 
the new NOx NSPS with respect to modified utility boilers, 
while upholding the NSPS with respect to new sources. By 
vacating the modified standard, the NSPS for modified sources 
returns to the previous 1979 standard until such time as EPA 
proposes a revised NSPS. As a result, the floor for determining 
BACT or LAER for modified coal-fired sources is unclear at the 
current time.''

    According to the General Accounting Office (GAO-02-709 Air 
Pollution), 57 percent of the fossil fuel units that generated 
electricity in 2000 began operating before 1972. Provided that 
they obtain and surrender to the Administrator the appropriate 
SOx allowances to cover their total annual emissions, these 
older units may legally emit SOx and NOx at higher rates than 
new units which are subject to NSPS. That GAO report states:
    Older electricity generating units those that began 
operating before 1972 emitted 59 percent of the sulfur dioxide, 
47 percent of the nitrogen oxides, and 42 percent of the carbon 
dioxide from fossil-fuel units in 2000, while generating 42 
percent of all electricity produced by fossil-fuel units. Units 
that began operating in or after 1972 were responsible for the 
remainder of the emissions and electricity production. For 
equal quantities of electricity generated, older units, in the 
aggregate, emitted about twice as much sulfur dioxide and about 
25 percent more nitrogen oxides than did the newer units which 
must meet the new source standards for these substances. Older 
and newer units emitted about the same amount of carbon dioxide 
for equal quantities of electricity generated. Of the older 
units, those in the Mid-Atlantic, Midwest, and Southeast 
produced the majority of the emissions, and in disproportionate 
quantities for the amount of electricity they generated 
compared with units located in other parts of the country. 
Older units that burned coal released a disproportionate share 
of emissions for the electricity they produced compared with 
units burning natural gas and oil.
    In 2000, 36 percent of older units emitted sulfur dioxide 
at levels above the new source standards applicable to newer 
units, and 73 percent emitted nitrogen oxides at levels above 
the standards. These ``additional'' emissions--the difference 
between actual emissions and the NSPS levels--accounted for 34 
percent of the sulfur dioxide and 60 percent of the nitrogen 
oxides produced by older units. Most of the additional 
emissions were released from units located in the Mid-Atlantic, 
Midwestern, and Southeastern United States. Coal-burning units 
emitted 99 percent of the additional sulfur dioxide and 91 
percent of the additional nitrogen oxides, while other fossil 
fuel-burning units accounted for the remainder.
    Based on GAO's data and EPA testimony, the total emissions 
of sulfur dioxide nitrogen oxides would be dramatically lower 
if all existing coal-fired sources, particularly those plants 
built prior to1972, were to apply, at a minimum, the New Source 
Performance Standards. The EPA estimates that annual emissions 
would be reduced by 3.4 million tons of SOx by the application 
of NSPS to all fossil-fuel electric generating units. To date, 
the Agency has been unable to estimate the affect of NSPS on 
NOx and fine particulate matter (PM2.5) emissions 
for the same plants. GAO indicates that application of NSPS to 
just the pre-1972 plants would reduce SOx emissions by 2.13 
million tons and NOx emissions by 1.41 million tons annually 
from those plants. In 1977, when Congress provided those plants 
with the exemption from immediate application of NSPS, the 
general understanding was that the plants would either be 
substantially repowered with cleaner technologies or would 
become uneconomic and therefore closed by this point in time.
    Total pollution inventories would have been further reduced 
if existing coal-fired electric generating units had complied 
with the Act's requirement to apply more stringent pollution 
controls when making modifications, according to the Department 
of Justice and the EPA. These agencies, and the Attorneys 
General of New York, Vermont and other States, have taken legal 
enforcement action against eight companies and the Tennessee 
Valley Authority that allegedly illegally modified their 51 
power plants in a manner that increased emissions without 
complying with Title I, parts C and D of the Act and the 
implementing regulations. The Agency has estimated that the 
enforcement actions, if successfully settled, could result in 
annual emissions reductions of 3.1--4.6 million tons of SOx and 
0.5--1.4 million tons of NOx, beyond implementation of the NOx 
SIP Call. The sources in question are alleged to have engaged 
in modification projects at these power plants which have 
extended the lives of the plants beyond their normally expected 
term of operation, and increased emissions in violation of the 
law.
    In addition to setting out requirements for emissions 
standards for new sources, Title I, parts C and D require new 
and existing sources making modifications to their facilities 
that will increase emissions, to go through a pre-construction/
pre-modification process called New Source Review and obtain 
the appropriate permit. Permits for sources in attainment areas 
are referred to as prevention of significant air quality 
deterioration (PSD) permits (section 165 of CAA); while permits 
for sources located in nonattainment areas are referred to as 
nonattainment (NAA) permits (sections 171 and 172 of CAA). 
Permits must ensure the facility will meet the performance 
standards established under section 111. The entire program, 
including both PSD and NAA permit reviews, is referred to as 
the NSR program.
    In general, the purpose of new source review (NSR) is to 
ensure that ambient air quality does not deteriorate any 
further in nonattainment areas, while PSD ensures that areas 
with good air quality will continue to maintain good air 
quality. The relevant regulations can be found at 40 CFR Part 
51 and in 40 CFR Part 52.
    If NSR is determined to apply for reasons described below, 
then existing sources are required to install the best 
available pollution control equipment. More specifically, in 
nonattainment areas, this means using the control technology 
with the ``lowest achievable emission rate'' or LAER. In 
attainment areas, sources must apply the ``best available 
control technology'' or BACT. This latter standard allows for 
the consideration of cost in the selection of the technology. 
In both kinds of areas, the choice of control technology must 
not be less stringent than the New Source Performance 
Standards, which are to be revised every 8 years as noted 
earlier.
    There are approximately 20,000 sources considered to be 
major under NSR. (Major means those new sources that could 
potentially emit 100 tons per year of a criteria pollutant, or 
a source that could increase emissions by 40 tons per year of 
NOx or SOx through modification.) Approximately 250 sources 
apply for a PSD or NSR permit annually. According to the EPA's 
90-day NSR Review Background Paper in June 2001, PSD sources 
take permit caps to stay below the NSR threshold and thereby 
avoid about 1.4 million tons per year of new emissions compared 
to what would be emitted if there were no such Federal or State 
permitting.
    According to that paper, approximately 90 percent of these 
reductions are thought to come from electricity generating 
facilities and have average health related benefits, not 
including visibility, of approximately $4 billion annually. EPA 
estimates suggest that, over the life of the program, PSD has 
prevented more than one hundred million tons of air pollution. 
The EPA has not, despite repeated requests from the committee 
for comprehensive public health and air quality analysis on the 
NSR program, produced an estimate of the pollution prevented by 
the entire NSR program or the proposed changes to the 
implementing regulations, or a thorough analysis of its 
benefits.
    This committee, which has primary Senate legislative 
jurisdiction over Federal regional economic development 
entities, including the Tennessee Valley Authority (TVA), takes 
a dim view of TVA's decision to attempt to oppose the EPA 
administrative enforcement orders on NSR in a Federal court. 
The TVA, as a Federal agency, has no standing to pursue such a 
course, particularly because the TVA's facilities are clearly 
contributing a significant portion of the emissions that are 
polluting the Great Smoky Mountains National Park and 
surrounding and distant areas. The committee expects Federal 
agencies to be leaders in compliance with the law and well 
ahead of the private sector in pollution prevention and control 
technology. Instead of reducing emissions, however, TVA used 
emission reduction credits under the national trading program 
in 2001 to emit approximately 300,000 tons of sulfur dioxide 
above its Phase II allocation. Those excess emissions interfere 
with visibility and damage public health. While the market-
based trading regime in the CAAA of 1990 provides for such use 
of credits, the committee expects TVA to be primarily a seller 
of credits, by reducing emissions below permitted levels.

The United Nations Framework Convention on Climate Change
    The United Nations Framework Convention on Climate Change, 
which the Senate ratified in 1992, committed the United States 
to aim to reduce greenhouse gas emissions to 1990 levels and 
report on its adoption of policies and measures to return 
emissions, individually or jointly with other nations, to those 
levels. Total national emissions of greenhouse gases have 
increased 14 percent above 1990 levels, despite improvements in 
national emissions intensity (tons emitted per dollar of gross 
domestic product).
    Emissions from the electricity generation sector have risen 
rapidly. The sector emitted approximately 2.05 billion tons of 
carbon dioxide, the principal greenhouse gas, in that year. 
Emissions from this sector are now 26 percent higher and 
continue to grow. Voluntary reduction efforts have failed to 
achieve the 1990 target and the U.S. has failed to report to 
the U.N. on the policies and measures that it has adopted to 
achieve 1990 levels.
    During 2000, then-Presidential candidate Governor George 
Bush announced his support for multi-pollutant legislation that 
would control carbon dioxide emissions from electric power 
plants. In March 2001, in a letter to several Senators, he 
reversed that position and, in addition, confirmed his 
opposition to the Kyoto Protocol, which was negotiated by the 
U.S. and 180 other countries and signed by President Clinton in 
1998. However, the Protocol was not sent to the Senate for 
ratification nor was any implementing legislation proposed by 
that Administration. The Kyoto Protocol would have required the 
United States to reduce greenhouse gas emissions by 
approximately 7 percent below 1990 levels, with an average 
reduction across the industrialized nations of about 5 percent 
below 1990 levels.
    American multi-national companies with operations in Europe 
and other Kyoto-signatories are likely to take steps to reduce 
net greenhouse emissions in those countries, including the 
development of more efficient energy technologies and carbon 
sequestration methods. That technology may eventually be 
transferred to American operations and businesses, and around 
the world. Several American companies have already begun to 
reduce their greenhouse gas emissions and have established 
their own targets. In addition, requirements for reporting and 
disclosure of greenhouse gas emissions due to State laws or 
shareholder actions may encourage U.S. companies to invest in 
control efforts.

          State Actions to Reduce Pollution from Power Plants

    The Clean Air Act does not preempt a State from seeking to 
apply more stringent controls to those sources in that State 
or, in the case of interstate transport, to sources in other 
States, so that attainment of the NAAQS can be achieved. 
Several States, such as New Hampshire, North Carolina, 
Massachusetts, Oregon and others have taken significant steps 
to reduce emissions of power plants below what is required by 
Federal law or regulation. Here are some examples:


----------------------------------------------------------------------------------------------------------------
               State                       Bill No.                    Purpose                  Latest Action
----------------------------------------------------------------------------------------------------------------
Connecticut.......................  HB5209...............  The bill limits sulfur dioxide   Signed Apr. 2, 2002
                                                            emissions from older power
                                                            plants to the average rate of
                                                            0.33 lbs/MMbtu per quarter per
                                                            unit by 2003. The use of
                                                            credit trading as a means of
                                                            meeting SO2 standards from
                                                            older power plants becomes
                                                            limited in 2004.
                                    Exec. Order..........  The Governor signed an           May, 2000
                                                            executive order requiring the
                                                            development of regulations to
                                                            reduce emissions of: sulfur
                                                            dioxide by 30-50 percent from
                                                            current commitments; and
                                                            nitrogen oxides by 20-30
                                                            percent from current
                                                            commitments.
Illinois..........................  SB372................  Legislation requires Illinois    Signed Aug. 26, 2001
                                                            EPA to promulgate rule by 2005
                                                            establishing 3P cuts;
                                                            establishes voluntary registry
                                                            for carbon cuts.
Massachusetts.....................  310 CMR 7.29 Final     The Dept. of Environmental       Finalized Apr. 23,
                                     Rule.                  Protection promulgated a set     2001
                                                            of regulations requiring
                                                            reductions at the six dirtiest
                                                            electric utilities of about 50
                                                            percent below current emission
                                                            levels for NOx and SO2 by
                                                            October, 2004. The utilities
                                                            are also required to cut
                                                            average CO2 emissions by about
                                                            10 percent below an average of
                                                            1997-1999 levels by October of
                                                            2006 or 2008 for plant
                                                            retrofit or replacement. CO2
                                                            credit trading, sequestration,
                                                            and other offsite strategies
                                                            are allowed. A final rule for
                                                            mercury reductions is to be
                                                            promulgated by December, 2002,
                                                            with a compliance deadline of
                                                            2006.
New Hampshire.....................  HB284................  The NH Clean Power Act caps      Signed May 9, 2002
                                                            emissions of carbon dioxide at
                                                            a slightly higher level than
                                                            1990 levels by 2010, which is
                                                            consistent with the Climate
                                                            Change Action Plan adopted in
                                                            2001 by the New England
                                                            Governors and Eastern Canadian
                                                            Premiers. Also, a 75 percent
                                                            reduction in SO2 emissions and
                                                            a 70 percent reduction in NOx
                                                            emissions are mandated
                                                            beginning in 2007. Credit
                                                            trading and banking are
                                                            allowed for the three
                                                            pollutants. An assessment of
                                                            actual mercury emissions is
                                                            requested, to inform a future
                                                            legislative process curbing
                                                            those emissions.
North Carolina....................  S1078................  The NC Clean Smokestacks bill    Signed June 20, 2002
                                                            requires all coal-fired
                                                            utilities over 25MW together
                                                            to reduce emissions of SO2 and
                                                            NOx by 73 percent and 77
                                                            percent of 1998 levels,
                                                            respectively, by 2013 for SO2
                                                            and 2009 for NOx. Annually,
                                                            the State must report on SO2
                                                            and NOx-scrubbing co-benefits
                                                            for mercury and recommend
                                                            additional control
                                                            requirements for mercury by
                                                            2005, if necessary. Similarly,
                                                            the State must report annually
                                                            on control options for CO2 and
                                                            make a recommendation by 2003.
Oregon............................  HB3283...............  Any new power plant must reduce  Signed June 26, 1997
                                                            net CO2 emissions by 17
                                                            percent below the level of the
                                                            best existing combustion-
                                                            turbine plant anywhere in the
                                                            United States. CO2 is capped
                                                            at 0.7 lbs/Kwh for natural gas-
                                                            fired plants; in 1999 the cap
                                                            was lowered to 0.675 lbs/Kwh.
                                                            The standard can be met by any
                                                            combination of efficiency,
                                                            cogeneration, and offsets from
                                                            CO2 mitigation measures,
                                                            including paying $0.85
                                                            (currently) per ton of CO2
                                                            into a Climate Trust.
----------------------------------------------------------------------------------------------------------------

            Summary and Discussion of the Bill's Provisions

Section 1. Short title
    The Clean Power Act of 2002.
Sec. 2. Electric Energy Generation Emission Reductions
    A new title is added to the Clean Air Act--Title VII--
Electric Energy Generation Emission Reductions. The following 
is a discussion and summary of provisions of the new Title:
            Sec. 701. Findings
            Sec. 702. Purposes
            Sec. 703. Definitions
            Sec. 704. Emission Limitations

                                SUMMARY

    a) EPA is required to promulgate regulations to assure that 
by 2008 total annual emissions from electric generating 
facilities (EGFs) greater than 15 Megawatts (or the equivalent 
in thermal energy generation) are no more than the following: 
sulfur dioxide--1,975,000 tons in the eastern region and 
275,000 in the western region; nitrogen oxides--1,510,000 tons; 
carbon dioxide--2.05 billion tons; mercury--5 tons. This 
limitation applies to electric generators that sell electricity 
generated through combustion of fossil fuels and emit a 
pollutant listed in the previous sentence. b) The regulations 
will provide for banking of emissions allowances. In other 
words, more pollutants may be emitted in a given year than the 
amounts specified under (a) if EGFs have unused allowances 
created under this new program from previous years. c) The 
emissions limitations in a) must be reduced annually by the 
amount of pollutant emissions from EGFs below 15 MW in the 
preceding year.

                               DISCUSSION

    This section and section 705 establish the basis for an 
emission trading program for sulfur dioxide, nitrogen oxides, 
and carbon dioxide, patterned after the successful emission 
allowance cap and trade system established in 1990 by the Clean 
Air Act Amendments Title IV. That system was created in tandem 
with and in addition to a variety of requirements imposed on 
electric generating units and other sources, as part of the 
overall structure of the Act of ``cooperative federalism.'' 
These sections are intended to operate in a similarly efficient 
market-based manner, allowing EGFs to make the most economical 
investments at the appropriate facility-specific pace and still 
comply with the overall limitation. A cap and trade program for 
mercury is not established.
    These provisions ensure that the Administrator actively 
maintains the integrity of the caps, yet allows for the 
flexibility that is necessary in a market-based cap-and-trade 
system. It also insures, unlike Title IV of the Clean Air Act 
Amendments of 1990, that growth in pollution from sources below 
the statutory threshold (i.e. <15 MW) is automatically 
accounted for and revised in setting the annual cap. According 
to the EPA, there is a growing trend in the development of 
smaller and potentially less clean sources, e.g. the large 
diesel generators that were employed during California's price 
spikes.
    The emissions caps were chosen to reflect necessary 
emissions reductions that must take place quickly to improve 
environmental and public health. The limits for sulfur dioxide, 
nitrogen oxides and mercury, are set at approximately the 
levels that are achievable and expected to be achieved through 
faithful implementation of the existing Clean Air Act. The 
carbon dioxide limit is set at the sector's proportional 
responsibility toward fulfillment of the country's 
international treaty commitment under the United Nations 
Framework Convention on Climate Change. According to EPA 
presentations to the Edison Electric Institute in the fall of 
2001, the likely scenario of ``business-as-usual'' 
implementation of the Act's authorities, which are intended to 
protect public health and the environment, would result in the 
following limits and compliance dates: sulfur dioxides at 
2,000,000 tons by 2012, nitrogen oxides at 1,250,000 tons by 
2010, and mercury at 5 tons by 2008.
    The deadline for achieving the caps in the bill on sulfur 
dioxide and nitrogen oxides are set, in part, to coincide with 
the requirements for mercury reductions, as per the consent 
decree described previously. \1\ Integrating these 
requirements, and that for carbon dioxide, will provide greater 
certainty for and greater cost-effectiveness in investments in 
pollution control and prevention and in environmental 
protection. According to testimony from the head of a large 
coal-fired utility in the Midwest,
---------------------------------------------------------------------------
     \1\(See, ``Consent Decree,'' referenced on page 25 of this report.

    `` . . . the electric power industry faces enormous 
uncertainties as it contemplates long-term investment decisions 
involving billions of dollars. Inevitably, the lack of 
coordination and consistency among the many existing and 
proposed initiatives will mean that energy consumers as well as 
our shareholders will bear far higher costs than necessary to 
achieve clean air. Still, the prospect of future CO2 
emissions controls is a major source of uncertainty for the 
power generation sector. If CO2 requirements are 
imposed that compel massive expenditures by companies to switch 
coal-fired power plants to natural gas or to purchase expensive 
allowances, the sizable investments we will make to install 
pollution control equipment over the next 10 years could be 
---------------------------------------------------------------------------
wasted.

    For these reasons, Cinergy could support a CO2 
component in this bill, especially if it helped encourage the 
further commercial development of carbon-friendly technologies 
such as solar and wind power, micro turbines, fuel cells that 
are the key to making real progress on this issue.'' (Jim 
Rogers, President and CEO of Cinergy Corp.)

    In addition, testimony from Jeffrey Smith of the Institute 
for Clean Air Companies, an association that represents the 
commercial purveryors of equipment and control systems that 
would be necessary to meet the bill's deadlines:

    ``The air pollution control technology industry has the 
technology to achieve the NOx, SO2, and mercury 
reductions contemplated by Sen. Jefford's bill (S. 556), and 
the resources to deliver that technology within the timeframes 
the bill contemplates. Of course there will be site-specific 
issues, but in the 31-year history of the Clean Air Act the air 
pollution control technology industry has always delivered on 
the charge this committee has given it.''

    Testimony from witnesses expert in integrated gasification 
combined cycle (IGCC) technology indicates that current 
technology is also capable of reducing carbon dioxide emissions 
substantially and well within the requirements and timeframe of 
this bill.

    ``High IGCC efficiencies yield CO2 greenhouse 
gas emissions that are 12 percent lower than those of state-of-
the-art coal steam-boiler plants. These emissions are 
approximately 30 percent lower than those of average coal 
plants operating today, for comparison purposes.''--(Edward 
Lowe, Gas Turbine-Combined Cycle Product Line Manager, General 
Electric Power Systems)

    Further, in a May 2001 report, ``Increasing Electricity 
Availability From Coal-Fired Generation in the Near-Term,'' the 
National Coal Council said that IGCC technology is available 
now and has major benefits.

    ``Integrated Gasification Combined Cycle (IGCC) has become 
a commercially available technology for both greenfield and 
repowering applications. IGCC is a clean, new technology option 
insensitive to fuel quality variation. While natural gas will 
fuel the majority of new capacity additions during this time 
period there are currently about 321,000 MW of coal-fired 
capacity in service. While not all of this capacity can be 
targeted for the new technologies discussed in this report, it 
is estimated that 75 percent of it can be retrofitted with one 
of these technologies. (emphasis added)
    This additional increase in capacity is estimated to be 
40,000 MW and much of it could be brought on line in the next 3 
years. This minimizes economic impacts while new generation 
facilities are sited, constructed, and brought into service 
without increasing emissions at existing facilities and, in 
some cases, lowering emissions. Approximately 25 percent of 
existing facilities can be targeted for repowering with much 
cleaner and more efficient coal-based power generation.''

    These caps are set at levels that will save more than 
18,900 lives annually, reduce the number of projected 
nonattainment areas in 2010 to fewer than 23 for 
PM2.5 and fewer than 27 for ozone, expedite the 
recovery of the northeastern and southeastern ecosystems, 
improve visibility in national parks and other protected areas, 
and make progress in addressing global warming. The annual cap 
on nitrogen oxides represents an extension of the seasonal caps 
in the NOx SIP Call into a national cap. For EGFs in the 
eastern region, their cap can largely be met by running 
equipment installed to meet current summer time emission 
limitations on a year round basis. The mercury cap is 
approximately a 90 percent reduction from 1999 emissions 
levels, and based on an EPA presentation in December 2001, is 
the total reduction expected from the sector, even if the MACT 
rulemaking subcategorizes coal types.
    The sulfur dioxide limit of 2.25 million tons has been 
split into two sub-caps primarily to assure that visibility is 
protected in the West. This sub-cap for the western region (AZ, 
CA, CO, ID, MT, NV, NM, OR, UT, WA and WY) is intended to 
reflect the milestones and objectives of the Western Regional 
Air Partnership (WRAP), though not each State listed is a 
member of the WRAP. The WRAP is an outgrowth of the Grand 
Canyon Visibility Transport Commission established under 
section 169B of the Clean Air Act. A separate sulfur dioxide 
cap will ensure that the western region benefits equally from 
actual reductions, as opposed to meeting limits through the 
purchase of credits from Eastern utilities.
    The carbon dioxide cap is necessary to begin to comply with 
the nation's international responsibility to reduce greenhouse 
gas concentrations to safe levels. Testimony before the 
committee indicates that major investments in more energy 
efficient and less carbon-intensive energy production and 
consumption will be necessary very soon to avoid a doubling of 
carbon concentrations in the atmosphere this century. ``It is 
also important to note that the transition must begin in the 
very near future. For a global concentration of 550 ppm, global 
carbon dioxide emissions must begin to break from present 
trends within the next 10-15 years.'' (Dr. Jae Edmonds, 
Department of Energy's Pacific Northwest National Laboratory, 
May 2001) A variety of scientists, (including Oppenheimer, 
``Dangerous Climate Impacts and the Kyoto Protocol.'' Science 
296, 2002) have voiced concern that atmospheric carbon 
concentrations of 550 ppm constitute ``dangerous interference'' 
with the climate systems and will severely impact human 
communities and ecosystems.
    In part because ``business-as-usual'' implementation has 
proceeded more slowly than expected due to litigation by 
pollution sources, and litigation to prevent or further delay 
that implementation and future controls is likely, the 
committee finds it is essential that specific and certain 
statutory targets be set for the earliest feasible date 
possible. In general, this Administration has not responded 
rapidly with the promulgation of rules necessary to comport 
with judicial decisions and ensure swift implementation of the 
Act.
    In addition, the Administration's Clear Skies proposal, S. 
2815, would take substantially longer than ``business-as-
usual'' in achieving important public health and environmental 
benefits and eliminates existing local air quality protections 
without evidence that that legislation would provide equal or 
better air quality protections. That proposal would encourage 
the refinement of existing end-of-pipe control technology and 
direct investments to extend the life of older, dirtier 
facilities that would last many years, rather than integrating 
carbon dioxide controls to push innovation in more efficient 
and more environmentally sustainable technology and 
infrastructure. Many witnesses testified and industry experts 
expect that EGFs are likely to face limits on carbon dioxide 
emissions in the near future, so it is economically irrational 
to ignore these expectations in regulating or investment 
decisions. The Administration continues to oppose any agreement 
that would require reductions in such emissions by U.S. 
sources. Both the Senate and the House, however, have approved 
resolutions (Title XI--Part A--of H.R. 4, as passed by the 
Senate; section 745 of H.R. 1646 as passed by the House) urging 
the President to re-engage in international negotiations to 
produce a binding agreement to reduce greenhouse gas emissions.
            Sec. 705. Emission Allowances

                                SUMMARY

    a) Emission allowances for sulfur dioxide, nitrogen oxides, 
and carbon dioxide, are created by statute equal in number to 
the emissions caps. Each allowance represents permission to 
emit one ton of the covered pollutants. Each year, the 
Administrator must reduce the number of emissions allowances 
created in this subsection by the amount of pollutant emissions 
from EGFs below 15 MW in the preceding year. Note that mercury 
emission allowances are not created, since the bill does not 
create an emissions trading program for that pollutant.
    b) The Administrator is required to promulgate regulations 
to establish an emission allowance tracking and transfer 
system, and emissions monitoring requirements, incorporating 
current requirements in section 412 of the Clean Air Act for 
sources to install and operate continuous emission monitoring 
systems. As under the existing acid rain program, the provision 
clarifies that emission allowances are not a property right and 
does not limit the Federal Government's ability to terminate or 
otherwise limit the use of such allowances.
    c) Each emission allowance will be given a unique serial 
number and an annual vintage. An allowance may be used in that 
year or any subsequent year, i.e. it may be banked or reserved. 
In the case of sulfur dioxide emission allowances, the 
Administrator shall ensure that those emission allowances 
allocated to EGFs in the western region are distinct from 
others.
    d) Beginning on April 1, 2009, and each year after that, 
each EGF must submit to the Administrator one allowance for 
each ton of the covered pollutant emitted by that EGF. In the 
event that an EGF's nitrogen oxide emissions are found by a 
State and the Administrator to be significantly contributing to 
non-attainment of the ozone NAAQS and that EGF is inadequately 
controlled, the Administrator may require that the EGF submit 3 
nitrogen oxide allowances for every ton emitted. In addition, 
sulfur dioxide emission allowances from the western region may 
not be used for submission by EGFs in the eastern region and 
vice versa.
    e) The Administrator is required to maintain an adequate 
system of emissions monitoring, verification and record 
keeping, which is publicly accessible and represents ambient 
concentrations accurately. In addition, the Administrator, in 
cooperation with the States must maintain an inventory of 
emissions of sulfur dioxide, nitrogen oxides, carbon dioxide, 
and particulate matter from small EGFs (<15MW). EGFs with 
capacity greater than 50MW must maintain ambient monitoring of 
sulfur dioxides and hazardous air pollutants (HAPs).
    f) In cases where an EGF fails to submit sufficient 
allowances to the Administrator in the same amount as were 
emitted in a given year, the excess emission penalties of 
section 411 of the Clean Air Act shall apply generally, except 
that the penalty will be calculated by the excess emissions by 
three times the average annual market price of emission 
allowances. In the case of mercury, the penalty will be 
calculated by multiplying the number of grams emitted in excess 
of the permitted emission limitation by three times the average 
cost of mercury controls at EGFs.
    g) To cure a potential adverse public health or 
environmental impact, the Administrator may impose a specific 
limit on the emissions of any EGF and thereby preclude the use 
of banked or transferred allowances for emissions in excess of 
that limitation.
    h) If the national emission limitations in section 704 are 
not reasonably anticipated to protect public health or welfare 
or environment, including sensitive subpopulations, the 
Administrator may reduce that limitation accordingly. In 2011 
and every 3 years after, the Agency shall complete a study of 
the impacts of the trading of emission allowances on ambient 
air quality in areas around EGFs and the national average 
ambient air quality.
    i) Sulfur dioxide and nitrogen oxides emission allowances 
created and banked under Titles I or IV of the Clean Air Act 
may only be used at the ratio of 1:4 for use in complying with 
the emission limitations of this Act. If allowances are banked 
early because an EGF achieved and maintained the NSPS in the 
period 2000-2007, before the imposition of the caps, then those 
allowances may be used for compliance at their full value.

                               DISCUSSION

    This section builds off the existing Title IV cap and trade 
system structure and is intended to create the basic mechanisms 
necessary for operating an efficient and reliable allowance 
trading system for sulfur dioxide, nitrogen oxides, and carbon 
dioxide. In addition, however, because of growing scientific 
evidence, particularly with respect to PM2.5 and 
related adverse health effects and the growing contribution of 
nitrogen oxides from EGFs toward ozone nonattainment, the 
Administrator is given latitude to limit or direct the use of 
allowances in cases where their use may harm local air quality 
or the environment, or significantly contribute to downwind 
nonattainment. EGFs that are significantly contributing to 
nonattainment of the ozone NAAQS may be required to reduce 
their emission rates or acquire additional nitrogen emission 
allowances to comply with a 3:1 submission rate for the period 
of any ozone exceedance which the Administrator determines is 
partly the result of that EGFs emissions.
    Due to concerns about local air quality impacts noted 
earlier in this Report related to the health and environmental 
effects of pollution and the need to swiftly reduce overall 
sulfur dioxide and nitrogen oxides emissions into the 
environment, banked allowances of either pollutant under Title 
IV are reduced in value by 75 percent, in keeping with the 
purpose of this bill. This will minimize the utility of the 
large 11 million or greater allowances that are currently in 
reserve and represent tons that would otherwise be emitted. 
This requirement is a recognition that the original cap in 
Title IV for sulfur dioxide was not set low enough.
    The prohibition on the use of sulfur dioxide emission 
allowances from other regions (eastern vs. western regions) for 
compliance with the caps is intended primarily to maintain the 
viability of the milestones and objectives in the WRAP and to 
avert emissions growth in the West that would jeopardize 
visibility and public and environmental health.
    In addition, because local and State government agencies 
cannot afford a comprehensive ambient monitoring system around 
each EGF, where the majority of adverse health impacts appear 
to occur (J.I. Levy et al., 2002) in the case of 
PM2.5 especially, EGFs will be required to do such 
monitoring and make it available to the public. The EPA has 
also found that exposure to short-term concentrations of sulfur 
dioxide can be dangerous to asthmatics living or working in the 
immediate area, within 3 miles, of EGFs. The current monitoring 
networks is not designed to capture and record high short-term 
sulfur dioxide concentrations.
    This system will provide vital information to public health 
agencies which is now lacking. Continuous emission monitoring 
systems (CEMS), required by this section, will also provide 
valuable information for public health data collection and 
studies. CEMS for all covered pollutants, including mercury, 
are now either commercially available or nearly ready for 
commercial markets.
            Sec. 706. Permitting and Trading of Emission Allowances
    Within 1 year of enactment, the Administrator is required 
to promulgate regulations to establish a permitting and 
emission allowance trading system for sulfur dioxides, nitrogen 
oxides and carbon dioxide. Trading of allowances may only occur 
between EGFs, except in the case of carbon dioxide emission 
allowances generated from limits placed on those emissions from 
the entirety of another industrial sector. This provision could 
provide additional flexibility to EGFs in complying with the 
carbon dioxide limitations.
            Sec. 707. Emission Allowance Allocation
            a) Allocation to Electricity Consumers

                                SUMMARY

    For 2008, the Administrator will allocate approximately 63 
percent of the total emission allowances value to households 
based on per household population and the percentage of 
national electricity consumption of the State in which the 
household is located. This annual allocation will rise to 
nearly 80 percent by 2018. The Administrator will promulgate 
regulations to ensure that the fair-market value of those 
allowances is conveyed to households, by appointing as 
necessary one or more trustees who will obtain fair market 
value for the allowances and distribute the proceeds to 
households equitably.

