Being a Good Neighbor and the Clean Air Act

Being a good neighbor isn’t just a practice that applies to business or homeowners. States are required to adhere to a “good neighbor” provision under the Clean Air Act (CAA), Section 110(a)(2)(D). In order to be a “good neighbor”, a state is prohibited from emitting air pollution that causes a downwind state to become out of compliance with any of the National Ambient Air Quality Standards (NAAQS). NAAQS are nationwide standards, set by the Environmental Protection Agency (EPA), for a specific set of pollutants that provide public health and welfare protection.

So, why is the “good neighbor” provision so important in Kentucky?  Air quality in a state or region is affected by a combination of local emissions and emissions from
upwind sources. Emissions of sulfur dioxide (SO2) and nitrogen oxides (NOX) can react in the atmosphere to form fine particle pollution. Similarly, NOX emissions can react in the atmosphere with volatile organic compounds to create ground-level ozone pollution.

These pollutants can travel across state boundaries affecting air quality locally or regionally. Because of the types of industries, pollution emitted, and geography of Kentucky, the Commonwealth is considered an upwind state affecting states downwind of Kentucky.

Historically, the “good neighbor” provision of the CAA was satisfied using emission trading or cap and trade type programs. These programs set a limit on the amount of pollutant to be emitted (a cap). Emission allowances are allocated or sold to eligible entities and then traded on the market so that the total cap is never exceeded. Examples of these successful market based programs include Acid Rain and the  NOx Budget Trading Program. As a result of these programs, SO2 emissions have fallen 56 percent from the 2005 level, and annual NOx emissions have dropped 46 percent. Recently, additional regulations such as the Clean Air Interstate Rule (CAIR) and the Cross-State Air Pollution Rule (CSAPR) attempted to strengthen the state’s ability to comply with the “good neighbor” provision. Unfortunately, both of these regulations have faced litigation and their full implementation has been delayed indefinitely.

In absence of a federal regulatory framework to address interstate air pollution, the EPA and affected states are assessing the feasibility of defining a state’s interstate
air pollution contribution and strategies for controlling those emissions. Complicating
the discussion are the effects of other EPA regulations and changing market
conditions such as the Mercury and Air Toxic Standards (MATS), the market shift to
natural gas for fuel and electricity, and recent Tier 3 Vehicle Emission and Fuel

All of these affect a state’s air pollution emissions even though they are not directly tied to interstate air pollution.

This year will be important in deciding how interstate air pollution is regulated from both a federal and state perspective as states face increasing pressure from third party lawsuits regarding interstate air pollution. Adding to this, states are awaiting decisions from EPA regarding how to handle state contributions to interstate air pollution and how to demonstrate compliance. The Kentucky Division for Air Quality is continually engaging with EPA, affected states and associations to ensure Kentucky interests are represented and that Kentucky is well positioned and prepared for future changes.