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Viewpoint: Legal woes to weigh on NOx allowances

  • Spanish Market: Coal, Electricity, Emissions, Natural gas
  • 29/12/23

Legal complications that have upended federal efforts to rein in ozone-forming pollution show no sign of abating, likely weighing further on Cross-State Air Pollution Rule (CSAPR) NOx allowances in 2024.

The US Environmental Protection Agency (EPA) finalized a "good neighbor" plan earlier this year to curtail interstate migration of NOx emissions that contribute to ground-level ozone and smog. It includes more-stringent CSAPR ozone season NOx caps for power plants. But various federal courts, responding to complaints that EPA acted unlawfully by rejecting state implementation plans for tackling the issue, have issued orders preventing the agency from enforcing new federal limits in 12 states — for now.

The orders have effectively shrunk the size of the CSAPR Group 3 NOx market and left more states than expected in the less-ambitious Group 2 market, which is tied to earlier ozone standards. Prices have plunged — particularly for Group 3 allowances, which peaked at $48,000/short ton (st) last year but were heard to trade for just $1,500/st in November. Power plants have found little reason to buy up allowances now when future compliance responsibilities are hazy and ozone season markets are well supplied.

Courts will provide more clues about the future of the CSAPR program in 2024, guiding EPA as it weighs state ozone plans it has not yet accepted, although progress could be staggered.

A significant decision is likely early in the year, with the US Supreme Court holding oral arguments in February to consider emergency requests to stay the plan nationwide. Lawyers say that it is rare for the court to schedule arguments in response to emergency petitions, which typically involve only written briefs and are handled quickly.

Federal courts have affirmed the legality of similar EPA regulations in the past, including the Supreme Court in 2014 and the US Court of Appeals for the District of Columbia Circuit earlier this year. Three judges on the current Supreme Court were in the 6-2 majority in the 2014 case, including chief justice John Roberts, while justice Clarence Thomas dissented.

Notably, that Supreme Court decision overrode a lower court order written by now-Supreme Court justice Brett Kavanaugh, who said CSAPR limits at the time overcontrolled emissions from upwind states.

Should the Supreme Court reject a nationwide stay, other courts could still add complexity to EPA's enforcement. Regional appeals courts that have temporarily blocked EPA's rejection of state ozone plans are weighing final decisions on varying timelines, creating the potential for contradictory orders, or at least decisions at different times next year.

"It will depend on what are the specific issues before the court, and what the court decides is the appropriate remedy," said Carrie Jenks, executive director of Harvard Law School's Environmental & Energy Law Program.

The courts could task EPA with taking a fresh look at the state plans or give states more time to revise their plans and submit new ones for review, she said.

The cases could resolve more quickly if they are transferred to the DC Circuit, which typically handles national Clean Air Act cases. But the other courts have so far resisted EPA's requests to do just that for the state plan cases. The DC Circuit is in the early stages of reviewing the federal plan's legality, but the court's current briefing schedule makes a final decision unlikely before next year's ozone season.

Stumbling blocks for NOx

As judicial stays effectively increase supply by keeping more power plants in the less-stringent Group 2 market, the faltering competitiveness of coal plants is simultaneously shrinking demand. Coal-fired generation dropped significantly in 2023, leading to an 18pc drop in ozone season NOx emissions among Group 3 power plants. The US Energy Information Administration forecasts a 10pc reduction in coal generation next year.

Absent a nationwide stay, obligations in the 10 participating Group 3 states will become harder in 2024 as more-restrictive budgets come into force, cutting the allowance supply by 8pc from its temporarily inflated levels this year and potentially putting upwards pressure on the record-low Group 3 price. EPA, targeting a Group 3 allowance bank that does not exceed 21pc of the states' 2024 caps, also plans to take thousands of unused allowances out of circulation next year.

But the threat of oversupply — a persistent feature of CSAPR markets, which also include annual programs for NOx and SO2 emissions — still looms large. Power plants in Group 3 emitted less than 49,200st during this year's ozone season, but they will have a budget of around 60,000 allowances next year. NOx budgets are not set to become significantly more stringent until 2026, and EPA might ultimately phase in the most ambitious provisions in particular states even if courts determine the federal plan is legal.

