Senate Rejects Effort to Derail Mercury Rule

On Wednesday, June 20, the U.S. Senate defeated a proposal sponsored by Senator James Inhofe (R-OK) to effectively impede implementation of regulations to control mercury emissions from power plants and other coal fired facilities.

Inhofe’s resolution, Senate Joint Resolution 37, would have used Congress’ authority under the Congressional Review Act, or CRA, to block the U.S. Environmental Protection Agency’s (EPA) Mercury and Air Toxics Standards (MATS). 

The Senate rejected the resolution by a vote of 53 No’s to 46 Yes’s. If the measure had passed, the White House Office of Management and Budget recommended the President veto the resolution.

Meanwhile, a number of companies and interest groups have filed petitions in federal court to block the implementation of MATS.  Oral arguments have not yet been scheduled.

MATS is a command-and-control regulation of mercury emissions, mandating reductions with no trading aspect. It would essentially force many coal plants to either install mercury emissions controls or shut down altogether. The MATS rule is scheduled to take effect in 2015.      

Court Decision Looms Over CSAPR Emissions Market

On June 12, 2012, the U.S. Environmental Protection Agency (EPA) issued their final revisions to the Cross State Air Pollution Rule (CSAPR).  The revisions increase the 2012 and 2014 emissions budgets for 13 States and would be effective on August 13, 2012.  The revisions also make associated changes to states’ variability limits.  After the final Transport Rule was published on July 6, 2011, EPA identified discrepancies in certain data assumptions that affected some state budgets.  EPA had also received numerous comments since the Rule had been published and the June 12 revision reflects EPA’s final revision to the Rule.

In total, the revisions add 27,229 Allowances (increase of approx 2%) to the SO2 Group 1 2014 Budget, 102,426 Allowances (increase of approx 11.5%) to the SO2 Group 2 2014 Budget, 42,047 Allowances (increase of approx 3.5%) to the Annual NOx 2014 Budget, and 19,797 (increase of approx 3.4%) allowances to the Seasonal NOx 2014 Budget. 

CSAPR is designed to protect downwind wind states from emissions that cross state lines and contribute to ozone and fine particle pollution from upwind states.   The rule was to become effective January 1, 2012, however on December 30, 2011, the US Court of Appeals for the DC Circuit Court acting on numerous motions filed by multiple state and utility parties, issued a rare judicial stay of CSAPR.  The Court ordered EPA to continue with the previous emissions program, the Clean Air Interstate Rule (CAIR), and indicated that it would move quickly to resolve the merits of the case.  The Court heard oral arguments on April 13, 2012 and all parties are currently awaiting the Courts decision. 

Upon releasing the June 12th program revisions, the Department of Justice filed a letter with the Court stating the revisions make no substantive changes to the arguments in EPA’s legal briefs and should not affect the validity of its defense.

Market participants are content to be on the sidelines until a Court decision is reached.  There are many potential outcomes, and any prediction is pure speculation. However, many market participants feel that the Court will remand CSPAR back to the EPA, and depending on the changes required, the program would not start until 2013 or 2014.  Regardless of the outcome, all market participants are hopeful the Court’s decision will lift the cloud of regulatory uncertainty from this market.

For more background on U.S. SO2 and NOx emissions trading, see our brief history of emissions markets.

For current pricing or to transact in the market, please contact our Emissions Market Team at: +1 914.323.0255.