May Trigger Unintended Consequences
| Author | Brian J. McLean |
| Position | Director, Office of Atmospheric Programs, U.S. Environmental Protection Agency |
| Pages | 47-48 |
NOVEMBER/DECEMBER 2008 ❧ Page 47
Copyright © 2008, Environmental Law Institute®, Washington, D.C. www.eli.org.
Reprinted by permission from The Environmental Forum®, Nov./Dec. 2008
Th e fo r u m
gives Congress the opportunity to
provide the electric industry with
a clear view of the future for mak-
ing decisions about the massive
investments needed for the next
half century. e industry is im-
mensely capital-intensive. e cost
of putting sulfur dioxide scrubbers
on a 600-megawatt coal-fired power
plant is between $280 million and
$450 million; a selective catalytic
reduction unit for the same plant is
an additional $175 million. Under
CAIR, the industry was asked to
make investment decisions of this
magnitude with the knowledge that
climate change legislation is almost
certain in the next several years but
with great uncertainty as to what
that measure will look like or what it
will do to the investments demand-
ed by CAIR. Many companies had
deferred those investment plans be-
cause of the uncertainty surrounding
future climate change requirements.
e electric industry is uniquely
situated to quickly begin trad-
ing carbon. e industry has been
monitoring and reporting its CO2
emissions to EPA since 1995. e
transactional and information infra-
structure needed for an electric in-
dustry cap-and-trade system already
is in place. e electric industry
represents approximately 35 per-
cent of domestic GHG emissions,
and about 43 percent of the emis-
sions that ultimately could become
subject to direct regulation. With a
reasonable mix of allocated and auc-
tioned allowances, coupled with a
robust offset market, Congress could
take the first step toward achieving
long-delayed GHG emission reduc-
tions without imposing large price
increases on electricity consumers.
Congress then would have a foun-
dation for expanding the scope of
climate legislation in the next few
years to include other industry sec-
tors that are not as accustomed to
emissions trading.
Congress needs to address North
Carolina promptly to allow EPA and
the states to meet ambient air qual-
ity standards as quickly as possible.
However, it would be a shame to
miss this opportunity to establish a
comprehensive, long-term program
under which the electric industry
could make multi-billion-dollar
decisions with confidence in the
regulatory environment that they
will face.
William Bumpers is Partner and head of
the Global Climate Practice Group at Baker
Botts L.L.P The opinions are solely the au-
thor’s and should not be attributed to any
client.
May Trigger
Unintended
Consequences
B J. ML
In response to the problem of
emissions transported from one
state to another, we have long
recognized that legislation can
provide a better, more certain
remedy. In 2005, when it was clear
that our legislative solution would
not be enacted, EPA promulgated
the Clean Air Interstate Rule, assist-
ing eastern states in meeting the na-
tional ozone and fine particle stan-
dards. But in July, the D.C. Circuit
vacated CAIR in its entirety.
EPA is pursuing corrective ac-
tion through all three branches of
government. e first step toward a
legislative solution would have been
a congressional quick fix reinstat-
ing CAIR while developing a longer
term solution. However, Congress
adjourned without passing a bill.
On September 24, the Depart-
ment of Justice on behalf of EPA
asked the Court to reconsider its
decision, identifying three areas wor-
thy of rehearing. First, even though
EPA based CAIR on the interstate
NOx Budget Trading Program up-
held in 2000 by the same Court and
even though no petitioner in the
instant case questioned EPA’s au-
thority to establish interstate trading
programs under CAIR, the panel
found the resemblance to the NBPT
“superficial” and rejected the use of
interstate trading.
Second, the panel found that
EPA had no authority under the
Clean Air Act to limit the use of
SO2 allowances even though Sec-
tion 403(f) of the act states that
“an allowance allocated under this
subchapter is a limited authorization
to emit sulfur dioxide. . . . Nothing
in this subchapter or in any other
provision of law shall be construed
to limit the authority of the United
States to terminate or limit such au-
thorization.”
ird, even though the issue of
remedy was not addressed in the
briefs and the panel did not consider
the significant environmental and
economic “disruptive consequences”
that would result from CAIR’s ter-
mination, the rule was vacated.
EPA had predicted that 13,000
premature deaths would have been
avoided annually, as early as 2010,
due to CAIR’s SO2 and NOx emis-
sions reductions. By 2015, 17,000
premature deaths would have been
avoided each year, with health and
environmental benefits totaling over
$100 billion.
Already, early actors had moved
to lock-in emissions reductions.
Annual SO2 emissions from power
plants in 2007 had dropped below
the Title IV 2010 cap, three years
ahead of schedule. Billions of dollars
in pollution control equipment was
expected to be operational by 2009.
e panel’s holding eliminated
CAIR’s stringent caps and triggered
a precipitous decline in allowance
values. Without a cap and a price
signal, the mechanism to deliver the
reductions evaporates: power plants
no longer have an incentive to con-
tinue making additional reductions.
Until new programs are in place,
sources may increase emissions by
switching to higher sulfur coal, turn-
ing off controls, or utilizing controls
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