Court ruling rocks emissions markets
From Argus Air Daily, July 11, 2008

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Washington, July 11 (Argus) –- A court on Monday struck the Clean Air Interstate Rule (CAIR) down in its entirety, destroying the market for annual nitrogen oxide (NOx) permits that was due to start in January 2009. The DC Circuit Court of Appeals said EPA must rewrite the rule, which means a new program might look very different and may not even include interstate trading.

The court ruled that CAIR did not require individual states to reduce their emissions as required by the Clean Air Act, but instead sought to address regional goals.

"EPA's approach - regionwide caps with no state-specific quantitative contribution determinations or emissions requirements - is fundamentally flawed," the court said. "It is possible that after rebuilding, a somewhat similar CAIR may emerge; after all, EPA already promulgated the apparently similar NOx SIP Call eight years ago. But ... the similarities with the NOx SIP Call are only superficial, and CAIR's flaws are deep."

The ruling also removes a CAIR provision that would have doubled the number of sulfur dioxide (SO2) allowances required to cover each ton of emissions from 2010. SO2 allowance prices plunged more than $200 to a low mark below $100/ton shortly after the decision came out.

SO2 emissions have already fallen below the Acid Rain cap of around 9.5 million tons/yr the past two years, and the decision "takes a lot of demand out of the market," said Peter Zaborowsky, managing director of Evolution Markets.

An annual NOx market was still active today as states have their own regulations, although their validity is in question after today's decision. The seasonal market for NOx will continue under the NOx SIP Call, the trading program in the northeastern states.

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