By then, CSAPR obligations could have less to do with the current legal fracas and more to do with which party prevails in the 2024 presidential election. Another term for President Joe Biden could mean new efforts to rein in power plant pollution and potentially tighter air quality standards for ozone, while Republicans have made no secret they see EPA rules, including the "good neighbor" plan, as regulatory overreach.


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04/02/25

Tariffs not only US threat to Canada canola oil

Tariffs not only US threat to Canada canola oil

New York, 4 February (Argus) — Canadian canola farmers have reason to celebrate a last-minute deal to at least delay US tariffs. Changing US biofuel policies, however, could dim their excitement. The two countries agreed Monday to pause for a month 25pc tariffs on most Canadian imports, including agricultural products like canola oil. While best known for its use in food, canola oil has become an increasingly important ingredient in US biofuel production. Canada exported 800,000 lbs of crude canola oil to the US in 2021, before US regulators allowed more canola-based fuels to qualify for a biofuel mandate, but more than three times that total over just 11 months in 2024 according to customs data. Canola oil from all origins made up around 12pc of the US biomass-based diesel feedstock mix last year. The challenge for Canada is that policies in the US that helped cement canola oil's role in biofuel production are increasingly encouraging producers to use other feedstocks. The mere threat of tariffs could speed that trend along. A long-running US tax credit for blenders of biomass-based diesel expired last year and was replaced by the Inflation Reduction Act's "45Z" credit, which requires fuels to meet an initial carbon intensity threshold and then ups the subsidy as emissions fall. This shift was always expected to benefit waste feedstocks over crops, which incur a carbon penalty for land changes and fertilizer use. The clear message to refiners — both from the US government and from California regulators that run the state's influential low-carbon fuel standard — has been to diversify beyond vegetable oils. But an updated emissions model released by the Department of Energy last month surprised some in the industry by assessing the default carbon intensity of canola-based fuels as too high to automatically qualify for 45Z. Although fuels from soybean oil generally earn some credit, diesels made from canola oil could go from earning $1/USG last year to nothing this year. Before even factoring in potential tariffs, Canadian canola oil appears less attractive for refiners than even competing crops. Guidance on 45Z is preliminary , meaning canola crushers can push for final rules that are less restrictive. But energy lobbyists say privately that they do not expect the new administration to act with urgency to implement an incentive created by Democratic lawmakers and oriented around climate change. And many Republicans' concern with the credit is not that it is too harsh on canola — but that it is too permissive of foreign feedstocks they see as hurting US crop demand. The introduction of 45Z could simultaneously leave Canadian biofuel producers less able to backfill canola oil demand if US buyers look elsewhere. The credit can only be claimed by US producers, cutting off subsidies for imported fuels. At the same time, 45Z does not require fuel to be consumed stateside — meaning that US biorefineries can send subsidized fuel abroad to chase additional incentives Canada offers for biofuel usage. "The on-again off-again status of US tariffs and Canada's counter-tariff response do not alter the bare economics of biofuel production between jurisdictions when one has an exportable tax credit and the other does not," said Fred Ghatala, president of Advanced Biofuels Canada. The future of renewable diesel production in Canada, previously expected to grow significantly to the benefit of farmers, is in doubt. ExxonMobil's Canadian subsidiary is on track to open a 20,000 b/d renewable diesel plant this year, but other companies collectively representing more production capacity are wavering. Plans for an integrated canola crush and 15,000 b/d renewable diesel facility in Saskatchewan were paused last month. And it is unclear if Braya Renewable Fuels' 18,000 b/d biorefinery in Newfoundland is running now or if Tidewater Renewables' 3,000 b/d British Columbia plant will run after March. If demand from Canadian biorefineries remains limited, some traders expect that Trump's tariff threats could divert more canola oil previously bound for the US to Europe . But there is no perfect alternative to the US market, which accounted for 91pc of all Canadian canola oil exports in 2023 according to the US Department of Agriculture. "There is logistics capacity to sell canola oil, seed, or meal abroad. That's certainly an option," said Chris Vervaet, executive director of the Canadian Oilseed Processors Association. "The best option though is to continue to maintain and grow our trade relationship with our most important trade partner, which is the United States." By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump makes U-turn on Canada, Mexico tariffs: Update


