Dear Colleagues:
This morning the DC Circuit Court of Appeals announced a decision striking down the US Environmental Protection Agency’s Clean Air Interstate Rule (CAIR). Citing “several fatal flaws” in the rule, the Court ordered the EPA to promulgate a new rule to regulate interstate emissions of pollutants contributing to acid rain and smog.
CAIR was intended to tighten air regulations in 25 eastern states by mandating the submittal of two SO2 allowances for each ton of SO2 emitted starting in 2010. This ratio is tightened further in 2015 to 2.86 to 1. CAIR also established an annual NOx program for eastern states to curb the precursor to particulate pollution.
Several petitioners, including states and utilities, had asked that various portions of CAIR be struck down, including dates of implementation and details associated with the NOx program. The Courts, citing the single nature of CAIR, declined to seek specific remedies, and instead ordered all of CAIR, including its impact on the existing SO2 trading program and the new annual NOx program, vacated and sent back to the EPA for revisions.
The Court did note, however, that in the absence of CAIR the NOx SIP Call trading program will continue. The existing SO2 program also remains in place at the current 1:1 submittal ratio of allowances to emissions.
SO2 and annual NOX allowance markets are trading down sharply on the news. At one point this morning spot SO2 allowances traded at around $100, down from around $300 at the close yesterday. Annual NOx traded down as well in anticipation of the suspension of the program.
Should you have any questions regarding the market implications of this decision or wish to transact in the market, I encourage to contact our Emissions Markets desk at: +1 914.323.0255.
Best regards,
Peter Zaborowsky
Managing Director
+1 914.323.0255
pzaborowsky@evomarkets.com
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