Talaganis 1

Michael Talaganis
CPB 442
Dr. Jones
May 10, 2019
Emission Cap and Trade Program

Introduction
Every year, industrial companies burn fossil fuels to produce energy, to make combustion
products such as gasoline and diesel for automobiles, and the synthesis of chemicals for use in
labs. The main types of fuels that are used in these circumstances are coal, petroleum oil, and
natural gas. As each industry creates its own types of pollutants, these chemical pollutants are
then released into the atmosphere if not first cleaned by some type of pollution unit operation.
The key pollutants that are kept in check by the Environmental Protection Agency (EPA) from
these processes are sulfur oxides (SOx), nitrogen oxides (NOx), and ozone (O3). Each company
that produces these pollutants is required by law to reduce their emissions down to a permissible
level as to not over-pollute the environment in a given year. Since some company’s unit
operation equipment may be outdated or not up to specifications to properly clean their
emissions, the EPA needs to step in to stop this horrible pollution. The EPA has three main
programs to deal with companies that over pollute: The Acid Rain Program (ARP), the Cross-
State Air Pollution Rule (CSAPR), and lastly the Emission Cap and Trade Program.

Ozone Depletion
The ozone layer is vital to all life on Earth for plants, animals, bacteria, and us humans.
Ozone has an amazing quality of being able to block most UV radiation that enters our
atmosphere from the sun. During the 1970s and
80s, compounds called chlorofluorocarbons were
used in industry along with household appliances
due to their great abilities for use as
refrigerants. Once entered into the atmosphere,
these compounds react with ozone and remove the
third oxygen creating O2. Since
Figure 1: The hole in the Ozone layer as of
chlorofluorocarbons were outlawed in the Montreal October 1, 2016. (12)
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Protocol in 1987 (12), the decomposition of the ozone layer today is mainly contributed to the
decomposition of N2O coming for combustion byproducts of transportation and industrial
practices.

Effects of Nitrous Oxide

From today’s automobiles and industrial processes, one of the fewest but most dangerous
chemicals released is Nitrous Oxide (N2O). This chemical is released once combusted in gasoline
diesel engines, and industrial processes, and is released at the ground level onto the Earth. Due to
buoyancy forces of gases present in our atmosphere and changing wind currents, this nitrous
compound gets swept up into the atmosphere where it rests in the stratosphere. Once in this layer
of the atmosphere, it is then broken down into N2 and O* by photolysis by Ultra Violet (UV)
light. From there it also reacts with oxygen radicals which are high energy atoms needing one
extra electron that will rip a spare electron from whichever atom it comes into contact with first.
After this it forms N2 and O2 and also into 2NO. Since nitrogen prefers to form three bonds total
with other molecules, the compound picks up an extra nitrogen atom from the atmosphere since
the air on our planet is composed on seventy-nine percent nitrogen. Once this happens, diatomic
nitrogen N2 forms leaving the oxygen radical free in the atmosphere. This radical then attacks
ozone molecules (O3) and forms 2O2. (17, 18)
The following is the series of reactions that occurs when Nitrous Oxide is decomposed by
UV radiation:
N# O + hv → N# + O∗ 1.1

and reaction with O* (oxygen radical)

𝑁# 𝑂 + 𝑂∗ → 𝑁# + 𝑂# 1.2

And finally:

𝑁# 𝑂 + 𝑂∗ → 2𝑁𝑂 1.3

Acid Rain
When organic compounds are combusted in industrial processes, the general byproducts
are water and carbon dioxide. This is true for all general combustion reactions except in the case
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when the reaction is not hot enough to burn to completion or there are impurities present in the
fuel. This incomplete combustion causes carbon monoxide (CO) to form, along with any
compounds formed from sulfur and nitrogen present in the fuel. These cause sulfur dioxides
(SO2) and nitrogen dioxides (NO2) to form. The basic reactions that form these oxides are as
follows:

S(aq) + O2(g) Þ SO2(g) 2.1

N2(aq) + O2(g) Þ NO2(g) 2.2

Once these combustion problems have formed, they can then react with water and
hydroxyl radicals (OH-) and hydrogen (H+) present in the atmosphere that are left behind from
water vapor being decomposed due to any number of pollutants in the air. Once they come into
contact with these other atoms, they can form hydrosulfuric acid and nitric acid in vapor form.
The compounds are then swept around by air currents where they are taken to colder climates
and condense into liquid form with other water particles, creating acid rain. Acid rain is
devastating to the environment as it kills plants, harms wildlife, erodes roadways, and even
dissolves stone buildings as the compounds present in the rocks chemically reacts with the acid
rain. (5) The following is the chemical reaction of sulfuric and nitric acid as it forms in the
atmosphere:

12 42 1
𝑆𝑂#(/) → 𝑆𝑂3(/) 5⎯7 𝐻# 𝑆𝑂9 3.1

𝐻# 𝑆𝑂9 → 𝐻𝑆𝑂9: + 𝐻 ; 3.2

𝐻𝑆𝑂9: → 𝑆𝑂9#: + 𝐻 ; 3.3

3𝑁𝑂#(/) + 𝐻# 𝑂 → 2𝐻𝑁𝑂3(=>) + 𝑁𝑂(/) 3.4

EPA Programs
Below is a basic timeline of U.S. regulations from the formation of the EPA to modern day. (10)
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Acid Rain Sale (Mar. EPA revises and U.S. withdraw

strengthens
from Paris
Formation of Phase out of 5, 1993) emission
Climate Accord
U.S. EPA (Dec. CFCs in credits could now be NAAQS standards (June 1, 2017).
2, 1970) 1978. publicly traded. (Sep. 21, 2006).

Clean Air Acid Rain Controls Act Clean Diesel (June 1, 2006)
(Nov. 15, 1990) refineries are required to Clean Car
Act (Dec.
Program (April 1,
30, 1970) beginning cap and trade produce ultra-low sulfur 2009) emission
and the limit of SO2 in diesel at 97% less sulfur. standards on cars.
acid rain.

Under the Acid Rain program, the EPA gives companies an emission credit for each ton
of pollution that is below the legal polluting limit for each criteria pollutant, mainly SOx, NOx,
and ozone. On the EPA’s website, the organization gives some key ideas to limit these
pollutants. Some of the methods include advanced scrubbers to reduce smoke-stack pollution,
update obsolete technology, use alternative fuels, or to purchase credits from the free market. If a
company is over the legal limit, then they have to face massive fines such as $2,000 per ton. This
amount is also adjusted for inflation as they are endangering other human lives. Since 1980, the
EPA has estimated that the amount of SOx in the atmosphere has been reduced by half of what it
initially was in 2010, recorded at a cap of 8.95 million tons of SO2. From 2016 Acid Rain
Program statistics, there was an estimated 1.5 million tons of SO2 polluted into the atmosphere,
which is down 91% from 1990 when SO2 and NO2 were required to be reduced in the power
sector. The industry has also seen a reduction of NOx emissions of 1.2 million tons which is 81%
below the amount of NOx in 1990. Thankfully the EPA has reached one hundred percent
compliance with the Acid Rain Program since its introduction. (6)
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Figure 2: SO2 emission trends since the beginning of emissions restrictions. (8)

The sister program to the Acid Rain Program, the Cross-State Air Pollution Rule
(CSAPR), measures each characteristic pollutant that is tracked across state lines due to weather
patterns. Along with SOx and NOx pollutants, this program also catalogs the amount of fine
particulate soot that is formed and how much ground-level smog is generated. This program was
created in 2008 to replace the EPA’s Clean Air Interstate Rule (CAIR) from 2005 since this
regulation was ineffective at limiting pollution. There are a few major requirements for this
program. First is identifying downwind air receptors to track the amount of pollutants that would
violate the National Ambient Air Quality Standards (NAAQS) regulation. Second, the EPA has
to determine which upwind states are contributing links to the traveling air pollution. Third,
identification of key emissions that play an important role in nonattainment areas (places where
local air quality sits below the NAAQS average). Fourth and final, the EPA has to restrict
upwind emissions through permanent solutions, such as pollution unit operation measures, and
enforceable requirements through limits on characteristic pollutants. (16)