                               DISCUSSION

    Because the atmosphere is a public good, limitations have 
been imposed on the use of the atmosphere for dumping waste 
products and pollutants. As the EPA and noted economists 
(Burtraw et al., 2002--Distributional Impacts of Carbon 
Mitigation Policies) have indicated, the most economically 
efficient manner for allocating access to that public good is 
through an auction mechanism. ``The auction approach is about 
twice as cost-effective as grandfathering or GPS, when viewed 
over a wide range of emission reduction targets.''(Burtraw)
    By placing a limit on how much pollution may be released 
into the atmosphere, the bill makes emissions allowances a 
scarce resource with substantial economic value. Preliminary 
analysis by the Natural Resources Defense Council and the Clean 
Air Task Force suggests that the value of households' 
allocation may be $16.2--37.7 billion in 2008, and $19.7-45.8 
billion in 2017. The analysis depends on the price of natural 
gas and the cost of a carbon dioxide allowance most 
significantly. (See Appendix III).
    The bill assigns the bulk of that value to the residential 
consumers of electricity, rather than to the producers of 
electricity. This allocation system ensures that the most 
efficient and least-polluting producers of electricity will be 
rewarded competitively as they will need to purchase fewer 
emissions allowances. The allocation of allowances primarily to 
consumers will largely insulate them from price increases. The 
value of the allowances allocated to consumers should equal or 
exceed any increases in their electricity costs. According to 
the analysis mentioned above, electricity consumers are likely 
to receive approximately 1.5 times the cost of any increases in 
electricity costs.
    The committee believes the most probable structure for 
conveying the value of the allowances to households is likely 
to be through the Administrator competitively awarding 
contracts with retail electricity distributors, the States or 
other entities with significant organizational capacity, to 
serve as trustees. It is anticipated that these trustees will 
act as brokers, selling emissions allowances on the market, and 
returning the proceeds to households. The method of return may 
be a rebate on an electricity bill, a clean air State tax 
benefit, or other forms.
    The committee heard testimony from some witnesses that 
requiring electricity generators to purchase allowances will 
cause electricity prices to rise more than if generators are 
given the allowances for free on the basis of historical 
emissions (so-called ``grandfathering''). The committee 
concluded that given the predominance of a competitive 
marketplace at the wholesale level and, increasingly, at the 
retail level, this argument is unlikely to be accurate. In such 
a marketplace, generators will factor allowances into 
electricity prices based on their resale value, whether or not 
they are initially received for free. As a result, consumers 
will see the same electricity price increases whether or not 
allowances are allocated to them. Grandfathering allowances 
primarily to electric generators thus results in bestowing on 
them a windfall worth billions of dollars, without protecting 
consumers from price increases. In contrast, allocating most 
allowances to residential consumers will protect those 
consumers by offsetting such price increases.
            b) Allocation for Transition Assistance

                                SUMMARY

    In 2008, the Administrator will allocate 6 percent 
initially, declining in steps of 0.5 annually to 1.5 percent in 
2017, of the total emission allowances for transition 
assistance to
    (A) dislocated workers and communities, receiving 80 
percent of that amount. The Administrator shall promulgate 
regulation as in (a) to ensure that the fair-market value of 
the allowances is conveyed for grants for training, adjustment 
assistance, income-maintenance payments, and grants to States 
and local governments for attracting new employers or operating 
essential local government services.
    (B) manufacturers of energy intensive products, receiving 
20 percent of that amount. Those allowances will be distributed 
by a formula which multiplies a manufacturers percentage of the 
total products manufactured, the average amount of electricity 
used in making a product with the most energy efficient 
process, and the average emissions of covered pollutants per 
MWH of EGFs.

                               DISCUSSION

    The bill will produce large health, environmental and 
economic benefits for the Nation by reducing emissions of the 
covered pollutants. However, some communities, workers and 
industries may be temporarily bear a disproportionate share of 
the costs of transition to more efficient, cleaner electricity 
generation. The Clean Air Act Amendments of 1990 recognized the 
potential impact of Title IV on such transitions and sought to 
ameliorate them. The allowances provided under this provision 
are estimated to be worth approximately $8-18 billion over the 
10-year period for which they are authorized. Eighty percent of 
the allowances are allocated to employees, such as coal mine 
workers, in the event of job losses directly related to the 
bill's requirements, and to communities that experience 
disproportionate economic impacts from implementation of the 
bill. The bill uses a trustee system, as described earlier, to 
convert the allowances value into grants for training, income 
support, and other forms of transition assistance.
    Twenty percent of the allowances are distributed to 
manufacturers who use substantial amounts of electricity in 
making products, i.e. 5 percent of the costs of production of a 
product are from electricity consumption. The committee expects 
that these manufacturers would use the value of the allowances 
to adopt innovative, less energy-intensive and therefore less 
polluting technologies and processes.
            c) Allocation to Renewable Electricity-Generating Units, 
                    Efficiency Projects, and Cleaner Energy Sources

                                SUMMARY

    The Administrator will allocate 20 percent of the total 
emission allowances available for distribution to
    (1) owners and operators of renewable electric generating 
units, those using wind, biomass, landfill gas, geothermal, 
solar thermal or photovoltaic sources, or a fuel cell using 
fuel from a renewable source. They may obtain allowances 
according to the number of MWH they generate multiplied by the 
average rate of emissions of covered pollutants per MWH of 
EGFs.
    (2) owners and operators of energy efficient buildings, 
producers of energy efficient products and entities that 
implement energy efficiency projects. They may obtain 
allowances according to the number of MWH generated or the 
amount of natural gas saved multiplied by the average rate of 
emissions of covered pollutants per MWH of EGFs.
    (3) owners and operators of new clean fossil fuel-fired 
EGFs, those that have operated for less than 10 years and are 
highly efficient (>55 percent), use best available control 
technology, use IGCC, or use fuel cells operating on fuel from 
nonrenewable sources. They may obtain allowances according to 
the number of MWH generated by the facility multiplied by + of 
the average rate of emissions of covered pollutants per MWH of 
EGFs.
    (4) owners and operators of combined heat and power 
electricity-generating facilities according to the BTUs 
produced and productively used multiplied by the average rate 
of emissions of covered pollutants per BTU at EGFs.

                               DISCUSSION

    The Administrator is required to set aside 20 percent of 
all allowances to encourage energy efficiency, renewable 
electricity generation, combined heat and power, and cleaner 
fossil fuel generation. These allowances, with an estimated 
annual value of $5.2-12.1 billion, will provide an incentive 
for these activities that will help realize multi-billions of 
dollars in cost savings for consumers, public health, and the 
economy as a whole.
    That beneficial effect of implementing such policies and 
stimulating incremental technology investments and penetration 
is demonstrated in the study by the Department of Energy's Oak 
Ridge National Laboratory, entitled Scenarios for a Clean 
Energy Future (November 2000). That study shows that energy 
efficiency and renewable power could meet 60 percent of the 
demand for new power plants projected by the Administration in 
May 2001. By lowering total emissions from fossil generation, 
these incentives will also tend to reduce the overall cost of 
the program; with lower demand for scarce emissions allowances, 
allowance prices will be reduced. This set aside approximates 
the levels of investment that were modelled in that study's 
moderate scenario and could result in net direct savings of $40 
billion annually to the economy by 2010.
    The allowances under c) are generally distributed according 
to the amount of pollution they avoid from the conventional 
fossil fuel generation of electricity or thermal energy. The 
Administrator will determine the emissions avoided by 
multiplying the national average number of tons of a pollutant 
emitted per MWH of electricity generated by fossil fuel EGFs 
and the MWH (or thermal equivalent) generated by the renewable 
project or facility or the amount of avoided generation/energy 
saved by an energy efficient project. For the purposes of these 
determinations, the committee expects the Agency to use data 
from a variety of sources and voluntary industry standards 
where they are applicable. For instance, for the purpose of 
baselining energy consumption for buildings to establish 
emissions avoided and to measure/calculate improvements to 
award allowances, the Agency could use ASHRAE 90.1 standards 
(American Society of Heating, Refrigerating and Air-
Conditioning Engineers) and the International Energy 
Conservation Code (IECC) developed by the International Code 
Council.
    This provision will encourage more renewable energy 
generation by lowering the cost of technology. It will 
encourage an array of energy efficiency measures, from the 
production of more EnergyStar products to the construction of 
more energy-efficient homes and commercial buildings. Combined 
heat and power systems will also be advantaged and encouraged 
as captured thermal energy put to productive use will have 
additional value in the form of allowances received under this 
provision.
    Coal IGCC technology development and use will be 
encouraged, increasing coal plant efficiency, reducing related 
emissions and creating a path toward greater use of coal than 
is otherwise expected under Clean Air Act requirements. All 
things being equal, growth in coal use for new electricity 
generation is projected by EIA to grow at the most by 9 percent 
by 2020, while natural gas use will increase by more than 200 
percent.
            d) Transition Assistance to Electricity-Generating 
                    Facilities

                                SUMMARY

    Starting in 2008, owners and operators of EGFs will receive 
10 percent of the total allowances available, declining by a 
percentage point annually until it reaches 1 percent in 2017. 
The allowances will be distributed according to the EGF's 
percentage of the national total amount of electricity 
generated in 2001.

                               DISCUSSION

    This provision is intended to limit any reduction in asset 
or shareholder value that a company may experience as a result 
of complying with the bill's caps. Existing coal-fired EGFs, in 
particular, will need to make substantial investments in 
emission reduction/efficiency improvements or in acquiring 
emission allowances in order to comply with the limitations in 
section 704. The bulk of allowances are distributed to 
consumers and other beneficiaries as described above, and will 
be made available to electricity generators primarily through 
an auction mechanism, which is considered a highly efficient 
means of allocation. But, the committee is persuaded that 
providing gradually declining transition assistance will 
ameliorate existing facilities' exposure to financial 
uncertainty and increased costs until new or repowered 
facilities can be financed. The allowances provided here are 
expected to be valued at approximately $2.6-6 billion in 2008, 
declining to $260-600 million in 2017.
    There have been few studies focused on determining the 
exact level of ``grandfathered'' allowances necessary to hold 
harmless the existing EGFs asset value. One study (Burtraw 
2002) mentioned previously concluded: ``Paradoxically, owners 
of existing generation assets may be better off paying for 
carbon dioxide emission allowances than having them distributed 
for free. This analysis shows that it takes just 7.5 percent of 
the revenue raised under an auction to preserve the asset 
values of existing generators.'' The other studies also suggest 
that some limited asset value protection is appropriate and 
useful. Most careful analyses indicate that providing EGFs with 
all the allowances free of charge produces windfall profits for 
the owners of those facilities. Allocating a larger fraction of 
allowances to EGFs based on historical emissions levels and 
free of charge has perverse result of overcompensating EGF 
company shareholders at the expense of consumers.
            e) Allocation to Encourage Biological Carbon Sequestration

                                SUMMARY

    From the total carbon dioxide emission allowances created 
in section 704, the Administrator shall allocate 0.075 percent 
for biological carbon dioxide sequestration in an 
environmentally sound manner. That value of these allowances is 
expected to range from $19.2-40 million annually. One-third of 
those allowances shall be distributed to not more than 5 States 
or multi-state land or forest management agencies to projects 
to improve biological carbon inventorying processes. Two-thirds 
of those allowances shall be awarded competitively to the 
States for establishing State revolving loan funds to implement 
forest and forest soil carbon sequestration activities. If the 
allowances are sold, the proceeds from their sale must be used 
for the purposes of this subsection. The Administrator, with 
USDA, will report to Congress with recommendations for a system 
for allocating carbon dioxide emission allowances to 
incremental carbon sequestration efforts.

                               DISCUSSION

    This subsection will help clarify the value of sinks or 
biological carbon sequestration in reducing net carbon dioxide 
emissions. Two programs are established, using the value of 
allowances as capitalization funds, to develop reliable carbon 
inventorying methods and to encourage environmentally sound 
sequestration activities. If these activities can be 
ascertained to be sufficiently permanent and reliable, then 
biologically sequestered carbon may eventually be valuable as a 
tool in reducing net emissions from EGFs at a lower cost until 
such time as the economy transitions to less carbon intensity.
            f) Allocation to Geological Carbon Sequestration

                                SUMMARY

    Beginning in 2008, the Administrator will allocate not more 
than 1.5 percent of the total carbon dioxide emission 
allowances to entities that carry out environmentally sound 
carbon dioxide geological sequestration projects. They will be 
distributed according to the number of tons of carbon dioxide 
that an EGF sequesters. If the allowances are sold, the 
proceeds from their sale must be used for the purposes of this 
subsection.

                               DISCUSSION

    This set aside of allowances is intended to expedite the 
development of permanent geological sequestration of carbon 
dioxide from EGFs. Large amounts of carbon dioxide are already 
being used for enhanced oil recovery, remaining underground 
once the oil has been dislocated. Preliminary studies suggest 
that there is a very large potential for storage underground, 
though this option, like activities encouraged by (e), is most 
likely transitional. Substantial and expensive research must be 
completed, and will be supported by these allowances' value, 
before permanence and other environmental impacts can be 
resolved. See Putting Carbon Back in the Ground (International 
Energy Administration, 2001) for a discussion of those issues.
            Sec. 708. Mercury Emission Limitations

                                SUMMARY

    Within 1 year of enactment, the Administrator must 
promulgate regulations to limit mercury emissions from EGFs 
such that the total emitted is no more than the cap set out in 
section 704. In no case, however, may any EGF emit an average 
of more than 2.48 grams of mercury per 1000 MWH, over any 30-
consecutive day period. In the event that total mercury 
emissions averaged over the previous 2 years exceeds the 
national limitation, the Administrator must revise the 
emissions limitations in this section within a year to prevent 
that from reoccurring. In addition, by 2005, the Administrator 
must promulgate regulations to ensure that mercury captured 
from EGFs is not re-released into the environment.

                               DISCUSSION

    The purpose of this section is to lower the total mercury 
emitted from the currently uncontrolled power plant sector by 
90 percent to no more than 5 tons in 2008. Based on information 
collected by the EPA and presentations from the Agency, the 
standards to be promulgated under section 112 of the Clean Air 
Act regarding HAPs emissions could require such reduction in 
the same timeframe. Under the consent decree described 
previously, the Administrator must require EGFs to comply with 
these requirements by December 2007. Those requirements, known 
as the MACT (maximum achievable control technology) rule, 
require that the maximum degree of reduction in mercury 
emissions that is deemed achievable for new sources shall not 
be less stringent than the emission control achieved in 
practice by the best controlled source. For existing sources, 
the standards must be as least as stringent as the average 
emission limitation achieved by the best performing 12 percent 
of existing sources (for which the Agency has emissions 
information).
    According to the EPA, if the MACT rule were issued now 
(presentation--December 2001) and plants were not 
subcategorized by coal type, each existing coal-fired 
generating unit would have to reach 98 percent removal. This 
would be done most likely through fluidized bed combustion and 
fabric filter technology application. If the rule were issued 
now and subcategorization by coal type is permitted, then 
bituminous coals would have to achieve 99 percent removal for 
new sources and 98 percent removal for existing sources 
resulting in total annual emissions of .84 tons; subbituminous 
coal 86 percent and 76 percent removal, respectively for new 
and existing sources resulting in 2.35 tons annually; and, 
lignite 66 percent and 58 percent removal, respectively for new 
and existing sources resulting in 1.88 tons annually. Total 
tons of mercury emitted annually would be 5.07 tons if the rule 
subcategorizes by coal type and is based on the average 
emissions achieved by the top 12 percent of existing sources 
and the emission limitation achieved by the best performing 
sources for new sources. The EPA projected that 
subcategorization by boiler type would result in similar 
reductions, resulting in 5.5 tons of mercury emitted annually 
in 2008.
    The bill's output based emission rate limitation for each 
coal-fired power plant is intended to produce, on average, a 90 
percent reduction from 1999 emissions levels. The exact level 
of reduction required of each power plant will depend on 
controls already installed, type of coal being burned, controls 
that will be installed to meet the NOx SIP Call and other Clean 
Air Act requirements. This emission rate may require some 
plants to install one or a combination of available controls, 
including upstream controls, fuel blending, modifying the burn 
to air ratio, or, in some cases, no other controls would be 
needed to meet the standard. Several plants already have 
existing emission rates below the levels specified in the bill.
    This provision, in combination with section 709(e), gives 
industry more flexibility than is available under the existing 
law to meet the mercury limit, and provides additional 
certainty of environmental protection. Unlike the MACT 
requirements, which will impose limits on each individual 
generating unit, the bill allows allows emissions averaging 
over more than one generating unit at a facility.
    Public health and the environment are also protected by a 
requirement that, as new generation capacity and technologies 
come on-line, the Administrator will have information available 
to regulate to maintain the integrity of the 90 percent 
reduction from 1999 levels. In addition, because the EPA found 
in its report on wastes from the combustion of fossil fuels 
that there is a potential risk of re-release of mercury 
captured or recovered from emission controls, the Administrator 
is required to promulgate regulations to address critical 
relevant issues involving re-release.
            Sec. 709. Other Hazardous Air Pollutants

                                SUMMARY

    The EPA is required to collect additional data on hazardous 
air pollutants (HAPs) emissions from EGFs and to promulgate 
emission standards for those HAPs under section 112(d) of the 
Clean Air Act by 2006 and enforce them by 2007. The emission 
limitation established for mercury and HAPs in this bill are 
deemed to represent the maximum achievable control technology 
for the purposes of section 112(d) of the Act.

                               DISCUSSION

    The committee is aware that there are concerns that the 
Agency has not sought adequate data to set a MACT standard for 
non-mercury HAPs, which are emitted in substantial amounts by 
coal-fired EGFs. The deadlines established in this section are 
structured to coincide with the EPA's current schedule of 
obligations under the consent decree and the Utility MACT 
Federal Advisory Commission.
            Sec. 710. Effect of Failure to Promulgate Regulations
    If the Administrator fails to promulgate and implement the 
emission limitations in section 704, then by 2007 each EGF must 
reduce emissions of nitrogen oxides by 85 percent, carbon 
dioxide by 25 percent, and for coal-fired EGFs, reduce sulfur 
dioxides by 95 percent and mercury by 90 percent, below a 
similar uncontrolled facility. As noted throughout this Report, 
the committee believes that swift and significant cuts in 
emissions must take place to protect public health and the 
environment. This is a failsafe provision intended to ensure 
that those reductions take place, regardless of litigation that 
seeks to delay regulations or the failure of the Administration 
to act in good faith to regulate and achieve the purposes of 
this legislation. Other environmental laws incorporate similar 
``backstop'' measures.
            Sec. 711. Prohibitions
    This provision makes it unlawful to be in noncompliance 
with the requirements of the new Title or to use emission 
allowances except in approved manners.
            Sec. 712. Modernization of Electricity Generating 
                    Facilities

                                SUMMARY

    Beginning on the later of January 1, 2013, or 40 years 
after an EGF commences operation, an EGF must achieve emission 
limitations that are as good or better than occurs through 
application of best available control technology on a new major 
source of a similar size and type.

                               DISCUSSION

    In 1977, Congress exempted EGFs built before 1972 from 
immediate compliance with New Source Performance Standards. The 
rationale at the time was that such compliance would be too 
costly and compel their closure. To balance this exemption, 
Congress required that new and modified EGFs must meet those 
standards, thereby assuring that as the fleet of EGFs aged and 
were replaced or repowered, they would become cleaner. Instead 
of becoming more efficient and cleaner, many EGFs, particularly 
coal-fired plants, continued to expand capacity without 
appropriate environmental review and improvement under best 
available control technology (BACT) requirements. There is 
lengthy discussion in the body of the report on the legal and 
environmental problems created by EGF life-extension projects 
and non-compliance with New Source Review requirements. The 
sluggish pace of modernization led to the compelling need to 
reduce national emissions from these dirty plants through the 
imposition of a cap in Title IV of the 1990 Clean Air Act 
Amendments. Despite this cap, there are still more than 300 
EGFs that do not meet the NSPS, much less BACT. Congress did 
not intend that this exemption, or ``grandfathering'' should 
become a permanent shield from reducing emission rates.
    The committee has largely adopted the cap-and-trade 
mechanism for reducing emissions of sulfur dioxide, nitrogen 
oxides and carbon dioxide. However, as experience with Title IV 
shows, such a cap does not guarantee emission reductions from 
all facilities. Some continue to find it in their economic 
interest to purchase emission allowances rather than meet 
stringent emission rates required by BACT. This provision in S. 
556 allows the market based system to reduce total covered 
pollutant emissions to move forward, but additionally requires 
the application of BACT for the criteria pollutants at all EGFs 
by a time certain to ensure that local air quality is 
protected. The reported bill allows more time for sources to 
apply BACT than provided by S. 556 as introduced. This change 
is a recognition of the need to motivate early and innovative 
action and to increase flexibility in achieving the caps.
            Sec. 713. Relationship to Other Law
    Nothing in this new Title limits the application of other 
provisions of the Act or precludes a State from adopting more 
stringent requirements than are imposed under this new Title.
Sec. 3. Savings Clause
    This section ensures that this legislation will not affect 
or disrupt any regulations, standards, rules, notices, orders 
or guidance promulgated or issued prior to the enactment of the 
Clean Power Act of 2002, unless they are inconsistent with this 
legislation.
Sec. 4. Acid Precipitation Research Program
    This section amends existing section 103(j) of the Clean 
Air Act, revising the assessment requirements of the National 
Acid Precipitation Assessment Program to include a review of 
the reduction in acid deposition rates necessary to avert a 
decline in the number of water bodies with adequate acid-
neutralizing capacity. The Administrator must also report to 
Congress every 4 years on those steps and that will protect and 
restore acid-sensitive ecosystems. By 2011, the Administrator 
must determine if the emission reduction requirements of Titles 
IV and the new Title VII are adequate to protect these 
sensitive ecosystems. If they are not, the Administrator must 
reduce emissions further. This provision averts the need for 
additional legislation to lower the caps if they are not 
sufficient for acidified ecosystems to recover adequately. The 
longer it takes to reset the caps, when it is demonstrated they 
are not promoting timely recovery, the greater the 
environmental harm is done and the longer it takes to remedy.
Sec. 5. Authorization of Appropriation for Deposition Monitoring
    There are several programs authorized at many agencies for 
FY03-12 to enhance pollutant monitoring and deposition, 
including equipment and site modernization needs. These include 
the National Atmospheric Deposition Program National Trends 
Network, the National Atmospheric Deposition Program Mercury 
Deposition Network, the National Atmospheric Deposition Program 
Atmospheric Integrated Research Monitoring Network, the Clean 
Air Status and Trends Network, and the Temporally Integrated 
Monitoring of Ecosystems and Long-Term Monitoring Program.

