Modeling the Effects of Changes in New Source Review on National SO2 and NOx Emissions from Electricity-Generating Units

Abstract

The Clean Air Act establishes New Source Review (NSR) programs that apply to construction or modification of major stationary sources. In 2002 and 2003, EPA revised its rules to narrow NSR's coverage of renovations. Congress mandated a National Research Council study of the revisions' impacts. In that study, we used an electricity-sector model to explore possible effects of the equipment replacement provision (ERP), the principal NSR change directed at power plants. We find that, assuming implementation of the Clean Air Interstate Rule (CAIR), tight enforcement of the prerevision NSR rules would likely lead to no or limited decreases in national emissions compared to policies such as ERP. However, emissions might shift forward in time because the previous NSR rules would depress allowance prices, discouraging banking and encouraging allowance use. Only under the most aggressive prerevision NSR enforcement scenario, in which essentially all coal capacity is compelled to retrofit controls by 2020, do NOx emissions fall below ERP levels. Even then, total 2007-2020 SO2 emissions are unaffected. Further decreases in national emissions could be accomplished more cheaply by tighter emissions caps than through NSR because caps provide incentives for efficient operating strategies, such as fuel switching, as well as retrofits.