Figure 3: Map of U.S. NOx emissions for the CSAPR program and the amount of NOx
produced in an emission heavy state such as Alabama. (7)
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Emission Cap and Trade

For the companies that abide by these program’s rules and are under the legal polluting
limit, they will be given a credit or commonly referred to as an allowance for every ton of
pollutant under the limit. This credit can be used in a few different ways. First, the allowance can
be held for later use when at certain times of the year, pollution limits are stricter due to things
like the ozone season. This is a time of the year, typically during the summer months, when
ozone pollution is the highest due to increased temperatures and heavy automotive use or
industrial processes. The second way companies use these credits is for use when their
equipment is down for long periods of time when unit operations are down or when equipment is
in the process of being upgraded. (13)
The third and final use for these allowances is to be sold on the open market to other
companies that have polluted over the legal limit. For the given year, these particular companies
would rather spend money at the free market auction for these allowances rather than pay the
fines from the EPA. Another way to avoid the hefty fines is to put offsets in place. An offset is a
documented case where the company’s money was put to use to reduce pollution in some way.
(15) This can be a more efficient scrubber, a better ESP, updating existing equipment so that the
efficiency of particle or compound retention is increased, or even financing low carbon energy
projects such as wind farms and solar arrays. While finding what exactly companies have done to
reduce their pollution, a detailed record of the amount of money spent is documented and sent to
the EPA. (4)

Allowance Pricing
From the California Air Resource Board, a compliance report from 2015-2017 shows the
amount of money used for the purchase of allowances and offsets put in place. An industry
leader in petroleum such as Exxon Mobile spent $191,854 on allowances to reduce pollution and
$0 on offsets. For as big a company as Exxon Mobile is, this amount seems very small, but it is
in fact correct. A company such as Exxon Mobile makes so much money every year due to its
global petroleum trade that they do not care about reducing their pollution and just pays for it to
be taken care. Their profits are so large that the company does not even have a fiscal budget. But
a company such as Chevron, another petroleum producer, payed $119,280,183 in allowances and
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$10,372,189 for offsets. Chevron is taking a step in the right direction to reduce their emissions
but should have focused more of their allowance budget on offsets. Both of these companies
fulfilled their obligation status to meet the legal limit criteria. (4)
In the state of California, there is a stock market for the free trade of these allowances.
Based on the graph of Figure 5, the March 29, 2018 price for a CO2 credit is $15.10. (3) This
price might seem low, but companies can emit or reduce their pollution in millions of tons each
year. The system works by a free market so companies can compete for the lowest prices; this
system helps companies stay in business and creates a competitive advantage in the market. As
for other areas around the world, Europe also deals with cap and trade emission program. The
European Union’s commodity price for the allowances currently sits at €25.82 as of 5:01 a.m.
EDT time. (9) This amount is equivalent to $28.98 American dollars.
European companies have invested in offsets in countries such as China
where large factories have been put in place to destroy the refrigerant
HFC-23 (Fluoroform) created by European company’s factories there.
While the byproducts of this decomposition are not ozone depleters,
they are greenhouse gases such as CO2 and HF. This process is vital to
Figure 4: A molecule air pollution because HFC-23 has a greenhouse gas potency of 11,700
of Fluoroform. (11)
time that of carbon dioxide. These Chinese plants produce large
amounts of CO2 in the process of destroying HFC-23 but the CO2 does far less damage to the
atmosphere than the refrigerant does. (15)

Figure 5: This chart shows the

price per carbon allowance for
about the last decade. You can
see where during certain years
prices have skyrocketed with
high demand compared to now
when prices have been fairly
constant at a low amount. (3)
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Figure 6: This pie chart

displays the percentage
of greenhouse gases
produced annually by
each sector. (2)