                                Hearings

106th Congress
    On October 14, 1999, the Subcommittee on Clean Air, 
Wetlands, Private Property, and Nuclear Safety held a hearing 
on review and oversight of the Clean Air Act, particularly 
addressing the continuing problem of air pollution from power 
plants, as well as global warming. Testimony was given by 
Robert Perciasepe, Assistant Administrator, Office of Air and 
Radiation, U.S. Environmental Protection Agency; John Graham, 
Professor, Harvard Center for Risk Analysis; Richard Revesz, 
Professor, New York University School of Law; Alison Kerester, 
University of Texas School of Public Health, Mickey Leland 
National Urban Air Toxic Research Center; Michel R. Benoit, 
Executive Director, Cement Kiln Recycling Coalition; Bernard C. 
Melewski, Counsel, Adirondack Council; and Bill Tyndall, Vice 
President of Environmental Services, Cinergy Corporation, on 
behalf of Edison Electric Institute.
    On February 28, 2000, the Subcommittee on Clean Air, 
Wetlands, Private Property, and Nuclear Safety held a hearing 
on the Clean Air Act's New Source Review regulatory program. 
Testimony was given by the Honorable Ted Strickland, U.S. 
Representative from the State of Ohio; John S. Seitz, Director, 
Office of Air Quality Planning and Standards, North Carolina; 
Joe Bynum, Executive Vice President, Fossil Power Group, 
Tennessee Valley Authority; Bob Slaughter, Director, Public 
Policy, National Petrochemical and Refiners Association; W. 
Henson Moore, President and Chief Executive Officer, American 
Forest and Paper Association; David Hawkins, Director, Air and 
Energy Programs, Natural Resources Defense Council; and Bill 
Tyndall, Vice President of Environmental Services, Cinergy 
Corporation.
    On May 2, 2000, the Committee on Environment and Public 
Works held a hearing on successful State environmental 
programs, addressing States' difficulty in controlling electric 
utility emissions under Clean Air Act programs. Testimony was 
given by W. Michael McCabe, Acting Deputy Administrator, U.S. 
Environmental Protection Agency; Peter F. Guerrero, Director, 
Environmental Protection Issues, General Accounting Office; R. 
Lewis Shaw, Deputy Commissioner, Environmental Quality Control, 
South Carolina Department of Health and Environmental Control 
President, Environmental Council of the States; Robert W. 
Varney, Commissioner, New Hampshire Department of Environmental 
Services; James Seif, Secretary, Pennsylvania Department of 
Environmental Protection; Brent C. Bradford, Deputy Director, 
Utah Department of Environmental Quality; Lynn Scarlett, 
Executive Director, Reason Public Policy Institute; Erik D. 
Olson, Senior Attorney, Natural Resources Defense Council; and 
Jason S. Grumet, Executive Director, Northeast States for 
Coordinated Air Use Management.
    On May 17, 2000, the Subcommittee on Clean Air, Wetlands, 
Private Property, and Nuclear Safety held a hearing on 
incentive-based utility emissions under the Clean Air Act. 
Testimony was given by David G. Wood, Assistant Director, 
Resources, Community and Economic Development Division, U.S. 
General Accounting Office; James E. Rogers, Vice Chairman, 
President, and CEO, Cinergy Corporation; Charles McCrary, 
President, Southern Company Generation; Frank Cassidy, 
President and COO, PSEG Power, LLC; Armond Cohen, Executive 
Director, Clean Air Task Force; and Wayne Brunetti, Chairman 
and CEO, New Century Energies.
    On June 14, 2000, the Subcommittee on Clean Air, Wetlands, 
Private Property, and Nuclear Safety held a hearing on 
environmental benefits and impacts of ethanol under the Clean 
Air Act, addressing ethanol's effects on air pollution and 
global warming. Testimony was given by Dan Greenbaum, 
President, Health Effects Institute; Blake Early, Environmental 
Consultant, American Lung Association; Michael Graboski, 
Director, Colorado Institute for Fuels and High Altitude Engine 
Research, Department of Chemical Engineering, Colorado School 
of Mines; Bob Slaughter, Director, Public Policy, National 
Petrochemical and Refiners Association; Jack Huggins, Vice 
President, Ethanol Operations, Williams Energy Services; Jason 
S. Grumet, Executive Director, Northeast States for Coordinated 
Air Use Management; Stephen Gatto, President and CEO, BC 
International; Gordon Proctor, Director, Ohio Department of 
Transportation; The Honorable Charles Grassley, U.S. Senator 
from the State of Iowa; The Honorable Tom Harkin, U.S. Senator 
from the State of Iowa; The Honorable Richard Durbin, U.S. 
Senator from the State of Illinois; and The Honorable Peter 
Fitzgerald, U.S. Senator from the State of Illinois.
    On September 27, 2000, the Subcommittee on Clean Air, 
Wetlands, Private Property, and Nuclear Safety held a hearing 
on State reauthorization issues under the Clean Air Act, 
addressing the concept of multi-pollutant legislation as a way 
to simplify the numerous Clean Air Act requirements imposed on 
States. Testimony was given by Karen A. Studders, Commissioner, 
Minnesota Pollution Control Agency; Jeff Saitas, Executive 
Director, Texas Natural Resources Conservation Commission; 
Dennis Hemmer, Director, Wyoming Department of Environmental 
Quality; John E. Terrill, Air Quality Director, Oklahoma 
Department of Environmental Quality; Kenneth Colburn, Director, 
Air Resources Division, New Hampshire Department of 
Environmental Services; Ron Methier, Air Protection Branch 
Chief, Georgia Environmental Protection Division; The Honorable 
Richard Homrighausen, Mayor of the city of Dover, Ohio; Marcia 
Willhite, Assistant Chief, Pollution Prevention-Air Quality 
Environmental Health Division, city of Lincoln, Nebraska; and 
Zach Taylor, Executive Director, Association of Central 
Oklahoma Governments.
107th Congress
    On March 21, 2001, the Subcommittee on Clean Air, Wetlands, 
Private Property, and Nuclear Safety held a hearing on 
harmonizing the Clean Air Act with our nation's energy policy. 
Testimony was given by Linda Stuntz, former Deputy Secretary, 
Department of Energy; Katie McGinty, former Chair, Council on 
Environmental Quality; Anthony J. Alexander, President, First 
Energy; David Nemtzow, President, Alliance to Save Energy; Olon 
Plunk, Vice President for Environmental Services, Excel Energy; 
and David Hawkins, Director, Air and Energy Programs, Natural 
Resources Defense Council.
    On April 4, 2001, the Subcommittee on Clean Air, Wetlands, 
Private Property, and Nuclear Safety held a hearing on Clean 
Air Act regulations and energy policy, especially as it relates 
to oil and gas issues. Testimony was given by Robert Hirsch, 
Board of Directors, Annapolis Center (also chair of the NAS 
energy and environment board); The Honorable Eliot Spitzer, 
Attorney General of the State of New York; Thomas Stewart, 
Executive Vice President, Ohio Oil and Gas Association; Jason 
S. Grumet, Executive Director, Northeast States for Coordinated 
Air Use Management; Bob Slaughter, Director, Public Policy, 
National Petrochemical & Refiners Association; Carlos J. 
Porras, Executive Director, Communities for a Better 
Environment; and Taylor Bowlden, Vice President, Policy and 
Government Affairs, American Highway Users Alliance.
    On May 2, 2001, the Committee on Environment and Public 
Works held a hearing on the state of global warming science and 
issues related to reducing net greenhouse gas emissions. 
Testimony was given by Dr. Richard S. Lindzen, Alfred P. Sloane 
Professor of Meteorology, Massachusetts Institute of 
Technology; Dr. Kevin E. Trenberth, Head, Climate Analysis 
Section, Climate and Global Dynamics Division, National Center 
for Atmospheric Research; Dr. John R. Christy, Professor, 
Department of Atmospheric Science, University of Alabama at 
Huntsville; Dr. Jae Edmonds, Pacific Northwest National 
Laboratory, Battelle Memorial Institute; Dr. Rattan Lal, School 
of Natural Resources, Ohio State University; James E. Rogers, 
Chairman, President, and CEO, Cinergy Corp.; Dr. Marilyn A. 
Brown, Director, Energy Efficiency and Renewable Energy 
Program, Oak Ridge National Laboratory.
    On May 30, 2001, the Committee on Environment and Public 
Works held a hearing on innovative environmental technologies, 
addressing advances in multi-pollutant control technologies. 
Testimony was given by Frank Alix, CEO and President, Powerspan 
Corp.; Judith A. Bayer, Director, Environmental Government 
Affairs, United Technologies; Richard Taylor, CEO and 
President, Ocean Power Technologies; Richard Eidlin, Vice 
President and Business Development Director, Solar Works, Inc.; 
David Goldstein, Energy Program Co-Director, Natural Resources 
Defense Council; Tom Kelly, Ph.D., Director, Office of 
Sustainability, University of New Hampshire; and Casimer 
Andary, Director, Mobile Source Affairs, Alliance of Automobile 
Manufacturers.
    On July 26, 2001, the Committee on Environment and Public 
Works held a hearing on the public health and environmental 
effects of electric power plant emissions. Testimony was given 
by the Honorable Susan M. Collins, U.S. Senator from the State 
of Maine; the Honorable Christine Todd Whitman, Administrator, 
U.S. Environmental Protection Agency; Scott Johnstone, 
Secretary, Vermont Agency of Natural Resources; George 
Thurston, Associate Professor of Environmental Medicine, New 
York University School of Medicine; C. Boyden Gray, Partner, 
Wilmer, Cutler, and Pickering, on behalf of the Electric 
Reliability Coordinating Council; Dale E. Heydlauff, Senior 
Vice President, Environmental Affairs, Edison Electric 
Institute; and Conrad Schneider, Advocacy Director, Clean Air 
Task Force.
    On November 1, 2001, the Committee on Environment and 
Public Works held a hearing on how S. 556 would affect the 
environment and the economy, and any improvements or amendments 
that should be made to the legislation. Testimony was given by 
the Honorable Sherwood L. Boehlert, U.S. Representative from 
the State of New York; The Honorable Jeffrey Holmstead, 
Assistant Administrator, Office of Air and Radiation, 
Environmental Protection Agency; Mary Hutzler, Acting 
Administrator, Energy Information Administration; Ken Colburn, 
Director of Air Resources, New Hampshire Department of 
Environmental Services; Dave Ouimette, Manager, Stationary 
Sources, Air Pollution Control Division, Colorado Department of 
Public Health and the Environment; Brock Nicholson, Chief, Air 
Quality Planning Division, North Carolina Department of 
Environmental Natural Resources; and Michael Callaghan, 
Secretary, West Virginia Department of Environmental 
Protection.
    On November 15, 2001, the Committee on Environment and 
Public Works held a hearing on S. 556, the Clean Power Act. 
Testimony was given by the Honorable Howard Dean, M.D., 
Governor of the State of Vermont; Gerard M. Anderson, President 
& COO, DTE Energy Resources, DTE Energy Company; Jeffery E. 
Sterna, Chairman, President and CEO, Public Service Company of 
New Mexico; Robert LaCount, Air Quality Manager--Environmental 
Affairs, PG&E National Energy Group; Jeffrey C. Smith, 
Executive Director, Institute of Clean Air Companies; David 
Hawkins, Program Director, Climate Center, Natural Resources 
Defense Council; Ronald J. Tipton, Senior Vice-President for 
Programs, National Parks Conservation Association; John 
Kirkwood, Chief Executive Officer, American Lung Association; 
and Bill Banig, Director of Governmental Affairs, United Mine 
Workers of America.
    On January 29, 2002, the Subcommittee on Clean Air, 
Wetlands, and Climate Change held a hearing on compliance 
options for electric power generators under S. 556. Testimony 
was given by Robert S. Kripowicz, Acting Assistant Secretary 
for Fossil Energy, U.S. Department of Energy; Ed Lowe, Gas 
Turbine-Combined Cycle Product Line Manager, General Electric 
Power Systems; Phil Amick, Vice President, Commercial 
Development, Global Energy, Inc.; Dr. Richard L. Sandor, 
Chairman and CEO, Environmental Financial Products LLC; Dr. 
Michael D. Durham, President, ADA Environmental Solutions; 
Richard L. Miller, Fabric Filter & FGD Sales Manager, Hamon 
Research-Cottrell, Inc.; Frank Alix, CEO, Powerspan Corp.; and 
George Offen, Area Manager for Air Emissions & By-Products, 
Environmental Department, Electric Power Research Institute.
    On March 13, 2002, the Committee on Environment and Public 
Works held a hearing on the economic and environmental risks 
associated with increasing greenhouse gas emissions. Testimony 
was given by Dr. F. Sherwood Rowland, Donald Bren Research 
Professor of Chemistry and Earth System Science, University of 
California, Irvine; Dr. Roger A. Pielke, Jr., Associate 
Professor, Center for Science and Technology Policy Research, 
University of Colorado/CIRES; Adam Markham, Executive Director, 
Clean Air-Cool Planet; Dr. Sallie Baliunas, Astrophysicist, 
Harvard-Smithsonian Center for Astrophysics; Dr. David M. 
Legates, C.C.M., Director, Center for Climatic Research, 
University of Delaware; Dr. Martin Whittaker, Managing 
Director, Innovest; and Jack D. Cogen, President, Natsource.
    On June 12, 2002, the Committee on Environment and Public 
Works held a hearing on the benefits and costs of multi-
pollutant legislation. Testimony was given by the Honorable 
Dennis J. Kucinich, U.S. Representative from the State of Ohio; 
Ronald C. Methier, Branch Chief, Georgia Department of Natural 
Resources, Environmental Protection Division, Air Protection 
Branch, on behalf of the State and Territorial Air Pollution 
Program Administrators and the Association of Local Air 
Pollution Control Officials (STAPPA/ALAPCO); Bob Page, Vice 
President of Sustainable Development, Transalta Corporation; 
William F. Tyndall, Vice President, Environmental Services and 
Federal Affairs, Cinergy Corp.; David G. Hawkins, Director, 
Climate Center, Natural Resources Defense Council; Lee Hughes, 
Vice President, Corporate Environmental Control, Bayer 
Corporation, on behalf of the American Chemistry Council; Don 
Barger, Senior Director, National Parks Conservation 
Association, Southeast Regional Office; and Tom Mullen, 
Secretary, Catholic Charities Health and Human Services, 
Diocese of Cleveland.
    On July 16, 2002, the Committee on Environment and Public 
Works and the Committee on the Judiciary jointly held a hearing 
on New Source Review policy, regulations, and enforcement 
activities. Testimony was given by the Honorable Thomas L. 
Sansonetti, Assistant Attorney General, Environment and Natural 
Resources Division, U.S. Department of Justice; The Honorable 
Jeffrey Holmstead, Assistant Administrator for Air and 
Radiation, U.S. Environmental Protection Agency; The Honorable 
William H. Sorrell, Attorney General of the State of Vermont; 
The Honorable Eliot Spitzer, Attorney General of the State of 
New York; The Honorable Bill Pryor, Attorney General of the 
State of Alabama; Eric Schaeffer, Director, Environmental 
Integrity Project, Rockefeller Family Fund; Bob Slaughter, 
President, National Petrochemical & Refiners Association; 
Hilton Kelley, Community In-power and Development Association, 
Refinery Reform Campaign; Steve Harper, Director, Environment, 
Health, Safety, and Energy Policy, Intel, Corp.; John Walke, 
Clean Air Director, Natural Resources Defense Council; and E. 
Donald Elliott, Paul, Hastings, Janofsky & Walker LLP.
    On October, 2, 2002, the Committee on Environment and 
Public Works held a hearing on the status and studies of the 
health impacts of fine particulate matter air pollution 
(PM2.5), particularly those effects associated with 
power plant emissions. Testimony was given by Dr. Jonathan M. 
Samet, Co-Director, Risk Sciences and Public Policy Institute, 
and Professor and Chair of the Department of Epidemiology, 
Johns Hopkins Bloomberg School of Public Health; Robert M. 
O'Keefe, Vice President, Health Effects Institute; Dr. Ron 
Wyzga, Technical Executive and Manager of Air Quality, Health 
and Risk, Electric Power Research Institute; Ben Rose, 
Executive Director, Green Mountain Club; and Dr. Jonathan Levy, 
Assistant Professor of Environmental Health and Risk 
Assessment, Department of Environmental Health, Harvard School 
of Public Health.
    [Note: In addition, on October 4-5, 2001, the Chairmen and 
Ranking Members of the Committee on Environment and Public 
Works and the Subcommittee on Clean Air, Climate Change and 
Wetlands hosted a stakeholder meeting on multi-pollutant 
legislation which was attended by representatives of utilities, 
environmental groups, States, tribes, and other interested 
parties.]

                          Legislative History

    On March 15, 2001, S. 556 was received in the Senate, read 
twice, and referred to the Committee on Environment and Public 
Works. On June 27, 2002, the committee held a business meeting 
to consider the bill. The Chairman offered an amendment in the 
nature of a substitute. Prior to the final vote on the 
substitute, several Senators offered and withdrew amendments, 
including several amendments in the nature of substitutes. 
Three amendments were approved by voice vote: Senator Boxer 
offered an amendment to include sensitive subpopulations in EPA 
consideration of revising the overall emission caps; Senator 
Clinton offered an amendment to assure that the EPA regularly 
monitors acidification of water bodies and takes action to 
reduce emission caps if they are threatened; and, Senators 
Smith and Jeffords offered an amendment to authorize air 
quality monitoring programs at various Federal agencies. The 
bill, as amended, was ordered reported.

                             Rollcall Votes

    On June 27, 2002, at 9:55 a.m., the committee held a 
business meeting to consider S. 556 and other bills. A motion 
to report the bill was made by the Chairman. The bill, as 
amended, was passed by a vote of 10-9. Recorded as voting "aye" 
were Senators Jeffords, Reid, Graham, Lieberman, Boxer, Wyden, 
Carper, Clinton, Corzine, Chafee. Recorded as voting "no" were 
Senators Smith, Warner, Inhofe, Bond, Voinovich, Crapo, 
Specter, Domenici, Baucus.

                      Regulatory Impact Statement

    There is substantial regulatory authority granted by this 
bill to the Administrator of the U.S. EPA to reduce emissions 
of pollutants that are harming or have the potential to harm 
public health and the environment. As noted in the body of the 
Report, there are already a substantial number of regulations 
in the process of being implemented, pursuant to existing 
authority, statutory deadlines, and consent decrees, to achieve 
purposes similar to this bill.
    The Administrator is required to issue regulations 
affecting owners and operators of fossil fuel electric 
generating facilities by capping annual emissions of sulfur 
dioxide, nitrogen oxides, carbon dioxide, and mercury. 
Allocations of emissions allowances will be made by regulation 
among the various categories of recipients. Clarification of 
those categories and the process by which emissions allowances 
or their value will be distributed will require a variety of 
rulemakings. These will include the selection and operation of 
trustees to convey the value of auctioned emission allowances 
to households, dislocated workers, biological carbon 
sequestration projects, etc.
    The cap-and-trade system created by the bill, which applies 
to the first three pollutants, is modelled after the successful 
and efficient Title IV-Acid Deposition of the Clean Air Act 
Amendments of 1990. That system's establishment and maintenance 
have not required significant increases in regulations or 
government resources to operate, including the identification 
and tracking of emission allowances or the submission of 
allowances for compliance purposes.
    However, the Administrator will need to revise the existing 
system regulations to accommodate the addition of two more 
pollutants, nitrogen oxides and carbon dioxide. The existing 
NOx SIP call trading mechanism employed in the summer in the 
ozone transport region will provide a useful template for the 
national program in this bill. The Administrator must also 
regularly review and revise the implementing regulations to 
assure the environmental integrity of the cap is retained and 
public health and ecosystems are protected.
    The Administrator is required to promulgate an emission 
limitation for mercury and other hazardous air pollutants 
emitted by coal-fired EGFs by a time certain. This is primarily 
a codification of existing regulatory requirements. These rules 
must be regularly reviewed and revised as appropriate to ensure 
that growth in electricity demand does not increase mercury 
emissions above the cap. The Administrator must also issue 
regulations to ensure that captured mercury is not re-released 
into the environment.
    Guidelines must be prepared by the Agency for EGFs for the 
conduct of required ambient monitoring within the vicinity of 
those facilities.
    If the Administrator fails to promulgate regulations 
implementing the emissions caps, automatic reductions in 
emissions are required from EGFs and their permits are 
automatically amended to reflect those new emission rates.

                          Mandates Assessment

    In compliance with the Unfunded Mandates Reform Act of 1995 
(P.L. 104-4), the committee finds that this bill imposes no 
Federal intergovernmental unfunded mandates on State or tribal 
governments. To the extent that local governments may be 
operating EGFs, those power plants will be required to 
demonstrate compliance with the emission limitations in the 
same manner as the private sector EGFs. None of the cost 
estimates provided to the committee from the EPA, the Energy 
Information Administration (EIA), or other sources have 
differentiated costs between publicly owned and privately owned 
facilities, so it is not possible to quantify the direct costs 
associated with requirements of this bill.
    The legislation includes a variety of Federal private 
sector mandates, many of which, with the exception of carbon 
dioxide emission limitations, are expected to be imposed under 
existing authorities and requirements of the Clean Air Act. 
This bill imposes them sooner, except in the case of mercury 
and hazardous air pollutant emissions, which is on a schedule 
pursuant to a consent decree.
    The mandates center around the establishment of a market-
based, cap and trade program to limit emissions of sulfur 
dioxides, nitrogen oxides and carbon dioxide, and specific 
emissions limitations for mercury. They will require EGFs to 
invest in pollution control and prevention equipment, such as 
wet scrubbers (sulfur dioxide), selective catalytic reduction 
(nitrogen oxides), absorbent carbon injection (mercury), and 
efficiency improvements and integrated gasification combined 
cycle units for coal (carbon dioxide). Or, except mercury, they 
may choose to acquire sufficient emissions allowances to match 
their emissions, whichever is more cost-effective. The adoption 
of the cap and trade program will maximize the efficiency of 
control investments, reducing the overall cost of the program, 
though individual EGFs may experience high costs if they are 
currently significantly above BACT or MACT emission rates.
    Projections of the cost of these allowances to EGFs range 
dramatically depending on the assumptions that are made 
regarding existing requirements, trading, the price of natural 
gas and alternative energy sources, and many other market and 
technology penetration considerations. The estimated costs of 
allowances in 2010 vary significantly--sulfur dioxide at $46-
$306 per ton, nitrogen oxides at $0 to $1,564 per ton, and 
carbon dioxide $54-110 per metric ton.
    The cost of the mandates imposed on EGFs in this bill, 
therefore, could range from $11.5 billion to $25.9 billion in 
2010, though benefits are expected to outweigh these costs by 
between 4.2-6.4 to 1. The true cost imposed on EGFs depends on 
their ability to pass through costs to consumers. Under their 
``business as usual'' case, which exempt many of costs of 
existing Clean Air Act requirements, the EPA has estimated that 
the annual costs to EGFs could be $17 billion per year in 2015, 
or, with the increased investment in renewables and efficiency 
that will be stimulated by the bill's allocation method, 
approximately $500 million annually. The committee would also 
note that in each case that the Agency analyzed, regarding a 
four-pollutant bill, the generation costs per kilowatt hour 
were less than today's levels.
    Estimating the benefits of these caps is similarly 
difficult. However, the EPA has provided estimates of control 
levels similar to those provided in this legislation ranging 
from $75-150 billion due to avoided loss of life from 
PM2.5 exposure resulting from sulfur dioxide and 
nitrogen oxides emissions, plus $1 billion in visibility 
benefits. The EPA has not been able to provide to the committee 
a monetized estimate of the benefits of controlling mercury and 
carbon dioxide emissions, or attempted to evaluate the 
ecosystem services benefits that accrue from these reductions.
    The committee would note that witnesses, the 
Administration's Climate Action Report, and economic literature 
indicate that global warming and climate change, exacerbated by 
manmade greenhouse gas emission, already appears to be having a 
significant and negative impact on communities, ecosystems, 
public health and infrastructure. Economists are not agreed on 
the cost estimates of these impacts, but those making such 
estimates have projected a range of 1-3 percent of GDP could be 
lost due to these effects. Carbon reduction requirements in the 
utility sector, which represents about one-third of the 
nation's carbon dioxide emissions, will not on their own stop 
these effects, but should lead to new technologies, including 
IGCC and geologic sequestration, that will reduce greenhouse 
gas concentrations and slow global warming and its effects.
    In addition to compliance with the costs of achieving the 
costs, EGFs will incur additional costs associated with the 
monitoring systems required by the bill. The committee is not 
able to provide a qualitative or quantitative evaluation of the 
cost of this mandate.

                          Cost of Legislation

    It is essential that the committee comment on the 
inaccuracy of assumptions affecting the cost estimates that 
have been performed to date as part of analyses of multi-
pollutant control strategies and scenarios prepared by the EIA 
and the EPA, which can be found as part of the committee 
hearing record of November 1, 2001.
    Neither of these analyses, in projecting the future costs 
of implementation of multi-pollutant legislation, makes any 
comprehensive effort to compare the cost of S. 556 to the costs 
that will otherwise be or are already being incurred by EGFs in 
complying with existing law and regulation. For instance, the 
EPA has indicated to industry that MACT requirements for 
emissions of mercury and other hazardous air pollutants, as 
driven by a consent decree, will very likely produce an 
emission reduction limitation of a minimum of 70 percent. The 
agencies' reference or ``business as usual'' cost estimates do 
not include this driver, thereby making the incremental cost 
appear higher. These and other reduction requirements are 
outlined in the section above on Federal Programs, Regulations 
and Actions. Despite the omission of an accurate ``business as 
usual'' baseline, EPA's analysis found that net GDP impacts 
would be essentially unchanged in a $13 trillion economy.
    Most notably, EIA inaccurately attributes the costs of 
substantial new natural gas generation capacity to multi-
pollutant legislation. However, as of April 2002, nearly 
130,000 MW of new natural gas combined cycle base load 
generating capacity had either become operational or was under 
construction that was not included in EIA's analysis--which is 
about 45,000 MW or 50 percent more new such capacity than EIA 
projected would be in operation in 2010. This strong new 
generation development trend is being driven by forces other 
than this legislation. As noted in a previous section, EIA 
projects that 88 percent of the demand for 355,000 MW in new 
generating capacity by 2020 will come from natural gas, 
regardless of passage of this legislation. The committee would 
note that it appears that the market is anticipating potential 
compliance costs with the Federal Programs, Regulations and 
Actions, but the agencies projections do not.
    Neither agency adequately considered the potential for the 
widespread application of relatively new and more efficient 
technologies, such as IGCC for coal, to enter the market, 
particularly as stimulated by the introduction of carbon 
dioxide emission limitations. As one expert witness indicated, 
``Gasification is a widely used, commercially proven 
technology. Today there are approximately 130 gasification 
plants in operation around the world with some 35 additional 
facilities in various stages of development, design and 
construction. When all of these plants are operating they will 
have the capacity produce the energy equivalent of 750,000 
barrels per day of clean gas for use in power generation as 
well as for the production of fuels and chemicals. In the U.S. 
there are 20 gasification plants in operation producing a 
variety of products including electricity; at least one-half 
again that many are in the pipeline.'' In addition, the EIA 
analysis stated that, ``Numerous options exist for reducing 
carbon dioxide emission within the electricity sector, 
including generation efficiency improvements, transmission and 
distribution system efficiency improvements, . . . and the 
electricity sector can and currently does use non-greenhouse 
gas-emitting energy sources, such as wind, solar, hydropower,. 
. . .''
    In January 2001, the EPA's Clean Air Market Programs 
estimated that the annual incremental costs of a comprehensive, 
four-pollutant strategy in 2010 would be approximately $11.5 
billion, while continuing with the current system of 
controlling each pollutant individually including reducing 
carbon dioxide to 1990 levels, would be approximately $16 
billion. There are obvious and substantial cost savings from a 
multi-pollutant approach versus a piecemeal approach.
    In addition, as testimony cited previously and appears 
throughout the hearing record on this legislation, there is a 
need for and a value to certainty of emission reduction 
requirements which has not been captured by any analysis. 
Industry anticipates that there will be a constraint on carbon 
dioxide emissions in the near future and yet will need to make 
decisions to add new capacity. As the CEO of Cinergy noted, not 
integrating carbon dioxide into the capacity investment 
decisions now will substantially devalue any capacity 
investments made in the very near term. Anecdotal speculation 
by market analysts suggest that the value of certainty may be 
as high as $40 billion annually.
    Further, the agencies' studies do not take note of the 
beneficial effects of the allocation system in S. 556, as 
reported, or of the flexibility for using carbon dioxide 
allowances obtained from other industrial sectors that are 
subject to a cap on greenhouse gas emissions. Section 707 of 
the bill allows trading between entities in the power sector 
and entities in any other domestic industrial sector that is 
subject to an emissions cap. Access to emissions reduction 
allowances produced outside of the power sector will 
significantly lower carbon allowance prices.
    Access to emissions reduction allowances from other capped 
industrial sectors outside of the power sector will 
significantly lower carbon allowance prices below levels 
projected in the several EIA and EPA analyses of a range of 
multi-pollutant scenarios including a carbon emissions cap. The 
EIA and EPA analyses responding to the Jeffords/Lieberman 
request projected carbon allowance prices ranging from $51 to 
$138 per metric ton of carbon in 2015.
    A recent report by the Pew Center for Global Climate Change 
documents early carbon emissions reduction allowance market 
prices in the United Kingdom and Danish ``compliance'' carbon 
reductions markets at a mid range of about $21/MTC (million 
tons of carbon) in the UK and $11/MTC in Denmark. The EIA's 
analysis in response to the request by Senators Smith, 
Voinovich and Brownback, assumed that domestic and global 
carbon offsets would be available for purchase by U.S. carbon 
emitters. The EIA found that U.S. carbon allowance prices would 
drop dramatically with global trading of carbon emissions 
reductions. In this study, EIA projected (based on modeling by 
DOE's Pacific Northwest Laboratory) that carbon allowance 
prices for a 2008 power sector carbon cap with global trading 
would clear at a price of about $10 per metric ton of carbon in 
2020. However, U.S. entry into the global market would most 
likely necessitate U.S. participation in an international 
agreement to limit carbon emissions.
    Because many non-domestic power sector carbon cap programs 
will definitely exist within the next several years, it seems 
highly likely that the provisions of section 707(b)(2) would be 
implemented, dropping carbon allowance costs into the $10--$21 
per metric ton range, which is 92 percent to 60 percent below 
the carbon allowance prices projected by the EPA and the EIA.
    A variety of studies have been included and referenced in 
the hearing record, from the Tellus Institute, Resources for 
the Future, International Project for Sustainable Energy Paths, 
the Department of Energy's Clean Energy Futures report, and 
others that have demonstrated that an integrated approach such 
as provided in this bill and including other domestic policy 
initiatives can successfully reduce greenhouse gas emissions 
without economic harm.
    ``Economic studies have found that there are many potential 
policies to reduce greenhouse gas emissions for which the total 
benefits outweigh the total costs. For the United States in 
particular, sound economic analysis shows that there are policy 
options that would slow climate change without harming American 
living standards, and these measures may in fact improve U.S. 
productivity in the longer run. (Statement signed by 2500 
economists led by Nobel laureates Kenneth Arrow and Robert 
Solow, January 1997, American Economics Association)
    Finally, the bill provides for a hybrid allocation system, 
which has not been modelled effectively by either agency. 
Indeed, the Agency assumed that allowances would be given 
freely to EGFs. Instead, the bulk of the allocations are sold 
by a trustee at auction and the revenue is recycled directly 
back to consumers. The committee has heard testimony and 
collected information that indicates that an auction/revenue 
recycling system is the most cost-effective way to implement 
emissions limitations. As noted in testimony from various 
witnesses, consumers of electricity are likely to see a 
reduction in electricity prices and the bill is designed to 
hold harmless the asset value of owners and shareholders of EGF 
properties.
    The following cost estimate provided by the Congressional 
Budget Office is an improvement on the analyses provided by the 
EPA and the EIA. However, it still does not incorporate an 
adequate discussion of the pollution control regulatory costs 
and ensuing investment decisions that electricity generators 
will likely face regardless of enactment of this legislation. 
This omission skews the projected future marginal 
implementation costs higher than the committee anticipates.
                              ----------                              

    Section 403 of the Congressional Budget and Impoundment 
Control Act requires that a statement of the cost of the 
reported bill, prepared by the Congressional Budget Office, be 
included in the report. That statement follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 18, 2002.

Hon. James M. Jeffords, Chairman,
Committee on Environment and Public Works,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 556, the Clean Power 
Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lisa Cash 
Driskill, who can be reached at 226-2860.
            Sincerely,
                                            Dan L. Crippen.
                              ----------                              

S. 556, Clean Power Act of 2002, as ordered reported by the Senate 
        Committee on Environment and Public Works on June 27, 2002
Summary
    S. 556 would amend the Clean Air Act to establish new 
limits starting in 2008 on the emission of carbon dioxide, 
sulfur dioxide, nitrogen oxides, and mercury from electricity-
generating facilities. The bill also would require that 
electricity generators, including the federally owned Tennessee 
Valley Authority (TVA), annually purchase a number of permits 
equal to the number of tons of regulated emissions generated, 
except mercury. That is, each permit would represent the 
authority to emit one ton of a regulated emission for 1 year.
    S. 556 would allocate the emission permits to different 
recipients who could sell them to owners and operators of 
electricity plants. The owners and operators of electricity-
generating facilities and certain energy efficiency and carbon 
reduction projects also would receive a portion of the permits. 
Most of the permits would be allocated to the Federal 
Government for sale to power plant owners and operators. 
Proceeds from the sale of those Government-owned permits would 
be distributed to household electricity consumers, workers, 
communities, and companies adversely affected by the new 
emission limits.
    CBO estimates that enacting S. 556 would increase 
governmental receipts (i.e., revenues) by about $113 billion, 
net of income and payroll tax offsets over the 2009-2012 
period. CBO estimates that enacting S. 556 would result in 
direct spending of about $0.3 billion in 2003, $3 billion over 
the 2003-2007 period, and $154 billion over the 2003-2012 
period. Over the next 6 years, all of the estimated increase in 
spending would be by TVA to comply with pollution limits 
imposed by the bill. Those costs would be offset over time 
(perhaps 30 to 40 years) by increased rates on TVA's power 
sales. Beginning in 2009, the revenues collected under the bill 
for sale of emission permits would be spent, resulting in most 
of the estimated direct spending over the 2003-2012 period.
    Finally, CBO estimates that implementing S. 556 would cost 
$25 million in 2003, $175 million over the 2003-2007 period, 
and $371 million over the 2003-2012 period, assuming 
appropriation of the authorized and necessary amounts for 
preparing rules, implementing new pollution control programs, 
and air quality monitoring initiatives that would be 
established by S. 556.
    S. 556 contains several intergovernmental and private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA). The single most costly mandate contained in the bill 
would cap the amount of emissions of carbon dioxide, sulfur 
dioxide, and nitrogen oxides emitted by large electricity-
generating facilities and would require the owners and 
operators of such facilities to purchase permits for the right 
to emit those pollutants beginning in 2009. CBO estimates that 
the cost to the electricity industry of meeting those emission 
limits could amount to as much as $40 billion in 2009. 
NonFederal public power represents roughly 8 percent of the 
nation's electricity generation from fossil fuels. CBO expects 
that public power facilities would absorb a proportional amount 
of the total cost borne by the sector; the remaining share 
would accrue to private utilities. While we cannot precisely 
estimate the costs of many of the other mandates in the bill, 
CBO estimates that the aggregate direct costs of all the 
mandates would be well in excess of the annual thresholds for 
intergovernmental and private-sector mandates established by 
UMRA ($58 million and $115 million in 2002, respectively, 
adjusted annually for inflation), starting in 2009.
Estimated Cost to the Federal Government
    The estimated budgetary impact of S. 556 is shown in the 
following table. The costs of this legislation fall within 
budget functions 300 (natural resources and environment) and 
270 (energy).
Basis of Estimate
    For this estimate, CBO assumes that S. 556 will be enacted 
near the beginning of calendar year 2003. The following 
paragraphs explain our estimates of the revenues that would be 
collected from the sale of emissions permits and the spending 
associated with these revenues. Also detailed below is our 
estimate of the roughly $30 million a year in discretionary 
costs to implement the bill. Outlays for discretionary programs 
are based on historical rates of spending for similar programs.


                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
       CHANGES IN REVENUES
Sale of Emission Permits:
    Estimated Revenues..........       0       0       0       0       0       0    24.1    26.8    29.6    32.7

  CHANGES IN DIRECT SPENDING\1\
Spending from Sale of Emission
 Permits:
    Estimated Budget Authority..       0       0       0       0       0       0    32.2    35.8    39.5    43.6
    Estimated Outlays...........       0       0       0       0       0       0    32.2    35.8    39.5    43.6

2Tennessee Valley Authority:
    Estimated Budget Authority..     0.3     0.6     0.7     0.8     0.8     0.6     0.1    -0.2    -0.2    -0.2
    Estimated Outlays...........     0.3     0.6     0.7     0.8     0.8     0.6     0.1    -0.2    -0.2    -0.2

Total Changes in Direct
 Spending:
    Estimated Budget Authority..     0.3     0.6     0.7     0.8     0.8     0.6    32.3    35.6    39.3    43.4
    Estimated Outlays...........     0.3     0.6     0.7     0.8     0.8     0.6    32.3    35.6    39.3    43.4
----------------------------------------------------------------------------------------------------------------
\1\ In addition to increasing direct spending, CBO estimates that implementing this bill would cost an average
  of about $30 million a year, subject to the availability of appropriated funds, to conduct air-quality
  monitoring and administer the emission permits required under the bill.

