1. Local Reductions Incentive Program (LRIP) Encouraging Collaborative Solutions for the Future

2. Purpose of Presentation Discuss Current national and regional programs Local Reductions Incentive (LRIP) Concept Funding the LRIP Program advantages

3. Current Strategies State Implementation Plans (SIPs) Title IV SO 2 Acid Rain Program NOx SIP Call Program Proposed Clean Air Interstate Rule (CAIR)

4. ConceptBehind LRIP To integrate National and Regional emission reduction programs with State and local attainment planning by providing incentives for local programs aimed at reductions in residual non- attainment areas.

5. Purpose of LRIP Address residual non attainment areas after regional emission reductions have already been achieved Encourage solutions at the State and local level with broad stakeholder participation Utilize the framework of existing national and regional programs to encourage local reductions

6. Incentive Structure The proposed CAIR rule is designed to integrate the title IV Acid Rain SO2 program with the trading program proposed in its rule. EPA’s proposal to meet the 65 percent reduction required under phase II of the new rule could result in a slight overage of allowances. States could voluntarily choose to: convert the additional reductions into allowances for use in their individual State rules adopt the IRP concept, awarding the overage allowances to sources based on innovative proposals for achieving additional reductions in areas projected to need further local emissions reductions for attainment with the PM2.5 NAAQS.

7. Potential Allowance Distribution Basic Option State Government auctions overage allowances and uses proceeds to provide incentives for alternative local controls. “Allowance Value” Option Number of allowances awarded based upon benefit Location Timing (I.e., ozone action days) EJ Impacts Population exposure State distributes allowances based upon benefit-adjusted value of emission reduction.

8. Advantages of Concept More innovative mechanism to achieve targeted reductions in residual non-attainment areas than traditional measures. Encourages additional reductions (SO2, NOx, and other pollutants) from uncapped sources. May mitigate potential future pressure on capped sources to further reduce emissions. Continues to engage State and Local governments in developing solutions to local emission reductions while also constructively involving local industries.