Pennsylvania's coal-fired Hatfield's Ferry Power Station stopped generating electricity in 2013. Its closure was part of a string of coal-plant closures brought on by competition from less expensive, cleaner natural gas and incentives under the US Clean Air Act. Long after the facility was closed, however, it continued to produce smog.

This is to ensure that Hatfield's Ferry could continue to receive pollution permits under a cap-and-trade program for five years after it shut down thanks to a flaw in clean-air legislation.

The plant's owner later sold those credits to other facilities so that they could use them when their own regulation budget of allowances was exceeded to maintain compliance. The largest emitter of smog-causing gas in the American power industry is one of the winners.

States give power plants a specific number of allowances each year as part of the federal scheme. One ton of nitrogen oxide (NOx) emissions are allowed per unit. Smog, which causes respiratory issues and early death, is made up in part by NOx.

A plant can sell any unused permits to other plants if it doesn't use them all. The benefits of the credits include giving plants a less expensive option than purchasing and using extremely expensive pollution-control machinery.

The US’ Clean Air Act Over the Years

A federal law in the US that was passed in 1970 and later updated with the goal of reducing air pollution, preserving the ozone layer, and enhancing public health. The federal Environmental Protection Agency (EPA) was given the authority it needed to combat environmental pollution thanks to the Clean Air Act (CAA).

The CAA was expanded from its original set of regulations, in which the states regulated the sources of air pollution, to the establishment of national regulatory programs, with specific air quality requirements, federal enforcement, and federally issued permits, which required large industrial entities to address and control their contributions to air pollution.

 

The National Ambient Air Quality Standards (NAAQS), which were the traditional centerpiece of CAA regulations, were established by EPA officials with authorization from the CAA of 1970. Six pollutants namely sulfur dioxide, nitrogen dioxide, particulate matter, carbon monoxide, ozone, and lead—that posed a risk to the public's health were the subject of the NAAQS. To avoid severe nonattainment fines and penalties, all states, cities, and towns in the US must have levels of these pollutants below the NAAQS-mandated limitations.

The New Source Performance Standards (NSPS), which limit the amount of permitted emissions from several classes of facilities, were also established by the EPA under the CAA. The NSPS requirements are established at levels that can be met by implementing systems and programs for reducing emissions while taking into account the cost to enterprises. Air quality, environmental effect, and energy needs are the NSPS's top priorities.

Another important part of the CAA is the National Emissions Standards for Hazardous Air Pollutants (NESHAP). It was established to control pollutants that are listed in the NAAQS and that could, or are projected to, have a negative impact on public health. The EPA was obligated to establish uniform acceptable limitations for the chemicals by the 1990 CAA amendments. Many companies also had to establish risk-management plans to deal with potential discharges of hazardous substances as a result of the revisions.

The CAA amendments also implemented a specific system for reducing acid rain, which is brought on by emissions of sulfur dioxide, with a possible reduction of 10 million tons per year. In order to limit the ozone layer's destruction and to comply with the Montreal Protocol, which established worldwide standards to reduce ozone depletion, the CAA amendments also stipulated that chlorofluorocarbons (CFCs) and halons must be banned.

By lowering the period of time a retired facility can receive closed-plant allowances from five to two, the EPA last month took action to lessen their impact. However, the prior policy had already injected a substantial amount of credits into the market, and it will take them years to move through the system.

Loopholes in the Act

The EPA has long argued that the incentives for retired plants encourage owners to shut down inefficient operations. The EPA stated in its completed March regulation that the additional credits will have little impact on shutdown choices today due to the abundance of market and government incentives to create renewable energy.

According to EPA transaction data, Hatfield's Ferry traded more than 5,000 allowances to AECI, the owner of New Madrid, in its 2021 agreement. According to estimates from the EPA, coal plants without the most sophisticated pollution controls would need to spend $900 to $1,600 to remove a ton of NOx using their technology.

It appears that the New Madrid plant is making efforts to lessen pollution. In October 2022, AECI and Missouri authorities reached an agreement for the SCR pollution controls to be in operation for at least 95 percent of the peak ozone season, which runs from May 1 to September 30. The deal is being evaluated by the EPA for approval.

However, AECI claims that the transition to renewable energy is being accelerated by federal regulators.

EPA's most recent NOx-reduction standards have been vigorously opposed by utilities and lawmakers in states with Republican governors.

The Good Neighbor rule, the EPA's most recent amendment to cross-state emissions laws, caps the annual proportion of allowances that can be stored for later use in each state at 21 percent, another step targeted at reducing the surplus of pollution credits.

The price of allowances has significantly increased as a result of this and other policy changes, and is currently hovering around $10,000 per allowance.

However, even at that price, coal plants, including those that operate at high pollution rates, will find buyers for NOx allowances. According to S&P, certain facilities can still turn a profit with allowance costs above $30,000 when natural gas and wholesale power prices rise.

The CAA has had significant positive benefits on the environment and public health. Despite increases in the gross domestic product, vehicle miles traveled, and population size between 1980 and 2015, total emissions of the six major air pollutants covered by the NAAQS decreased by 63 percent in the US. However, in some areas of the US, pollutant levels continued to be higher than the NAAQS.