State Environmental Policy Innovations: North Carolina's Clean Smokestacks Act

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I. INTRODUCTION  II. BACKGROUND       A. The Clean Air Act      B. Grandfathering      C. Tail Stacks and Add Rain      D. 1990Amendments: Cap and Trade      E. Interstate Pollution and State Petitions      F. Mercury      G. The NQ SIP Call      H. Particulate Matter      I. New Source Review      J. Regional Haze Regulations  III. ORIGINS OF THE CLEAN SMOKESTACKS ACT       A. Context      B. The Clean Smokestacks Plan      C. Senate Bill      D. Negotiation Process      E. Final Version  IV. IMPLEMENTATION: N.C. UTILITIES       A. Initial Steps: Emission Control Technologies      B. Plant Retirements and Replacements      C. Enforceability Confirmed  V. BROADER IMPACTS       A. North Carolina's EPA Petition and Lawsuit      B. North Carolina's Lawsuit and Settlement With TVA  VI. OUTCOMES       A. In-State Emissions Reductions      B. Additional Upwind Emissions Reductions      C. Assessments      D. Ambient Air Quality      E. Mercury      F. Regional Haze      G. Costs  VII. CONCLUSIONS AND LESSONS       A. Results      B. Success Factors      C. Lessons 

I. INTRODUCTION

The Clean Air Act of 1970 established strict technology based standards for reducing air pollution from new fossil-fueled electric power plants and other stationary sources, but it left existing sources unregulated, on the assumption that they would gradually be retired and replaced by more modern and well-controlled plants. (1) Three decades later, however, most of these older and dirtier plants were still in operation, owing at least in part to the greater costs of building new plants with more expensive controls.

In 2002, North Carolina enacted an unusually creative law, the Clean Smokestacks Act (CSA), to solve this problem by state rather than federal initiative. (2) The CSA set caps on total annual emissions of nitrogen oxides (N[O.sub.x]) and sulfur dioxide (S[O.sub.2]) by each of North Carolina's two investor-owned utilities, Duke Energy and Progress Energy, which required them in effect to permanently reduce their total year-round NOX emissions 77% by 2009 and their S[O.sub.2] emissions 73% by 2013, and to maintain these caps notwithstanding any future growth in service. (3) These caps were sufficiently stringent to force either modernization or retirement of all forty-five coal-fired electric generating units (EGUs) at their fourteen sites in North Carolina. (4) The law also created a novel cost recovery mechanism to pay for these improvements, and it required the utilities to surrender to the State any emissions allowances thereby gained so that they could not be resold to polluters in upwind states. (5) It mandated reporting processes for steps to reduce N[O.sub.x] and S[O.sub.2] emissions even further, and for reducing mercury and C[O.sub.2] emissions as well. Finally, it directed the state's Attorney General to "use all available resources and means, including negotiation, participation in interstate compacts and multistate and interagency agreements, petitions pursuant to 42 U.S.C. [section] 7426, and litigation" to induce other states to achieve comparable reductions in emissions, particularly by the Tennessee Valley Authority (TVA) and other upwind utilities. (6)

A decade later, the direct results of this law have become clear. As of 2012, N[O.sub.x] emissions by the two utilities have decreased by 84% compared to 1998, and their S[O.sub.2] emissions by 89%, two years before the 2013 deadline. (7) Duke Energy has retired or scheduled retirement of fifteen of its twenty-eight coal-fired power plants, and has added S[O.sub.2] flue gas desulfurization (FGD) scrubbers and N[O.sub.x] burners or selective catalytic or non-catalytic reduction (SCR/SNCR) technology on all the rest; and it has built one large new coal-fired power plant to operate far more efficiently using advanced emissions control technology. (8) Duke also has invested in new gas fired generating plants, as well as in renewable energy and energy-efficiency incentive programs. …