On July 6, 2010, the U.S. Environmental Protection Agency (“EPA”) announced a proposed rule to address air emissions that cross state lines and contribute to ozone and particulate matter pollution in the eastern half of the country. Many areas in the northeast cannot meet National Ambient Air Quality Standards (“NAAQS”) because of pollution from upwind states.[1] The rule would create Federal Implementation Plans (“FIPs”) to reduce sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions from electric power plants in 32 states through a combination of direct abatement standards and a limited voluntary “cap-and-trade” emissions permit trading program.
Once adopted, the proposed rule will replace the 2005 Clean Air Interstate Rule (“CAIR”), which required states to develop State Implementation Plans (“SIPs”) to address interstate transport of SO2 and NOx.[2] CAIR allowed states to opt into a voluntary cap-and-trade program.[3] In a 2008 decision and subsequent decision on rehearing,[4] the D.C. Circuit remanded CAIR to EPA, holding the rule unlawful but declining to vacate it during the period of the agency’s reconsideration.
The basis of the court’s objections was that CAIR’s permit trading program did not contain absolute emissions limits for individual sources, and so could technically allow individual sources in upwind states to increase emissions by buying enough emissions allowances. The court found that this system violated the CAA, which requires SIPs to contain “adequate measures” prohibiting sources from “contribut[ing] significantly to nonattainment in … any other State …” or “interfere[ing] with the maintenance of” NAAQSs.
The newly proposed EPA rule aims to remedy these flaws. It relies on state-specific data to identify each state’s contribution to nonattainment or interference with NAAQSs maintenance in other states and uses this information to create a state-wide emissions budget and an enforceable FIP designed to reduce emissions in the state below that budget. States will have the option of replacing these FIPs with SIPs that achieve the same emissions reduction goals.[5] Within this framework, the rule allows trading of emissions allowances within each state, as well as limited interstate trading.
In addition to this primary proposal, EPA has also requested comment on two alternative schemes. Under the first alternative, interstate trading of emissions allowances would be prohibited, although trading among power plants within states would continue. Under the third option, emissions trading would be replaced completely with emissions rate limits.
The final rule, if it survives legal challenges, could have substantial impacts on air quality and also impose significant costs on industry. EPA estimates that its preferred approach would have annual health and welfare benefits amounting to $120-290 billion in 2014, including the prevention of 14,000 to 36,000 premature deaths, at an annual cost of compliance of $2.8 billion. The rule represents a central element of EPA’s wider effort to reduce ozone and particulate matter pollution in the eastern U.S., as evidenced by EPA’s recent adoption of more stringent SO2 and NOx standards.
EPA will be receiving public comment on each of the three proposed versions of the Air Transport Rule for 60 days following its publication in the Federal Register. Three public hearing will be conducted following the comment period, in locations to be announced in the Federal Register notice.
Dan Mach is a summer associate at Sive, Paget & Riesel, P.C.
[1] Factsheet, EPA, Proposed Transport Rule Would Reduce Interstate Transport of Ozone and Fine Particle Pollution, at 1 (July 6, 2010). See CAA 109(a), 42 U.S.C. § 7409(a).
[2] 70 Fed. Reg. 25,162 (May 12, 2005).
[3] EPA, Clean Air Interstate Rule: Basic Information, http://www.epa.gov/cair/basic.html (last visited July 16, 2010).
[4] North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008).
[5] EPA, Proposed Air Transport Rule, at 14.
