Staying ahead of the feds: EPA proposes cap-and-trade to cut back on mercury emissions, but many states think they have a quicker. better solution.

• Author: Morandi, Larry

"By making mercury emissions a tradable commodity, the system provides a strong motivation for some utilities to make early emission reductions and for continuous improvements in control technologies."

U.S. ENVIRONMENTAL PROTECTION AGENCY, MARCH 15, 2005.

"This rule inappropriately allows trading of mercury, which is a powerful neurotoxin, rather than requiring state-of-the-art control at each facility."

NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, MARCH 15, 2005.

Mercury is the lastest, and most contentious, pollutant in the struggle between states and the federal government's environmental policy.

The Environmental Protection Agency announced its long-awaited mercury reduction rule in March, after Congress failed to act on the Bush administration's Clear Skies initiative. The rule is designed to reduce mercury emissions from coal-fired power plants by 70 percent over the next 13 years.

It is "the first time the United States has regulated mercury emissions from power plants," according to EPA Administrator Steve Johnson. "In so doing, we become the first nation in the world to address this remaining source of mercury pollution."

Mercury is a toxic substance that falls from the sky through precipitation into lakes and streams and penetrates fish tissue. People are exposed to unhealthy mercury levels primarily by eating contaminated fish. Pregnant women are most in jeopardy because a developing fetus can sustain neurological damage when a mother eats fish with high levels of mercury.

Coal-fired power plants are the largest man-made American source of mercury emissions released into the atmosphere. On a global scale, however, U.S. power plants account for only 1 percent of total mercury emissions, with all domestic sources responsible for 3 percent of emissions.

The EPA rule aims to reduce mercury emissions from coal-fired power plants by 20 percent by 2010 (from 48 tons to 38 tons), and by 70 percent by 2018 (from 48 tons to 15 tons). The first reduction would be achieved without addressing mercury directly, but through "co-benefit" reductions that accompany cuts in sulfur dioxide and nitrogen oxides under EPA's Clean Air Interstate Rule. EPA proposes to achieve the second level of reductions through a cap-and-trade program.

How will it work? EPA will grant each coal-fired power plant a certain number of emission allowances. A power plant will have to hold one allowance for each ounce of mercury released during the year. Power plants that reduce emissions below allowable levels (meaning they have more allowances than actual emissions) can sell their unused allowances to other power plants that cannot reduce emissions in...