03/02/25
03/02/25

Trump makes U-turn on Canada, Mexico tariffs: Update

Washington, 3 February (Argus) — US president Donald Trump reversed course on planned tariffs on imports from Canada and Mexico, delaying their implementation by one month. Trump over the weekend issued executive orders for a 25pc tariff on all imports from Mexico, a 25pc tariff on non-energy imports from Canada, a 10pc tax on Canadian energy imports and a 10pc tariff on all imports from China, all to be effective on 4 February. But Trump delayed the tariffs on Mexico and Canada by a month and has indicated that tariffs on China likewise could be subject to negotiations with Beijing. Trump's decision-making on Mexico and Canada tariffs so far looks like a signature move from his first term — escalatory rhetoric and action followed by de-escalation after extracting concessions that do not appear to be significant. Trump said today he agreed to postpone the implementation of tariffs on Mexican goods after receiving assurances from Mexico president Claudia Sheinbaum that she would immediately reinforce the shared border with 10,000 national guard troops. Trump also cited similar assurances from Canadian prime minister Justin Trudeau. "As President, it is my responsibility to ensure the safety of ALL Americans, and I am doing just that," Trump said via his social media platform. "I am very pleased with this initial outcome." In both cases, the border security pledges touted by Sheinbaum and Trudeau recast initiatives already planned or underway. Trump told reporters today he would "be speaking to China probably over the next 24 hours" — likely meaning the country's president Xi Jinping. Unlike Mexico and Canada, China has taken a restrained stance to Trump's announcement of tariffs. Like the US immediate neighbors, China already has been taking steps to cut off the illegal manufacturing and exports of precursors for fentanyl — the pretext for Trump's tariffs. Things can only get bitter The announcement of tariffs that would have directly hit US energy trade will leave many in the industry scratching their heads about Trump's future moves. A major trade war that would have severely curtailed the flow of energy and other commodities across North America is averted for now, but Trump is signaling that tariffs remain a key plank on his policy agenda. Trump has shrugged off any negative impacts on the US energy sector and the broader economy, saying over the weekend that "WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID." In remarks to reporters today, Trump pushed back against criticism of negative impacts of his tariffs. "Very simply, every single country that you're writing about right now is dying to make a deal," Trump said. In the immediate term, the Trump administration will hold high-level talks with the governments of Mexico and Canada against the deadline for the delayed imposition of tariffs. But down the line, there are other motivations for Trump to move forward with tariffs against key US trading partners. Trump today once again decried the "massive deficits" the US has in trade with Canada, Mexico, China, the EU and the UK. And then there is the lure of tariff revenue that Trump — with an eye toward upcoming congressional deliberation of extending tax cuts beyond 2025 — says would be sufficient to offset lower personal and corporate taxes. Trump set a 1 April deadline for US government agencies to prepare a report on "unfair trade practices" by key US trading partners, which would kick off a legal process for imposing tariffs in the following two months. Trump is separately planning to review the US-Mexico-Canada free trade agreement that his first administration negotiated in 2019. Unlike the tariffs that were due to be imposed on Tuesday by an executive order, the broader plan for tariffs scheduled to kick in after 1 April would be harder to reverse or to negotiate away. And his first two weeks in office show that, despite his claim to be championing America's "energy dominance", the US energy industry would not be exempt during the upcoming trade wars. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US delays Canada tariffs by a month: Trudeau


