SOLAR TODAY - January/February 2009

advances

| environmental programs

Clean Air Rule
On Hold
First cO allowance
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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

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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 ).

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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.