The Options for Weatherization Programs in the NOx Tradable Emission Permit Program

Abstract

In September 1998, the U.S. Environmental Protection Agency (EPA) promulgated a rule to address the regional transport of ground-level ozone by reducing nitrogen oxide (NOx) emissions in states that were contributing significantly to air pollution problems for downwind states. One element of this program is a NOx tradable emission rights system, to be implemented by individual states. Large, stationary emission sources such as utilities and large cement plants will be issued certain quantities of emission rights, but EPA has encouraged states to set aside some proportion of these rights for energy-efficiency and renewable energy (EE/RE) programs, which could sell rights and use the proceeds to further support their programs. States have considerable leeway in specifying which EE/RE programs will receive emission rights. The U.S. Department of Energy's (DOE) Weatherization Assistance Program wanted to know whether the funding that could be derived from the sale of NOx emission rights would be large enough to justify the effort of verifying NOx reductions from its weatherization activities. This study projected the scope for NOx emission reductions from electricity-intensive weatherization measures in the twenty-two states, and the District of Columbia, included in the EPA ruling. The twenty-two states covered by the rule could expect from $6,000 to $66,000 per year from sale of NOx permits (at an average sale price of $3,000/ton), amounts which correspond to 0.08% to 0.25% of annual state weatherization expenditures in 1998. Some states may find the prospective revenues large enough to justify the cost of providing savings verification to state environmental agencies, and others may not.