03/02/25
03/02/25

US delays Canada tariffs by a month: Trudeau

Calgary, 3 February (Argus) — US tariffs threatened against Canada will be delayed by 30 days, prime minister Justin Trudeau said this afternoon after talking with US president Donald Trump. "I just had a good call with President Trump," Trudeau posted on X, before describing Canada's plan to send thousands of officials to the US border to police fentanyl trafficking. The two leaders spoke twice on Monday, the eve of sweeping tariffs Trump had proposed against Canada and Mexico . Earlier in the day Mexican tariffs were also delayed by a month after similar promises for more troops on the border. "Nearly 10,000 frontline personnel are and will be working on protecting the border," Trudeau wrote. "In addition, Canada is making new commitments to appoint a Fentanyl Czar, we will list cartels as terrorists, ensure 24/7 eyes on the border, launch a Canada-US Joint Strike Force to combat organized crime, fentanyl and money laundering." Canada will be putting C$200mn ($139mn) towards tackling organized crime and fentanyl. In light of the US-Canada tariff pause, manufacturing and mineral-heavy Ontario said it would pause retaliation measures of its own announced earlier in the day. That would have banned US companies from provincial contracts, removed American products in liquor stores and cancelled a contract with Elon Musk's Starlink internet services. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump defends U-turn on Mexico tariffs


03/02/25
03/02/25

Trump defends U-turn on Mexico tariffs

Washington, 3 February (Argus) — US president Donald Trump insisted today that his abrupt decision to delay by a month the decision to impose 25pc tariffs on imports from Mexico had nothing to do with the reaction of financial markets or criticism from the normally reliable quarters of his support. Trump's decision-making on Mexico tariffs so far looks like a signature move from his first term — escalatory rhetoric and action followed by de-escalation after extracting concessions that do not appear to be significant. Trump said today he agreed to postpone the 4 February implementation of 25pc tariffs on Mexican goods by one month, after receiving assurances from Mexico president Claduia Sheinbaum that she would immediately reinforce the shared border with 10,000 national guard troops. Trump said there would be negotiations in the coming weeks between Mexican officials and US secretary of state Marco Rubio, secretary of the treasury Scott Bessent and secretary of commerce Howard Lutnick to prevent the tariffs from going into effect. Trump's plans to impose import taxes on Mexico, Canada and China weighed on stock markets early on Monday and boosted oil prices and the US dollar. The effects of his tariffs and any retaliatory actions by Mexico would have been felt on both sides of the border and would have severely curtailed the flow of energy and other commodities between the two countries. "There was no blinking", Trump said in a free-flowing gaggle with reporters at the White House. "She did agree to 10,000 soldiers on the border. I would say that's a lot." Trump in 2019 similarly threatened to impose 5pc tariffs on all Mexican goods. He relented when former president Andres Manuel Lopez Obrador said Mexico would deploy 21,000 national guard troops to contain the flow of migrants toward the US. "Dumbest Trade War" or deal pathway? Trump, who invited the press into the Oval Office today to observe the signing of an executive order establishing a sovereign wealth fund for the US, heaped praise on News Corp owner Rupert Murdoch, who was invited as a guest at the ceremony. But Trump pushed back against News Corp-owned Wall Street Journal 's editorial board, which described his tariffs on US neighbors as "the Dumbest Trade War". "I don't agree with [Murdoch] on many things," Trump said. "The Wall Street Journal is wrong, because, very simply, every single country that you're writing about right now is dying to make a deal." Canada, which is also subject to a 25pc tariffs beginning tomorrow, so far has not made a deal with the US. Trump said he spoke with Canadian prime minister Justin Trudeau this morning and would speak again at 3pm ET. "We're going to talk again at three o'clock, right after my next meeting, and we'll see what happens," Trump said. "I can't tell you what's going to happen." The US has yet to offer details on implementing tariffs or to break down which Canadian energy commodities would be subject to a lower, 10pc import tax. The White House executive order listed the exemptions as "crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water and critical minerals". Trudeau's government has unveiled a more detailed list of US imports , worth C$30bn ($21bn), that would be subject to retaliatory tariffs, to be followed by an additional C$125bn of products later this month. Trump, who imposed a lower, 10pc, tariff on imports from China, said today that imports from that country would be subject to higher taxes soon. But he added, "I will be speaking to China probably over the next 24 hours." Trump today again proposed a joint US-China ownership of social media platform TikTok, the latest of many issues that divide the two countries. He also repeated his allegation that China "is involved with the Panama Canal" and that the US would wrest back control over the waterway. In addition to pushback over tariffs, Trump today faced harsh criticism from Democratic lawmakers after he ordered the shutdown of the US Agency for International Development, which is responsible for disbursing US humanitarian aid and carrying out development programs globally. Senior Democratic lawmakers joined the staff of the agency in front of its headquarters, where security guards were preventing anyone from entering. "I love the concept [of that agency], but they turned out to be radical left lunatics," Trump said. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