Conclusion
Under the emission cap and trade system, companies can find the best way to lower
pollution based on current engineering practices and government policy. Unfortunately based on
the existing system, companies that invest in offsets drive down the price of allowances. This
undermines the laws set in place and de-incentivizes companies to reduce their own carbon
emissions. Once way to stop this process from happening is done in California where a price
floor is set in place for these allowances. A minimum price of $10 makes it so that an
oversaturated market of allowances does not drive the price of the credits down to $0. (15) Each
year, the legal limit of emissions is lowered, but a better system should be put in place. A carbon
tax should be included in this program so that companies are forced to lower their pollutants
down by even more every year. The cap and trade program has successfully limited the key
characteristic pollutants

References
1. “Acid Rain Program.” EPA, Environmental Protection Agency, 3 Apr. 2018,
www.epa.gov/airmarkets/acid-rain-program.
2. Beach, Greg. “EPA Announces Plans to Limit Airplane Emissions.” Inhabitat Green Design
Innovation Architecture Green Building, Inhabitat, 10 June 2015, inhabitat.com/epa-
announces-plans-to-limit-airplane-emissions/.
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3. “California Carbon Dashboard.” California Carbon Dashboard: Carbon Prices, the Latest
News, and California Policy, Climate Policy Initiative, calcarbondash.org/.
4. “Cap-and-Trade Program.” California Environmental Protection Agency Air Resources
Board, State of California, www.arb.ca.gov/cc/capandtrade/capandtrade.htm.
5. Cassidy, Rachel, and Regina Frey. “Acid Rain Inorganic Reactions Experiment.” Acid Rain,
Washington University, 1998,
www.chemistry.wustl.edu/~edudev/LabTutorials/Water/FreshWater/acidrain.html.
6. “Clean Air Markets Programs: Progress Reports.” EPA, Environmental Protection Agency,
www3.epa.gov/airmarkets/progress/reports/index.html.
7. “Clean Air Markets Programs: Progress Reports.” EPA, Environmental Protection Agency,
www3.epa.gov/airmarkets/progress/reports/emissions_reductions_ozone.html#figure2.
8. “Clean Air Markets Programs: Progress Reports.” EPA, Environmental Protection Agency,
www3.epa.gov/airmarkets/progress/reports/emissions_reductions_so2.html#figure1.
9. “CO2 European Emission Allowances PRICE Today | CO2 European Emission Allowances
Spot Price Chart | Live Price of CO2 European Emission Allowances per Ounce | Markets
Insider.” Markets Insider, Business Insider, markets.businessinsider.com/commodities/co2-
emissionsrechte.
10. “EPA History.” EPA, Environmental Protection Agency, 3 May 2018, www.epa.gov/history.
11. “Fluoroform.” Wikipedia, Wikimedia Foundation, 17 Feb. 2019,
en.wikipedia.org/wiki/Fluoroform.
12. Gray, Alex. “30 Years Ago the World Pledged to Fix the Ozone Layer. And It
Worked.” World Economic Forum, 15 Sept. 2017,
www.weforum.org/agenda/2017/09/ozone-action-worked-environmental-progress/.
13. “How Do Emissions Trading Programs Work?” EPA, Environmental Protection Agency, 24
Apr. 2019, www.epa.gov/emissions-trading-resources/how-do-emissions-trading-programs-
work.
14. “NOx Budget Trading Program.” EPA, Environmental Protection Agency, 26 Feb. 2019,
www.epa.gov/airmarkets/nox-budget-trading-program.
15. “Offsets.” Carbon Tax Center, www.carbontax.org/carbon-tax-vs-the-alternatives/offsets/.
16. “Overview of the Cross-State Air Pollution Rule (CSAPR).” EPA, Environmental Protection
Agency, 27 Sept. 2018, www.epa.gov/csapr/overview-cross-state-air-pollution-rule-csapr.
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17. Portmann, R W et al. “Stratospheric ozone depletion due to nitrous oxide: influences of
other gases.” Philosophical transactions of the Royal Society of London. Series B,
Biological sciences vol. 367,1593 (2012): 1256-64. doi:10.1098/rstb.2011.0377
18. Team, ESRL Web. “NOAA Study Shows Nitrous Oxide Now Top Ozone-Depleting
Emission.” National Oceanic & Atmospheric Administration, U.S. Department of
Commerce, 27 Aug. 2009,
19.