Revenues from Sale of Permits
    S. 556 would establish a system to cap the emission of 
certain air pollutants created as a by-product of the 
generation of electricity-using fossil fuels and would require 
owners and operators of electricity-generating facilities to 
purchase annual permits for any of the covered pollutants 
emitted. Under the bill, the permits would each represent the 
authority to emit one ton of the regulated pollutants for a 
year. S. 556 would allocate such permits to various groups who 
could sell them to the electricity industry. Electricity 
generators, qualified energy efficiency projects, and certain 
carbon reduction projects would receive about 32 percent of the 
permits starting in 2008, decreasing to 23 percent by 2017. The 
remainder of the permits would be allocated to the Federal 
Government on behalf of certain groups and for designated 
purposes.
    In CBO's view, the pollution permitting system established 
in S. 556 would have an effect similar to a tax on pollution 
emitted by electricity generators. A direct tax on pollution 
would increase the cost of emitting pollution in an amount 
designated by the Government. S. 556 would increase the cost of 
pollution by an amount equal to the price established in the 
marketplace for pollution permits. Thus, CBO would consider the 
funds generated from the annual sale of permits by the 
Government to be governmental receipts (i.e., revenues).
    Based on the estimated value of permits discussed below, we 
estimate that the sale of permits by the Government would 
generate net revenues of about $113 billion over the 2009-2012 
period. Although permits would be available starting in 2008, 
companies would not be required to provide proof of purchase 
until 2009 when we estimate collections and spending would 
start. In addition, the bill would establish penalties for 
firms that generate pollution in excess of the permits they 
hold, but CBO estimates that such penalties would be negligible 
because we expect firms would comply with the requirement to 
obtain permits.
    Emission Caps: Starting in 2008, S. 556 would establish 
annual caps on the emissions of carbon dioxide at 2,050 million 
tons, sulfur dioxide at 2.25 million tons, and nitrogen oxides 
at 1.51 million tons. Mercury emissions would be capped at 5 
tons, but there would be no permits issued or required for that 
pollutant. These limits would require reductions in emissions 
by the electricity industry of roughly 75 percent below the 
1997 emissions levels for nitrogen oxides and sulfur dioxide, 
90 percent below the 1997 emissions level of mercury, and a 
reduction to the 1990 level of carbon dioxide emissions (the 
1990 level was about 12 percent below the 1997 level).
    Permit Price: The revenues that would be collected under S. 
556 depend on the price received from the sale of the permits. 
To estimate the price of pollution permits that would be issued 
under this bill, CBO used an analysis by the Energy Information 
Administration (EIA) that models a scenario similar to what 
would be imposed by S. 556. In July 2001, EIA issued a report 
titled Strategies for Reducing Multiple Emissions from Electric 
Power Plants. In that report, EIA analyzed the effects on the 
electricity industry of capping the four pollutants addressed 
in S. 556 to levels very similar to those in the bill. 
According to the EIA analysis, if all four pollutants were 
reduced to levels similar to those imposed by S. 556, the 
effort to meet the carbon dioxide and mercury limits would 
result in effectively meeting the caps on the other emissions. 
Thus, for this estimate, we assume that the only permit with a 
significant cash value would be the carbon dioxide permit. That 
is, electricity generators would likely be willing to pay a 
significant price for the carbon dioxide permit.
    Although the bill also would require that owners and 
operators of electricity plants obtain permits for any sulfur 
dioxide or nitrogen oxides released during the generation of 
electricity, we expect that the permits for those two 
pollutants would have a negligible price. As a consequence of 
meeting the carbon dioxide and mercury caps in the bill, 
electricity generators would reduce the amount of sulfur 
dioxide and nitrogen oxides emissions below the caps 
established by S. 556. That action would result in a supply of 
permits for those two pollutants well in excess of the demand 
for those permits. In this situation, we expect that the 
permits for sulfur dioxide and nitrogen oxides would be sold at 
a negligible price that would cover any transaction costs 
involved in the process of selling the permits. As a result, we 
have estimated only the value to the Government of selling the 
carbon dioxide permits.
    EIA estimated the market price of permits to emit carbon 
dioxide by using its model of the U.S. electricity system to 
estimate the permit price that forces power suppliers and 
consumers to make sufficient changes in investment, operations, 
and conservation activities to meet each of the caps. Because 
coal-fired generation produces the highest levels of pollution 
that would be reduced and regulated under the modeled scenario, 
EIA estimates significant reductions in the use of coal to make 
electricity. Currently, about 50 percent of total electricity 
generation in the United States is produced from coal. Under 
the scenario modeled by EIA and used for this estimate, 
electricity generation from coal would be about 40 percent 
lower by 2010 than it would have been without legislation to 
establish pollution caps. Natural gas generation and, to a 
lesser degree, renewable energy generation would increase under 
the model.
    The amount of fuel switching in the electricity industry 
that EIA projects under a multi-pollution cap scenario relies 
on some significant assumptions. Specifically, the model 
assumes that new generating capacity would be built as needed 
to replace generation that would no longer be economic to 
operate under the pollution caps. It assumes that siting and 
permitting for new plants would occur without significant 
delays and that taking electricity plants off-line to install 
significant upgrades of new pollution-control technology would 
not affect the reliability of the electricity system. Finally, 
the EIA model assumes that by 2010, the combination of imports 
and domestic production of natural gas could increase enough to 
accommodate much more natural gas generation of electricity 
(about 70 percent above what it would have been without new 
pollution caps with no more than a 20 percent increase in 
natural gas prices). Any changes in these assumptions could 
change the estimate of permit prices dramatically.
    Based on the information in the EIA report, CBO estimates 
that the price of carbon dioxide permits would be about $23, 
starting in 2008, and would increase to $32 by 2012. The permit 
price would increase annually because as demand for electricity 
grows and new firms enter the market, the availability of 
permits would remain the same, and in some cases, could 
decrease. This would increase the demand for the permits, and 
thus the price for the permits. In the EIA model, the value of 
the permits to electricity producers is equal to the cost of 
eliminating one more ton of the pollutant (the marginal cost) 
and generally reflects the lowest-cost combination of 
investments that electricity producers could make to capture 
pollutants and raise the efficiency of their coal-fired power 
plants and replace coal-fired plants with natural gas-fired 
generation. Changes in the assumptions used by EIA would yield 
a different estimate of permit prices.
    Revenue Calculation. Under S. 556, we assume that starting 
in 2008 and for each year thereafter, the amount of carbon 
dioxide generated from electricity production would meet the 
2,050 million ton cap established in the bill. To achieve that 
result, we expect that the Government would sell all of its 
permits each year at the prices discussed above. Thus, we 
estimate that the Government's 1,403 million permits (68.4 
percent of the total in 2008, increasing annually) would 
generate about $32 billion in 2009 because permits generated 
for emissions in 2008 would not be required until the following 
year. The lag between when emissions are generated and when 
permits must be obtained would continue. Overall, we estimate 
that S. 556 would generate gross revenues of about $151 billion 
over the 2009-2012 period.
    However, the cost of the permits adds to the cost of the 
electricity industry, which passes the cost on to consumers. 
When consumers spend less in the economy, the result is a 
reduction in corporate and individual taxes. CBO estimates that 
this decline in income and payroll tax receipts would equal 25 
percent of the total amount of the revenue generated from 
permit sales. Thus, we estimate that net revenues under S. 556 
would total about $24 billion in 2009 and $113 billion over the 
2009-2012 period.
    Penalties. Under S. 556, civil penalties would be assessed 
for failure to submit the adequate number of permits for each 
of the pollutants covered under the bill. Because civil 
penalties would be assessed at a cost of three times the market 
rate for a permit, we would expect most firms to comply with 
the bill. Currently, under the Environmental Protection 
Agency's Acid Rain Program, penalties are collected on 
emissions of sulfur dioxide and nitrogen oxides in excess of 
submitted allowances. Penalties currently collected under that 
program are less than $500,000 a year, and CBO estimates that 
any additional revenues that would be collected under S. 556 
also would be less than $500,000 a year.
Direct Spending
    Enacting S. 556 would increase direct spending primarily by 
using the proceeds from the sale of pollution permits, 
beginning in 2009, for assistance to electricity consumers. 
Some of the proceeds would be used for other purposes as well. 
In addition, complying with the bill would cause an increase in 
spending by TVA over the next several years (but that spending 
would be offset, over time, by increases in TVA receipts). In 
total, CBO estimates direct spending increases of $3 billion 
over the 2003-2007 period and $154 billion over the 2003-2012 
period.
    Allocation of Pollution Permits: S. 556 would allocate 
permits to different groups who could sell them to the 
electricity industry and use the proceeds for designated 
purposes. Electricity generators, qualifying energy efficiency 
projects, and certain projects designed to remove carbon from 
the atmosphere would receive 31.6 percent of the permits 
starting in 2008, decreasing to 22.6 percent by 2017. The 
remainder would be allocated to the Federal Government for 
various programs. CBO estimates that spending of the proceeds 
from the sale of permits by the Government under S. 556 would 
start in 2009 and total about $153 billion over the 2009-2012 
period. Such spending would be spread among various purposes 
designated in the bill as discussed below.
    Household Electricity Consumers: S. 556 would allocate most 
of the permits to residential electricity consumers. Through 
the Federal Government (or its agent), consumers would receive 
62.4 percent of the proceeds from the sale of permits in 2009, 
increasing annually by 1.5 percent. Electricity consumers could 
receive the proceeds from the sale of the permits as a rebate 
on their electricity bill or by some other means. CBO estimates 
that such assistance to electricity consumers would start at 
about $29 billion in 2009 and increase, as the permit price and 
the amount of permit sale proceeds allocated to electricity 
consumers increases, to about $41 billion in 2012. We estimate 
that spending by the Government for assistance to electricity 
consumers over the 2009-2012 period would total about $140 
billion.
    Transition Assistance: In 2009, S. 556 would allocate 6 
percent of proceeds from permit sales to workers and 
communities that experience adverse economic impacts as a 
result of the emissions reductions imposed by the bill and to 
producers of electricity intensive products. The percentage of 
permit sale proceeds available to these groups would be reduced 
annually by one-half of a percent, reaching 4 percent in 2012 
and 1.5 percent of permit sales in 2017. Either the Federal 
Government or its agent would be responsible for allocating the 
proceeds to these groups. CBO estimates that spending for 
transition assistance would start at about $2.8 billion in 2009 
and be reduced to about $2.7 billion in 2012. We estimate that 
total spending for transition assistance would be about $11 
billion over the 2009-2012 period.
    Tennessee Valley Authority: CBO estimates that implementing 
this bill would increase direct spending by the Tennessee 
Valley Authority by about $3 billion over the 2003-2012 period, 
but should have no net budgetary impact over 30 to 40 years. 
TVA is one of the nation's largest electricity marketers and 
currently accounts for about 5 percent of the country's coal-
generation capacity. For this estimate, CBO assumes that TVA 
would comply with the bill in the same manner as private 
utilities. We estimate that replacing 40 percent of its coal 
facilities by 2009 would cost about $6 billion (including 
interest costs), but we expect that this increase would be 
partially offset by lower spending on pollution controls and 
other upgrades to the facilities being taken out of service, 
saving about $1 billion relative to current law. TVA is 
required to recover all of its costs over time through proceeds 
from electricity sales. For this estimate, we assume that the 
agency would increase rates to recover the cost of the new 
investments over a 30-year period and that the additional 
amounts collected to recover those expenditures would total 
about $2 billion over the 2003-2012 period. Hence, the net 
effect of those TVA actions over the 10-year period is about $3 
billion.
    In addition, we expect that TVA would increase electricity 
rates by about $6 billion over the 2009-2012 period, which is 
the amount necessary to cover the annual cost of carbon dioxide 
permits for its own use. We assume that TVA would purchase all 
of its permits from the Government. Because the increase in 
receipts to TVA would be used to purchase the required permits, 
there would be no net increase in direct spending resulting 
from this requirement. However, the increased receipts would be 
counted as revenues collected by the Government from the sale 
of its permits.
Spending Subject to Appropriation
    S. 556 would authorize the appropriation of $27.2 million 
annually over the 2003-2012 period for operational support, 
equipment, and modernization for several air quality monitoring 
programs managed by the Environmental Protection Agency (EPA) 
and supported by several other agencies. In addition, based on 
information from EPA, we estimate that the bill would authorize 
$11 million in 2003 and $55 million over the 2003-2007 period 
for new rulemakings, reports, and pollution control programs 
that would be established by the bill. We estimate that outlays 
for these purposes under S. 556 would total $25 million in 
2003, $175 million over the 2003-2007 period, and about $370 
million over the 2003-2012 period, assuming the appropriation 
of the necessary and authorized amounts.
    Air Quality Monitoring: S. 556 would authorize the 
appropriation of $27.2 million a year over the 2003-2012 period 
for operational support, equipment, and modernization for 
several air quality monitoring programs managed by EPA and 
supported by other agencies. In 2002, those programs received 
about $20 million. CBO estimates that implementing these 
monitoring programs would cost $18 million in 2003, $125 
million over the 2003-2007 period, and about $260 million over 
the 2003-2012 period, assuming appropriation of the authorized 
amounts.
    Program Implementation: Based on information from EPA, CBO 
estimates that implementing S. 556 would require the 
appropriation of $11 million in 2003, $55 million over the 
2003-2007 period, and $115 million over the 2003-2012 period 
for rulemakings, program implementation, air quality 
monitoring, and reporting relating to the pollution control 
programs that would be established by the bill. Currently, EPA 
manages a program to issue rulemakings and manage and track the 
trading of permits for pollutants covered under the Acid Rain 
Program. Based on information from EPA, we estimate that the 
agency will spend about $12 million on that program in 2002.
    We expect that new programs established under S. 556 would 
cost slightly less than the current Acid Rain Program, as some 
pollution permitting and tracking systems through that program 
are currently in place. Based on information from EPA, we 
expect that about $3 million a year would be spent on outside 
contracting for modeling and programming related to the new air 
quality standards and for workshops and guidance programs for 
regulated firms. About $8 million a year would be spent on 
additional staff to manage and support the complex rulemakings, 
allocation of emissions permits, monitoring, and data 
collection and analysis required by the bill. Overall, we 
expect that spending for the new programs authorized by S. 556 
would be $7 million in 2003, $50 million over the 2003-2007 
period, and $110 million over the 2003-2012 period, assuming 
appropriation of the necessary amounts.
Intergovernmental and Private-Sector Impact
    S. 556 would impose mandates by:

      Establishing national caps on emissions of carbon 
dioxide, sulfur dioxide, and nitrogen oxides produced by large 
electricity-generating facilities and requiring the owners or 
operators of such facilities to purchase permits for the right 
to emit the substances;
      Requiring owners or operators of coal-fired 
generating facilities to reduce their emissions of mercury;
      Eliminating current exemptions for certain coal-
fired facilities from adopting best available control 
technology, as determined by the EPA Administrator;
      Requiring electricity generators to monitor 
ambient air quality and report on local emissions of sulfur 
dioxide, nitrogen oxides, and carbon dioxide;
      Establishing standards intended to prevent the 
re-release of captured mercury;
      Requiring EPA to issue standards for hazardous 
air pollutants emitted from coal-fired generating facilities;
      Granting EPA new authority to establish 
additional emission reductions to prevent adverse local 
impacts, to protect public health, welfare or the environment 
and to protect certain sensitive ecosystems; and
      Requiring States, as part of their State 
Implementation Plans, to identify electric facilities that are 
significantly contributing to that State's nonattainment status 
under the Clean Air Act.

    While we cannot precisely estimate the costs of many of the 
mandates in the bill, CBO estimates that the aggregate direct 
costs of both the intergovernmental and private-sector mandates 
in S. 556 would be well in excess of the annual thresholds 
established by UMRA starting in 2009. The thresholds are $58 
million for intergovernmental mandates and $115 million for 
private-sector mandates in 2002, and are adjusted annually for 
inflation.
Cap and Trade Program for Emissions of Carbon Dioxide, Sulfur Dioxide, 
        and Nitrogen Oxides
    Beginning in 2008, S. 556 would establish national caps on 
emissions of carbon dioxide, sulfur dioxide and nitrogen 
oxides. The bill would require the owners or operators of large 
electricity-generating facilities, those which have a capacity 
to generate 15 megawatts or more, to purchase permits 
consistent with the amount of annual emissions from their 
facility. S. 556 would establish caps on the emissions of 
carbon dioxide at 2,050 million tons; sulfur dioxide at 2.25 
million tons; and nitrogen oxides at 1.51 million tons. Those 
limits would require reductions in emissions by the electricity 
industry of roughly 75 percent below the 1997 emissions levels 
for sulfur dioxide and nitrogen oxides and a reduction to the 
1990 level of carbon dioxide emissions. Programs to control 
atmospheric emissions from the production of electricity 
already exist, largely under the authority of the Clean Air 
Act. Such programs include a mix of emissions standards, 
technology standards, and cap and trade programs that directly 
affect emissions of sulfur dioxide and nitrogen oxides, among 
other air pollutants. Those programs may affect carbon dioxide 
emissions indirectly by influencing fuel choice, but no 
programs specifically targeting carbon dioxide emissions 
currently exist.
    Under S. 556, the owners and operators of large 
electricity-generating facilities would purchase one permit for 
each ton of a pollutant emitted. The July 2001 EIA analysis, 
upon which CBO has based its estimate of permit prices, 
indicated that if facilities meet the carbon dioxide and 
mercury limits, they also would effectively meet the caps on 
the other two pollutants. Therefore, the permit prices for 
sulfur dioxide and nitrogen oxides emissions would be 
negligible (covering only relevant transactions costs) if the 
caps on those pollutants would be applied in combination with 
the carbon dioxide and mercury limitations. Accordingly, CBO 
estimates that the cost to the electricity-generating industry 
of complying with the sulfur dioxide and nitrogen oxides cap 
and trade programs would be minimal.
    CBO estimates that the price of carbon dioxide permits 
would be about $23 per short ton of carbon dioxide in 2009, 
increasing to $32 by 2012. CBO expects that plants will begin 
making expenditures to comply with the emissions caps well in 
advance of 2009. If the electricity-generating industry were 
required to purchase all carbon dioxide permits available in 
2009, the cost would amount to roughly $47 billion. However, S. 
556 would allocate 10 percent of the permits to the industry in 
2009 and would decrease that allocation by 1 percent each year 
until 2017. Other offsets for individual generators may exist 
because certain clean fossil fuel generating units, combined 
heat and power generators, utilities that improve the 
efficiency of transmission and distribution systems, and 
utilities involved in geologic carbon sequestration would be 
eligible to receive an additional allocation of permits. Thus 
the total cost to industry could amount to as much as $40 
billion in 2009, when the permits are first purchased, 
increasing to as much as $60 billion in 2012. Because 
nonFederal public power represents 8 percent of the industry, 
CBO estimates that about $3 billion of the cost would be 
absorbed by public power in 2009, increasing to roughly $5 
billion in 2012.
Standards for Mercury Emissions Generated By Coal-Fired Facilities
    Mercury emissions are currently regulated only indirectly 
under the requirement that new plants adopt the best available 
control technology. In December 2000, EPA stated its intent to 
regulate mercury from coal-fired power plants. The agency is 
not scheduled to issue final regulations until December 2004. 
S. 556 would establish a national emissions standard, set at 
2.48 grams of mercury per 1,000-megawatt hours of electricity 
from all coal-fired generating facilities, beginning in 2008. 
That standard may be raised after 2 years if generators are 
unable to reduce national emissions of mercury by electricity 
generators to 5 tons annually. According to the EIA analysis, 
achieving the carbon dioxide cap required by the bill would 
advance the industry's progress toward meeting the mercury 
limit. Additional costs above the carbon dioxide requirement 
could be about $2.2 billion annually, beginning in 2008, based 
upon a compliance cost of approximately $220,000 per pound of 
mercury emitted. The incremental cost of meeting the mercury 
limit contained in S. 556 could be lower if in 2004 EPA issues 
regulations to limit mercury emissions that would take effect 
prior to 2008.
Eliminate Exemptions for Coal-fired Facilities from Adopting Best 
        Available Control Technology
    The Clean Air Act Amendments of 1977 exempt generating 
facilities that existed prior to 1971, and plants that did not 
make major modifications to their facilities, from the 
requirements of the New Source Review program. That program 
requires plants to install particular equipment to limit 
emissions, known as the best available control technology or 
BACT, as determined by the EPA Administrator. At the time, it 
was believed that older plants would soon be retired, but the 
industry has successfully extended their lives and in many 
cases increased their generating capacity. Starting in 2013, S. 
556 would bring those older facilities (there are over 700 of 
them) under the same restrictions on technology that apply to 
newer facilities. Further, the provision would require all 
coal-fired facilities, upon their 40th birthday, to install 
BACT when modifying the facility, regardless of whether the 
modification is major or not. Information provided by industry 
and governmental sources indicates that the technology that 
would be installed to meet the carbon dioxide and mercury 
emissions caps would satisfy the BACT standard. Therefore, CBO 
expects that there would be no cost for complying with this 
mandate.
Monitoring of Air Quality and Reporting on Local Emissions.
    Under S. 556, EPA would issue regulations requiring that 
electricity generators report information on the amount of 
covered pollutants emitted each year, gathered through the use 
of continuous emissions monitoring systems. The bill details 
specific requirements for monitoring of ambient air quality at 
large coal-fired facilities to begin January 2004, which would 
include stationing monitors at no fewer than two points within 
three miles of the facility. Currently, there are requirements 
for the continuous monitoring and reporting of sulfur dioxide 
and nitrogen oxides emissions for units regulated under the 
Acid Rain program and nitrogen oxides emissions programs. In 
addition, EPA has specified procedures for monitoring or 
estimating carbon dioxide emissions, although to date, such 
monitoring has not been required. Accordingly, some facilities 
are already monitoring emissions from their facilities 
voluntarily to comply with existing regulations. CBO does not 
have sufficient information on current emissions monitoring 
practices in the industry nor the requirements that would be 
contained in future EPA regulations to estimate the cost of 
this mandate.
Safeguards Against the Re-Release of Captured Mercury
    The bill would require EPA to promulgate regulations 
ensuring that mercury contained in coal wastes is not re-
released into the environment in either disposal or recycling 
of the substance. Coal wastes are a byproduct of the treatment 
of coal before combustion, coal combustion itself, sulfur 
dioxide scrubbing, and the treatment of flue gases. While a 
portion of the coal wastes are contained in disposal units, 
some of the wastes, including ash, are recycled for use in 
agricultural applications or in the production of wallboard and 
cement. In terms of coal waste disposal, among other 
requirements, the regulations to be promulgated by EPA would 
require daily covers on all active waste disposal units and 
permanent covers on all inactive waste disposal units. In terms 
of coal waste recycling, the regulations would eliminate 
agricultural uses and require businesses that process or use 
coal wastes to limit mercury emissions. According to industry 
sources, those recycling applications account for roughly half 
of the current use of all coal combustion byproducts. At this 
time, neither EPA nor the industry could provide any 
information on the costs stemming from such regulations. 
Therefore, CBO cannot determine the cost of this mandate.
New Standards for Hazardous Air Pollutants
    Prior to January 2006, S. 556 would require EPA to 
promulgate emissions standards for hazardous air pollutants 
emitted by coal-fired generating facilities. Because there are 
numerous substances to which regulations could be applied and 
EPA cannot provide information as to the scope of such 
regulations, CBO cannot estimate the impact of such regulations 
on affected facilities.
Additional Authority to Regulate Emissions
    Pending the outcome of a 3-year study on emissions 
allowance trading, the bill would grant EPA the authority to 
limit the emissions from a specific electricity-generating 
facility in order to avoid adverse local impacts such as the 
endangerment of public health, contribution to acid deposition 
in a sensitive area, and other degradation of the environment. 
In addition, S. 556 would allow the Administrator to require 
reductions in national emissions beyond those required by the 
bill if the Administrator believes the reductions are not 
reasonably anticipated to protect public health or welfare or 
the environment. And finally, beginning as early as 2008, the 
bill would grant EPA the authority to regulate emissions of 
sulfur dioxide and nitrogen oxides for the protection of 
sensitive ecosystems. Sensitive ecosystems identified by the 
bill include the Adirondack Mountains, mid-Appalachian 
Mountains, Rocky Mountains, southern Blue Ridge Mountains, the 
Great Lakes, Lake Champlain, Long Island Sound, and the 
Chesapeake Bay. In the event the agency uses any of the new 
authority granted, compliance with new limits would constitute 
a mandate under UMRA. However, because EPA could not provide 
information as to whether such authority would be used, CBO has 
no basis to estimate the cost for the industry to comply.
State-Reporting Requirements
    States would be required, as part of their responsibilities 
under the Clean Air Act, to periodically report on the 
electricity-generating facilities that are significantly 
contributing to their nonattainment status for ozone. Based on 
information from State air pollution administrators, CBO 
estimates that this new requirement would not significantly 
increase the costs that States incur to comply with the Clean 
Air Act.

Estimate Prepared By: Federal Spending: Lisa Cash Driskill 
(226-2860); Federal Revenues: Annabelle Bartsch (226-2685), 
Lisa Cash Driskill (226-2860), Dick Farmer and Terry Dinan 
(226-2940); Impact on State, Local, and Tribal Governments: 
Theresa Gullo (225-3220); Impact on the Private Sector: Lauren 
Marks and Dick Farmer (226-2940).

Estimate Approved By: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis; and G. Thomas Woodward, Assistant 
Director for Tax Analysis.
                              ----------                              


                               APPENDIX I

                 National Ambient Air Quality Standards
------------------------------------------------------------------------
                               Pollutant Standard       Standard Type
------------------------------------------------------------------------
Carbon Monoxide (CO):
    8-hour Average..........  9 ppm (10 mg/m3)....  Primary
    1-hour Average..........  35 ppm (40 mg/m3)...  Primary
Nitrogen Dioxide (NO2):
    Annual Arithmetic Mean..  0.053 ppm (100        Primary & Secondary
                               g/m3).
Ozone (O3):
    1-hour Average..........  0.12 ppm (235 g/m3).
    8-hour Average..........  0.08 ppm (157 g/m3).
Lead (Pb):
    Quarterly Average.......  1.5 g/m3...  Primary & Secondary
Particulate (PM10)--
 Particles with diameters of
 10 micrometers or less:
    Annual Arithmetic Mean..  50 g/m3....  Primary & Secondary
    24-hour Average.........  150 g/m3...  Primary & Secondary
Particulate (PM2.5)--
 Particles with diameters of
 2.5 micrometers or less:
    Annual Arithmetic Mean..  15 g/m3....  ....................
     Primary & Secondary
    24-hour Average.........  65 g/m3....  ....................
     Primary & Secondary
Sulfur Dioxide (SO2):
    Annual Arithmetic Mean..  0.03 ppm (80 g/m3).
    24-hour Average.........  0.14 ppm (365 g/m3).
    3-hour Average..........  0.50 ppm (1300        Secondary
                               g/m3).
------------------------------------------------------------------------
Parenthetical value is an approximately equivalent concentration.

                              ----------                              


      APPENDIX II--BIBLIOGRAPHY OF RESEARCH ON HEALTH IMPACTS OF 
                            PM2.5

2002

  National Environmental Trust. 2002. ``Toxic Beginnings: 
        Cancer Risks to Children from California's Air 
        Pollution.'' See http://environet.policy.net/health/
        toxic--beginnings02.pdf.

  Pope, C. Arden III, Burnett, Richard T., et al. March 6, 
        2002. ``Lung Cancer, Cardiopulmonary Mortality, and 
        Long-Term Exposure to Fine Particulate Air Pollution.'' 
        Journal of the American Medical Association 
        287(9):1132-1141.
2001

  Avol, E.L., Gauderman, W.J., et al. 2001. ``Respiratory 
        Effects of Relocating to Areas of Differing Air 
        Pollution Levels.'' American Journal of Respiratory and 
        Critical Care Medicine 164:2067-2072.

  Brown, K.H., Suh, H.H., et al. April, 2001. 
        ``Characterization of Personal-Ambient PM2.5 
        Relationships for Children and Older Adults.'' Health 
        Effects Institute Annual Conference, Program and 
        Abstracts.

  Katsouyanni, K., Touloumi, G., et al. 2001. ``Confounding and 
        Effect Modification in the Short-Term Effects of 
        Ambient Particles on Total Mortality: Results from 29 
        European Cities within the APHEA2 Project.'' 
        Epidemiology 12:521-531.

  Lewtas, J., Binkova, B., et al. 2001. ``Biomarkers of 
        Exposure to Particulate Air Pollution in the Czech 
        Republic.'' In: Teplice Program: Impact of Air 
        Pollution on Human Health. Academia Press: Prague.

  Ostro, B., Lipsett, M., et al. 2001. ``Air Pollution and 
        Exacerbation of Asthma in African-American Children in 
        Los Angeles.'' Epidemiology 12(2):200-208.

  Otto, D., Skalik, I., et al. 2001. ``Neurobehavioral Effects 
        of Exposure to Environmental Pollutants in Czech 
        Children.'' In: Teplice Program: Impact of Air 
        Pollution on Human Health. Academia Press: Prague.

  Peters, Annette, Dockery, Dougles, et al. 2001. ``Increased 
        Particulate Air Pollution and the Triggering of 
        Myocardial Infarction.'' Circulation 103:2810-2815.
2000

  Abt Associates, Inc. with ICF Consulting. October, 2000. 
        ``The Particulate-Related Health Benefits of Reducing 
        Power Plant Emissions.'' Bethesda, MD; and

  Clean Air Task Force. October, 2000. ``Death, Disease & Dirty 
        Power: Mortality and Health Damage Due to Air Pollution 
        from Power Plants.'' Boston, MA.

  Gauderman, J.W., McConnell, R., et al. 2000. ``Association 
        between Air Pollution and Lung Function Growth in 
        Southern California Children.'' American Journal of 
        Respiratory and Critical Care Medicine 162:1383-1390.

  Goldberg, M.S., Bailar, J.C. III, et al. October, 2000. 
        ``Identifying Subgroups of the General Population That 
        May be Susceptible to Short-Term Increases in 
        Particulate Air Pollution: A Time-Series Study in 
        Montreal, Quebec.'' Health Effects Institute, Research 
        Report Number 97.

  Heinrich, J., Hoelscher, B., and H.E. Wichmann. 2000. 
        ``Decline of Ambient Air Pollution and Respiratory 
        Symptoms in Children.'' American Journal of Respiratory 
        and Critical Care Medicine 161:1930-1936.

  Krewski, D., Burnett, R.R., et al. July, 2000. ``Reanalysis 
        of the Harvard Six Cities Study and the American Cancer 
        Society Study of Particulate Air Pollution and 
        Mortality.'' Health Effects Institute: Boston, MA.

  Pope, C.A. III. 2000. ``Epidemiology of Fine Particulate Air 
        Pollution and Human Health: Biological Mechanisms and 
        Who's at Risk?'' Environmental Health Perspectives 
        108(suppl 4):713-723.

  Samet, J.M., Dominici, F., et al. June, 2000. ``The National 
        Morbidity, Mortality, and Air Pollution Study. Part II: 
        Morbidity, Mortality and Air Pollution in the United 
        States.'' Health Effects Institute Research Report 94, 
        Part II; and

  Samet, J.M., Zeger, S.L., et al. May, 2000. ``The National 
        Morbidity, Mortality, and Air Pollution Study. Part I: 
        Methods and Methodological Issues.'' Health Effects 
        Institute Research Report 94, Part I.

  Schwartz, Joel. 2000. ``The Distributed Lag Between Air 
        Pollution and Daily Deaths.'' Epidemiology 11:320-326.

  Thurston, G.D. September 1, 2000. ``Particulate Matter and 
        Sulfate: Evaluation of Current California Air Quality 
        Standards with Respect to Protection of Children.'' 
        California Air Resources Board, Office of Health Hazard 
        Assessment.

  Tolbert, P., et al. 2000. ``Air Quality and Pediatric 
        Emergency Room Visits for Asthma in Atlanta, Georgia.'' 
        American Journal of Epidemiology 151(8):798-810.
1999

  Bobak, M. and D. Leon. 1999. ``The Effect of Air Pollution on 
        Infant Mortality Appears Specific for Respiratory 
        Causes in the Postneonatal Period.'' Epidemiology 
        10(6):666-670.

  Holgate, S.T., Samet, J.M., et al. (eds). 1999. Air Pollution 
        and Health. San Diego: Academic Press.

  Loomis, D., Castillejos, M., et al. 1999. ``Air Pollution and 
        Infant Mortality in Mexico City.'' Epidemiology 10:118-
        123.

