U.S. Acid Rain, Smog Rules May Spur New Carbon Law, Traders Say

By Simon Lomax
(c) 2010 Bloomberg News
Monday, July 12, 2010; 12:00 AM

July 12 (Bloomberg) -- The threat of power-plant closures under the Obama administration's planned limits on acid rain and smog pollution should revive efforts to pass legislation this year establishing a U.S. carbon market, an emissions trading group said today.

The rules, issued last week by the U.S. Environmental Protection Agency, "will increase the pressure on Congress to act" on legislation giving the owners of coal-fired plants pollution targets that are easier to meet in exchange for new limits on carbon dioxide, said David Hunter, U.S. policy director for the International Emissions Trading Association.

The Edison Electric Institute, a Washington-based trade association representing power companies such as American Electric Power Co. and Southern Co., has said the EPA's new acid-rain and smog regulations would require "dramatic" cuts in pollution from power plants.

The U.S. Senate is set to debate an energy bill this month, and the proposals under discussion include cap-and-trade programs for acid rain, smog and carbon dioxide in which companies buy and sell a declining number of pollution rights.

If Congress passes these cap-and-trade programs, a smaller number of the coal-fired plants that generate nearly half the electricity in the U.S. will likely have to be closed or upgraded right away, Hunter said in a telephone interview. The EPA was forced to issue tougher acid-rain and smog rules last week after a federal appeals court rejected a pollution trading plan put forward by the agency in 2005, he said.

"It shows the importance of Congress passing a clear law based on trading," Hunter said of the EPA's new rules. Without cap-and-trade programs for different pollutants, including carbon dioxide, "it gets to be a whole lot more expensive and you'll force premature closures" of power plants, he said.

The emissions trading group is based in Geneva and its members include Goldman Sachs Group Inc. and General Electric Co., according to its website.

© 2010 bloomberg.com