State Reactions to the Trading of Emissions Allowances Under Title IV of the Clean Air Act Amendments of 1990

To cut down on the S02 emissions from coal-fired electric utilities, Title IV creates a two-pronged approach. First, it sets a national cap on emissions. Title IV allocates to each utility a number of pollution allowances to emit a certain amount of S02.11 The sum of all the allowances equals the nationwide cap. Second, Title IV recasts S02 as a commodity. If a utility does not need all of its allowances in a particular year, it may either trade them on a public exchange, or it may arrange private sales to a utility that needs more allowances to stay within its emissions limit. States have raised unforeseen objections to some of their utilities\u27 private trades of emissions allowances. This Article will discuss these trades, the responses states have already made, and possible responses states may still make. Specifically, Section II explains why Title IV is built on market-based incentives and how the program works. Section III details the various state reactions to Title IV. These reactions include lawsuits and threats of legislative action to control utilities\u27 emissions allowance trades. Section III also identifies state laws that control acid deposition, and state laws that control the use of state coal, to see if states use these laws to circumvent Title IV, Section IV analyzes the various state lawsuits and laws identified in Section III. Section V concludes that the most serious threat to utilities\u27 ability to trade emissions freely is state legislation that would require state oversight of an in-state utility\u27s trade with an out-ofstate utility. These essentially local reactions could derail the Clean Air Act\u27s nationwide approach to solving the acid rain problem. Since the allowance program does not include NOx, the Article discusses only S02