  Norris, G., Young Pong, N., et al. 1999. ``An Association 
        Between Fine Particles and Asthma Emergency Department 
        Visits for Children in Seattle.'' Environmental Health 
        Perspectives 107(6):489-493.

  Pope, C. Arden, III., Dockery, D. 1999. ``Epidemiology of 
        Particle Effects.'' In: Holgate, S., Samet, J., et al. 
        (eds.) Air Pollution and Health. Academic Press: 
        London, UK, pp. 673-705.

  Pope, C. Arden, III., Gold, D., et al. 1999. ``Particulate 
        and Ozone Pollutant Effects on the Respiratory Function 
        of Children in Southwest Mexico City.'' Epidemiology 
        10:8-16.

  Pope, C. Arden, III., Dockery, D., et al. 1999. ``Oxygen 
        Saturation, Pulse Rate, and Particulate Air Pollution: 
        A Daily Time-series Panel Study.'' American Journal of 
        Respiratory and Critical Care Medicine 159:365-372.

  Pope, C. Arden, III., Hill, R. and G. Villegas. 1999. 
        ``Particulate Air Pollution and Daily Mortality on 
        Utah's Wasatch Front.'' Environmental Health 
        Perspectives 107:567-573.

  Pope, C. Arden, III., Verrier, R., et al. 1999. ``Heart Rate 
        Variability Associated with Particulate Air 
        Pollution.'' American Heart Journal 138:890-899.

  Pope, C. Arden, III., Dockery, D., et al. 1999. ``Daily 
        Changes in Oxygen Saturation and Pulse Rate Associated 
        with Particulate Air Pollution and Barometric 
        Pressure.'' Health Effects Institute Research Report 
        Number 83.
1998

  Thurston, G.D. 1998. ``Determing the Pollution Sources 
        Associated with PM Health Effects.'' AWMA VIP-
        81(2):889.

  Zmirou, D., Schwartz, J., et al. 1998. ``Time-Series Analysis 
        of Air Pollution and Cause-Specific Mortality.'' 
        Epidemiology 9(5):495-503.
1997

  Anderson, H.R., Spix, C., et al. 1997. ``Air Pollution and 
        Daily Admissions for Chronic Obstructive Pulmonary 
        Disease in 6 European Cities: Results from the APHEA 
        Project.'' European Respiratory Journal 10:1064-1071.

  Brunekreef, Burt. November, 1997. ``Air Pollution and Life 
        Expectancy: Is There a Relation?'' Occupational 
        Environmental Medicine 54(11): 781-4.

  Katsouyanni K., Touloumi G., et al. 1997. ``Short-Term 
        Effects of Ambient Sulphur Dioxide and Particulate 
        Matter on Mortality in 12 European Cities: Results from 
        the APHEA Project.'' British Medical Journal 314:1658-
        1663.

  Spix, C., Anderson R., et al. 1997. ``Short-Term Effects of 
        Air Pollution on Hospital Admissions of Respiratory 
        Diseases in Europe. A Quantitative Summary of the APHEA 
        Study Results.'' Archives of Environmental Health 
        53:54-64.

  Timonen, K.L. and J. Pekkanen. 1997. ``Air Pollution and 
        Respiratory Health Among Children with Asthmatic or 
        Cough Symptoms.'' American Journal of Respiratory 
        Critical Care Medicine 156:546-552.

  Touloumi, G., Katsouyanni K., et al. 1997. ``Short-Term 
        Effects of Ambient Oxidant Exposure on Mortality: A 
        Combined Analysis within the APHEA Project.'' American 
        Journal of Epidemiology 146:177-185.

  Wang, X., Ding, H., et al. 1997. ``Association Between Air 
        Pollution and Low Birth Weight: A Community-Based 
        Study.'' Environmental Health Perspectives 15:514-520.

  Woodruff, T.J., Grillo, J., and Schoendorf, K.C. 1997. ``The 
        Relationship Between Selected Causes of Postneonatal 
        Infant Mortality and Particulate Air Pollution in the 
        United States.'' Environmental Health Perspectives 
        105:607-612.
1996

  American Thoracic Society, Committee of the Environmental and 
        Occupational Health Assembly. 1996. ``Health Effects of 
        Outdoor Air Pollution. Part 1.'' American Journal of 
        Respiratory Critical Care Medicine 153:3-50; and

  American Thoracic Society, Committee of the Environmental and 
        Occupational Health Assembly, Bascom R., Bromberg P.A., 
        et al. 1996. ``Health Effects of Outdoor Air Pollution. 
        Part 2.'' American Journal of Respiratory and Critical 
        Care Medicine 153:477-498.

  Touloumi G., Samoli E., et al. 1996. ``Daily Mortality and 
        'Winter Type' Air Pollution in Athens, Greece A Time 
        Series Analysis within the APHEA Project.'' Journal of 
        Epidemiology and Community Health 50(suppl 1):S47-S51.
1995

  Katsouyanni, K., Schwartz, J., et al. 1995. ``Short Term 
        Effects of Air Pollution on Health: A European Approach 
        Using Epidemiologic Time Series Data: The APHEA 
        Protocol.'' Journal of Epidemiology and Community 
        Health 50(Suppl 1):S12-S18.

  Pope, C.A., Thun, M.J., et al. 1995. ``Particulate Air 
        Pollution as a Predictor of Mortality in a Prospective 
        Study of U.S. Adults.'' American Journal of Respiratory 
        and Critical Care Medicine 151:669-74.
1993

  Dockery, D.W., Pope C.A., et al. 1993. ``An Association 
        Between Air Pollution and Mortality in Six U.S. 
        Cities.'' New England Journal of Medicine 329:1753-9.
1992

  Pope, C.A., Dockery, D.W. 1992. ``Acute Health Effects of 
        PM10 Pollution in Symptomatic and 
        Asymptomatic Children.'' American Review of Respiratory 
        Disease 145:1123-1128.
                              ----------                              



                         APPENDIX III--Part II

                       General Accounting Office

   ESTIMATE OF DISTRIBUTION OF STATE EMISSION ALLOWANCES DONE BY THE 
          GENERAL ACCOUNTING OFFICE AT THE COMMITTEE'S REQUEST

Analysis of emissions allowance allocations under S. 556

                      OVERVIEW AND KEY ASSUMPTIONS

    The following tables summarize an analysis of emissions 
allowance allocations in 2008 and 2017 under S. 556, using the 
June 27,2002 version of the legislation.
    The allocation calculations are based on the allocation 
mechanism outlined in section 707 of the bill. As described in 
section 707[c], generators of renewable electricity, efficiency 
projects, and cleaner energy sources can receive up to 20 
percent of the total allocation, depending on a variety of 
factors. We analyzed the allocation under two scenarios; the 
first allocates 10 percent of the total to these sources, while 
the second allocates them the maximum 20 percent.
    In addition, the analysis assumes that .0075 percent of the 
carbon dioxide allowances will be allocated to biologic carbon 
sequestration. This is the maximum allowed under the 
legislation. Similarly, the analysis assumes that 1.5 percent 
of the carbon allowances will be allocated to geological carbon 
sequestration--also the maximum allowed under the legislation.
    The analysis of allocations to electricity consumers in the 
States relies on EIA's 2001 data on household electricity 
consumption, by State. These consumption values are static and 
were not adjusted to account for projected changes in 
electricity demand between 2001 and 2017, such as those that 
might result in anticipation of implementing the legislation or 
due to changes in the economy. The reliability of EIA's data 
was not tested.
    The total number of allowances was not reduced to account 
for emissions from electricity co-generation or generation at 
units under 15 Megawatts in size, as required under section 
704[c], or as required under section 705[h], due to data 
limitations. The legislation calls for reductions in the total 
number of allowances equal to the emissions from these sources.


                    Minority Views of Senator Smith

    The effort to develop a multi-pollutant bill in the Senate 
Committee on Environment and Public Works has long been 
regarded as an effort to address three discreet challenges: 1) 
the need for significant reductions of harmful emissions from 
the nation's power plants, 2) the need to streamline the 
regulatory burdens placed on the power sector in a manner that 
increases business certainty for the regulated community and 
improves the investment climate for beneficial new 
technologies, and 3) builds on the success of the Acid Rain 
Program in a way that modernizes our approach to environmental 
policymaking. In the more than 18 hearings held on this topic 
bipartisan support for tackling all three issues simultaneously 
has been voiced by Environment and Public Works Committee 
Members. Regrettably, only the first challenge is taken up by 
S. 556. Additionally, because of the inclusion of a program to 
address carbon dioxide emissions that can be described as 
politically implausible at best, the passage of S. 556 by the 
committee ended any serious discussion on narrowing differences 
to move a bipartisan bill.

Objectives of Multi-Pollutant Legislation

    As demonstrated by numerous statements of Members of the 
Committee on Environment and Public Works, there is widespread 
agreement that scientific evidence continues to demonstrate 
harmful effects on human health and the environment of 
emissions of certain pollutants from power plants and other 
sources. There is also agreement that the mechanisms authorized 
in the Clean Air Act (CAA) to address these pollutants have 
failed to do so in an efficient, effective and comprehensive 
manner. The disjointed nature of those mechanisms have resulted 
in significant uncertainties regarding their potential to 
protect the environment and further uncertainties in the 
business and investment communities.
    As written the CAA provides no clear limit of emissions of 
pollutants from the nation's electricity sector. The chaotic 
jumble of regulatory authorities increases business 
uncertainties for power companies and their investors. The 
disjointed nature of implementation of Title I of the CAA 
increases the costs associated with reducing pollution. The 
lack of a clear implementation time line and the lack of 
flexibility in compliance options stifles investment in and 
development of new, cleaner and more efficient energy 
production and pollution control technologies.
    This dual problem of environmental and economic 
uncertainties seems unlikely to be solved unless the Congress 
addresses a larger question of environmental policymaking. Most 
congressional efforts to update and revise Federal 
environmental policies are at a stalemate nearing paralysis. 
Congress must seek ways to modernize our approach to shed the 
combative nature of the traditional command-and-control policy 
concept. While great strides toward protecting human health and 
the environment have been made through this traditional 
regulatory system, it is insufficiently dynamic to adjust to 
the rapidly evolving nature of the economy. The very nature of 
the problems we face often shift faster than regulations can be 
written to address them.
    Many members of the Committee on Environment and Public 
Works expressed their desire to use the multi-pollutant bill to 
develop a new and more flexible approach to environmental 
policy. Our hope has been to develop a program that would 
provide enough clear benefits to both the environment and the 
economy that it would reduce the level of argument about 
environmental and economic goals interfering with each other. 
To achieve that outcome, the Acid Rain Program was seen by many 
as the best model in existing Federal environmental law upon 
which to build. The reasons for that are detailed below.
    We believe that the statements by Members of the Committee 
on Environment and Public Works clearly illustrate that all of 
the objectives described above should be addressed in multi-
pollutant legislation.

    ``That solution is a market-based, cap-and-trade program 
modeled on the Acid Rain Program a program with clear emission 
reduction levels and compliance dates set in law a program that 
avoids needless litigation and delay and a program that 
provides industry with incentives to make deeper and faster 
reductions than required. That's my goal, and that's what I 
think we all should be working to achieve the most reductions 
with the least litigation and delay.''[Senator Smith: July 16, 
2002 joint hearing before the Committee on Environment and 
Public Works and the Committee on Judiciary hearing to review 
the New Source Review policy, regulations, and enforcement 
activities.]

    ``We, as nation, need to rethink the manner in which we 
approach regulation. We all need to keep an open mind. During 
the debates on various regulatory reform initiatives, I am 
tired of continually hearing that these efforts are ``sneak 
attacks on the environment.'' In fact, it is the opposite. If 
we rethink regulation, we could find ourselves in a place where 
we can have far greater environmental protection and more 
reliable and diverse energy sources.'' [Senator Inhofe: Ibid.]

    ``Eventually, the dam of resistance to this bill will 
break, and a cleaner and clearer future for America's 
environment and a more predictable regulatory climate for our 
industry will result.'' [Senator Lieberman: June 27, 2002 full 
committee business meeting to markup S. 556 and other pending 
business.]

    `` . . . S. 556 provides no regulatory relief. While it 
does recognize half of the goals of re-authorizing the Clean 
Air Act, which was to reduce emissions from power plants, it 
completely ignores the other half that is supposed to be 
considered at the same time--that is, to streamline the Clean 
Air Act and make it more cost-effective. This markup confirms a 
disturbing trend in this committee--a trend of politics over 
policy.'' [Senator Inhofe: Ibid.]

    ``As I have stated many times, I was optimistic that we 
could reach a bipartisan compromise to continue to improve the 
environment and public health, reduce utility emissions, create 
greater regulatory certainty, and ensure that American 
consumers will have safe, reliable and cost-effective 
electricity.'' [Senator Voinovich: Ibid.]

    ``The electric power industry is currently poised to invest 
billions of dollars to rebuild aging energy infrastructure. A 
clear emissions policy would give the industry a solid basis 
for investment decisions involving shareholder money and the 
future of its employees. It just is not sensible to invest in 
emissions controls, new facilities and new technologies while 
trying to decipher the future . . .'' [Senator Corzine: Ibid.]

    ``There has been, and continues to be, a great deal of 
interest in multi-pollutant legislation, on both sides of the 
aisle and within the Administration. I believe that all have 
the same goal as they consider the best way to craft multi-
pollutant legislation to achieve maximum environmental benefits 
in the most efficient and effective manner possible, at the 
least cost to our economy. Deregulation and restructuring of 
the electric utility industry in many areas of the country have 
complicated the cost equation associated with updating 
pollution control technologies. Industry has come to Congress, 
asking for greater regulatory certainty to help them plan for 
long-term capital investments in the electric utility sector.'' 
[Senator Baucus: November 1, 2001 full committee hearing to 
receive testimony on how S. 556 would affect the environment, 
the economy, and any improvements or amendments that should be 
made to the legislation.]

    ``While it is the role of the government to set 
environmental thresholds, it shouldn't mandate how to get 
there. I don't think that any of us, regardless of where we are 
on the political spectrum, believe that the Federal Government 
is more innovative, efficient, or technically competent than 
the private sector. Instead of stifling, even punishing 
innovation, as is current practice, I want to provide 
incentives to be innovative, not only reach the cap, but to do 
better. This is about using the free-market process to reduce 
emissions. If we allow the flexibility for innovation, then 
technology that has already proven itself effective can find 
its way into the mainstream.'' [Senator Smith: July 26, 2001 
full committee hearing on the public health and environmental 
effects of electric power plant emissions.]

    ``This bill will provide the utility industry with the 
flexibility and certainty they need to make business decisions 
while avoiding adverse environmental and public health 
impacts.'' [Senator Lieberman: Ibid.]

    ``Companies like these are leading the way and 
demonstrating that investments in cleaner, more efficient 
technologies can help our economy, as well as our environment. 
But, it is the responsibility of government to foster the 
development of these cutting-edge technologies. We can 
accomplish this by providing regulatory certainty for industry, 
combined with appropriate incentives.'' [Senator Clinton: 
Ibid.]

    ``Our task together on this committee is to find common 
ground on an issue important to the entire nation. We must 
strive to improve the nation's air quality even further. We 
will also try to bring certainty to an industry facing an array 
of complicated rules.'' [Senator Jeffords: July 26, 2001 full 
committee hearing on the public health and environmental 
effects of electric power plant emissions.]

    ``My goal as subcommittee chairman is to harmonize our 
Federal clean air regulations with our nation's energy needs. I 
want a clean environment and cost-effective reliable sources of 
energy that will allow continued economic growth.'' [Senator 
Voinovich: March 21, 2001 subcommittee hearing to receive 
testimony on harmonizing the Clean Air Act with our nation's 
energy policy.]

    ``The regulatory flexibility of a ``cap and trade'' 
program, exemplified by the SO2 Allowance Program, 
has been successful because of the flexibility it allows 
affected utilities. It promotes innovation and competition in 
emissions reduction technologies and has produced tremendous 
cost savings. Since 1990, studies have estimated that the cost 
savings due to emissions trading, compared to the traditional 
command-and-control approach, have been between $230 million 
and $600 million per year. These successes are encouraging but 
our work is not yet done.
    ``In conclusion, I want to say that the success of the 1990 
Clean Air Act Amendments cannot be questioned. The 
SO2 Allowance Program established by that 
legislation has achieved extraordinary benefits at program 
compliance costs less than half of initial projections. The 
efficacy of the approach is proven. The current science 
indicates, however, that we did not go far enough in 1990 in 
setting our emissions reduction targets. We must buildupon our 
accomplishments thus far, and to begin the work which remains 
to be done.'' [Senator Moynihan: October 14, 1999 subcommittee 
hearing to consider issues relating to the re-authorization of 
the Clean Air Act.]

    We are pleased that there is so much common purpose behind 
this effort to revise the CAA. To have a common target only 
increases our chances of success in the long run. As stated 
above, it sadly is our contention that S. 556 does not provide 
any evidence of an effort to achieve these lofty, but 
nonetheless realistic, goals. One need look no further than the 
layers of regulatory complexity S. 556 would add to the CAA or 
the nearly party line vote on the bill to comprehend the 
failure of this bill to satisfy the goals set for it.

The Acid Rain Program

    Others have summarized the underpinnings of the Acid Rain 
Program (ARP) and the reasons for its success are quite well 
understood. Rather than duplicate those explanations, we will 
simply touch on some of the most relevant factors. The ARP was 
included in the Clean Air Act Amendments of 1990 in response to 
evidence of the damage to the environment caused by emissions 
of sulfur dioxide. These emissions contributed to extremely 
high acid levels in lakes, streams, and soils, particularly in 
the Northeast. At the time, the ARP was considered something of 
an experiment.
    This program has been an unparalleled success. We have seen 
nearly 100 percent compliance without any enforcement activity. 
Many of the reductions were made before they were required, and 
overall reductions have generally been greater than required. 
Implementation and compliance costs have been a fraction of the 
estimates at time of enactment. Implementation has not been 
delayed by litigation; in fact, the Acid Rain Program has not 
sparked a single significant lawsuit to date.
    The performance of the ARP stands in stark contrast with 
the rest of Federal environmental law because the mechanism of 
the program is entirely unlike any other Federal environmental 
program. The flexibility allowed under the cap complements 
rather than competes with the traditional modes of business. It 
allows implementation to coincide with other planned physical 
changes to a facility rather than to add to or drive those 
schedules. It encourages facility managers to seek cost 
avoidance by finding the least expensive compliance strategy 
thereby spurring both investment in and competition among the 
control options.
    At the same time, the environmental performance of the 
program has been enhanced by the same flexibility. Because of 
the allowance trading program, many participants chose to 
overcomply and bank allowances for the future. This in turn 
resulted in environmental benefits being realized more rapidly. 
Additionally, the fixed emission cap sets a firm limit of 
environmental exposure to emissions no matter what techniques 
are used to control emissions. This compares favorably to the 
traditional approach which dictates the application of specific 
control devices for specific facilities, but places no limit 
the overall emissions to the atmosphere.

Cap-and-Trade in the Utility Context

    Many interested parties saw a comprehensive cap and trade 
system for the electric utility industry as preferable to the 
current command and control system because cap and trade would 
effectively address the three major problems discussed above 
environmental certainty, business certainty, and a change of 
approach in environmental policymaking. The ease of monitoring 
emissions from power plants and the homogeneity of the industry 
make a cap and trade system for the power sector attractive 
from an implementation standpoint.
    This type of system provides a clear and certain 
environmental outcome, particularly as compared to any of the 
current CAA programs such as New Source Review. Under the New 
Source Review Program, we can be certain of the type of 
hardware a plant must install, but we will have no clear idea 
of the overall effect on emissions.
    A cap and trade program also offers certainty to the 
business community. A single system, rather than innumerable 
and uncoordinated regulations, allows each electric utility to 
maximize long-term investment decisions. Such a system also 
internalizes the cost of pollution in a way that unleashes all 
the favorable forces of the American capitalist market to allow 
for minimizing the cost of achieving environmental protection. 
It also rewards developers of new, environmentally beneficial 
technologies by giving them direct access to a market without 
forcing them to first seek bureaucratic approval of each detail 
of the technology.
    An agreement to accept regulatory streamlining for business 
certainty and emissions reductions for environmental certainty 
would provide the best long-term hope for reducing the amount 
of fractious, hyperbolic debate that threatens to stymie all 
efforts at rational environmental policymaking.

Why S. 556 Is Not the Answer

    Unfortunately, S. 556 does not solve any of the three 
problems discussed above, and it actually exacerbates them. In 
addition to the current scheme of uncoordinated regulation, S. 
556 would add at least 24 rulemaking directives, with the 
obligation of multiple rulemakings under several of the 
directives. This excessive volume of new regulations will only 
slow down the process of controlling emissions by providing 
countless opportunities for litigation and delay and drive up 
the cost of implementation for both the public and private 
sectors. This approach builds on the worst performing aspects 
of the existing CAA.
    Given the partisan result of consideration of S. 556 in the 
Committee on Environment and Public Works, the bill exacerbates 
rather than ameliorates the problems associated with seeking 
constructive progress on environmental problems.
    It is our hope that future efforts to advance multi-
pollutant legislation will hew more closely to the intentions 
expressed by those Senators that have taken an active interest 
in pursuing this initiative.
                  Minority Views of Senator Voinovich

    As the former chairman and current ranking member of the 
Clean Air, Wetlands, and Climate Change Subcommittee, I must 
object strenuously to S. 556 as reported by the Environment and 
Public Works (EPW) Committee. The majority's report cites 
selective research, and ignores new findings that call into 
question the basis for the claims that are made. It vilifies 
fossil fuel combustion, especially coal combustion, and fails 
to recognize the tremendous environmental progress that we have 
already achieved--as is evidenced in the EPA trends reports--
and the progress that is continuing to be made with the air 
quality legislation that we currently have in place.
    In the 107th Congress, several bills have been introduced 
to provide for further reductions of power plant emissions. 
However, the approach taken by Senators James Jeffords (I-VT) 
and Joseph Lieberman (D-CT) in their proposed legislation S. 
556, the Clean Power Act, would have drastic effects on the 
U.S. economy. This is due in large part to the fact that it 
will cause massive fuel switching from low-cost and abundant 
coal to natural gas, which is subject to extremely volatile 
price swings.
    The Jeffords/Lieberman proposal mandates reductions in 
power plant emissions of nitrogen oxide (NOx), sulfur dioxide 
(SO2), carbon dioxide (CO2), and mercury 
through draconian command and control regulations which are 
impossible to meet in the timeframe called for in the bill. 
Although the impact would be the most severe for those regions 
of our nation whose economies rely on manufacturing, S. 556 
would affect many industries causing disastrous consequences to 
our global competitiveness and our economy. Sadly, the hardest 
hit by this short-sighted legislation would be low-income and 
disadvantaged families.

The Clean Air Act

    The Clean Air Act has been extremely successful in reducing 
emissions of pollutants. Since the 1970's, our nation's air 
quality has greatly improved as emissions of all criteria 
pollutants have been reduced by 29 percent: carbon monoxide, 
lead, particulate matter, NOx, ozone, and SO2. At 
the same time, our population has increased by 38 percent, our 
nation's energy consumption has increased by 45 percent, the 
number of miles our vehicles travel each year has increased by 
143 percent, and our gross domestic product has increased by 
160 percent. More can and should be done, however.

                           Illustration No. 1


                           Illustration No. 2


    I support tough new regulations to further ratchet down 
pollutants from power plants and believe we could have 
accomplished just that we could have gotten all interested 
parties to sit at the table to discuss and compromise on multi-
pollutant legislation.. It is unfortunate that the Senate will 
accomplish no clean air improvements this year because the time 
is right to further reduce power plant emissions. The Jeffords/
Lieberman proposal should have been used as a starting point 
for negotiation.
    When Congress established the Clean Air Act in 1970, it 
included minimum national standards for utility emissions in 
order to improve air quality. However, in addition to providing 
low-cost and reliable electricity, these power plants 
unfortunately emit harmful substances into the air that impact 
public health and the environment.
    Since its enactment, the Act has been amended several times 
and has resulted in significant reductions of NOx and 
SO2 from electric utilities. Despite this success, 
several studies have shown that further reductions of NOx and 
SO2 are essential to, among other things, curb acid 
rain, reduce ground-level ozone, and decrease concentrations of 
particulate matter.
    Additionally, there has been an ongoing debate on the need 
to reduce emissions of mercury and CO2. Mercury has 
been proven to bioaccumulate in fish and animal tissue in a 
highly toxic form, and it can cause health impacts. 
CO2, however, is not a pollutant in the traditional 
sense but is linked to the highly uncertain and controversial 
issue of climate change.

Fuel Switching

    In passing this legislation, the committee ignores the 
simple underlying fact that the U.S. relies heavily on fossil 
fuel combustion for the vast majority of its electricity 
generation. Currently, our nation relies on coal for 52 percent 
of our nation's electricity generation. By far, this is our 
cheapest and most abundant energy source, with enough domestic 
supply to meet our country's electricity needs for the next 250 
years. Although it is cleaner today than ever before, coal 
emissions present challenges for air quality. Because coal is 
an important and necessary part of our energy policy and 
economic future, our government has provided substantial 
resources to develop clean coal technologies to make it 
environmentally friendly.
    Despite the progress to make coal increasingly cleaner, the 
Jeffords/Lieberman proposal will put coal out of business for 
two main reasons. First, the bill mandates an unwarranted 
reduction of CO2 emissions to 1990 levels, which is 
about a 20 percent decrease from today's levels. While there is 
no consensus in the scientific community that such a drastic 
reduction is justified, this level will effectively eliminate 
coal as a viable resource for our Nation. This is extremely 
troubling considering our immediate focus on national security 
and reliance on foreign sources for energy.
    Second, the Jeffords/Lieberman bill mandates huge 
reductions of NOx (75 percent), SO2 (75 percent), 
mercury (90 percent), and CO2 (1990 levels) all in 6 
years. Additionally, S. 556 includes a ``birthday provision,'' 
which requires all facilities to install the latest control 
technology either by January 1, 2013 or before the facility 
becomes 40 years old. This command and control provision is 
mandated for all facilities regardless of past investments, 
fuel use, costs, regional differences, or installed technology. 
According to the Edison Electric Institute (EEI), 74 percent of 
our nation's coal units will be 40 years or older by 2013, and 
83 percent by 2018.

Unfeasible and Costly

    The timelines and provisions of the Jeffords/Lieberman bill 
are economically impractical and impossible to implement. If 
implemented today, all firms would have to invest 
simultaneously in the latest control technologies. Furthermore, 
these massive investments would have to occur within 6 years. 
The workforce required to install this equipment is not 
available within the timeframe of the legislation. Skilled 
workers from such crafts as the boilermakers, pipefitters, and 
electricians are needed to install the equipment, but the 
workers just are not there.
    For example, boilermakers have a capacity of 40 million 
manhours of labor per year. According to one equipment 
manufacturer, S. 556 would require over 60 million manhours to 
install the equipment by a 6-year deadline. It is impossible to 
recruit the labor force necessary to meet this requirement of 
S. 556 where after 6 years these jobs will no longer be needed.
    These arbitrary timelines are not feasible and are 
unnecessarily costly. According to the Energy Information 
Administration (EIA), the costs of reducing NOx, 
SO2, and mercury would be substantially less if 
there was an 11 year deadline instead of a 6-year deadline, 
which are represented by the years 2012 and 2007 in this 
analysis. For NOx, the compliance costs would be $1,000 less 
per ton. It is important to note that SO2 costs are 
actually less for a 6-year compliance date because the mercury 
controls have a side benefit of also reducing SO2. 
Yet, a 90 percent reduction of mercury in 6 years is about five 
times more costly than a 75 percent reduction in 11 years.

                           Illustration No. 3


Caption to Illustration No. 3: EIA has estimated the expected costs of 
 four different proposals addressing NOx, SO2, and mercury 
reductions. The first three scenarios show 50 percent, 65 percent, and 
75 percent reductions in all three pollutants in 11 years (2012). This 
is contrasted with the reductions in S. 556, which are called for in 6 
                             years (2007).

    Since coal costs about half as much as natural gas, 
compliance costs are only one factor in the costs attributed to 
S. 556. Currently, natural gas provides 16 percent of our 
nation's electricity. In order to meet the emissions levels and 
timelines of S. 556, utilities would have to abandon their 
reliance on coal and switch to natural gas, greatly increasing 
our reliance on this fuel. As the recent large price swings in 
natural gas have shown, increased reliance will only put more 
pressure on this one fuel, causing price fluctuations to occur 
more frequently.
    According to EIA, the Jeffords/Lieberman proposal without 
the birthday provision would increase the average delivered 
price of electricity in 2020 by 30 percent, and natural gas 
prices would increase by 20 percent.

Impacts Across Industries and Regions

    Due to its high BTU value and its use as a raw material, 
natural gas is an extremely valuable commodity. Therefore, 
increases in natural gas prices have a larger effect than just 
on electricity prices and the manufacturing industry. In fact, 
natural gas is used directly by many different industries, 
including plastics and agriculture, meaning that millions of 
Americans depend on its reliability and price for their 
livelihoods.

                           Illustration No. 4


  Caption to Illustration No. 4: The agriculture industry, which uses 
 natural gas to make fertilizer, employs nearly 3 million people. The 
   steel and metals industry, which uses natural gas for their blast 
  furnaces, employs almost 700,000 people. Using natural gas as a raw 
 material, the chemical, plastics, and polymer industries employs over 
 2.3 million people, and the food industry, which uses natural gas for 
    food processing and preparation, employs over 11 million people.

    Of course, the compliance costs of S. 556 and the higher 
prices of natural gas will be passed on to the consumers. By 
applying a one size fits all policy, some regions will be more 
impacted than others by the increased costs of electricity. 
Specifically, the effects would be felt the hardest by the 
Midwest because it is the manufacturing base of our country.
    Manufacturing is the lifeblood of our economy. It is 
centered in the Midwest because this region and its border 
States of West Virginia, Pennsylvania, Virginia, and Kentucky 
are the source of low-cost and abundant coal, along with iron 
ore in the Great Lakes. If the Midwest does not have reasonably 
priced and reliable energy sources for the manufacturing 
industry, then these companies will not stay in the U.S. They 
will take their jobs and go elsewhere in the world, where they 
can get cheaper labor and electricity.
    Therefore, while this has been a regional debate between 
the Midwest and New England, the fact of the matter is that 
higher energy prices in the Midwest will have a direct, 
negative impact on the economy of the entire nation. The 
Midwest represents 23 percent of the total U.S. manufacturing 
Gross State Product (GSP) with almost 3 million manufacturing 
jobs. This is compared to New England's 5.6 percent of 
manufacturing GSP with 615,000 jobs. When energy prices go up, 
manufacturing declines and workers are laid off.

                           Illustration No. 5


Caption to Illustration No. 5: Twenty-three percent of our nation's GSP 
 for manufacturing is concentrated in the five States which compromise 
     the Midwest: Ohio, Indiana, Michigan, Illinois, and Wisconsin.

