A ruling this morning invalidating the U.S. mercury emissions cap and trade program should not impact the Environmental Protection Agency’s authority to establish trading programs for other emissions, including carbon dioxide.

The United States Court of Appeals for the District of Columbia Circuit today struck down two rules promulgated by the U.S. Environmental Protection Agency (EPA) addressing mercury emissions from coal-fired power plants. State of New Jersey v. EPA, No. 05-1097 (D.C. Cir. Feb. 8, 2008). The court ruled that EPA deleted power plants from the list of emission sources subject to hazardous air pollutants requirements of the Clean Air Act (CAA) without following the statutory requirements for delisting. This conclusion, the court reasoned, required it also to invalidate EPA’s Clean Air Mercury Rule (CAMR) that had established numerical limitations for the emission of mercury from power plants and a cap and trade system for compliance with those limits.

The Bush Administration developed and promulgated CAMR in an effort to back away from an 11^th hour finding issued by EPA Administrator Browner in December 2000 that regulation of mercury emissions from coal-fired power plants under the hazardous air pollutant program was “appropriate and necessary.” This finding by the Clinton Administration was not subject to judicial review, but served as the linchpin for the court’s invalidation of CAMR. Once EPA made that finding and included power lists on the “list” of emission sources subject to regulation, the court ruled EPA could change course only by following the procedures set forth in the CAA.

To promulgate the CAMR, and its cap and trade system, EPA tried to short-circuit the statutory procedures. The court ruled that EPA did not have the discretion to proceed in that manner. While this decision prevents EPA from proceeding with a cap and trade system for mercury emissions, it does not provide opponents of cap and trade systems comfort. The court expressly declined to consider arguments concerning EPA’s authority to establish a cap and trade system for pollutants and sources outside the hazardous air pollutant regime.

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