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Viewpoint: Legal woes to weigh on NOx allowances

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

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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25/02/18

US court pauses refiner's biofuel case after EPA shift

US court pauses refiner's biofuel case after EPA shift

New York, 18 February (Argus) — A US federal appeals court has paused the Environmental Protection Agency (EPA)'s rejection of a refiner's request for exemptions from federal biofuel blend mandates, with relief possible for two more refiners as the US reassesses policy under a new administration. A three-judge panel on the US 5th Circuit Court of Appeals last week granted a request from Calumet's 57,000 b/d refinery in Shreveport, Louisiana, to pause a recent EPA action denying the refinery relief from its 2023 obligations under the federal Renewable Fuel Standard. The stay will remain as the court continues reviewing the legality of EPA's rejection, issued in the waning days of President Joe Biden's administration. Under the program, EPA sets annual mandates for blending biofuels into the conventional fuel supply but allows oil refineries that process 75,000 b/d or less to apply for exemptions if they can prove they would suffer "disproportionate" economic hardship. The Biden administration denied these petitions en masse, though most of these rejections were struck down by courts concerned with the government's reasoning. During his first term, President Donald Trump was more generous with refinery relief, which in turn weighed on biofuel demand and the prices of Renewable Identification Number (RIN) credits at the time. Though the 5th Circuit did not explain its decision, EPA had shifted course after the presidential transition, telling the court earlier in the week that it did not oppose Calumet's request for a stay and that it was reconsidering the refiner's earlier exemption petition. The agency said in other court cases that it would not oppose similar pauses on recently issued waiver rejections affecting Calumet's 15,000 b/d oil refinery in Great Falls, Montana, and CVR Energy's 75,000 b/d refinery in Wynnewood, Oklahoma. EPA's ambivalence makes stays more likely, leaving those refiners with little reason for now to enter the market for RIN credits. The agency still says it "takes no position on the merits" as its review of small refinery exemptions continues but the filings at least suggest the possibility of reversing prior rejections. EPA has not yet signaled a more substantive policy around how it will handle similar small refinery requests, which have piled up in recent months. There were 139 pending petitions covering ten compliance years according to the latest program data. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

EU proposal to extend gas filling targets due in 1Q


25/02/18
25/02/18

EU proposal to extend gas filling targets due in 1Q

London, 18 February (Argus) — The European Commission will publish a legislative proposal on the extension of its gas storage regulation before the end of March, according to a leaked document seen by Argus . The commission will work with member states to "promote more co-ordinated and flexible gas storage refilling, including with dynamic targets to reduce system stress linked to gas storage refilling and support summer preparedness", according to the document. The existing regulation — which obliges member states to fill their storage capacity to 90pc by 1 November, but with derogations for certain countries — expires at the end of this year. The EU's storage fill mandate has supported front-summer contracts across European hubs in recent months, as stronger underground storage withdrawals than in recent years have pushed up expectations of summer injection demand. Summer 2025 contracts have disconnected at well above winter 2025-26 prices. Filling up storage before winter in the context of inverted seasonal spreads has become a growing concern of member states . Some countries, including Germany, have called for the storage fill requirements to be less rigid . Last week, discussions between member states and the EU's gas co-ordination group regarding the potential relaxation of EU storage obligations led to tightened summer-winter spreads. The TTF summer 2025-winter 2025-2026 spread was €2.75/MWh on 17 February, in from €5.29/MWh a week earlier. Tighter gas market supervision The commission will consult stakeholders on tightening the supervision of gas-trading markets, according to the document. The consultation will cover exemptions from conduct and prudential rules applicable to investment firms for which gas derivatives trading is "ancillary" to their main commercial business, as well as position limits in EU spot markets. It will consult on the joint supervision of gas trading by energy and financial regulators and the creation of a database gathering all open positions held by market participants. These measures were promoted in a report by former European Central Bank president Mario Draghi published in September last year . Draghi warned that mounting activity and speculation in the gas derivatives market could lead to price volatility and called for greater oversight of gas trading. The commission had already set up a gas market task force earlier this month to scrutinise European gas markets and identify behaviours that distorted prices, according to the document. The gas market task force will provide recommendations by the fourth quarter of this year. By Isabel Valverde Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