Job Loss

    S. 556 will directly displace workers in those industries 
that depend on low-cost reliable electricity from coal or 
natural gas as an input. These lost jobs would have a ripple 
effect across the economy.
    While some people discount such predictions of job losses, 
past increases in natural gas prices have had a dramatic 
effect. Specifically, the chemical, polymer, and fertilizer 
industries were all negatively affected in early 2001 when 
natural gas prices spiked.
    According to the American Chemistry Council, every dollar 
that the price of natural gas increases translates to about $1 
billion in additional annual cost for the chemical industry, 
which employs more than one million people directly and 36 
million indirectly. Like many industries, these costs cannot be 
passed on to their customers because companies are competing in 
a global marketplace. When the price of natural gas is $4 per 
unit, the U.S. chemical industry can no longer compete with 
foreign producers. However, natural gas prices increased to 
over $10 a unit in 2001, causing several plant closings.
    Additionally, polymers use natural gas as a raw material. 
Since it has a significant effect on the cost of polymers, 
greater reliance on natural gas as a fuel for electricity would 
have a decidedly negative impact on our global competitiveness, 
threatening our domestic industry. When natural gas prices 
spiked, many of the polymer companies had a difficult time 
remaining competitive with their foreign counterparts.
    Furthermore, natural gas is a major ingredient in the 
production of fertilizers. In early 2001, fertilizer companies, 
who had purchased natural gas contracts in advance, sold their 
natural gas on the market at a higher price instead of making 
fertilizer. As a result, there was less fertilizer in the 
market which increased the price, causing some farmers to 
either not plant crops or forego the use of fertilizer, which 
reduced yields.

Impacts on the Disadvantaged

    These recent experiences foreshadow the extreme effects 
that S. 556 would have on individual consumers. A study by the 
Edison Electric Institute (EEI) concluded that by causing fuel 
switching to natural gas the Jeffords/Lieberman proposal would 
result in an overall reduction in our Gross Domestic Product 
(GDP) of $75 billion by the year 2010 and $150 billion in 2020. 
The country would lose more than 600,000 jobs by 2010 and more 
than 900,000 jobs by 2020. Additionally, national household 
earnings would decline by up to $550 annually.
    According to EIA, the bill would increase electricity costs 
for industrial users by 45 percent, commercial users by 37 
percent, and residual consumers by 26 percent.
    Although high electricity prices would severely impact 
businesses and their ability to compete in the global 
marketplace, it will have a more profound affect on low-income 
families and the elderly. Everyday many Americans are forced to 
make choices between electricity or paying for food when energy 
prices are high. It is troubling to consider the effects of the 
Jeffords/Lieberman proposal on the elderly and low-income 
families who are already struggling to survive.

                           Illustration No. 6


Caption to Illustration No. 6: The Department of Energy reports that an 
  individual or family making less than $10,000 a year will spend 29 
                   percent of their income on energy.

    At an EPW hearing on the costs and benefits of S. 556, 
Thomas Mullen of Catholic Charities and Health and Human 
Services of Cleveland, Ohio expressed concern about how 
children would be impacted by S. 556. ``In Cleveland, over one-
fourth of all children live in poverty and are in a family of a 
single female head of household. These children will suffer 
further loss of basic needs as their moms are forced (under S. 
556) to make choices of whether to pay the rent or live in a 
shelter; pay the heating bill or see their child freeze; buy 
food or risk the availability of a hunger center. These are not 
choices any senior citizen, child, or, for that matter, person 
in America should make.''
    Regrettably, some Americans must make these choices each 
day. The Center for Disease Prevention and Control (CDC) states 
that more people, specifically the elderly and children, died 
from heat exposure (8,015) from 1979 to 1999 then from 
hurricanes, lightning, tornadoes, floods, and earthquakes 
combined. The CDC also claims that air conditioning is the No. 
1 preventive factor against heat exposure. Due to the projected 
increase in electricity costs under S. 556, fewer people would 
turn on their air conditioners and the impacts would be more 
severe.

Climate Change

    The only thing accomplished by this legislation is a 
political statement on CO2, which is the millstone 
that sinks this bill. The majority of the committee has held 
real emissions reductions hostage to the political issue of 
CO2, resulting in no emissions reduction bill 
passing this Congress. But for CO2, we would be 
saving lives this year. During debate on the energy bill 
earlier this year, the Senate rejected mandatory carbon 
controls three times: twice with votes on CAFE and once by 
rejecting a mandatory carbon registry and replacing it with a 
voluntary program. For the EPW committee to report out a 
mandatory CO2 provision ignores the will of the full 
Senate.
    The Senate is not willing to set mandatory carbon controls 
because more research is needed to understand the effects of 
carbon in our atmosphere, whether something needs to be done at 
this time, and what options are available. Recently, I met with 
Danish environmentalist Dr. Bjourn Lomberg, author of the 
``Skeptical Environmentalist.'' According to his analysis, if 
the Kyoto Treaty were fully implemented, the effects they 
predict will occur in 106 years as opposed to 100 years. He 
believes that the funds which would be expended under the Kyoto 
Treaty would be better spent on research or safe drinking water 
programs for Third World nations.
    However, the majority's report maintains that the science 
behind climate change is settled and the effects will be 
devastating. This is hardly the case. In a 2002 report, the 
National Academy of Sciences (NAS) noted that ``because there 
is considerable uncertainty in current understanding of how the 
climate system varies naturally and reacts to emissions of 
greenhouse gases and aerosols, current estimates of the 
magnitude of future warming should be regarded as tentative and 
subject to future adjustments upward or downward.''
    Due to this uncertainty, the U.S. should not embark on a 
national policy to drastically reduce emissions of 
CO2 when the effects of such a program would be 
overwhelming to our energy supply and economy. The United 
Nations Framework Convention on Climate Change, which was 
ratified by the Senate in 1992, states that the Parties to the 
Convention should implement policies and measures that are 
``appropriate for the specific conditions of each Party and 
should be integrated with national development programmes, 
taking into account that economic development is essential for 
adopting measures to address climate change.'' Contrary to the 
NAS report and the Framework, S. 556 would set an arbitrary 
level and drastic timeline for CO2 reductions that 
is not warranted and would harm economic development.

Comments on Federal Actions and Authorities Section

    The majority's report unjustifiably attacks the Tennessee 
Valley Authority (TVA) and makes claims that have never been 
considered by this committee before. In fact, at the February 
28, 2000, Clean Air Subcommittee field hearing in Cincinnati, 
Ohio on New Source Review (NSR), when TVA testified, the 
committee was careful not to take a position on the dispute 
between EPA and TVA. While the report states that ``TVA, as a 
Federal agency, has no standing to pursue such a course,'' EPA 
has also not justified its course of action and claims against 
TVA.
    The majority's report also maintains that TVA has not 
lowered emissions but used emission reduction credits to emit 
more pollution. However, TVA has substantially invested in 
emissions control technology and lowered its emissions. TVA did 
earn emission reduction credits as a result of early compliance 
and is using some of these credits to offset emissions from one 
of its units until a scrubber becomes operational in 2006. 
Nevertheless, overall emissions of SO2 from TVA were 
reduced in 2001. By adding scrubbers, upgrading technology, and 
using lower sulfur coal, TVA reports it has reduced 
SO2 emissions by 73 percent since 1976 and NOx 
emissions by 50 percent since 1995.
    Additionally, the report fails to recognize the harmful 
economic and environmental impacts of the uncertain and 
complicated NSR program. The NSR program dates back to the 1977 
amendments to the Clean Air Act. The original goal of the 
program was to ensure that new facilities and older facilities 
that make major modifications install the best technology. The 
program worked well for more than 20 years, helping to produce 
a cleaner environment. However, as any program ages, changes 
often need to be made. The EPA first issued a 20-page 
regulation in 1980 defining NSR and since has gone on to 
produce more than 4,000 pages of guidance documents explaining 
and reinterpreting the regulation. This continual 
reinterpretation over the years has led to confusion and 
misunderstanding by the Agency, the regulated community, 
States, and interested outside groups.
    In 1996, the Clinton Administration issued a proposed 
rulemaking to reform NSR. However, in 1998, due to an EPA 
guidance that changed the definition of routine maintenance, 
EPA filed lawsuits alleging NSR modification violations at 24 
different facilities in a variety of industries, reaching back 
as many as 22 years. Therefore, companies are not investing in 
cleaner, less polluting technologies for fear that such 
improvements would be considered a violation. According to a 
recent National Coal Council study, commissioned by the Clinton 
Administration, if the EPA were to return to the pre-1998 NSR 
definitions the U.S. could generate 40,000 new megawatts of 
electricity from coal-fired facilities and reduce pollution at 
the same time.
    There is strong bipartisan support for a regulatory 
definition of routine maintenance and repair in order to end 
the uncertainty in the program. On May 13, 2002, I joined 
Senator Kent Conrad (D-ND) and 24 other senators in a letter to 
EPA Administrator Christie Todd Whitman calling on her to 
``complete the review and to undertake the necessary regulatory 
process in the near future to clarify and reform the NSR 
program.'' This was a bipartisan letter signed by nine 
Democrats and 17 Republicans, all calling for reform.
    In response to our request, on June 13, 2002, EPA announced 
plans to finalize many of the Clinton-era NSR reforms and to 
move forward on proposing a new definition for ``routine 
maintenance, repair, and replacement.'' The new proposal would 
be subject to public review and comment. The proposal is 
already the result of over 10 years of work by the EPA (across 
three administrations) and has involved over 130,000 written 
comments in the last year alone. Following these steps will 
produce a better understood regulatory program which will 
provide needed certainty to the regulated community and will 
continue to protect public health and improve the environment. 
NSR reform is important for any multi-pollutant legislation 
because it allows companies to make the necessary investments 
and improvements in their plants to reduce emissions.

Comments on the Legislative History and Hearings Sections

    In marking up this bill, the majority circumvented the 
committee process. For over a year and a half the committee 
held hearings and debated the original five page Jeffords bill. 
With less than 1 week's notice, the majority substituted the 
five page bill for a 53-page chairman's mark.
    The following charts show the implementation steps for the 
original five page bill versus the fifty-three page mark. Only 
four main implementation steps, including two rulemakings which 
are denoted in italics text, were required under the original 
version. The other two charts show the new implementation steps 
required under the new version; again the italics bullets 
denote either rulemakings or notice and comment requirements. 
There are 35 different rulemakings or notice and comment 
provisions between now and 2008 alone. I would point out that 
these charts only go up to 2018, many of the allocation steps 
and adjustments will require annual rulemaking actions in 
perpetuity. All of the italics bullet items and many of the 
other bullets as well would be open to litigation and lawsuits. 
Of course all of this will be layered on top of the existing 
Clean Air Act. Therefore, we are taking one of the most 
litigated environmental statutes and making it harder to 
implement and open to more uncertainty through lawsuits. This 
bill is a lawyer's dream and a nightmare to anyone who cares 
about reducing emissions.

                         Illustration Nos. 7-9


    These charts show some of the complexity of this 
legislation, but the reality is that no one really knows how 
any of it would work. While the majority claims that many 
hearings have been held on this subject and specifically on S. 
556, not one hearing has been held on the bill the committee 
passed because it did not exist until right before the business 
meeting on June 27, 2002. Even if the chairman had not 
introduced a completely different bill, I do not believe the 
committee was ready to consider this important piece of 
legislation. Although I requested the hearings, the committee 
never examined the impacts of multi-pollutant legislation on 
our environment, energy supply, and economy.
    Evidenced by the four substitutes introduced at the 
business meeting, other members of the committee also did not 
think we were ready to vote on multi-pollutant legislation. 
Furthermore, Senators Thomas Carper (D-DE) and Lincoln Chafee 
(R-RI), who both introduced and withdrew substitutes at the 
business meeting and supported S. 556, recently introduced 
multi-pollutant legislation S. 3135. Additionally, the 
Administration proposed the Clear Skies Initiative to also 
reduce power plant emissions. While S. 556 might have been a 
starting point for negotiations, Senator Jeffords made it clear 
from the very start that he was unwilling to compromise. At the 
beginning of a stakeholder meeting that was held in October 
2001 to discuss multi-pollutant legislation, the chairman 
stated that he intended to markup the bill, even before a 
comment was heard from a single stakeholder.
    I have been enormously frustrated by the process the 
majority has used and their refusal to compromise and pass 
meaningful legislation to reduce pollutants in our air today. I 
am not alone in my disappointment, which is probably best 
summed up by the comments of Senator Max Baucus (D-MT) at the 
business meeting to consider S. 556:

    ``But although I agree with the goals of this legislation, 
I again respectfully say I cannot support the means that you 
have chosen to achieve these goals. This bill as written is not 
fair to my State of Montana. It is not fair to the West and it 
frankly could have a devastating impact on our economy, on the 
Montana coal industry and on consumer electricity prices.
    ``For those reasons and for many others, we all know that 
your bill as written as has been stated by the Senator from New 
Hampshire, will not pass the Senate this year. So why are we 
here? Are we here to advance the best way to improve the 
Nation's air quality, to protect public health, and to protect 
the environment? Frankly, no. We are here primarily for 
political reasons, that is to make political statements either 
in favor of the air or one way or the other, because this is 
not a consensus approach. It is not an approach that we all 
know is necessary to get solid results.
    ``But what is most frustrating to me, Mr. Chairman, is that 
we are even having this discussion today. We are not trying to 
craft a piece of legislation that is achievable; that protects 
the reliability of our energy system; that will not 
unnecessarily hurt our economy or displace our workers; and 
that achieves dramatic reductions in harmful air pollutants 
from the Nation's power plants, including SO2, 
nitrogen oxides, mercury and CO2.
    `` . . . we are not even close to having a serious 
discussion about these alternative proposals or any other 
proposal for that matter . . . Over many years--many, many 
years--this committee has passed landmark environmental laws--
Clean Water Act, Clean Air Act, Safe Drinking Water Act--that 
protect the Nation's air quality, water quality, wildlife, and 
public health--landmark legislation. How did we do that? 
Through compromise, through consensus--that is the legacy of 
this committee. There is just no other way to get things done 
when it comes to environmental resolution. And frankly, there 
is no other way to get things done in the Senate.''

Comments on the Costs of Legislation Section

    The majority's report tries to discount the work that EIA 
has done to provide cost analyses of multi-pollutant control 
strategies and scenarios. In fact, no one has done more 
rigorous modeling than EIA, and I believe they provide the most 
reliable available estimates of the costs of S. 556. The 
majority is simply trying to discredit these analyses because 
it does not like the results.
    Citing specifically the MACT requirements for emissions of 
mercury, the majority's report discredits EIA analyses based on 
the notion that there has been no effort to compare the cost of 
S. 556 to the costs that will otherwise be or already are being 
incurred. EIA did not incorporate future mercury emission 
reductions because those regulations are still being developed 
by EPA and it is not known what form they will finally take. 
The costs estimated by EIA cannot be disregarded because the 
costs of carbon dioxide reduction are much higher than those of 
the other emissions and would dominate the costs associated 
with multi-pollutant requirements. For instance, in a report 
entitled Analysis of Strategies for Reducing Multiple Emissions 
from Electric Power Plants: Sulfur Dioxide, Nitrogen Oxides, 
Carbon Dioxide, and Mercury and a Renewable Portfolio Standard, 
prepared at the request of the House Government Reform 
Committee, EIA estimated that the price of electricity would be 
about 0.2 cents per kilowatt-hour higher in 2010 and 2020 as a 
result of a 90 percent reduction in mercury emissions, without 
changes in current emission caps for sulfur dioxide, nitrogen 
dioxide, and carbon dioxide. However, in a four-pollutant case, 
with carbon dioxide emission caps set at 1990 levels and the 
other emission caps similar to those of S. 556, the impact on 
electricity prices would be between 2.0 and 2.2 cents per 
kilowatt-hour higher, showing the much smaller impact of 
mercury caps alone.
    The majority's report claims that ``EIA has inaccurately 
attributed the costs of substantial new natural gas generation 
capacity to multi-pollutant legislation.'' First, the new 
natural gas generating capacity coming on line recently 
represents an acceleration of the capacity EIA has projected, 
but this does not appreciably change the capacity needed to 
meet demands projected for 2010. Contrary to the report's 
assertion, EIA projected 107,000 megawatts (MW) of natural gas 
combined cycle capability would be on line in 2010, which is 
23,000 MW less than is now planned, not 45,000 MW as stated in 
the majority's report. More important, by 2015, all of this 
capacity and more will be needed to meet demand, with nearly 
100,000 additional MW needed to meet the demand for natural 
gas-fired generation in a multi-pollutant scenario. Second, the 
additional demand for natural gas, both for new capacity and 
the more intensive use of existing capacity, would tend to 
drive up natural gas prices. Therefore, despite the recent 
spurt of combined cycle construction, the previously estimated 
additional costs of S. 556 remain substantially the same.
    Contrary to the majority's report, IGCC for coal and other 
advanced technologies such as fuel cells and biomass 
gasification are explicitly represented in all multi-pollutant 
analyses developed by EIA. The IGCC technology was not chosen 
in carbon constrained scenarios because the costs of the 
technology are higher than the alternative advanced natural gas 
technology, particularly when a carbon limit is imposed. IGCC, 
while more efficient than traditional pulverized coal 
generating technologies, would not reduce carbon dioxide 
emissions sufficiently to penetrate the market under the carbon 
constraints required by S. 556. In fact, under a policy 
including carbon dioxide reductions, no new coal capacity would 
be expected to be built because of the high cost of carbon 
dioxide allowances that would have to be incurred for new coal 
capacity, unless economical methods of carbon sequestration 
could be achieved. At this time, the costs of carbon 
sequestration are too high to penetrate the market.
    The majority's report also states that no analysis has been 
done of the allocation system included in S. 556. While this 
claim is true because there has not been time to analyze it, 
the cost of meeting multi-pollutant legislation is unaffected 
by the original allocation of allowances. The system to 
allocate allowances affects the wealth of producers and 
consumers, but in equilibrium the cost of an allowance is equal 
to the marginal cost of abatement. Therefore, electricity 
prices would increase due to the impact of higher natural gas 
prices and the cost of allowances. The allocation scheme chosen 
could alleviate, but not eliminate these impacts. Under no 
circumstances has EIA projected a lower price of electricity 
under a multi-pollutant regime.

Conclusion

    Congress should act quickly to develop a strategy for 
further reducing power plant emissions in order to improve 
public health and protect the environment, provide better 
regulatory certainty, and ensure continued access to safe, 
reliable, low-cost electricity. By causing fuel switching away 
from coal, the Jeffords/Lieberman proposal would cause natural 
gas price increases that would negatively affect a wide variety 
of industries and displace people from their jobs. S. 556 would 
be disastrous to our nation's economy and manufacturing 
industries--like a tornado sweeping across the country, leaving 
in its wake unemployed individuals and ruined manufacturing 
facilities.
    For years, the discussion on utility emissions has resulted 
in a regional debate between the Northeast and the Midwest. 
What is lost in the debate is the fact that an economic hit on 
one region has a ripple effect across the entire country. Given 
this symbiotic relationship, it is all the more important that 
everyone work together to achieve the goal of a clean 
environment and reasonable energy costs for American consumers.
    Due to the various projections of the Jeffords/Lieberman 
proposal, more time should be spent on this issue. Perhaps most 
importantly, there needs to be a better understanding of what 
different reduction levels and timelines would mean to 
consumers and our nation's economy. Currently, there is even 
uncertainty on whether the technologies are available for the 
reductions mandated in the bill.
    The Jeffords/Lieberman bill would cost a great deal to our 
consumers, businesses, and it would have a devastating impact 
on the U.S. economy. Without a doubt, many people will lose 
their jobs if this bill is enacted. For these reasons and due 
to the fact that S. 556 will not reach the floor of the Senate 
because of the CO2 provisions, both sides need to 
come together to craft a sensible bill that makes real 
reductions today of NOx, SO2, and mercury. Real 
reductions in these three pollutants can be made which will 
greatly improve our environment and provide low-cost and 
reliable electricity to our nation's consumers.
                        Changes in Existing Law

    In compliance with section 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill 
as reported are shown as follows: Existing law proposed to be 
omitted is enclosed in [black brackets], new matter is printed 
in italic, existing law in which no change is proposed is shown 
in roman:
                              ----------                              


                         THE CLEAN AIR ACT \1\


             TITLE I--AIR POLLUTION PREVENTION AND CONTROL


              Part A--Air Quality and Emission Limitations


                         findings and purposes

      Sec. 101. (a) The Congress finds--
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    \1\ The Clean Air Act (42 U.S.C. 7401-7626) consists of Public Law 
159 (July 14, 1955; 69 Stat. 322) and the amendments made by subsequent 
enactments.

