By the OGJ Online Staff

HOUSTON, June 21, 2001 — Nitrogen oxide emissions from fossil-fueled power plants are expected to decline 66% by May 2004, under a new emissions trading system adopted by the Indiana Air Pollution Control Board.

Under the new rule, 2% of the emissions credit market will be set aside to create incentives for renewable energy and energy efficiency projects. The Hoosier Environmental Council estimated the market could generate $2.1 million in incentives. Indiana is only one of five states to include this type of provision and the incentives are among the largest in the nation.

"This rule will put controls in place that should, when combined with the actions of the other states, work to meet ozone-based health standards statewide and make a giant stride toward meeting the new ozone standards recently set by EPA," said Lori F. Kaplan, commissioner, Indiana Department of Environmental Management (IDEM).

IDEM spokesman Tim Coulum said the proposed rule will be submitted to the US Environmental Protection Agency for review. The two agencies worked together closely developing it, he said.

Assistant Indiana commissioner Janet McCabe said the EPA will begin running the regional emissions cap-and-trade program in 2003. In 2004, Indiana will issue allowances to sources. She said the emissions budget for the state is about 53,000 tons during the May-September ozone season.

The Indiana rule was adopted in response to a 1998 EPA decision requiring 22 states and the District of Columbia to submit state implementation plans to reduce the regional transport of ozone and to reduce nitrogen oxide (NO_x) emissions in the affected states. NO_x is considered a precursor to the formation of ground-level ozone.

The Indiana rule targets the electric power industry, large industrial boilers, and the cement industry. About 60% of NO_x emissions in Indiana come from large industrial boilers or electric utilities, IDEM said.

During development, IDEM said it considered four major principles to ensure the rule was balanced.

These included achieving the goal of established NO_x emissions reductions, meeting approval requirements of the EPA, reducing costs for both industry and the consumer, and encouraging development of a clean, reliable energy supply in Indiana.

Major elements of the Indiana NO_x control rule include:

• A 31% statewide reduction in NO_x emissions from 1995 levels by May 31, 2004.

• A 66% statewide reduction in NO_x emissions from 1995 levels emitted from fossil-fuel- fired electric plants by May 31, 2004.

• A 55% reduction in NO_x emissions from large industrial boilers by May 31, 2004.

• A cap and trade emission allowance program that allows the trading of NO_x "allowances" between facilities.

• Incentives for energy efficiency/renewable sources of power.

• An effective continuous emission monitoring system to assure compliance among most large emitters for NO_x emission requirements.

• Control requirements for large cement kilns that require either the use of specified technology or an emissions reduction of 30%.