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Description
The Clean Air Act Amendments of 1990 (CAAA) established several programs in order to improve air quality by imposing restrictions on the release of hazardous pollutants into the atmosphere. The CAAA also affected natural gas markets by promoting cleaner burning fuels in power generation and transportation, which further increased natural gas demand.
- In order to reduce the sulfur dioxide and nitrous oxides produced from electric utilities, the CAAA imposed a two-phase emission strategy. During phase one, which began in 1995 and ended in 1999, 110 power plants were assigned emission allowances. Facilities that exceeded the allowances were subject to fines.
- Beginning in 2000, phase two extended the range of power plants that were subject to emission caps and lowered the caps for the original 110 plants.
- The CAAA identified 22 cities as having excessive levels of ozone and carbon monoxide. In these specified areas, the owners of commercial fleet vehicles were required to begin purchasing clean-fuel vehicles (CFVs) as of 1998.
- In California, the CAAA introduced a pilot program that aimed to sell a targeted amount of CFVs each year. The law required that California sell 150,000 CFVs in 1996 and 300,000 CFVs by 1999.
- Because the process of drilling can result in significant emissions, the CAAA established stringent emission standards for drilling on the Outer Continental Shelf in the Gulf of Mexico. Except for the areas off the coasts of Texas, Louisiana, Mississippi, and Alabama, all drilling sites within 25 miles of the coast are required to meet the same clean air requirements as onshore sites.
Impact
In the markets for transportation and electric generation fuels, the CAAA have created increased demand for cleaner fuel sources, particularly natural gas.
- Because natural gas is a relatively clean-burning fuel, it has become an attractive energy source for industries seeking to lower their emissions.
- In phase one (1995-1999), most electric utilities met the legal threshold by fuel-switching to low-sulfur coal or by increasing the use of gas at existing units.
- In order to meet the standards of phase two, more gas-fired generation units have been constructed, which has resulted in a significant increase in the amount of electricity produced from natural gas.
- Natural gas vehicles (NGVs), which use natural gas in its compressed or liquid form, are one of the most economic types of clean-fuel vehicles. Natural gas demand for vehicular use is projected to increase in the future, but is not expected to exceed 1 percent of total U.S. natural gas consumption by 2025.
- The rigorous drilling standards imposed by the CAAA have increased the costs of exploration and production in OCS areas other than the Western Gulf.
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