In the waning days of 2008 a three-judge panel of the US appeals court ended months of uncertainty surrounding the regulation of power plant emissions of sulfur dioxide (SO2) and oxides of nitrogen (NOx) when it ruled that the EPA's Clean Air Interstate Rule (CAIR) could remain in effect until the Agency develops a lawful alternative. The same court last July vacated the tradable emission allowance scheme that CAIR has implemented since 2005 as "fatally flawed" because it could not assure compliance with the Clear Air Act directive that prohibits sources within one State from contributing significantly to non-attainment with national ambient air quality standards (NAAQS) in any other State. In reliance on CAIR owners of electric generating units in 28 eastern states and the District of Columbia had spent many millions of dollars to acquire emissions allowances in compliance with CAIR requirements.
In its order on rehearing, the court made clear that it was providing only a temporary reprieve pending EPA's development of a replacement rule that ensures compliance with the Clean Air Act. That will be challenging. Insofar as a system of tradable allowances is retained, what ensures that one state will not purchase sufficient allowances to authorize emissions that will contribute to another downwind state's violation of a NAAQS? Responsibility for fashioning a replacement rule that will prevent that from happening will fall to new Obama Administration EPA Director Lisa Jackson.