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Clean Air Markets

On March 10, 2005, EPA issued the Clean Air Interstate Rule (CAIR), to address regional interstate transport of soot (fine particulate matter) and smog (ozone). CAIR requires 28 eastern states to make reductions in sulfur dioxide (S0₂) and nitrogen oxides (NO_x) emissions that contribute to unhealthy levels of fine particle and ozone pollution in downwind states. Twenty six of those states must limit annual emissions of S0₂ and NO_x which contribute to the formation of fine particles, while a different set of 26 states must limit ozone season NOX emissions which contribute to the formation of ozone during the summer ozone season (May through September). At full implementation, CAIR will reduce power plant S0₂ emissions in affected states by 73% compared with 2003 emissions while NOX emissions will fall 61 percent from 2003 levels.

States must achieve the required emission reductions using one of two compliance options: 1) meet the state’s emission budget by requiring power plants to participate in an EPA-administered interstate cap and trade system that caps emissions in two stages, or 2) meet an individual state emissions budget through measures of the state’s choosing.

All affected states chose to meet their emission reduction requirements by controlling power plant emissions through three separate interstate cap and trade programs: the CAIR S0₂ annual trading program, the CAIR NO_x annual trading program, and the CAIR NO_x ozone season trading program.

Fine particles and ozone are associated with thousands of premature deaths and illnesses each year.
By the year 2015, the Clean Air Interstate Rule will result in:
-- $85 to $100 billion in annual health benefits, annually preventing 17,000 premature deaths, millions of lost work and school days, and tens of thousands of non-fatal heart attacks and hospital admissions.
-- nearly $2 billion in annual visibility benefits in southeastern national parks, such as Great Smoky and Shenandoah.
-- significant regional reductions in sulfur and nitrogen deposition, reducing the number of acidic lakes and streams in the eastern U.S.

On July 11, 2008, the U.S. Court of Appeals for the D.C. Circuit Court issued an opinion vacating and remanding CAIR; however, parties to the litigation requested rehearing of aspects of the Court's decision, including the vacatur of the rules. On December 23, 2008, the Court remanded the rules to EPA without vacating them and ordered EPA to continue implementing CAIR until a replacement rule was finalized..

EPA issued the Cross-State Air Pollution Rule (CSAPR) on July 2011 and CSAPR was scheduled to replace the CAIR trading programs starting on January 1, 2012. However, on December 30, 2011, the U.S. Court of Appeals for the D.C. Circuit Court stayed CSAPR pending judicial review and on August 21, 2012 the court issued a decision vacating the rule and again ordering EPA to continue implementing CAIR pending development of a valid replacement rule. The U.S. Supreme Court granted petitions from EPA and several environmental and public health organizations to review the D.C. Circuit Court’s decision, and argument was held on December 10, 2013. EPA anticipates that the Supreme Court will issue its opinion in the first half of 2014. At this time, CAIR remains in place and EPA is taking actions necessary to implement the rule.

CAIR Timeline

Action Item	Year
Promulgate CAIR Rule	2005
State Implementation Plans Due	2006
Phase I Cap in Place for NOx	2009
Phase I Cap in Place for SO2	2010
Phase II Cap in Place for NOx and SO2	2015

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CAIR Timeline

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