UN Green Climate Fund approves $483.1mn for projects


25/02/18
25/02/18

UN Green Climate Fund approves $483.1mn for projects

London, 18 February (Argus) — The UN Green Climate Fund (GCF) has approved eight projects, allocating $483.1mn in climate funding across 31 developing countries. The GCF will consider four more projects — which would allocate around $253.7mn — during its board meeting, which runs from 17-20 February. Of the approved projects, five are focused on adaptation — adjusting to the effects of climate change where possible — and three on adaptation and mitigation, which refers to cutting emissions. The GCF operates under the financial mechanism of UN climate body the UNFCCC and is mandated to invest half of its resources in mitigation and half in adaptation. It is the world's largest climate fund and was originally capitalised with $10.3bn in 2015. The fund's first replenishment, in 2019, gathered a further $10bn in pledges and its second replenishment reached around $13.6bn after funds committed at the UN Cop summits in 2023 and 2024 . But the US rescinded "outstanding pledges" to the fund earlier this month, the country's State Department said. These are thought to amount to around $4bn. Recent UN climate talks have centred around finance for developing countries, to address climate change and decarbonise. Countries agreed at last year's Cop 29 to a new financing goal of "at least" $300bn/yr for developing nations by 2035. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Japan approves new energy mix target, climate plans


25/02/18
25/02/18

Japan approves new energy mix target, climate plans

Tokyo, 18 February (Argus) — Japan has approved its targeted power mix portfolio for the April 2040-March 2041 fiscal year, as well as its new greenhouse gas (GHG) emissions reduction goal, it announced today. The new power mix goal, the centrepiece of the country's Strategic Energy Plan (SEP), is in line with Japan's aim to reduce GHG emissions by 73pc by 2040-41 compared to 2013-14 levels. Tokyo plans to submit the 2040-41 emission target, as well as a 60pc emissions reduction goal for 2035-36, to the UN climate body the UNFCCC on 18 February as the country's nationally determined contribution (NDC). The country has not made major changes to its draft proposal that it unveiled in December. The new SEP sees renewable energy making up 40-50pc of the country's power generation in 2040-41, up from 22.9pc in 2023-24. The share of thermal power will fall to around 30-40pc from 68.6pc, while that of nuclear will increase to around 20pc from 8.5pc during the same period. The 2040-41 target is based on Japanese power demand of 1,100-1,200 TWh, which is higher by 12-22pc from 2023-24. The government has planned the power portfolio so that it is not heavily dependent on one specific power source or fuel type, the country's minister for trade and industry (Meti) Yoji Muto said on 18 February, although the new plan suggests making maximum use of low-carbon power supply sources. Public consultation over 27 December-26 January revealed that some think Japan should slow or even stop the decarbonisation process, given the US government's reversal of its climate policies, including its withdrawal from the Paris climate agreement, said Meti. But global commitment to decarbonisation will remain unchanged, said Muto, adding that Japan will lose its industrial competitiveness if the country delays green transformation efforts. But US president Donald Trump's "drill, baby, drill" policy has prompted the Japanese government to delete a segment from the draft SEP that had initially proposed bilateral co-operation through Tokyo's green transformation strategy and the US' Inflation Reduction Act. Despite Tokyo's decarbonisation goals, the new SEP assumes that fossil fuels, including natural gas, oil and coal, will still account for over 50pc of primary energy demand in 2040-41 in all of its scenarios — although this is down from 93pc in 2013-14 and 83pc in 2022-23. The scenarios vary based on the degree of uptake of renewables, hydrogen and its derivatives, and carbon capture and storage (CCS) technologies, to fulfil the 73pc emission reduction goal by 2040-41. Worst-case scenario Tokyo also has also set out a potential worst-case scenario, assuming slower development of clean technologies, in which fossil fuels would still account for 67pc of primary energy supply in 2040-41. Under this scenario, which assumes Japan will only reduce its GHG emissions by around 61pc by 2040-41, natural gas is estimated to account for about 26pc, or 74mn t, of Japan's primary energy supply, which is higher than the 53mn-61mn t in the base scenarios that are formulated in accordance to the 73pc emissions reduction target. Japan would need to address the potential 21mn t gap in gas demand, which will mostly be met by LNG imports, in 2040-41, depending on the development of clean technologies. The gap is equivalent to 32pc of the country's LNG imports of 65.9mn t in 2024. When asked by Argus whether the government will continue to try securing LNG to ensure energy supply security when considering the worst-case scenario, a Meti official said Tokyo should continue pursuing its 73pc GHG reduction target, but it is necessary to consider the potential risks for each individual policy and the measures that need to be taken, instead of making decisions based on the worst-case scenario. The new SEP has highlighted the role of LNG in the country's energy transition and the necessity to secure long-term supplies of the fuel. It is unclear what ratio gas-fired capacity will account for in Japan's 2040-41 power mix, as the SEP does not include a breakdown of thermal generation. But gas-fed output is expected to take up the majority share, given that gas has already outpaced coal in power generation and Tokyo has pledged to phase out inefficient coal-fired plants by 2030. By Motoko Hasegawa and Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

