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Report Demonstrates Nitrogen Oxides Emission Trading Program Achieves 60 Percent Reduction of Emissions in Northeastern States

Release Date: 03/07/2003
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(03/07/03) The U.S. Environmental Protection Agency (EPA) and the Ozone Transport Commission (OTC) this week released a report demonstrating the continued success of the OTC NOx Budget Program, a market-based emissions trading program created to reduce nitrogen oxide (NOx) emissions from power plants and other large combustion sources in the Northeast.

“The OTC NOx Budget Program is another compelling example of the effectiveness of market-based trading programs in significantly and cost-effectively reducing emissions,” said EPA Administrator Christie Whitman.

The OTC NOx Budget Program Progress Report finds that affected sources have significantly reduced NOx emissions in all participating states during the ozone season (May through September). Total regional emissions in 2002 were approximately 60 percent below 1990 levels. Daily peak emissions have also declined. The program achieved cost-effective NOx reductions and enabled a viable allowance trading market for NOx to emerge.

NOx is a prime ingredient in the formation of ground-level ozone (smog), which aggravates asthma, increases susceptibility to respiratory illnesses and contributes to permanent lung damage. Through this unique program to address ozone, nine northeastern OTC states and the District of Columbia partnered with EPA and set a regional ozone season “budget” or cap on NOx emissions beginning in 1999. In its acid rain program, EPA has been using a cap and trade strategy nationwide since 1995 to successfully control sulfur dioxide emissions. However, the OTC NOx Budget Program is the first cap and trade program formed by a group of states, and represents the first large-scale application of “cap and trade” to a problem beyond acid rain.

The success of the OTC NOx Budget Program in reducing NOx in the Northeast is an important first step in efforts to reduce ambient ozone levels and supports the use of cap and trade to control multiple pollutants over broad regions in the future. Additional environmental progress is expected upon implementation of the NOx SIP Call emissions trading program. The NOx SIP Call cap and trade program, which was modeled after the OTC NOx Budget Program, will require more stringent NOx emissions reductions and will affect a much broader region. The NOx SIP Call program will begin in May 2003 for the OTC states. Additional states in the East and Midwest will join in May 2004.

Further NOx reductions using the cap and trade model have been proposed under various multipollutant legislative proposals currently being debated by Congress, including the Administration’s Clear Skies Act. The OTC NOx Budget Program Progress Report (1999-2002) is available at https://www.epa.gov/airmarkets.