Ground or low atmospheric level ozone is formed when nitrogen oxides (NOx) and volatile organic compounds (VOCs) react in the presence of sunlight. For this reason, heightened levels of ozone during the warmer months of the year become a concern. To address their air quality, eastern states have divided the year into an ozone season (May through September) and a non-ozone season (October through April).
Title I of the 1990 Clean Air Act set forth regulations that require states that contain an area that does not meet the national ambient air quality standards for ozone to develop plans and regulations to improve the air quality within the non-attainment zone. The map below displays the parts of the country that are in non-attainment of this standard. The air quality in these areas of the country violates federal health standards. While the map is current as of May 8, 1997, the non-attainment areas will change if the air in a given region deteriorates or as the EPA promulgates new, more stringent standards for ozone and fine particulates.

The Ozone Transport Region (OTR) is composed of 12 states in the northeastern United States and the District of Columbia. Together these states make up the membership of the Ozone Transport Commission, which has agreed on a common method to reach NOx reduction goals. This is the largest region in the United States to agree on NOx reductions through a cap and trade program similar to the national SO2 allowance system. Some of the key features of the program are the seasonal NOx allowance budget, allocations, data systems, banking of allowances, new sources, and the annual reconciliation. These key features, as well as geographic differences and utility deregulation, will all influence how the allowance market functions. Title I prescribes maximum levels of emissions for ozone pollutants and requirements for new sources. It also supports the use of trading programs to reach reduction goals. Title I divides non-attainment areas into five categories of severity as can be seen in the chart below. Depending on the severity of the region’s air quality, the minimum threshold of NOx emissions that triggers New Source Review requirements vary. For instance, the potential to emit 10 tons of NOx or VOC is the criteria for a "major source" designation in the Los Angeles "extreme" area. However, sources located in moderate non-attainment areas, such as upstate New York, must have the potential to emit 100 tons of NOx or VOC per year to be considered a "major source."