The article in the url below reports a recent decision by the US Court of Appeals that seems to be very important for a prospective carbon cap-and-trade scheme in the US, but which I haven’t seen reported elsewhere. The author describes the decision as a:
“… drive-by slaughter of the Clean Air Interstate Rule on July 11. CAIR is - sorry, was - the Environmental Protection Agency's cap-and-trade programme for electric utilities' emission allowances for sulphurous and nitrous oxides.”
The decision’s implications are significant because the court has essentially delivered an:
“… invalidation of what had become a significant market.”
As a direct result, PPL (an electricity utility) has announced a prospective $100m loss on nitrous oxide emissions credits that it had purchased to allow it to come in under a cap that no longer exists:
“Using EPA data, Jeffrey Holmstead … estimates that the total loss of value for SO emission allowances is in the order of $15bn-$20bn. Nitrous oxide allowances issued under the CAIR, which were wiped out by the Washington DC Circuit, had been valued at $21bn.”
These costs are in conjunction with the prospective losses of investments made by firms to minimize factory emissions:
“The last number we had for investment made in plants, [at least partially] as a consequence of that is around $75bn, and counting.”
The annoying thing about the article is that it does not explain the basis for the Court’s decisions. Ultimately, however, the decision has resulted in high uncertainty and threatens confidence that a similar scheme could work for carbon:
“The court's action means there will almost certainly be higher levels of NOX emissions in the air next year.”
An update on this story is provided in a subsequent article by the same author in the second url below. This story appears to have significant implications for a carbon cap-and-trade scheme, but I have not seen it mentioned anywhere else.
Take care
Dave
Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther
A costly cap on utilities' cap-and-trade programme
By John Dizard
868 words
29 July 2008
Financial Times
USA Ed1
08
http://www.ft.com/cms/s/0/4e32493e-5a7d-11dd-bf96-000077b07658.html
Misguided game of SOx and NOx played for high stakes
By John Dizard
891 words
19 August 2008
Financial Times
USA Ed1
08
http://www.ft.com/cms/s/0/8bf3e074-6c4e-11dd-96dc-0000779fd18c.html
