NOx Trading is Successful

Last year, a nitrogen oxide (NOx) trading program was conducted in the
Northeast, marking the first time a market-based approach was used to reduce an emission other than sulfur dioxide (SO2). The SO2 trading program has been used to successfully reduce power plant emissions since 1995.

The U.S. EPA reports that as a result of NOx trading, emissions were reduced 20 percent below levels allowed by law and over 50 percent below 1990 levels. The agency believes this demonstrates the utility of market-based approaches to substantially mitigate air pollution.

But in a unanimous vote this week, the New York State Senate passed a bill that fines state utility companies if they sell their pollution credits to companies in the 14 states that are believed to contribute to acid rain in New York. By selling credits gained from reducing SO2 emissions in New York to coal-burning utilities in the Midwest and Southeast, the pollution comes right back as acid rain in New York. Revenues from fines will be used to develop renewable energy sources in NY.

New York State’s utility companies have stockpiled a large percentage of U.S. emissions credits because the state requires lower emissions than the federal Clean Air Act. One result of this new law could be higher prices for emissions trades, which may provide more incentive for out-dated coal utilities to upgrade rather than buy credits to pollute. The law goes into effect as soon as Governor Pataki signs it.

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