| environmental programs
Clean Air Rule
First cO allowance
auction a Success
By ROBeR T Ukeile Y
Robert Ukeiley (rukeiley
@ igc.org) is a lawyer
who represents environmental nonprofits in
Clean Air Act litigation
affecting energy issues.
The last few months have seen two major developments in the regulatory systems’ efforts to internalize the cost of pollution from fossil fuels. The bad news
first. On July 11 the U.S. Court of Appeals in the District
of Columbia struck down the Clean Air Interstate Rule
(CAIR). CAIR was a cap-and-trade program that would
have required major reductions in soot-forming sulfur
dioxide and smog-forming nitrogen oxide emissions from
fossil-fueled power plants in the Eastern United States.
These reductions would have been made by installing
expensive pollution controls and would have driven up
the cost of dirty energy. The court ruled that the Bush
administration had violated the Clean Air Act in creating
CAIR, mainly because CAIR didn’t require enough emission reductions soon enough. This decision was legally
sound. The practical impacts, however, are disappointing.
On the bright side, there have been numerous proposals
in Congress to replace CAIR with a similar or even stronger program. As the Clean Air Act now stands, the U.S.
Environmental Protection Agency must mandate major
pollution reductions, but it is not clear when and how
they will do it. Don’t expect action until after January.
The good news is that the first U.S. cap-and-trade
program to regulate carbon dioxide (CO ) emissions for
fossil-fueled power plants is up and running. The Regional Greenhouse Gas Initiative (RGGI) auction of carbon
dioxide allowances, held on Sept. 25, resulted in the sale
of the entire initial offering of 12.5 million allowances (an
allowance is authorization to emit 1 ton of CO ).
RGGI reported that 59 participants from the energy,
financial and environmental sectors took part in the first-in-the-nation auction. The demand for the allowances
appeared to have been very strong: Bidders asked for 51. 7
million allowances, four times the available supply for
this first auction. Clearing price was $3.07 per allowance,
surprisingly low considering the demand. Nonetheless,
the auction generated $35.5 million, distributed to Connecticut, Maine, Maryland, Massachusetts, Rhode Island
and Vermont, the six RGGI states participating in the first
auction (RGGI also includes Delaware, New Hampshire,
New Jersey and New York). The states invest those funds
in energy-efficiency and renewable energy technologies,
and in programs to benefit energy consumers.
The program is up and running, providing valuable
lessons for other regional programs as well as for shaping
the inevitable national greenhouse gas regulations.
RGGI auctions will be held each quarter, with Auction
2 slated for Dec. 17.