India's domestic coal supply to utilities rises in Jan


25/02/18
25/02/18

India's domestic coal supply to utilities rises in Jan

Singapore, 18 February (Argus) — Domestic thermal coal supplies to Indian utilities rose in January as power plants continued to boost inventories. Combined coal supplies to utilities from domestic sources such as state-controlled Coal India (CIL), Singareni Collieries (SCCL) and captive blocks stood at 76.41mn t, up by 5.8pc from a year earlier, provisional data from India's coal ministry show. Supply was also up from 76.04mn t in December. Indian utilities continued to restock, although coal consumption at utilities was weaker than initially anticipated, as temperatures in most parts of the country were higher last month compared to historical averages, curbing power demand. India's coal-fired generation — which meets most of its power requirements — stood at 109.68TWh during January, down from 111.72TWh a year earlier, but up from 104.30TWh in December, Central Electricity Authority (CEA) data show. Higher domestic coal supplies and weaker coal burn supported stock positions at utilities. Combined coal inventories at Indian power plants stood at around 50.5mn t on 31 January, up from 45.2mn t on 31 December and higher from 38.59mn t as of 31 January 2024, according to CEA data. The inventory as of the end of January would last for over 17 days at the current daily coal consumption rate at utilities. Higher stocks and a steady uptick in domestic supplies might have pressured utility demand for imported coal and India's overall seaborne receipts last month. India imported 11.63mn t of thermal coal last month, down from 13.34mn t a year earlier, according to data from analytics firm Kpler. Imports reached 163mn t in 2024, down from 168.2mn t in 2023, Kpler data show. Indian power sector imports, which account for more than 40pc of the country's overall imports, dropped on the year for the fourth straight month in December , and might have eased in January. Combined thermal coal imports by Indian utilities, excluding captive power plants, stood at 3.25mn t in December, down by 2.17mn t or 49pc from a year earlier, CEA data show. Imports could come under pressure if the government does not extend its directive to imported coal-fired plants, which have a combined capacity of 17.7GW, to boost generation under Section 11 of the Indian electricity law, which also gives some flexibility to such generators to sell excess production in the power market. The directive is due to expire on 28 February. Production, supply mix The increased supplies to utilities were supported by higher overall thermal production. India's coal output rose by 4.4pc in January from a year earlier to 104.49mn t. The country's supplies to all sectors stood at 93.21mn t last month, up by 6.7pc on the year. CIL produced 77.79mn t in January, down from around 78.41mn t a year earlier, while it supplied 69.26mn t, rising from 67.52mn t last year, ministry data show. Of this, 55.01mn t of coal was supplied to the power sector in January, easing from 55.15mn t a year earlier. Meanwhile, output at coal producer SCCL rose by 5pc from a year earlier to 6.97mn t in January. But its overall supplies in January fell by about 1.5pc on the year to 6.12mn t, while dispatches to the power sector rose by 2.2pc on the year to 5.6mn t. Captive coal block producers and other small government mining entities comprised the remainder of the supplies to utilities in January. Output from captive coal blocks and other mining companies rose by over 31pc on the year to 19.72mn t in January, while supplies rose by nearly 30.7pc to 17.83mn t. Data on domestic coal supplies to Indian utilities do not include dispatches to captive power plants set up by industries. Supplies to such captive utilities — from sources such as CIL, SCCL and captive coal blocks — reached 6.29mn t in January, up by almost 9pc from a year earlier. Domestic supplies to steel and cement sector in January rose by 4.5pc and 31pc from a year earlier to 860,000t and 900,000t respectively, the ministry data show. By Saurabh Chaturvedi Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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