The US Environmental Protection Agency toughened the annual national ambient air quality health standards in December by reducing the amount of fine particulate matter that can be in the air. A city or larger region will be considered out of compliance if it has 12 or more micrograms per cubic meter of air. The threshold had been 15 micrograms.

This could eventually require additional pollution control measures and other restrictions at power plants, refineries, factories and other industrial facilities in parts of the country that have trouble meeting the new standard. “Fine” particulate matter is particles of 2.5 micrometers or less in diameter.

Each area of the country has been designated as in attainment, not in attainment, or unclassifiable with respect to the ambient air quality standards for each criteria air pollutant, including particulate matter.

The change affects annual standards for fine particulate matter only, leaving untouched the current daily standards for fine particulate matter at 35 micrograms per cubic meter of air. EPA also left unchanged secondary air quality standards for fine particles, which are designed to protect the environment rather than health.

The new standards target attainment by 2020. Initially, EPA will determine whether particular areas meet the revised standard based on monitoring data from 2011 through 2013. After it receives input from the states in December 2013, EPA will designate certain areas as “non-attainment” in December 2014. States must then submit their implementation plans for reducing pollution by 2018, and then meet the standards by 2020.

Areas that cannot comply will have to take additional steps to reduce pollution, such as restricting permits for new facilities or requiring additional pollution controls or permitting obligations on existing faculties. However, EPA suggests that the vast majority of counties will meet the standards without additional emission reductions because a number of federal regulatory efforts already in place will reduce particle emissions in the coming years. These measures include recent vehicle and fuel standards, regional haze regulations, and air toxics standards for power plants and new boiler rules. Nevertheless, EPA estimates the annual cost of meeting the standard could be as much as $350 million. It says annual health benefits from reduced exposure to particulates may range from $4 billion to $9.1 billion a year.

The Clean Air Act requires EPA to review air quality standards every five years. During the last review in 2006, EPA left untouched the particulate standards that were set in 1997. The latest revision of the standard should resolve pending litigation over whether the prior annual fine particulate standard was tough enough to protect public health. The final rule will become effective on March 18, 2013.

Boiler Emissions

EPA issued final rules in late December to restrict pollution from industrial, commercial and institutional boilers, solid waste incinerators and cement plants.

The rules limit emissions of a number of air toxics, including mercury, acid gases and particulate matter, from boilers and incinerators.

There are different standards for major source boilers and area source boilers.

Major source boilers, common to refineries and other industrial facilities, are larger and have the potential to emit more than 10 tons a year of a single air toxic or 25 tons a year of a combination of air toxics. Area source boilers, those with a potential to emit 10 or fewer tons a year of any single air toxic or 25 tons a year of a combination of air toxics, are commonly found in hospitals, schools and hotels.

The new rules create numerous boiler subcategories, applying numerical limits or work practice standards to particular boiler types. Only 14% of the largest boilers are expected to be subject to specific numeric emissions limits, while the other 86% will have merely to follow work practice standards to minimize toxic air emissions.

EPA says the boiler rules will cost industry at least $1.3 billion annually. At the same time, the rules are expected to prevent up to 8,100 premature deaths, 5,100 heart attacks and 52,000 asthma attacks each year once fully implemented.

In a concession to industry, EPA agreed to give additional time to comply with the new emissions standards. Major source boilers will have three years to comply, or until 2016. Area sources will have to comply by March 21, 2014, and incinerators must comply by 2018. Environmentalists are unhappy with the decision to delay the effective dates.

The new rules also revised performance standards for certain industrial solid waste incinerators. They also ease some restrictions on burning tires, railroad ties and plastic bottles. By sticking to a narrow definition of what is considered solid waste, the rules allow boilers to avoid stricter pollution controls that apply to incinerators.

The new rules restrict air toxics emissions from cement plants. Cement plants must comply by September 2015.

As an indication of how hard it is in the United States to implement new environmental regulations, the boiler rules were originally supposed to take effect by 2000 and the cement rules by 1997. The rules will become effective 60 days after publication in the Federal Register in early 2013.

California Cap and Trade

The first auction under California’s cap-and-trade program took place as expected in November despite a last-minute lawsuit filed on the eve of the auction by the California Chamber of Commerce. Although the lawsuit did not seek an injunction, it helped create uncertainty about the program’s future.

All of the 2013 vintage allowances available for auction in November sold at a settlement price of $10.09 per metric ton as compared to the auction reserve price of $10. However, fewer than 2% of the available 2015 vintage allowances were sold (5,576,000 of the available 39,450,000) at the auction reserve price of $10 per metric ton.

The cap-and-trade program limits the amount of carbon dioxide or CO2 and other greenhouse gases that power plants, refineries, chemical companies, cement plants and other affected emitters in California are allowed to release each year. Greenhouse gas emitters covered by the program are required to submit allowances for each metric ton of greenhouse gas emitted. The program is market based because anyone who can reduce his emissions more efficiently or less expensively can earn income by selling unneeded allowances to those whose emissions are harder or more expensive to control. As the cap on overall permitted emissions ratchets down over time, the value of the allowances is expected to rise, and the overall level of greenhouse gases entering the atmosphere should fall.

The program also creates a domestic offset market. Covered entities can meet, or “offset,” up to 8% of their compliance obligations by surrendering valid greenhouse gas offset credits. An offset credit represents greenhouse gas emission reductions or sequestered carbon that meets certain regulatory criteria. Offset credits may only be obtained in three ways. First, certain “early action offset credits” generated between 2005 and 2014 pursuant to the protocols of the Climate Action Reserve may be converted into credits. Second, the state air board expects to issue its own offset protocols. Third, it expects to allow use of credits registered with some third-party offset project registries.

The cap-and-trade program covers only the power and manufacturing sectors initially (including refineries, but only for their “direct emissions”). By 2015, the program will expand to reach 85% of the California economy, including not only electricity generation and manufacturing, but also such sources as refineries, pipelines and fuel distributors.

The program will also have an effect beyond California by imposing compliance obligations on emissions associated with electricity, natural gas and other fuels imported from other states into California. This is the first regulatory program to regulate suppliers of power and fuels in other states who sell into the California market.

The new rules cover “first deliverers of electricity,” who include not only in-state electricity generating facilities, but also “electricity importers.” “Electricity importers” are defined as “facilities physically located outside the state of California with the first point of interconnection to a California balancing authority’s transmission and distribution system.” Thus, even facilities located entirely outside California may be required to comply if their energy is sold in the state. California receives nearly a quarter of its power from out-of-state sources.

The program may also apply to out-of-state suppliers of natural gas and other fuels whose products sold in California reach an annual threshold of 25,000 metric tons or more of CO2-equivalent from emissions from combustion or oxidation of the fuels.

The California Air Regulatory Board, called CARB, took steps to limit wild swings in allowance prices and increase market stability. To prevent prices from falling too low, the early auctions will have a price floor of $10 per allowance, adjusted over time. Unsold allowances are returned to the state’s “auction holding account” and will be re-sold at later auctions, subject to the limitation that only 25% of an auction’s total volume may include such reauctioned allowances.

To prevent prices from rising too high too quickly, initially most allowances beyond the share reserved and sold at auction by CARB will be given to covered entities for free. Over time, as auctions account for greater distribution of allowances, there will be an allowance price containment reserve. This reserve acts as a soft price collar by offering allowances for sale six weeks after each auction at set price tiers ranging from $40 to $50 a ton at first, adjusted over time.

CARB announced in January that 57,628,254 2013 vintage allowances and 38,240,000 2016 vintage allowances will be offered in 2013 at an auction reserve price of $10.71. The first auction in 2013 will be held on February 19.