Court’s Ruling Against Clean Air Interstate Rule and Affect on Emissions Control Spending

Implications:     The decision by the U.S. Court of Appeals for the District of Columbia Circuit striking down the Clean Air Interstate Rule (CAIR) will affect emissions control spending in the immediate term.

Analysis: As a brief background, CAIR was to further reduce NOx emissions starting in 2009 on an annual basis beyond the already in place in a seasonal NOx program and further reduce SO2 emissions starting in 2010.  The plan covered 28 states in the Eastern United States.  CAIR was put in place in March 2005 by the EPA. 

     Challenges to CAIR led to this court case.  The court overturned CAIR based on the regional basis of the rules, rather than state-specific limits and the EPA’s change of the surrender rate on SO2 emissions allowances from the current 1 to 1 ratio to 2 to 1 in 2010 and 2.86 to 1 in 2018, among other reasons.               

    Coal-fired generators in the CAIR states were gearing up for the upcoming NOx and SO2 reductions through analysis, purchase, and ultimately the construction of SCRs or NSCRs to remove NOx and scrubbers to remove SO2 on existing coal plants.  Many retrofits have been completed, with more scheduled in the next two years.               As a result of this Court ruling, it is unlikely that a coal-fired generating utility or independent power producer in the affected CAIR states will make any commitment on new environmental control systems to reduce NOx or SO2 until either Congress or the EPA issue new emissions reduction laws or regulations.  The new laws or regulations could take into the next Administration to be completed and then taking effect a few years later.  Companies without definitive commitments for emissions control retrofits will take a wait and see attitude before moving forward.    

    Those with emissions control retrofit projects ordered or underway will complete the projects.  These projects are in the construction pipeline for the next 18 to 24 months or so.