           *       *       *       *       *       *       *

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      Sec. 103. (a) The Administrator shall establish a 
national research and development program for the prevention 
and control of air pollution and as part of such program 
shall--
            (1) conduct, and promote the coordination and 
        acceleration of, research, investigations, experiments, 
        demonstrations, surveys, and studies relating to the 
        causes, effects (including health and welfare effects), 
        extent, prevention, and control of air pollution;
            (2) encourage, cooperate with, and render technical 
        services and provide financial assistance to air 
        pollution control agencies and other appropriate public 
        or private agencies, institutions, and organizations, 
        and individuals in the conduct of such activities;
            (3) conduct investigations and research and make 
        surveys concerning any specific problem of air 
        pollution in cooperation with any air pollution control 
        agency with a view to recommending a solution of such 
        problem, if he is requested to do so by such agency or 
        if, in his judgment, such problem may affect any 
        community or communities in a State other than that in 
        which the source of the matter causing or contributing 
        to the pollution is located;
            (4) establish technical advisory committees 
        composed of recognized experts in various aspects of 
        air pollution to assist in the examination and 
        evaluation of research progress and proposals and to 
        avoid duplication of research; and
            (5) conduct and promote coordination and 
        acceleration of training for individuals relating to 
        the causes, effects, extent, prevention, and control of 
        air pollution.
      (b) In carrying out the provisions of the preceding 
subsection the Administrator is authorized to--
            (1) collect and make available, through 
        publications and other appropriate means, the results 
        of and other information, including appropriate 
        recommendations by him in connection therewith, 
        pertaining to such research and other activities;
            (2) cooperate with other Federal departments and 
        agencies, with air pollution control agencies, with 
        other public and private agencies, institutions, and 
        organizations, and with any industries involved, in the 
        preparation and conduct of such research and other 
        activities;
            (3) make grants to air pollution control agencies, 
        to other public or nonprofit private agencies, 
        institutions, and organizations, and to individuals, 
        for purposes stated in subsection (a)(1) of this 
        section;
            (4) contract with public or private agencies, 
        institutions, and organizations, and with individuals, 
        without regard to sections 3648 and 3709 of the Revised 
        Statutes (31 U.S.C. 529; 41 U.S.C. 5);
            (5) establish and maintain research fellowships, in 
        the Environmental Protection Agency and at public or 
        nonprofit private educational institutions or research 
        organizations;
            (6) collect and disseminate, in cooperation with 
        other Federal departments and agencies, and with other 
        public or private agencies, institutions, and 
        organizations having related responsibilities, basic 
        data on chemical, physical, and biological effects of 
        varying air quality and other information pertaining to 
        air pollution and the prevention and control thereof;
            (7) develop effective and practical processes, 
        methods, and prototype devices for the prevention or 
        control of air pollution; and
            (8) \1\ construct facilities, provide equipment, 
        and employ staff as necessary to carry out this Act.
---------------------------------------------------------------------------
    \1\ Section 901(a)(2)(C) of Public Law 101-549 (104 Stat. 2700) 
added a new paragraph (8) at the end of section 103(b). Paragraph (8) 
probably was intended to have been added after paragraph (7), as it is 
shown here.
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In carrying out the provisions of subsection (a), the 
Administrator shall provide training for, and make training 
grants to, personnel of air pollution control agencies and 
other persons with suitable qualifications and make grants to 
such agencies, to other public or nonprofit private agencies, 
institutions, and organizations for the purposes stated in 
subsection (a)(5). Reasonable fees may be charged for such 
training provided to persons other than personnel of air 
pollution control agencies but such training shall be provided 
to such personnel of air pollution control agencies without 
charge.
    (c) Air Pollutant Monitoring, Analysis, Modeling, and 
Inventory Research.--In carrying out subsection (a), the 
Administrator shall conduct a program of research, testing, and 
development of methods for sampling, measurement, monitoring, 
analysis, and modeling of air pollutants. Such program shall 
include the following elements:
            (1) Consideration of individual, as well as complex 
        mixtures of, air pollutants and their chemical 
        transformations in the atmosphere.
            (2) Establishment of a national network to monitor, 
        collect, and compile data with quantification of 
        certainty in the status and trends of air emissions, 
        deposition, air quality, surface water quality, forest 
        condition, and visibility impairment, and to ensure the 
        comparability of air quality data collected in 
        different States and obtained from different nations.
            (3) Development of improved methods and 
        technologies for sampling, measurement, monitoring, 
        analysis, and modeling to increase understanding of the 
        sources of ozone percursors, ozone formation, ozone 
        transport, regional influences on urban ozone, regional 
        ozone trends, and interactions of ozone with other 
        pollutants. Emphasis shall be placed on those 
        techniques which--
                    (A) improve the ability to inventory 
                emissions of volatile organic compounds and 
                nitrogen oxides that contribute to urban air 
                pollution, including anthropogenic and natural 
                sources;
                    (B) improve the understanding of the 
                mechanism through which anthropogenic and 
                biogenic volatile organic compounds react to 
                form ozone and other oxidants; and
                    (C) improve the ability to identify and 
                evaluate region-specific prevention and control 
                options for ozone pollution.
            (4) Submission of periodic reports to the Congress, 
        not less than once every 5 years, which evaluate and 
        assess the effectiveness of air pollution control 
        regulations and programs using monitoring and modeling 
        data obtained pursuant to this subsection.
    (d) Environmental Health Effects Research.--(1) The 
Administrator, in consultation with the Secretary of Health and 
Human Services, shall conduct a research program on the short-
term and long-term effects of air pollutants, including wood 
smoke, on human health. In conducting such research program the 
Administrator--
            (A) shall conduct studies, including 
        epidemiological, clinical, and laboratory and field 
        studies, as necessary to identify and evaluate exposure 
        to and effects of air pollutants on human health;
            (B) may utilize, on a reimbursable basis, the 
        facilities of existing Federal scientific laboratories 
        and research centers; and
            (C) shall consult with other Federal agencies to 
        ensure that similar research being conducted in other 
        agencies is coordinated to avoid duplication.
    (2) In conducting the research program under this 
subsection, the Administrator shall develop methods and 
techniques necessary to identify and assess the risks to human 
health from both routine and accidental exposures to individual 
air pollutants and combinations thereof. Such research program 
shall include the following elements:
            (A) The creation of an Interagency Task Force to 
        coordinate such program. The Task Force shall include 
        representatives of the National Institute for 
        Environmental Health Sciences, the Environmental 
        Protection Agency, the Agency for Toxic Substances and 
        Disease Registry, the National Toxicology Program, the 
        National Institute of Standards and Technology, the 
        National Science Foundation, the Surgeon General, and 
        the Department of Energy. This Interagency Task Force 
        shall be chaired by a representative of the 
        Environmental Protection Agency and shall convene its 
        first meeting within 60 days after the date of 
        enactment of this subparagraph.
            (B) An evaluation, within 12 months after the date 
        of enactment of this paragraph, of each of the 
        hazardous air pollutants listed under section 112(b) of 
        this Act, to decide, on the basis of available 
        information, their relative priority for preparation of 
        environmental health assessments pursuant to 
        subparagraph (C). The evaluation shall be based on 
        reasonably anticipated toxicity to humans and exposure 
        factors such as frequency of occurrence as an air 
        pollutant and volume of emissions in populated areas. 
        Such evaluation shall be reviewed by the Interagency 
        Task Force established pursuant to subparagraph (A).
            (C) Preparation of environmental health assessments 
        for each of the hazardous air pollutants referred to in 
        subparagraph (B), beginning 6 months after the first 
        meeting of the Interagency Task Force and to be 
        completed within 96 months thereafter. No fewer than 24 
        assessments shall be completed and published annually. 
        The assessments shall be prepared in accordance with 
        guidelines developed by the Administrator in 
        consultation with the Interagency Task Force and the 
        Science Advisory Board of the Environmental Protection 
        Agency. Each such assessment shall include--
                    (i) an examination, summary, and evaluation 
                of available toxicological and epidemiological 
                information for the pollutant to ascertain the 
                levels of human exposure which pose a 
                significant threat to human health and the 
                associated acute, subacute, and chronic adverse 
                health effects;
                    (ii) a determination of gaps in available 
                information related to human health effects and 
                exposure levels; and
                    (iii) where appropriate, an identification 
                of additional activities, including 
                toxicological and inhalation testing, needed to 
                identify the types or levels of exposure which 
                may present significant risk of adverse health 
                effects in humans.
    (e) Ecosystem Research.--In carrying out subsection (a), 
the Administrator, in cooperation, where appropriate, with the 
Under Secretary of Commerce for Oceans and Atmosphere, the 
Director of the Fish and Wildlife Service, and the Secretary of 
Agriculture, shall conduct a research program to improve 
understanding of the short-term and long-term causes, effects, 
and trends of ecosystems damage from air pollutants on 
ecosystems. Such program shall include the following elements:
            (1) Identification of regionally representative and 
        critical ecosystems for research.
            (2) Evaluation of risks to ecosystems exposed to 
        air pollutants, including characterization of the 
        causes and effects of chronic and episodic exposures to 
        air pollutants and determination of the reversibility 
        of those effects.
            (3) Development of improved atmospheric dispersion 
        models and monitoring systems and networks for 
        evaluating and quantifying exposure to and effects of 
        multiple environmental stresses associated with air 
        pollution.
            (4) Evaluation of the effects of air pollution on 
        water quality, including assessments of the short-term 
        and long-term ecological effects of acid deposition and 
        other atmospherically derived pollutants on surface 
        water (including wetlands and estuaries) and 
        groundwater.
            (5) Evaluation of the effects of air pollution on 
        forests, materials, crops, biological diversity, soils, 
        and other terrestrial and aquatic systems exposed to 
        air pollutants.
            (6) Estimation of the associated economic costs of 
        ecological damage which have occurred as a result of 
        exposure to air pollutants.
Consistent with the purpose of this program, the Administrator 
may use the estuarine research reserves established pursuant to 
section 315 of the Coastal Zone Management Act of 1972 (16 
U.S.C. 1461) to carry out this research.
    (f) Liquefied Gaseous Fuels Spill Test Facility.--(1) The 
Administrator, in consultation with the Secretary of Energy and 
the Federal Coordinating Council for Science, Engineering, and 
Technology, shall oversee an experimental and analytical 
research effort, with the experimental research to be carried 
out at the Liquefied Gaseous Fuels Spill Test Facility. In 
consultation with the Secretary of Energy, the Administrator 
shall develop a list of chemicals and a schedule for field 
testing at the Facility. Analysis of a minimum of 10 chemicals 
per year shall be carried out, with the selection of a minimum 
of 2 chemicals for field testing each year. Highest priority 
shall be given to those chemicals that would present the 
greatest potential risk to human health as a result of an 
accidental release--
            (A) from a fixed site; or
            (B) related to the transport of such chemicals.
    (2) The purpose of such research shall be to--
            (A) develop improved predictive models for 
        atmospheric dispersion which at a minimum--
                    (i) describe dense gas releases in complex 
                terrain including man-made structures or 
                obstacles with variable winds;
                    (ii) improve understanding of the effects 
                of turbulence on dispersion patterns; and
                    (iii) consider realistic behavior of 
                aerosols by including physicochemical reactions 
                with water vapor, ground deposition, and 
                removal by water spray;
            (B) evaluate existing and future atmospheric 
        dispersion models by--
                    (i) the development of a rigorous, 
                standardized methodology for dense gas models; 
                and
                    (ii) the application of such methodology to 
                current dense gas dispersion models using data 
                generated from field experiments; and
            (C) evaluate the effectiveness of hazard mitigation 
        and emergency response technology for fixed site and 
        transportation related accidental releases of toxic 
        chemicals.
Models pertaining to accidental release shall be evaluated and 
improved periodically for their utility in planning and 
implementing evacuation procedures and other mitigative 
strategies designed to minimize human exposure to hazardous air 
pollutants released accidentally.
    (3) The Secretary of Energy shall make available to 
interested persons (including other Federal agencies and 
businesses) the use of the Liquefied Gaseous Fuels Spill Test 
Facility to conduct research and other activities in connection 
with the activities described in this subsection.
    (g) Pollution Prevention and Emissions Control.--In 
carrying out subsection (a), the Administrator shall conduct a 
basic engineering research and technology program to develop, 
evaluate, and demonstrate nonregulatory strategies and 
technologies for air pollution prevention. Such strategies and 
technologies shall be developed with priority on those 
pollutants which pose a significant risk to human health and 
the environment, and with opportunities for participation by 
industry, public interest groups, scientists, and other 
interested persons in the development of such strategies and 
technologies. Such program shall include the following 
elements:
            (1) Improvements in nonregulatory strategies and 
        technologies for preventing or reducing multiple air 
        pollutants, including sulfur oxides, nitrogen oxides, 
        heavy metals, PM-10 (particulate matter), carbon 
        monoxide, and carbon dioxide, from stationary sources, 
        including fossil fuel power plants. Such strategies and 
        technologies shall include improvements in the relative 
        cost effectiveness and long-range implications of 
        various air pollutant reduction and nonregulatory 
        control strategies such as energy conservation, 
        including end-use efficiency, and fuel-switching to 
        cleaner fuels. Such strategies and technologies shall 
        be considered for existing and new facilities.
            (2) Improvements in nonregulatory strategies and 
        technologies for reducing air emissions from area 
        sources.
            (3) Improvements in nonregulatory strategies and 
        technologies for preventing, detecting, and correcting 
        accidental releases of hazardous air pollutants.
            (4) Improvements in nonregulatory strategies and 
        technologies that dispose of tires in ways that avoid 
        adverse air quality impacts.
Nothing in this subsection shall be construed to authorize the 
imposition on any person of air pollution control requirements. 
The Administrator shall consult with other appropriate Federal 
agencies to ensure coordination and to avoid duplication of 
activities authorized under this subsection.
    (h) NIEHS Studies.--(1) The Director of the National 
Institute of Environmental Health Sciences may conduct a 
program of basic research to identify, characterize, and 
quantify risks to human health from air pollutants. Such 
research shall be conducted primarily through a combination of 
university and medical school-based grants, as well as through 
intramural studies and contracts.
    (2) The Director of the National Institute of Environmental 
Health Sciences shall conduct a program for the education and 
training of physicians in environmental health.
    (3) The Director shall assure that such programs shall not 
conflict with research undertaken by the Administrator.
    (4) There are authorized to be appropriated to the National 
Institute of Environmental Health Sciences such sums as may be 
necessary to carry out the purposes of this subsection.
    (i) Coordination of Research.--The Administrator shall 
develop and implement a plan for identifying areas in which 
activities authorized under this section can be carried out in 
conjunction with other Federal ecological and air pollution 
research efforts. The plan, which shall be submitted to 
Congress within 6 months after the date of enactment of this 
subsection, shall include--
            (1) an assessment of ambient monitoring stations 
        and networks to determine cost effective ways to expand 
        monitoring capabilities in both urban and rural 
        environments;
            (2) a consideration of the extent of the 
        feasibility and scientific value of conducting the 
        research program under subsection (e) to include 
        consideration of the effects of atmospheric processes 
        and air pollution effects; and
            (3) a methodology for evaluating and ranking 
        pollution prevention technologies, such as those 
        developed under subsection (g), in terms of their 
        ability to reduce cost effectively the emissions of air 
        pollutants and other airborne chemicals of concern.
Not later than 2 years after the date of enactment of this 
subsection, and every 4 years thereafter, the Administrator 
shall report to Congress on the progress made in implementing 
the plan developed under this subsection, and shall include in 
such report any revisions of the plan.
    (j) Continuation of the National Acid Precipitation 
Assessment Program.--
            (1) The acid precipitation research program set 
        forth in the Acid Precipitation Act of 1980 shall be 
        continued with modifications pursuant to this 
        subsection.
            (2) The Acid Precipitation Task Force shall consist 
        of the Administrator of the Environmental Protection 
        Agency, the Secretary of Energy, the Secretary of the 
        Interior, the Secretary of Agriculture, the 
        Administrator of the National Oceanic and Atmospheric 
        Administration, the Administrator of the National 
        Aeronautics and Space Administration, and such 
        additional members as the President may select. The 
        President shall appoint a chairman for the Task Force 
        from among its members within 30 days after the date of 
        enactment of this subsection.
            (3) The responsibilities of the Task Force shall 
        include the following:
                    (A) Review of the status of research 
                activities conducted to date under the 
                comprehensive research plan developed pursuant 
                to the Acid Precipitation Act of 1980, and 
                development of a revised plan that identifies 
                significant research gaps and establishes a 
                coordinated program to address current and 
                future research priorities. A draft of the 
                revised plan shall be submitted by the Task 
                Force to Congress within 6 months after the 
                date of enactment of this subsection. The plan 
                shall be available for public comment during 
                the 60 day period after its submission, and a 
                final plan shall be submitted by the President 
                to the Congress within 45 days after the close 
                of the comment period.
                    (B) Coordination with participating Federal 
                agencies, augmenting the agencies' research and 
                monitoring efforts and sponsoring additional 
                research in the scientific community as 
                necessary to ensure the availability and 
                quality of data and methodologies needed to 
                evaluate the status and effectiveness of the 
                acid deposition control program. Such research 
                and monitoring efforts shall include, but not 
                be limited to--
                            (i) continuous monitoring of 
                        emissions of precursors of acid 
                        deposition;
                            (ii) maintenance, upgrading, and 
                        application of models, such as the 
                        Regional Acid Deposition Model, that 
                        describe the interactions of emissions 
                        with the atmosphere, and models that 
                        describe the response of ecosystems to 
                        acid deposition; and
                            (iii) analysis of the costs, 
                        benefits, and effectiveness of the acid 
                        deposition control program.
                    (C) Publication and maintenance of a 
                National Acid Lakes Registry that tracks the 
                condition and change over time of a 
                statistically representative sample of lakes in 
                regions that are known to be sensitive to 
                surface water acidification.
                    (D) Submission every two years of a unified 
                budget recommendation to the President for 
                activities of the Federal Government in 
                connection with the research program described 
                in this subsection.
                    (E) Beginning in 1992 and biennially 
                thereafter, submission of a report to Congress 
                describing the results of its investigations 
                and analyses. The reporting of technical 
                information about acid deposition shall be 
                provided in a format that facilitates 
                communication with policymakers and the public. 
                The report shall include--
                            (i) actual and projected emissions 
                        and acid deposition trends;
                            (ii) average ambient concentrations 
                        of acid deposition percursors \1\ and 
                        their transformation products;
---------------------------------------------------------------------------
    \1\ Probably should be ``precursors''.
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                            (iii) the status of ecosystems 
                        (including forests and surface waters), 
                        materials, and visibility affected by 
                        acid deposition;
                            (iv) the causes and effects of such 
                        deposition, including changes in 
                        surface water quality and forest and 
                        soil conditions;
                            (v) the occurrence and effects of 
                        episodic acidification, particularly 
                        with respect to high elevation 
                        watersheds; and
                            (vi) the confidence level 
                        associated with each conclusion to aid 
                        policymakers in use of the information.
                    (F) Beginning in 1996, and every 4 years 
                thereafter, the report under subparagraph (E) 
                shall include--
                            (i) the reduction in deposition 
                        rates that must be achieved in order to 
                        prevent adverse ecological [effects; 
                        and] effects, including an assessment 
                        of--
                                    (I) acid-neutralizing 
                                capacity; and
                                    (II) changes in the number 
                                of water bodies in the 
                                sensitive ecosystems referred 
                                to in subparagraph (G)(ii) with 
                                an acid-neutralizing capacity 
                                greater than zero; and
                            (ii) the costs and benefits of the 
                        acid deposition control program created 
                        by title IV of this Act.
                    (G) Sensitive ecosystems.--
                            (i) In general.--Beginning in 2004, 
                        and every 4 years thereafter, the 
                        report under subparagraph (E) shall 
                        include--
                                    (I) an identification of 
                                environmental objectives 
                                necessary to be achieved (and 
                                related indicators to be used 
                                in measuring achievement of the 
                                objectives) to adequately 
                                protect and restore sensitive 
                                ecosystems; and
                                    (II) an assessment of the 
                                status and trends of the 
                                environmental objectives and 
                                indicators identified in 
                                previous reports under this 
                                paragraph.
                            (ii) Sensitive ecosystems to be 
                        addressed.--Sensitive ecosystems to be 
                        addressed under clause (i) include--
                                    (I) the Adirondack 
                                Mountains, mid-Appalachian 
                                Mountains, Rocky Mountains, and 
                                southern Blue Ridge Mountains;
                                    (II) the Great Lakes, Lake 
                                Champlain, Long Island Sound, 
                                and the Chesapeake Bay; and
                                    (III) other sensitive 
                                ecosystems, as determined by 
                                the Administrator.
                    (H) Acid deposition standards.--Beginning 
                in 2004, and every 4 years thereafter, the 
                report under subparagraph (E) shall include a 
                revision of the report under section 404 of 
                Public Law 101-549 (42 U.S.C. 7651 note) that 
                includes a reassessment of the health and 
                chemistry of the lakes and streams that were 
                subjects of the original report under that 
                section.
            (4) Protection of sensitive ecosystems.--
                    (A) Determination.--Not later than December 
                31, 2010, the Administrator, taking into 
                consideration the findings and recommendations 
                of the report revisions under paragraph (3)(H), 
                shall determine whether emission reductions 
                under titles IV and VII are sufficient to--
                            (i) achieve the necessary 
                        reductions identified under paragraph 
                        (3)(F); and
                            (ii) ensure achievement of the 
                        environmental objectives identified 
                        under paragraph (3)(G).
                    (B) Regulations.--
                            (i) In general.--Not later than 2 
                        years after the Administrator makes a 
                        determination under subparagraph (A) 
                        that emission reductions are not 
                        sufficient, the Administrator shall 
                        promulgate regulations to protect the 
                        sensitive ecosystems referred to in 
                        paragraph (3)(G)(ii).
                            (ii) Contents.--Regulations under 
                        clause (i) shall include modifications 
                        to--
                                    (I) provisions relating to 
                                nitrogen oxide and sulfur 
                                dioxide emission reductions;
                                    (II) provisions relating to 
                                allocations of nitrogen oxide 
                                and sulfur dioxide allowances; 
                                and
                                    (III) such other provisions 
                                as the Administrator determines 
                                to be necessary.
    (k) Air Pollution Conferences.--If, in the judgment of the 
Administrator, an air pollution problem of substantial 
significance may result from discharge or discharges into the 
atmosphere, the Administrator may call a conference concerning 
this potential air pollution problem to be held in or near one 
or more of the places where such discharge or discharges are 
occurring or will occur. All interested persons shall be given 
an opportunity to be heard at such conference, either orally or 
in writing, and shall be permitted to appear in person or by 
representative in accordance with procedures prescribed by the 
Administrator. If the Administrator finds, on the basis of the 
evidence presented at such conference, that the discharge or 
discharges if permitted to take place or continue are likely to 
cause or contribute to air pollution subject to abatement under 
part A of title I, the Administrator shall send such findings, 
together with recommendations concerning the measures which the 
Administrator finds reasonable and suitable to prevent such 
pollution, to the person or persons whose actions will result 
in the discharge or discharges involved; to air pollution 
agencies of the State or States and of the municipality or 
municipalities where such discharge or discharges will 
originate; and to the interstate air pollution control agency, 
if any, in the jurisdictional area of which any such 
municipality is located. Such findings and recommendations 
shall be advisory only, but shall be admitted together with the 
record of the conference, as part of the proceedings under 
subsections (b), (c), (d), (e), and (f) of section 108.

           *       *       *       *       *       *       *


SEC. 193. GENERAL SAVINGS CLAUSE.

    Each regulation, standard, rule, notice, order and guidance 
promulgated or issued by the Administrator under this Act, as 
in effect before the [date of the enactment of the Clean Air 
Act Amendments of 1990] date of enactment of the Clean Power 
Act of 2002 shall remain in effect according to its terms, 
except to the extent otherwise provided under this Act, 
inconsistent with any provision of this Act, or revised by the 
Administrator. No control requirement in effect, or required to 
be adopted by an order, settlement agreement, or plan in effect 
before the [date of the enactment of the Clean Air Act 
Amendments of 1990] date of enactment of the Clean Power Act of 
2002 in any area which is a nonattainment area for any air 
pollutant may be modified after such enactment in any manner 
unless the modification insures equivalent or greater emission 
reductions of such air pollutant.

           *       *       *       *       *       *       *


                    TITLE [IV] VIII--NOISE POLLUTION

    Sec. [401] 801. This title may be cited as the ``Noise 
Pollution and Abatement Act of 1970''.
    Sec. [402] 802. (a) The Administrator shall establish 
within the the Environmental Protection Agency an Office of 
Noise Abatement and Control, and shall carry out through such 
Office a full and complete investigation and study of noise and 
its effect on the public health and welfare in order to (1) 
identify and classify causes and sources of noise, and (2) 
determine--
            (A) effects at various levels;
            (B) projected growth of noise levels in urban areas 
        through the year 2000;
            (C) the psychological and physiological effect on 
        humans;
            (D) effects of sporadic extreme noise (such as jet 
        noise near airports) as compared with constant noise;
            (E) effect on wildlife and property (including 
        values);
            (F) effect of sonic booms on property (including 
        values); and
            (G) such other matters as may be of interest in the 
        public welfare.
    (b) In conducting such investigation, the Administrator 
shall hold public hearings, conduct research, experiments, 
demonstrations, and studies. The Administrator shall report the 
results of such investigation and study, together with his 
recommendations for legislation or other action, to the 
President and the Congress not later than one year after the 
date of enactment of this title.
    (c) In any case where any Federal department or a agency is 
carrying out or sponsoring any activity resulting in noise 
which the administrator determines amounts to a public nuisance 
or is otherwise objectionable, such department or agency shall 
consult with the Administrator to determine possible means of 
abating such noise.
    Sec. [403] 803. There is authorized to be appropriated such 
amount, not to exceed $30,000,000, as may be necessary for the 
purposes of this title.

           *       *       *       *       *       *       *


SEC. 412. MONITORING, REPORTING, AND RECORDKEEPING REQUIREMENTS.

    (a) Applicability.--The owner and operator of any source 
subject to this title shall be required to install and operate 
CEMS on each affected unit at the source, and to quality assure 
the data for sulfur dioxide, nitrogen oxides, [opacity] 
mercury, opacity and volumetric flow at each such unit. The 
Administrator shall, by regulations issued not later than 
eighteen months after enactment of the Clean Air Act Amendments 
of 1990, specify the requirements for CEMS, for any alternative 
monitoring system that is demonstrated as providing information 
with the same precision, reliability, accessibility, and 
timeliness as that provided by CEMS, and for recordkeeping and 
reporting of information from such systems. Such regulations 
may include limitations or the use of alternative compliance 
methods by units equipped with an alternative monitoring system 
as may be necessary to preserve the orderly functioning of the 
allowance system, and which will ensure the emissions 
reductions contemplated by this title. Where 2 or more units 
utilize a single stack, a separate CEMS shall not be required 
for each unit, and for such units the regulations shall require 
that the owner or operator collect sufficient information to 
permit reliable compliance determinations for each such unit.

           *       *       *       *       *       *       *

Sec. 701. Findings.
Sec. 702. Purposes.
Sec. 703. Definitions.
Sec. 704. Emission limitations.
Sec. 705. Emission allowances.
Sec. 706. Permitting and trading of emission allowances.
Sec. 707. Emission allowance allocation.
Sec. 708. Mercury emission limitations.
Sec. 709. Other hazardous air pollutants.
Sec. 710. Effect of failure to promulgate regulations.
Sec. 711. Prohibitions.
Sec. 712. Modernization of electricity generating facilities.
Sec. 713. Relationship to other law.

SEC. 701. FINDINGS.

    Congress finds that--
            (1) public health and the environment continue to 
        suffer as a result of pollution emitted by powerplants 
        across the United States, despite the success of Public 
        Law 101-549 (commonly known as the `Clean Air Act 
        Amendments of 1990') (42 U.S.C. 7401 et seq.) in 
        reducing emissions;
            (2) according to the most reliable scientific 
        knowledge, acid rain precursors must be significantly 
        reduced for the ecosystems of the Northeast and 
        Southeast to recover from the ecological harm caused by 
        acid deposition;
            (3) because lakes and sediments across the United 
        States are being contaminated by mercury emitted by 
        powerplants, there is an increasing risk of mercury 
        poisoning of aquatic habitats and fish-consuming human 
        populations;
            (4)(A) electricity generation accounts for 
        approximately 40 percent of the total emissions in the 
        United States of carbon dioxide, a major greenhouse gas 
        causing global warming; and
            (B) the quantity of carbon dioxide in the 
        atmosphere is growing without constraint and well 
        beyond the international commitments of the United 
        States;
            (5) the cumulative impact of powerplant emissions 
        on public and environmental health must be addressed 
        swiftly by reducing those harmful emissions to levels 
        that are less threatening; and
            (6)(A) the atmosphere is a public resource; and
            (B) emission allowances, representing permission to 
        use that resource for disposal of air pollution from 
        electricity generation, should be allocated to promote 
        public purposes, including--
                    (i) protecting electricity consumers from 
                adverse economic impacts;
                    (ii) providing transition assistance to 
                adversely affected employees, communities, and 
                industries; and
                    (iii) promoting clean energy resources and 
                energy efficiency.

SEC. 702. PURPOSES.

    The purposes of this title are--
            (1) to alleviate the environmental and public 
        health damage caused by emissions of sulfur dioxide, 
        nitrogen oxides, carbon dioxide, and mercury resulting 
        from the combustion of fossil fuels in the generation 
        of electric and thermal energy;
            (2) to reduce by 2008 the annual national emissions 
        from electricity generating facilities to not more 
        than--
                    (A) 2,250,000 tons of sulfur dioxide;
                    (B) 1,510,000 tons of nitrogen oxides;
                    (C) 2,050,000,000 tons of carbon dioxide; 
                and
                    (D) 5 tons of mercury;
            (3) to effectuate the reductions described in 
        paragraph (2) by--
                    (A) requiring electricity generating 
                facilities to comply with specified emission 
                limitations by specified deadlines; and
                    (B) allowing electricity generating 
                facilities to meet the emission limitations 
                (other than the emission limitation for 
                mercury) through an alternative method of 
                compliance consisting of an emission allowance 
                and transfer system; and
            (4) to encourage energy conservation, use of 
        renewable and clean alternative technologies, and 
        pollution prevention as long-range strategies, 
        consistent with this title, for reducing air pollution 
        and other adverse impacts of energy generation and use.

SEC. 703. DEFINITIONS.

    In this title:
            (1) Covered pollutant.--The term `covered 
        pollutant' means--
                    (A) sulfur dioxide;
                    (B) any nitrogen oxide;
                    (C) carbon dioxide; and
                    (D) mercury.
            (2) Electricity generating facility.--The term 
        `electricity generating facility' means an electric or 
        thermal electricity generating unit, a combination of 
        such units, or a combination of 1 or more such units 
        and 1 or more combustion devices, that--
                    (A) has a nameplate capacity of 15 
                megawatts or more (or the equivalent in thermal 
                energy generation, determined in accordance 
                with a methodology developed by the 
                Administrator);
                    (B) generates electric energy, for sale, 
                through combustion of fossil fuel; and
                    (C) emits a covered pollutant into the 
                atmosphere.
            (3) Electricity intensive product.--The term 
        `electricity intensive product' means a product with 
        respect to which the cost of electricity consumed in 
        the production of the product represents more than 5 
        percent of the value of the product.
            (4) Emission allowance.--The term `emission 
        allowance' means a limited authorization to emit in 
        accordance with this title--
                    (A) 1 ton of sulfur dioxide;
                    (B) 1 ton of nitrogen oxides; or
                    (C) 1 ton of carbon dioxide.
            (5) Energy efficiency project.--The term `energy 
        efficiency project' means any specific action (other 
        than ownership or operation of an energy efficient 
        building) commenced after the date of enactment of this 
        title--
                    (A) at a facility (other than an 
                electricity generating facility), that 
                verifiably reduces the annual electricity or 
                natural gas consumption per unit output of the 
                facility, as compared with the annual 
                electricity or natural gas consumption per unit 
                output that would be expected in the absence of 
                an allocation of emission allowances (as 
                determined by the Administrator); or
                    (B) by an entity that is primarily engaged 
                in the transmission and distribution of 
                electricity, that significantly improves the 
                efficiency of that type of entity, as compared 
                with standards for efficiency developed by the 
                Administrator, in consultation with the 
                Secretary of Energy, after the date of 
                enactment of this title.
            (6) Energy efficient building.--The term `energy 
        efficient building' means a residential building or 
        commercial building completed after the date of 
        enactment of this title for which the projected 
        lifetime consumption of electricity or natural gas for 
        heating, cooling, and ventilation is at least 30 
        percent less than the lifetime consumption of a typical 
        new residential building or commercial building, as 
        determined by the Administrator (in consultation with 
        the Secretary of Energy)--
                    (A) on a State or regional basis; and
                    (B) taking into consideration--
                            (i) applicable building codes; and
                            (ii) consumption levels achieved in 
                        practice by new residential buildings 
                        or commercial buildings in the absence 
                        of an allocation of emission 
                        allowances.
            (7) Energy efficient product.--The term `energy 
        efficient product' means a product manufactured after 
        the date of enactment of this title that has an 
        expected lifetime electricity or natural gas 
        consumption that--
                    (A) is less than the average lifetime 
                electricity or natural gas consumption for that 
                type of product; and
                    (B) does not exceed the lesser of--
                            (i) the maximum energy consumption 
                        that qualifies for the applicable 
                        Energy Star label for that type of 
                        product; or
                            (ii) the average energy consumption 
                        of the most efficient 25 percent of 
                        that type of product manufactured in 
                        the same year.
            (8) Lifetime.--The term `lifetime' means--
                    (A) in the case of a residential building 
                that is an energy efficient building, 30 years;
                    (B) in the case of a commercial building 
                that is an energy efficient building, 15 years; 
                and
                    (C) in the case of an energy efficient 
                product, a period determined by the 
                Administrator to be the average life of that 
                type of energy efficient product.
            (9) Mercury.--The term `mercury' includes any 
        mercury compound.
            (10) New clean fossil fuel-fired electricity 
        generating unit.--The term `new clean fossil fuel-fired 
        electricity generating unit' means a unit that--
                    (A) has been in operation for 10 years or 
                less; and
                    (B) is--
                            (i) a natural gas fired generator 
                        that--
                                    (I) has an energy 
                                conversion efficiency of at 
                                least 55 percent; and
                                    (II) uses best available 
                                control technology (as defined 
                                in section 169);
                            (ii) a generator that--
                                    (I) uses integrated 
                                gasification combined cycle 
                                technology;
                                    (II) uses best available 
                                control technology (as defined 
                                in section 169); and
                                    (III) has an energy 
                                conversion efficiency of at 
                                least 45 percent; or
                            (iii) a fuel cell operating on fuel 
                        derived from a nonrenewable source of 
                        energy.
            (11) Nonwestern region.--The term `nonwestern 
        region' means the area of the States that is not 
        included in the western region.
            (12) Renewable electricity generating unit.--The 
        term `renewable electricity generating unit' means a 
        unit that--
                    (A) has been in operation for 10 years or 
                less; and
                    (B) generates electric energy by means of--
                            (i) wind;
                            (ii) biomass;
                            (iii) landfill gas;
                            (iv) a geothermal, solar thermal, 
                        or photovoltaic source; or
                            (v) a fuel cell operating on fuel 
                        derived from a renewable source of 
                        energy.
            (13) Small electricity generating facility.--The 
        term `small electricity generating facility' means an 
        electric or thermal electricity generating unit, or 
        combination of units, that--
                    (A) has a nameplate capacity of less than 
                15 megawatts (or the equivalent in thermal 
                energy generation, determined in accordance 
                with a methodology developed by the 
                Administrator);
                    (B) generates electric energy, for sale, 
                through combustion of fossil fuel; and
                    (C) emits a covered pollutant into the 
                atmosphere.
            (14) Western region.--The term `western region' 
        means the area comprising the States of Arizona, 
        California, Colorado, Idaho, Montana, Nevada, New 
        Mexico, Oregon, Utah, Washington, and Wyoming.

SEC. 704. EMISSION LIMITATIONS.

    (a) In General.--Subject to subsections (b) and (c), the 
Administrator shall promulgate regulations to ensure that, 
during 2008 and each year thereafter, the total annual 
emissions of covered pollutants from all electricity generating 
facilities located in all States does not exceed--
            (1) in the case of sulfur dioxide--
                    (A) 275,000 tons in the western region; or
                    (B) 1,975,000 tons in the nonwestern 
                region;
            (2) in the case of nitrogen oxides, 1,510,000 tons;
            (3) in the case of carbon dioxide, 2,050,000,000 
        tons; or
            (4) in the case of mercury, 5 tons.
    (b) Excess Emissions Based on Unused Allowances.--The 
regulations promulgated under subsection (a) shall authorize 
emissions of covered pollutants in excess of the national 
emission limitations established under that subsection for a 
year to the extent that the number of tons of the excess 
emissions is less than or equal to the number of emission 
allowances that are--
            (1) used in the year; but
            (2) allocated for any previous year under section 
        707.
    (c) Reductions.--For 2008 and each year thereafter, the 
quantity of emissions specified for each covered pollutant in 
subsection (a) shall be reduced by the sum of--
            (1) the number of tons of the covered pollutant 
        that were emitted by small electricity generating 
        facilities in the second preceding year; and
            (2) any number of tons of reductions in emissions 
        of the covered pollutant required under section 705(h).

SEC. 705. EMISSION ALLOWANCES.

