Air Pollution Control Equipment Services, Emissions

Lawsuit challenges New York law restricting emissions trade

OGJ Online

Nov. 20, 2000—A group of electricity producers and mining companies has filed suit in US District Court in Albany, NY, challenging a state law that restricts the sale of New York air emissions credits.

New York passed a law in May penalizing the seller of federally granted sulfur dioxide (SO2) air emission allowances, if the buyer is in 14 so-called “upwind” states.

The lawsuit is part of a long running dispute between regions of the country over transport by air of pollution from state to another.

If the allowances are actually used to offset emissions from power plants in “upwind” states, then the company that originated the allowance can be fined. If the allowances are traded to another region of the country, then no fine is generated.

In its lawsuit, the Clean Air Markets Group says the New York law interferes with the federal right to regulate interstate commerce. The suit asks the court to prevent enforcement of the state law. The state has 20 days to respond to the suit.

Sponsors of the lawsuit suggest the New York state law won’t do anything to reduce emissions in the 14 states anyway. Power plant owners in adjacent states can still buy emissions credits from other areas of the country and continue to emit SO2.

All the New York state law does is to place a special burden on the New York sources restricting where they can sell their credits, says Norman Fichthorn, a partner at Hunton & Williams, the Washington, DC, law firm representing the Clean Air Markets Group.

The market for SO2 emissions allowances was set up by Congress to allow companies that achieve greater reductions than required by law to sell their excess allowances to companies where such reductions could be cost-prohibitive.

New York environmentalists fear the federal law will not reduce pollution within the state. They claim credits originating within New York by companies reducing emissions will be sold to power plants in neighboring states, allowing them to continue emitting SO2 that will drift into New York.

Those emissions will only increase pollution in New York, says Bernard Melewski, spokesman for Adirondack Council, a New York environmentalist group.

“There is a problem that needs to be solved,” says Ashok Gupta, economist with the National Defense Resources Council in New York. “The question is how to do it.”

Meanwhile, the state of New York’s Department of Environmental Conservation is about to issue rules and regulations that will force power plants to reduce SO2 emissions and nitrogen oxide emissions within the state by 50% and 70% respectively. The stiff state requirements goe beyond the federally mandated provisions of the Clean Air Act.

Gupta says the rules will probably contain some sort of statewide cap on SO2 emissions and an allowance trading mechanism restricted to players in the state.