The Opportunity for Energy Efficiency with Clean Air Regulations

Four air quality requirements from the U.S. Environmental Protection Agency (EPA) include the: (1) National Ambient Air Quality Standards (NAAQS), (2) Cross-State Air Pollution Rule (CSAPR), (3) Mercury and Air Toxics Standards (MATS), and (4) Boiler MACT. The NAAQS specify maximum ambient concentrations of six air pollutants, while CSAPR and MATS require significant reductions in pollution from certain electric generating units (EGUs) – the country’s largest sources of SO2 and of mercury emissions, and the largest stationary sources of NOX emissions. Boiler MACT sets emissions limits and other requirements on industrial, commercial, and institutional boilers. Each of these regulations offers an important opportunity to expand the use of well-known, proven, and cost-effective energy efficiency 1 . With the NAAQS, states can use efficiency as a direct strategy to achieve emissions reductions necessary for meeting the standard. Under CSAPR, a market-based emissions trading program, power plants that improve their generating efficiency will correspondingly reduce the tons of SO2 and NOX they emit, thereby reducing the number of CSAPR allowances required to surrender for compliance 2 . MATS includes alternative output-based standards for existing sources and primary emission standards for new sources, including provisions for combined heat and power (CHP), or cogeneration units. In addition to opportunities for new-source efficiency improvements within the MATS rule, recent EPA power-sector modeling illustrates the important complementary benefits of state policies to support demand-side efficiency improvements. These benefits include lowering total compliance costs for MATS, reducing ratepayer bills over the long term, and in some cases, delaying or avoiding the need for equipment upgrades or new construction of generating facilities and emissions controls. The Boiler MACT 3 also includes alternative output-based standards that recognize improvements in boiler efficiency (including use of CHP), as well as a provision for boiler tune-ups and facilitywide energy assessments in affected facilities. The purposes of this paper are to: briefly describe these regulations; document the opportunity with each regulation to employ efficiency; and describe the steps EPA is taking to help state and municipal governments plan for and use energy efficiency as a strategy to reduce emissions and improve air quality. The paper concludes with several no-regrets options that these jurisdictions can consider.