In recent years, the Environmental Protection Agency has promulgated a number of regulations affecting the energy sector. Last year was no exception, with the EPA issuing several new rules aimed at curbing air emissions from electric generating units (EGUs). One of the most important — and potentially most costly — of the EPA’s recent regulations is the Cross-State Air Pollution Rule (CSAPR), formally titled “Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals.” CSAPR is a direct response to the U.S. Court of Appeals for the D.C. Circuit’s 2008 remand of the Clean Air Interstate Rule, or CAIR ( North Carolina v. EPA ). The D.C. Circuit remanded CAIR without vacating it, and directed the EPA to continue to implement the underlying regulatory scheme until the agency could develop a replacement rule to lawfully fulfill the objectives of CAIR.
CSAPR, like CAIR, regulates the interstate transport of air pollution through the use of an emission allowance-based cap-and-trade program applicable to EGUs in 27 states, including Pennsylvania, New Jersey and New York. CSAPR is designed to reduce emissions of nitrogen oxides and sulfur dioxide. The EPA has concluded that nitrogen oxides and sulfur dioxide are “precursors” that react in the atmosphere to form ozone and fine particulate matter. The EPA previously established National Ambient Air Quality Standards (NAAQs) for both ozone and fine particulate matter pursuant to Section 110 of the Clean Air Act (CAA). The EPA estimates the projected annual costs of CSAPR at over $800 million, in addition to the $1.6 billion per year in capital investments that the EPA recognizes are already under way in response to CAIR. Moreover, CSAPR’s projected compliance costs, and the uncertainty surrounding the rule’s implementation, are likely to have meaningful impacts on the electricity bidding markets in Pennsylvania and other states.
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