Opinion ID: 187215
Heading Depth: 3
Heading Rank: 1

Heading: Pollution-Trading Programs

Text: North Carolina challenges the lawfulness of CAIR's trading programs for SO2 and NOx. North Carolina contests the lack of reasonable measures in CAIR to assure that upwind states will abate their unlawful emissions as required by section 110(a)(2)(D)(i)(I), but does not submit that any trading is per se unlawful. EPA designed CAIR to eliminate the significant contribution of upwind states, as a whole, to downwind nonattainment. CAIR, 70 Fed.Reg. at 25,195. EPA did not purport to measure each state's significant contribution to specific downwind nonattainment areas and eliminate them in an isolated, state-by-state manner. Reasoning that capping emissions in each state would not achieve reductions in the most cost-effective manner, EPA decided to take a regionwide approach to CAIR and include voluntary emissions trading programs. In modeling the CAIR ... EPA assumes interstate emissions trading. While EPA is not requiring States to participate in an interstate trading program for EGUs, we believe it is reasonable to evaluate control costs assuming States choose to participate in such a program since that will result in less expensive reductions. Id. at 25,196. In CAIR's trading system, states are given initial emissions budgets, but sources can choose to sell or purchase emissions credits from sources in other states. As a result, states may emit more or less pollution than their caps would otherwise permit. Because EPA evaluated whether its proposed emissions reductions were highly cost effective, at the regionwide level assuming a trading program, it never measured the significant contribution from sources within an individual state to downwind nonattainment areas. Using EPA's method, such a regional reduction, although equivalent to the sum of reductions required by all upwind states to meet their budgets, would never equal the aggregate of each state's significant contribution for two reasons. State budgets alone, without trading, would not be highly cost effective. And although EPA has measured the air quality factor to include states in CAIR, it has not measured the unlawful amount of pollution for each upwind-downwind linkage. As noted earlier in the case of SO2, EPA recognizes that the choice of method in setting State budgets, with a given regionwide total annual budget, makes little difference in terms of the levels of resulting regionwide annual SO2 and NOx emissions reductions. Id. at 25,230-31. Thus EPA's apportionment decisions have nothing to do with each state's significant contribution because under EPA's method of analysis, state budgets do not matter for significant contribution purposes. But according to Congress, individual state contributions to downwind nonattainment areas do matter. Section 110(a)(2)(D)(i)(I) prohibits sources  within the State  from contribut[ing] significantly to nonattainment in ... any other State ... (emphasis added). Yet under CAIR, sources in Alabama, which contribute to nonattainment of PM2.5 NAAQS in Davidson County, North Carolina, would not need to reduce their emissions at all. See CAIR, 70 Fed.Reg. at 25,247 tbl. VI-8. Theoretically, sources in Alabama could purchase enough NOx and SO2 allowances to cover all their current emissions, resulting in no change in Alabama's contribution to Davidson County, North Carolina's nonattainment. CAIR only assures that the entire region's significant contribution will be eliminated. It is possible that CAIR would achieve section 110(a)(2)(D)(i)(I)'s goals. EPA's modeling shows that sources contributing to North Carolina's nonattainment areas will at least reduce their emissions even after opting into CAIR's trading programs. 71 Fed.Reg. at 25,344-45. But EPA is not exercising its section 110(a)(2)(D)(i)(I) duty unless it is promulgating a rule that achieves something measurable toward the goal of prohibiting sources within the State from contributing to nonattainment or interfering with maintenance in any other State. In Michigan v. EPA, 213 F.3d 663 (D.C.Cir.2000), we deferred to EPA's decision to apply uniform emissions controls to all upwind states despite different levels of contribution of NOx to nonattainment areas caused by the differing quantities of emissions produced in upwind states and the varying distances of upwind sources to downwind nonattainment areas. Id. at 679. We did so because these effects flow[] ineluctably from the EPA's decision to draw the `significant contribution' line on a basis of cost differentials and [o]ur upholding of that decision logically entails upholding this consequence. Id. But the flow of logic only goes so far. It stops at the point where EPA is no longer effectuating its statutory mandate. In Michigan we never passed on the lawfulness of the NOx SIP Call's trading program. Id. at 676 (Of course we are able to assume the existence of EPA's allowance trading program only because no one has challenged its adoption.). It is unclear how EPA can assure that the trading programs it has designed in CAIR will achieve section 110(a)(2)(D)(i)(I)'s goals if we do not know what each upwind state's significant contribution is to another state. Despite Michigan 's approval of emissions controls that do not correlate directly with each state's relative contribution to a specific downwind nonattainment area, CAIR must include some assurance that it achieves something measurable towards the goal of prohibiting sources within the State from contributing to nonattainment or interfering with maintenance in any other State. Because CAIR is designed as a complete remedy to section 110(a)(2)(D)(i)(I) problems, as EPA claims, FIP, 71 Fed.Reg. at 25,340, CAIR must do more than achieve something measurable; it must actually require elimination of emissions from sources that contribute significantly and interfere with maintenance in downwind nonattainment areas. To do so, it must measure each state's significant contribution to downwind nonattainment even if that measurement does not directly correlate with each state's individualized air quality impact on downwind nonattainment relative to other upwind states. See Michigan, 213 F.3d at 679. Otherwise, the rule is not effectuating the statutory mandate of prohibiting emissions moving from one state to another, leaving EPA with no statutory authority for its action. Whether EPA could promulgate a section 110(a)(2)(D)(i)(I) remedy that would bar alternate relief, such as would be available under section 126, 42 U.S.C. § 7426, is a question that is not before the court.