South Africa has 44mn t/yr coal projects in pipeline


03/02/25
03/02/25

South Africa has 44mn t/yr coal projects in pipeline

Cape Town, 3 February (Argus) — South Africa currently has 16 project proposals for mostly thermal coal projects in the pipeline with an aggregate capacity of 44mn t/yr, according to the IEA. Globally, new or expanded coal mines aimed at the export market with a total capacity of 430mn t/yr are planned, the IEA says in its Coal 2024 Analysis and forecast to 2027 report. Last year coal consumption in Africa increased by 6mn t to 191mn t, the IEA estimates, driven mainly by South Africa's higher coal consumption owing to an improved performance by state-owned Eskom's electricity plants. In the near term, the IEA forecasts modest growth in Africa's total coal demand to 203mn t/yr by 2027. South Africa increased its coal consumption to 165mn t last year on improved economic activity and less load shedding. The country is by far the biggest coal consumer in Africa, accounting for 86pc of the continent's coal consumption in 2023. Strong electricity demand growth is expected to create room for an additional 14 TWh of coal-fired generation in South Africa over the next three years, the IEA predicts. Three coal-fired power plants of 4.5GW capacity that were due to shut by 2027 will run until at least 2030 . Hence the IEA projects that South Africa's coal consumption for power generation will rise to 124mn t by 2027. "The future of coal demand in South Africa will be shaped by policy makers' decisions regarding the coal-fired power fleet, either to invest in their maintenance to keep them running for longer or to phase them out," the IEA says. Coal production in South Africa grew marginally over the past two years to 234mn t in 2024, the IEA estimates. The main challenges to increasing production have been an unstable electricity grid and frequent disruptions to coal transport as state-owned Transnet has struggled with collisions, equipment failures, cable theft, derailments, power outages and increased costs. Last year, South Africa's Canyon Coal started shipments from its Gugulethu mine that is set to produce 2.4mn t/yr, half of which will be NAR 5,500 kcal/kg fob RB thermal coal. After years of being in administration, the Optimum coal mine was added to the project pipeline after new owner Liberty Coal settled outstanding legal issues related to the mine. Liberty plans to increase Optimum's capacity to 11mn t/yr of mid-CV thermal coal, but the mine first needs significant reconstruction. Until 2027, the IEA expects coal production in South Africa and most other African countries to remain flat, apart from Ethiopia where a new coal mine will slightly boost output, the IEA said. But growing steel production in Mozambique and Zimbabwe is set to propel coal production. In Mozambique, India's state-controlled Steel Authority of India (Sail) will invest up to $200mn over the next four years to double the capacity of its Benga coking coal mine to 4.5mn t/yr. Most of the mine's output is intended for Sail's internal use in India. In Zimbabwe, Chinese firm Tsingshan Holding's Dinson Iron and Steel (Disco) unit started production last year, with initial capacity of 600,000 t/yr to be expanded to 5mn t/yr once the plant is complete. In addition, Mozambique, Zimbabwe and Botswana plan a major infrastructure project, which includes a new deepwater port at Techobanine, south of Maputo, that will cost up to $1.5bn. Botswana plans to revive a long-standing project to create a 1,700km rail link through Zimbabwe to Maputo, enabling the landlocked country to export its coal reserves estimated at over 200bn t. South African infrastructure operator Grindrod will take full ownership of the Matola Coal Terminal in Mozambique by spending $77mn to acquire Vitol's 35pc stake. Grindrod then intends to expand the terminal's capacity beyond its current 7mn t/yr. Thai Mocambique Logistica plans to construct a coal port at Macuse in Mozambique and build a railway line to connect the port with coal mines in Tete province. Neighbouring Malawi also aims to import coal from Tete via a rehabilitated railway from Balaka to its capital Lilongwe. "The country is seen as a favourable option for coal exports compared to South Africa, whose ports are expected to reach capacity limits," the IEA says. Elaine Mills Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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