    (a) Creation and Allocation.--
            (1) In general.--For 2008 and each year thereafter, 
        subject to paragraph (2), there are created, and the 
        Administrator shall allocate in accordance with section 
        707, emission allowances as follows:
                    (A) In the case of sulfur dioxide--
                            (i) 275,000 emission allowances for 
                        each year for use in the western 
                        region; and
                            (ii) 1,975,000 emission allowances 
                        for each year for use in the nonwestern 
                        region.
                    (B) In the case of nitrogen oxides, 
                1,510,000 emission allowances for each year.
                    (C) In the case of carbon dioxide, 
                2,050,000,000 emission allowances for each 
                year.
            (2) Reductions.--For 2008 and each year thereafter, 
        the number of emission allowances specified for each 
        covered pollutant in paragraph (1) shall be reduced by 
        a number equal to the sum of--
                    (A) the number of tons of the covered 
                pollutant that were emitted by small 
                electricity generating facilities in the second 
                preceding year; and
                    (B) any number of tons of reductions in 
                emissions of the covered pollutant required 
                under subsection (h).
    (b) Nature of Emission Allowances.--
            (1) Not a property right.--An emission allowance 
        allocated by the Administrator under subsection (a) is 
        not a property right.
            (2) No limit on authority to terminate or limit.--
        Nothing in this title or any other provision of law 
        limits the authority of the United States to terminate 
        or limit an emission allowance.
            (3) Tracking and transfer of emission allowances.--
                    (A) In general.--Not later than 1 year 
                after the date of enactment of this title, the 
                Administrator shall promulgate regulations to 
                establish an emission allowance tracking and 
                transfer system for emission allowances of 
                sulfur dioxide, nitrogen oxides, and carbon 
                dioxide.
                    (B) Requirements.--The emission allowance 
                tracking and transfer system established under 
                subparagraph (A) shall--
                            (i) incorporate the requirements of 
                        subsections (b) and (d) of section 412 
                        (except that written certification by 
                        the transferee shall not be necessary 
                        to effect a transfer); and
                            (ii) permit any entity--
                                    (I) to buy, sell, or hold 
                                an emission allowance; and
                                    (II) to permanently retire 
                                an unused emission allowance.
                    (C) Proceeds of transfers.--Proceeds from 
                the transfer of emission allowances by any 
                person to which the emission allowances have 
                been allocated--
                            (i) shall not constitute funds of 
                        the United States; and
                            (ii) shall not be available to meet 
                        any obligations of the United States.
    (c) Identification and Use.--
            (1) In general.--Each emission allowance allocated 
        by the Administrator shall bear a unique serial number, 
        including--
                    (A) an identifier of the covered pollutant 
                to which the emission allowance pertains; and
                    (B) the first year for which the allowance 
                may be used.
            (2) Sulfur dioxide emission allowances.--In the 
        case of sulfur dioxide emission allowances, the 
        Administrator shall ensure that the emission allowances 
        allocated to electricity generating facilities in the 
        western region are distinguishable from emission 
        allowances allocated to electricity generating 
        facilities in the nonwestern region.
            (3) Year of use.--Each emission allowance may be 
        used in the year for which the emission allowance is 
        allocated or in any subsequent year.
    (d) Annual Submission of Emission Allowances.--
            (1) In general.--On or before April 1, 2009, and 
        April 1 of each year thereafter, the owner or operator 
        of each electricity generating facility shall submit to 
        the Administrator 1 emission allowance for the 
        applicable covered pollutant (other than mercury) for 
        each ton of sulfur dioxide, nitrogen oxides, or carbon 
        dioxide emitted by the electricity generating facility 
        during the previous calendar year.
            (2) Special rule for ozone exceedances.--
                    (A) Identification of facilities 
                contributing to nonattainment.--Not later than 
                December 31, 2007, and the end of each 3-year 
                period thereafter, each State, consistent with 
                the obligations of the State under section 
                110(a)(2)(D), shall identify the electricity 
                generating facilities in the State and in other 
                States that are significantly contributing (as 
                determined based on guidance issued by the 
                Administrator) to nonattainment of the national 
                ambient air quality standard for ozone in the 
                State.
                    (B) Submission of additional allowances.--
                In 2008 and each year thereafter, on petition 
                from a State or a person demonstrating that the 
                control measures in effect at an electricity 
                generating facility that is identified under 
                subparagraph (A) as significantly contributing 
                to nonattainment of the national ambient air 
                quality standard for ozone in a State during 
                the previous year are inadequate to prevent the 
                significant contribution described in 
                subparagraph (A), the Administrator, if the 
                Administrator determines that the electricity 
                generating facility is inadequately controlled 
                for nitrogen oxides, may require that the 
                electricity generating facility submit 3 
                nitrogen oxide emission allowances for each ton 
                of nitrogen oxides emitted by the electricity 
                generating facility during any period of an 
                exceedance of the national ambient air quality 
                standard for ozone in the State during the 
                previous year.
            (3) Regional limitations for sulfur dioxide.--The 
        Administrator shall not allow--
                    (A) the use of sulfur dioxide emission 
                allowances allocated for the western region to 
                meet the obligations under this subsection of 
                electricity generating facilities in the 
                nonwestern region; or
                    (B) the use of sulfur dioxide emission 
                allowances allocated for the nonwestern region 
                to meet the obligations under this subsection 
                of electricity generating facilities in the 
                western region.
    (e) Emission Verification, Monitoring, and Recordkeeping.--
            (1) In general.--The Administrator shall ensure 
        that Federal regulations, in combination with any 
        applicable State regulations, are adequate to verify, 
        monitor, and document emissions of covered pollutants 
        from electricity generating facilities.
            (2) Inventory of emissions from small electricity 
        generating facilities.--On or before January 1, 2004, 
        the Administrator, in cooperation with State agencies, 
        shall complete, and on an annual basis update, a 
        comprehensive inventory of emissions of sulfur dioxide, 
        nitrogen oxides, carbon dioxide, and particulate matter 
        from small electricity generating facilities.
            (3) Monitoring information.--
                    (A) In general.--Not later than 180 days 
                after the date of enactment of this title, the 
                Administrator shall promulgate regulations to 
                require each electricity generating facility to 
                submit to the Administrator--
                            (i) not later than April 1 of each 
                        year, verifiable information on covered 
                        pollutants emitted by the electricity 
                        generating facility in the previous 
                        year, expressed in--
                                    (I) tons of covered 
                                pollutants; and
                                    (II) tons of covered 
                                pollutants per megawatt hour of 
                                energy (or the equivalent 
                                thermal energy) generated; and
                            (ii) as part of the first 
                        submission under clause (i), verifiable 
                        information on covered pollutants 
                        emitted by the electricity generating 
                        facility in 1999, 2000, and 2001, if 
                        the electricity generating facility was 
                        required to report that information in 
                        those years.
                    (B) Source of information.--Information 
                submitted under subparagraph (A) shall be 
                obtained using a continuous emission monitoring 
                system (as defined in section 402).
                    (C) Availability to the public.--The 
                information described in subparagraph (A) shall 
                be made available to the public--
                            (i) in the case of the first year 
                        in which the information is required to 
                        be submitted under that subparagraph, 
                        not later than 18 months after the date 
                        of enactment of this title; and
                            (ii) in the case of each year 
                        thereafter, not later than April 1 of 
                        the year.
            (4) Ambient air quality monitoring for sulfur 
        dioxide and hazardous air pollutants.--
                    (A) In general.--Beginning January 1, 2004, 
                each coal-fired electricity generating facility 
                with an aggregate generating capacity of 50 
                megawatts or more shall, in accordance with 
                guidelines issued by the Administrator, 
                commence ambient air quality monitoring within 
                a 30-mile radius of the coal-fired electricity 
                generating facility for the purpose of 
                measuring maximum concentrations of sulfur 
                dioxide and hazardous air pollutants emitted by 
                the coal-fired electricity generating facility.
                    (B) Location of monitoring points.--
                Monitoring under subparagraph (A) shall include 
                monitoring at not fewer than 2 points--
                            (i) that are at ground level and 
                        within 3 miles of the coal-fired 
                        electricity generating facility;
                            (ii) at which the concentration of 
                        pollutants being monitored is expected 
                        to be the greatest; and
                            (iii) at which the monitoring shall 
                        be the most frequent.
                    (C) Frequency of monitoring of sulfur 
                dioxide.--Monitoring of sulfur dioxide under 
                subparagraph (A) shall be carried out on a 
                continuous basis and averaged over 5-minute 
                periods.
                    (D) Availability to the public.--The 
                results of the monitoring under subparagraph 
                (A) shall be made available to the public.
    (f) Excess Emission Penalty.--
            (1) In general.--Subject to paragraph (2), section 
        411 shall be applicable to an owner or operator of an 
        electricity generating facility.
            (2) Calculation of penalty.--
                    (A) In general.--Except as provided in 
                subparagraph (B), the penalty for failure to 
                submit emission allowances for covered 
                pollutants as required under subsection (d) 
                shall be equal to 3 times the product obtained 
                by multiplying--
                            (i) as applicable--
                                    (I) the number of tons 
                                emitted in excess of the 
                                emission limitation requirement 
                                applicable to the electricity 
                                generating facility; or
                                    (II) the number of emission 
                                allowances that the owner or 
                                operator failed to submit; and
                            (ii) the average annual market 
                        price of emission allowances (as 
                        determined by the Administrator).
                    (B) Mercury.--In the case of mercury, the 
                penalty shall be equal to 3 times the product 
                obtained by multiplying--
                            (i) the number of grams emitted in 
                        excess of the emission limitation 
                        requirement for mercury applicable to 
                        the electricity generating facility; 
                        and
                            (ii) the average cost of mercury 
                        controls at electricity generating 
                        units that have a nameplate capacity of 
                        15 megawatts or more in all States (as 
                        determined by the Administrator).
    (g) Significant Adverse Local Impacts.--
            (1) In general.--If the Administrator determines 
        that emissions of an electricity generating facility 
        may reasonably be anticipated to cause or contribute to 
        a significant adverse impact on an area (including 
        endangerment of public health, contribution to acid 
        deposition in a sensitive receptor area, and other 
        degradation of the environment), the Administrator 
        shall limit the emissions of the electricity generating 
        facility as necessary to avoid that impact.
            (2) Violation.--Notwithstanding the availability of 
        emission allowances, it shall be a violation of this 
        Act for any electricity generating facility to exceed 
        any limitation on emissions established under paragraph 
        (1).
    (h) Additional Reductions.--
            (1) Protection of public health or welfare or the 
        environment.--If the Administrator determines that the 
        emission levels necessary to achieve the national 
        emission limitations established under section 704 are 
        not reasonably anticipated to protect public health or 
        welfare or the environment (including protection of 
        children, pregnant women, minority or low-income 
        communities, and other sensitive populations), the 
        Administrator may require reductions in emissions from 
        electricity generating facilities in addition to the 
        reductions required under the other provisions of this 
        title.
            (2) Emission allowance trading.--
                    (A) Studies.--
                            (i) In general.--In 2011 and at the 
                        end of each 3-year period thereafter, 
                        the Administrator shall complete a 
                        study of the impacts of the emission 
                        allowance trading authorized under this 
                        title.
                            (ii) Required assessment.--The 
                        study shall include an assessment of 
                        ambient air quality in areas 
                        surrounding electricity generating 
                        facilities that participate in emission 
                        allowance trading, including a 
                        comparison between--
                                    (I) the ambient air quality 
                                in those areas; and
                                    (II) the national average 
                                ambient air quality.
                    (B) Limitation on emissions.--If the 
                Administrator determines, based on the results 
                of a study under subparagraph (A), that adverse 
                local impacts result from emission allowance 
                trading, the Administrator may require 
                reductions in emissions from electricity 
                generating facilities in addition to the 
                reductions required under the other provisions 
                of this title.
    (i) Use of Certain Other Emission Allowances.--
            (1) In general.--Subject to paragraph (2), emission 
        allowances or other emission trading instruments 
        created under title I or IV for sulfur dioxide or 
        nitrogen oxides shall not be valid for submission under 
        subsection (d).
            (2) Emission allowances placed in reserve.--
                    (A) In general.--Except as provided in 
                subparagraph (B), an emission allowance 
                described in paragraph (1) that was placed in 
                reserve under section 404(a)(2) or 405 or 
                through regulations implementing controls on 
                nitrogen oxides, because an affected unit 
                emitted fewer tons of sulfur dioxide or 
                nitrogen oxides than were permitted under an 
                emission limitation imposed under title I or IV 
                before the date of enactment of this title, 
                shall be considered to be equivalent to \1/4\ 
                of an emission allowance created by subsection 
                (a) for sulfur dioxide or nitrogen oxides, 
                respectively.
                    (B) Emission allowances resulting from 
                achievement of new source performance 
                standards.--If an emission allowance described 
                in subparagraph (A) was created and placed in 
                reserve during the period of 2000 through 2007 
                by the owner or operator of an electricity 
                generating facility through the application of 
                pollution control technology that resulted in 
                the achievement and maintenance by the 
                electricity generating facility of the 
                applicable standards of performance required of 
                new sources under section 111, the emission 
                allowance shall be valid for submission under 
                subsection (d).

SEC. 706. PERMITTING AND TRADING OF EMISSION ALLOWANCES.

    (a) In General.--Not later than 1 year after the date of 
enactment of this title, the Administrator shall promulgate 
regulations to establish a permitting and emission allowance 
trading compliance program to implement the limitations on 
emissions of covered pollutants from electricity generating 
facilities established under section 704.
    (b) Emission Allowance Trading With Facilities Other Than 
Electricity Generating Facilities.--
            (1) In general.--Subject to paragraph (2) and 
        section 705(i), the regulations promulgated to 
        establish the program under subsection (a) shall 
        prohibit use of emission allowances generated from 
        other emission control programs for the purpose of 
        demonstrating compliance with the limitations on 
        emissions of covered pollutants from electricity 
        generating facilities established under section 704.
            (2) Exception for certain carbon dioxide emission 
        control programs.--The prohibition described in 
        paragraph (1) shall not apply in the case of carbon 
        dioxide emission allowances generated from an emission 
        control program that limits total carbon dioxide 
        emissions from the entirety of any industrial sector.
    (c) Methodology.--The program established under subsection 
(a) shall clearly identify the methodology for the allocation 
of emission allowances, including standards for measuring 
annual electricity generation and energy efficiency as the 
standards relate to emissions.

SEC. 707. EMISSION ALLOWANCE ALLOCATION.

    (a) Allocation to Electricity Consumers.--
            (1) In general.--For 2008 and each year thereafter, 
        after making allocations of emission allowances under 
        subsections (b) through (f), the Administrator shall 
        allocate the remaining emission allowances created by 
        section 705(a) for the year for each covered pollutant 
        other than mercury to households served by electricity.
            (2) Allocation among households.--The allocation to 
        each household shall reflect--
                    (A) the number of persons residing in the 
                household; and
                    (B) the ratio that--
                            (i) the quantity of the residential 
                        electricity consumption of the State in 
                        which the household is located; bears 
                        to
                            (ii) the quantity of the 
                        residential electricity consumption of 
                        all States.
            (3) Regulations.--Not later than 1 year after the 
        date of enactment of this title, the Administrator 
        shall promulgate regulations making appropriate 
        arrangements for the allocation of emission allowances 
        to households under this subsection, including as 
        necessary the appointment of 1 or more trustees--
                    (A) to receive the emission allowances for 
                the benefit of the households;
                    (B) to obtain fair market value for the 
                emission allowances; and
                    (C) to distribute the proceeds to the 
                beneficiaries.
    (b) Allocation for Transition Assistance.--
            (1) In general.--For 2008 and each year thereafter 
        through 2017, the Administrator shall allocate the 
        percentage specified in paragraph (2) of the emission 
        allowances created by section 705(a) for the year for 
        each covered pollutant other than mercury in the 
        following manner:
                    (A) 80 percent shall be allocated to 
                provide transition assistance to--
                            (i) dislocated workers (as defined 
                        in section 101 of the Workforce 
                        Investment Act of 1998 (29 U.S.C. 
                        2801)) whose employment has been 
                        terminated or who have been laid off as 
                        a result of the emission reductions 
                        required by this title; and
                            (ii) communities that have 
                        experienced disproportionate adverse 
                        economic impacts as a result of the 
                        emission reductions required by this 
                        title.
                    (B) 20 percent shall be allocated to 
                producers of electricity intensive products in 
                a number equal to the product obtained by 
                multiplying--
                            (i) the ratio that--
                                    (I) the quantity of each 
                                electricity intensive product 
                                produced by each producer in 
                                the previous year; bears to
                                    (II) the quantity of the 
                                electricity intensive product 
                                produced by all producers in 
                                the previous year;
                            (ii) the average quantity of 
                        electricity used in producing the 
                        electricity intensive product by 
                        producers that use the most energy 
                        efficient process for producing the 
                        electricity intensive product; and
                            (iii) with respect to the previous 
                        year, the national average quantity 
                        (expressed in tons) of emissions of 
                        each such pollutant per megawatt hour 
                        of electricity generated by electricity 
                        generating facilities in all States.
            (2) Specified percentages.--The percentages 
        referred to in paragraph (1) are--
                    (A) in the case of 2008, 6 percent;
                    (B) in the case of 2009, 5.5 percent;
                    (C) in the case of 2010, 5 percent;
                    (D) in the case of 2011, 4.5 percent;
                    (E) in the case of 2012, 4 percent;
                    (F) in the case of 2013, 3.5 percent;
                    (G) in the case of 2014, 3 percent;
                    (H) in the case of 2015, 2.5 percent;
                    (I) in the case of 2016, 2 percent; and
                    (J) in the case of 2017, 1.5 percent.
            (3) Regulations for allocation for transition 
        assistance to dislocated workers and communities.--
                    (A) In general.--Not later than 1 year 
                after the date of enactment of this title, the 
                Administrator shall promulgate regulations 
                making appropriate arrangements for the 
                distribution of emission allowances under 
                paragraph (1)(A), including as necessary the 
                appointment of 1 or more trustees--
                            (i) to receive the emission 
                        allowances allocated under paragraph 
                        (1)(A) for the benefit of the 
                        dislocated workers and communities;
                            (ii) to obtain fair market value 
                        for the emission allowances; and
                            (iii) to apply the proceeds to 
                        providing transition assistance to the 
                        dislocated workers and communities.
                    (B) Form of transition assistance.--
                Transition assistance under paragraph (1)(A) 
                may take the form of--
                            (i) grants to employers, employer 
                        associations, and representatives of 
                        employees--
                                    (I) to provide training, 
                                adjustment assistance, and 
                                employment services to 
                                dislocated workers; and
                                    (II) to make income-
                                maintenance and needs-related 
                                payments to dislocated workers; 
                                and
                            (ii) grants to States and local 
                        governments to assist communities in 
                        attracting new employers or providing 
                        essential local government services.
    (c) Allocation to Renewable Electricity Generating Units, 
Efficiency Projects, and Cleaner Energy Sources.--For 2008 and 
each year thereafter, the Administrator shall allocate not more 
than 20 percent of the emission allowances created by section 
705(a) for the year for each covered pollutant other than 
mercury--
            (1) to owners and operators of renewable 
        electricity generating units, in a number equal to the 
        product obtained by multiplying--
                    (A) the number of megawatt hours of 
                electricity generated in the previous year by 
                each renewable electricity generating unit; and
                    (B) with respect to the previous year, the 
                national average quantity (expressed in tons) 
                of emissions of each such pollutant per 
                megawatt hour of electricity generated by 
                electricity generating facilities in all 
                States;
            (2) to owners and operators of energy efficient 
        buildings, producers of energy efficient products, and 
        entities that carry out energy efficient projects, in a 
        number equal to the product obtained by multiplying--
                    (A) the number of megawatt hours of 
                electricity or cubic feet of natural gas saved 
                in the previous year as a result of each energy 
                efficient building, energy efficient product, 
                or energy efficiency project; and
                    (B) with respect to the previous year, the 
                national average quantity (expressed in tons) 
                of emissions of each such pollutant per, as 
                appropriate--
                            (i) megawatt hour of electricity 
                        generated by electricity generating 
                        facilities in all States; or
                            (ii) cubic foot of natural gas 
                        burned for a purpose other than 
                        generation of electricity in all 
                        States;
            (3) to owners and operators of new clean fossil 
        fuel-fired electricity generating units, in a number 
        equal to the product obtained by multiplying--
                    (A) the number of megawatt hours of 
                electricity generated in the previous year by 
                each new clean fossil fuel-fired electricity 
                generating unit; and
                    (B) with respect to the previous year, \1/
                2\ of the national average quantity (expressed 
                in tons) of emissions of each such pollutant 
                per megawatt hour of electricity generated by 
                electricity generating facilities in all 
                States; and
            (4) to owners and operators of combined heat and 
        power electricity generating facilities, in a number 
        equal to the product obtained by multiplying--
                    (A) the number of British thermal units of 
                thermal energy produced and put to productive 
                use in the previous year by each combined heat 
                and power electricity generating facility; and
                    (B) with respect to the previous year, the 
                national average quantity (expressed in tons) 
                of emissions of each such pollutant per British 
                thermal unit of thermal energy generated by 
                electricity generating facilities in all 
                States.
    (d) Transition Assistance to Electricity Generating 
Facilities.--
            (1) In general.--For 2008 and each year thereafter 
        through 2017, the Administrator shall allocate the 
        percentage specified in paragraph (2) of the emission 
        allowances created by section 705(a) for the year for 
        each covered pollutant other than mercury to the owners 
        or operators of electricity generating facilities in 
        the ratio that--
                    (A) the quantity of electricity generated 
                by each electricity generating facility in 
                2000; bears to
                    (B) the quantity of electricity generated 
                by all electricity generating facilities in 
                2000.
            (2) Specified percentages.--The percentages 
        referred to in paragraph (1) are--
                    (A) in the case of 2008, 10 percent;
                    (B) in the case of 2009, 9 percent;
                    (C) in the case of 2010, 8 percent;
                    (D) in the case of 2011, 7 percent;
                    (E) in the case of 2012, 6 percent;
                    (F) in the case of 2013, 5 percent;
                    (G) in the case of 2014, 4 percent;
                    (H) in the case of 2015, 3 percent;
                    (I) in the case of 2016, 2 percent; and
                    (J) in the case of 2017, 1 percent.
    (e) Allocation To Encourage Biological Carbon 
Sequestration.--
            (1) In general.--For 2008 and each year thereafter, 
        the Administrator shall allocate, on a competitive 
        basis and in accordance with paragraphs (2) and (3), 
        not more than 0.075 percent of the carbon dioxide 
        emission allowances created by section 705(a) for the 
        year for the purposes of--
                    (A) carrying out projects to reduce net 
                carbon dioxide emissions through biological 
                carbon dioxide sequestration in the United 
                States that--
                            (i) result in benefits to 
                        watersheds and fish and wildlife 
                        habitats; and
                            (ii) are conducted in accordance 
                        with project reporting, monitoring, and 
                        verification guidelines based on--
                                    (I) measurement of 
                                increases in carbon storage in 
                                excess of the carbon storage 
                                that would have occurred in the 
                                absence of such a project;
                                    (II) comprehensive carbon 
                                accounting that--
                                            (aa) reflects net 
                                        increases in carbon 
                                        reservoirs; and
                                            (bb) takes into 
                                        account any carbon 
                                        emissions resulting 
                                        from disturbance of 
                                        carbon reservoirs in 
                                        existence as of the 
                                        date of commencement of 
                                        the project;
                                    (III) adjustments to 
                                account for--
                                            (aa) emissions of 
                                        carbon that may result 
                                        at other locations as a 
                                        result of the impact of 
                                        the project on timber 
                                        supplies; or
                                            (bb) potential 
                                        displacement of carbon 
                                        emissions to other land 
                                        owned by the entity 
                                        that carries out the 
                                        project; and
                                    (IV) adjustments to reflect 
                                the expected carbon storage 
                                over various time periods, 
                                taking into account the likely 
                                duration of the storage of the 
                                carbon stored in a carbon 
                                reservoir; and
                    (B) conducting accurate inventories of 
                carbon sinks.
            (2) Carbon inventory.--The Administrator, in 
        consultation with the Secretary of Agriculture, shall 
        allocate not more than \1/3\ of the emission allowances 
        described in paragraph (1) to not more than 5 State or 
        multistate land or forest management agencies or 
        nonprofit entities that--
                    (A) have a primary goal of land 
                conservation; and
                    (B) submit to the Administrator proposals 
                for projects--
                            (i) to demonstrate and assess the 
                        potential for the development and use 
                        of carbon inventorying and accounting 
                        systems;
                            (ii) to improve the standards 
                        relating to, and the identification of, 
                        incremental carbon sequestration in 
                        forests, agricultural soil, grassland, 
                        or rangeland; or
                            (iii) to assist in development of a 
                        national biological carbon storage 
                        baseline or inventory.
            (3) Revolving loan program.--The Administrator 
        shall allocate not more than \2/3\ of the emission 
        allowances described in paragraph (1) to States, based 
        on proposals submitted by States to conduct programs 
        under which each State shall--
                    (A) use the value of the emission 
                allowances to establish a State revolving loan 
                fund to provide loans to owners of 
                nonindustrial private forest land in the State 
                to carry out forest and forest soil carbon 
                sequestration activities that will achieve the 
                purposes specified in paragraph (2)(B); and
                    (B) for 2009 and each year thereafter, 
                contribute to the program of the State an 
                amount equal to 25 percent of the value of the 
                emission allowances received under this 
                paragraph for the year in cash, in-kind 
                services, or technical assistance.
            (4) Use of emission allowances.--An entity that 
        receives an allocation of emission allowances under 
        this subsection may use the proceeds from the sale or 
        other transfer of the emission allowances only for the 
        purpose of carrying out activities described in this 
        subsection.
            (5) Recommendations concerning carbon dioxide 
        emission allowances.--
                    (A) In general.--Not later than 4 years 
                after the date of enactment of this title, the 
                Administrator, in consultation with the 
                Secretary of Agriculture, shall submit to 
                Congress recommendations for establishing a 
                system under which entities that receive grants 
                or loans under this section may be allocated 
                carbon dioxide emission allowances created by 
                section 705(a) for incremental carbon 
                sequestration in forests, agricultural soils, 
                rangeland, or grassland.
                    (B) Guidelines.--The recommendations shall 
                include recommendations for development, 
                reporting, monitoring, and verification 
                guidelines for quantifying net carbon 
                sequestration from land use projects that 
                address the elements specified in paragraph 
                (1)(A).
    (f) Allocation To Encourage Geological Carbon 
Sequestration.--
            (1) In general.--For 2008 and each year thereafter, 
        the Administrator shall allocate not more than 1.5 
        percent of the carbon dioxide emission allowances 
        created by section 705(a) to entities that carry out 
        geological sequestration of carbon dioxide produced by 
        an electric generating facility in accordance with 
        requirements established by the Administrator--
                    (A) to ensure the permanence of the 
                sequestration; and
                    (B) to ensure that the sequestration will 
                not cause or contribute to significant adverse 
                effects on the environment.
            (2) Number of emission allowances.--For 2008 and 
        each year thereafter, the Administrator shall allocate 
        to each entity described in paragraph (1) a number of 
        emission allowances that is equal to the number of tons 
        of carbon dioxide produced by the electric generating 
        facility during the previous year that is geologically 
        sequestered as described in paragraph (1).
            (3) Use of emission allowances.--An entity that 
        receives an allocation of emission allowances under 
        this subsection may use the proceeds from the sale or 
        other transfer of the emission allowances only for the 
        purpose of carrying out activities described in this 
        subsection.

SEC. 708. MERCURY EMISSION LIMITATIONS.

    (a) In General.--
            (1) Regulations.--
                    (A) In general.--Not later than 1 year 
                after the date of enactment of this title, the 
                Administrator shall promulgate regulations to 
                establish emission limitations for mercury 
                emissions by coal-fired electricity generating 
                facilities.
                    (B) No exceedance of national limitation.--
                The regulations shall ensure that the national 
                limitation for mercury emissions from each 
                coal-fired electricity generating facility 
                established under section 704(a)(4) is not 
                exceeded.
                    (C) Emission limitations for 2008 and 
                thereafter.--In carrying out subparagraph (A), 
                for 2008 and each year thereafter, the 
                Administrator shall not--
                            (i) subject to subsections (e) and 
                        (f) of section 112, establish 
                        limitations on emissions of mercury 
                        from coal-fired electricity generating 
                        facilities that allow emissions in 
                        excess of 2.48 grams of mercury per 
                        1000 megawatt hours; or
                            (ii) differentiate between 
                        facilities that burn different types of 
                        coal.
            (2) Annual review and determination.--
                    (A) In general.--Not later than April 1 of 
                each year, the Administrator shall--
                            (i) review the total mercury 
                        emissions during the 2 previous years 
                        from electricity generating facilities 
                        located in all States; and
                            (ii) determine whether, during the 
                        2 previous years, the total mercury 
                        emissions from facilities described in 
                        clause (i) exceeded the national 
                        limitation for mercury emissions 
                        established under section 704(a)(4).
                    (B) Exceedance of national limitation.--If 
                the Administrator determines under subparagraph 
                (A)(ii) that, during the 2 previous years, the 
                total mercury emissions from facilities 
                described in subparagraph (A)(i) exceeded the 
                national limitation for mercury emissions 
                established under section 704(a)(4), the 
                Administrator shall, not later than 1 year 
                after the date of the determination, revise the 
                regulations promulgated under paragraph (1) to 
                reduce the emission rates specified in the 
                regulations as necessary to ensure that the 
                national limitation for mercury emissions is 
                not exceeded in any future year.
            (3) Compliance flexibility.--
                    (A) In general.--Each coal-fired 
                electricity generating facility subject to an 
                emission limitation under this section shall be 
                in compliance with that limitation if that 
                limitation is greater than or equal to the 
                quotient obtained by dividing--
                            (i) the total mercury emissions of 
                        the coal-fired electricity generating 
                        facility during each 30-day period; by
                            (ii) the quantity of electricity 
                        generated by the coal-fired electricity 
                        generating facility during that period.
                    (B) More than 1 unit at a facility.--In any 
                case in which more than 1 coal-fired 
                electricity generating unit at a coal-fired 
                electricity generating facility subject to an 
                emission limitation under this section was 
                operated in 1999 under common ownership or 
                control, compliance with the emission 
                limitation may be determined by averaging the 
                emission rates of all coal-fired electricity 
                generating units at the electricity generating 
                facility during each 30-day period.
    (b) Prevention of Re-Release.--
            (1) Regulations.--Not later than January 1, 2005, 
        the Administrator shall promulgate regulations to 
        ensure that any mercury captured or recovered by 
        emission controls installed at an electricity 
        generating facility is not re-released into the 
        environment.
            (2) Required elements.--The regulations shall 
        require--
                    (A) daily covers on all active waste 
                disposal units, and permanent covers on all 
                inactive waste disposal units, to prevent the 
                release of mercury into the air;
                    (B) monitoring of groundwater to ensure 
                that mercury or mercury compounds do not 
                migrate from the waste disposal unit;
                    (C) waste disposal siting requirements and 
                cleanup requirements to protect groundwater and 
                surface water resources;
                    (D) elimination of agricultural application 
                of coal combustion wastes; and
                    (E) appropriate limitations on mercury 
                emissions from sources or processes that 
                reprocess or use coal combustion waste, 
                including manufacturers of wallboard and 
                cement.

SEC. 709. OTHER HAZARDOUS AIR POLLUTANTS.

    (a) In General.--Not later than January 1, 2004, the 
Administrator shall issue to owners and operators of coal-fired 
electricity generating facilities requests for information 
under section 114 that are of sufficient scope to generate data 
sufficient to support issuance of standards under section 
112(d) for hazardous air pollutants other than mercury emitted 
by coal-fired electricity generating facilities.
    (b) Deadline for Submission of Requested Information.--The 
Administrator shall require each recipient of a request for 
information described in subsection (a) to submit the requested 
data not later than 180 days after the date of the request.
    (c) Promulgation of Emission Standards.--The Administrator 
shall--
            (1) not later than January 1, 2005, propose 
        emission standards under section 112(d) for hazardous 
        air pollutants other than mercury; and
            (2) not later than January 1, 2006, promulgate 
        emission standards under section 112(d) for hazardous 
        air pollutants other than mercury.
    (d) Prohibition on Excess Emissions.--It shall be unlawful 
for an electricity generating facility subject to standards for 
hazardous air pollutants other than mercury promulgated under 
subsection (c) to emit, after December 31, 2007, any such 
pollutant in excess of the standards.
    (e) Effect on Other Law.--Nothing in this section or 
section 708 affects any requirement of subsection (e), (f)(2), 
or (n)(1)(A) of section 112, except that the emission 
limitations established by regulations promulgated under this 
section shall be deemed to represent the maximum achievable 
control technology for mercury emissions from electricity 
generating units under section 112(d).

SEC. 710. EFFECT OF FAILURE TO PROMULGATE REGULATIONS.

    If the Administrator fails to promulgate regulations to 
implement and enforce the limitations specified in section 
704--
            (1)(A) each electricity generating facility shall 
        achieve, not later than January 1, 2008, an annual 
        quantity of emissions that is less than or equal to--
                    (i) in the case of nitrogen oxides, 15 
                percent of the annual emissions by a similar 
                electricity generating facility that has no 
                controls for emissions of nitrogen oxides; and
                    (ii) in the case of carbon dioxide, 75 
                percent of the annual emissions by a similar 
                electricity generating facility that has no 
                controls for emissions of carbon dioxide; and
            (B) each electricity generating facility that does 
        not use natural gas as the primary combustion fuel 
        shall achieve, not later than January 1, 2008, an 
        annual quantity of emissions that is less than or equal 
        to--
                    (i) in the case of sulfur dioxide, 5 
                percent of the annual emissions by a similar 
                electricity generating facility that has no 
                controls for emissions of sulfur dioxide; and
                    (ii) in the case of mercury, 10 percent of 
                the annual emissions by a similar electricity 
                generating facility that has no controls 
                included specifically for the purpose of 
                controlling emissions of mercury; and
            (2) the applicable permit under this Act for each 
        electricity generating facility shall be deemed to 
        incorporate a requirement for achievement of the 
        reduced levels of emissions specified in paragraph (1).

SEC. 711. PROHIBITIONS.

    It shall be unlawful--
            (1) for the owner or operator of any electricity 
        generating facility--
                    (A) to operate the electricity generating 
                facility in noncompliance with the requirements 
                of this title (including any regulations 
                implementing this title);
                    (B) to fail to submit by the required date 
                any emission allowances, or pay any penalty, 
                for which the owner or operator is liable under 
                section 705;
                    (C) to fail to provide and comply with any 
                plan to offset excess emissions required under 
                section 705(f); or
                    (D) to emit mercury in excess of the 
                emission limitations established under section 
                708; or
            (2) for any person to hold, use, or transfer any 
        emission allowance allocated under this title except in 
        accordance with regulations promulgated by the 
        Administrator.

SEC. 712. MODERNIZATION OF ELECTRICITY GENERATING FACILITIES.

    (a) In General.--Beginning on the later of January 1, 2013, 
or the date that is 40 years after the date on which the 
electricity generating facility commences operation, each 
electricity generating facility shall be subject to emission 
limitations reflecting the application of best available 
control technology on a new major source of a similar size and 
type (as determined by the Administrator) as determined in 
accordance with the procedures specified in part C of title I.
    (b) Additional Requirements.--The requirements of this 
section shall be in addition to the other requirements of this 
title.

SEC. 713. RELATIONSHIP TO OTHER LAW.

    (a) In General.--Except as provided in this title, nothing 
in this title--
            (1) limits or otherwise affects the application of 
        any other provision of this Act; or
            (2) precludes a State from adopting and enforcing 
        any requirement for the control of emissions of air 
        pollutants that is more stringent than the requirements 
        imposed under this title.
    (b) Regional Seasonal Emission Controls.--Nothing in this 
title affects any regional seasonal emission control for 
nitrogen oxides established by the Administrator or a State 
under title I.

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