1. Air Quality Benefits from Energy Conservation Measures Anna Garcia April 2004

2. Overview Energy efficiency is fastest, most cost effective remedy to satisfy both power reliability and environmental quality concerns State energy, environmental and public utility officials are working together to develop integrated policies, programs and regulations on energy and environmental issues

3. Current air quality planning processes have disincentives to energy efficiency: limits and budgets are often input-based rather than output-based focus is on end-of-pipe, single pollutant fixes no economic value attributed to prevention of multiple pollutant emissions achieved through efficiency

4. EE Offers Critical Environmental Benefits Energy Innovations, 1997: “Innovations Path” reduces energy consumption by over 40%, and by 2010 reduces the following pollutants: –NOx to 24% below 1990 levels –SO 2 to 64% below 1990 levels –CO 2 to 10% below 1990 levels Clean Energy Futures, 2000: Efficiency programs reduce demand growth by 20 to 47% –avoid need for ~250 - 600 big 300 MW power plants and their associated emissions

5. Source: STAPPA/ALAPCO, 1999.

6. Trading Program Set-Asides SIP Call EE/RE Set-asides IN - proposed 2% in rule; ~1100 tons NY - 3% or 1200 tons MA - 5% or 643 tons Clean Air Projects Set-aside MD - 3% or 436 tons – for more efficient new/modified electric generators or a project that reduces more than 1 ton of NOx

7. Economic Incentive Programs Four types of economic incentive programs in EPA’s guidance: Financial mechanism programs Clean Air Investment Funds State, regional or local emission trading programs –can include EE/RE set-asides Public information programs Other EIPs may have EE/RE applications EPA Final guidance: www.epa.gov/ttn/oarpg/ramain.html

8. More State & Local Actions Systems Benefits Funds Regulatory Flexibility: performance based programs in WI (Green Tier) and NJ (Gold and Silver Track) UT pilot to include EE & RE in regional haze SIP Supplemental Environmental Projects (SEPs) –StEPP Foundation (www.steppfoundation.org)

9. Other Efforts EPA Voluntary Measures Policies EPA Draft Policy for Nontraditional Programs –Summer 2004 target date Texas Emission Reduction Plan (SB 5)

10. EPA Voluntary Measures Mobile Sources –Allows 3% of total reductions needed for attainment to come from voluntary mobile source programs –Credit based on realistic estimates and ability to remedy shortfalls Stationary Sources –Allows 3% in addition to that for mobile source policy –Can be continuous, seasonal or episodic measures –Not directly enforceable against the source –Credit based similarly as that for mobile sources

11. EPA Draft Nontraditional Measures Policy Provides for flexibility re SIP requirements for quantifiability and enforceability –Deals with more uncertain quantification of new and innovative measures –Voluntary measures not enforceable against the source 4 Step process for EE/RE credit: –Estimate energy savings of EE/RE measures –Convert into emission reductions –Determine emission reductions in non-attainment areas –Provide mechanism to evaluate effectiveness While policy is being developed, EPA working 1-on-1 with interested states and localities

12. Texas Emission Reduction Plan (SB 5) Implement all cost-effective energy efficiency measures Establish a goal to reduce electricity consumption by 5% each year for 5 years Report all progress to State Energy Office Intent is to include emissions reductions from these measures in SIPs –Develop emissions reduction calculator –Developing policy for incorporating reductions into SIPs