A Bewildering Web of Emissions: Unraveling the Clean Air Act Loophole
The Puzzling Persistence of Polluters: Hatfield’s Ferry Power Station Saga
In the curious case of Pennsylvania’s Hatfield’s Ferry Power Station, electricity production ceased in 2013 due to the emergence of cleaner, more affordable natural gas alternatives. Yet, the plant continued to befoul the air long after its termination. A mystifying loophole in the Clean Air Act enabled the facility to amass emissions allowances under a cap-and-trade program for half a decade after its closure.
FirstEnergy Corp, the plant’s owner, lucratively sold these credits to other facilities striving to stay compliant despite exceeding their regulatory allowance budgets.
Cap-and-Trade Conundrum: Allowance Distribution Dilemma
The perplexing Federal program bestows states with the power to allot a specific number of allowances to power plants each year, thus permitting one ton of nitrogen oxide (NOx) emissions. Plants with surplus allowances can lucratively sell them to others, offering a cost-effective alternative to pricey pollution-control equipment. Consequently, closing facilities gain a windfall of credits to sell, as they cease generating smog.
EPA’s Attempt to Curb Closed-Plant Allowances
Last month, the Environmental Protection Agency (EPA) endeavored to diminish the influence of closed-plant allowances by curtailing the number of years a retired facility can accumulate them from five to two. Despite this move, the prior policy already inundated the market with a plethora of credits, taking years to work their way through the system. The EPA claims that retired-plant credits did not impact the total number of credits given to all US plants or the country’s overall coal pollution, which is capped by the total volume of available allowances each ozone season.
The Power Sector’s Push for Closed-Plant Credits
In a twist of events, the power sector advocated last year for the continuous flow of closed-plant credits, as evidenced by letters sent to the EPA by utilities and electric cooperatives. The EPA maintains that these retired-plant credits incentivize owners to shutter inefficient facilities. However, this practice raises concerns that active plants can increase NOx emissions, posing a threat to public health in proximate and downwind communities.
Shrouded Transactions: The Hatfield’s Ferry and New Madrid Exchange
In an enigmatic 2021 deal, Hatfield’s Ferry traded over 5,000 allowances to New Madrid’s proprietor, AECI, as per EPA transaction data. The sale terms remain undisclosed, but at the time, NOx allowances were valued at approximately $225 per ton, according to S&P Global’s Market Intelligence. New Madrid scaled back its pollution controls and emitted NOx at a staggering rate during that period, utilizing credits to maintain compliance.
EPA’s Latest Effort: The Good Neighbor Rule
In a bid to further address the pollution-credit glut, the EPA’s most recent update to cross-state emissions regulations, known as the Good Neighbor rule, limits the annual percentage of allowances that can be banked for future use in each state to 21%.
