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June 26, 1998


SUBJECT: Mercury Emissions Consequences of NOx Allowance Allocation System

   FROM: David Kee, Director  /s/
Air and Radiation Division (A-18J)

TO: Richard D. Wilson, Acting Assistant Administrator
This memorandum is intended to encourage consideration of the mercury emission consequences of the Agency’s current initiatve to achieve ozone reductions by reducing emissions of oxides of nitrogen (NOx), and to suggest that the system for allocating NOx allowances could have an impact on mercury emissions. As the United States Environmental Protection Agency (USEPA) proceeds to implement the findings of the Ozone Transport Assessment Group (OTAG), USEPA is proposing to achieve NOx reductions by allocating allowances based on inputs of fossil fuel, thereby providing substantial economic benefits to energy producers who currently emit large amounts of NOx. Since coal-fired utilities are major sources of both NOx and mercury, however, such a system could promote a shift in energy production toward utilities that coincidentally emit high levels of mercury.

We would like to bring to your attention that an alternative system, also mentioned in USEPA’s proposal, would base the allocation of NOx allowances on energy output, without regard to fuel type, allowing those who produce electricity without emitting NOx to sell the allocations at a profit. An “all generators” allocation system would level the playing field and better enable nuclear power and renewable energy sources to compete with coal-fired sources, leading to a reduction in mercury emissions. Another alternative would limit allocation of allowances to sources that use fossil fuel, but base the allocation on electricity output, creating an incentive for more efficient electricity generation.

Given the multiple environmental impacts of utilities and the potential effect of NOx controls on the future structure of this industry, we believe it is vital that USEPA consider the impacts of the allowance allocation system on emissions of other pollutants, as well as on energy efficiency. The potential impacts on mercury emissions deserve particular consideration, since electric utilities account for approximately one-third of nationwide mercury emissions, and since it has proven difficult to identify cost-effective emissions controls for coal-fired electric utilities.

The need for reductions in mercury emissions is evident here in the Upper Midwest, and across the country as well. Significant impairments in water quality are being caused by air deposition of mercury, as shown by the Clean Water Act section 303(d) lists that States are currently submitting. These impairments create particular risks for Native American subsistence anglers and low income minority anglers, two environmental justice populations identified in the second Great Waters Report to Congress. We would like to note that the Executive Order on Environmental Justice, recently signed by President Clinton, directs Federal agencies to consider health risks of consuming “pollutant-bearing fish or wildlife . . . in developing their policies and rules,” thereby suggesting that USEPA must consider the mercury implications of potential NOx controls.

We therefore offer the following two recommendations for your consideration:

If you would like to discuss this matter further, feel free to contact us at (312) 353-2212 (David Kee) or (312) 886-5870 (Gary Gulezian).

For further information, contact:
This Information Last Modified On: 09/18/2008 03:58 PM