Pollution Allowances at Work: Utilities slash SO2 as new rule approaches

U.S. utilities scrubbed down sulfur dioxide emissions from power plants by 24% between January and June, compared to the same period last year. Why? Because in 2010 a new air pollution regulation, the Clean Air Interstate Rule (CAIR) comes into effect in the eastern United States, and the industry is getting ready to abide by a new SO2 allowance system.

Covering a briefing by Genscape (a firm that provides real-time power supply information to the North American and European energy markets), Reuters reporter Bruce Nichols writes that the reduction is "much more than would be expected due to the recession and lower electricity demand, the power industry data provider said in its quarterly review of energy trends."

It's an interesting example of how an allowances system that features early adoption incentives can effectively bring about a needed environmental improvement. In this case, it's limiting SO2, which contributes to smog and is the primary cause of acid rain. There is a similar incentive for greenhouse gas emissions caps in the clean energy and climate legislation before Congress.

(Just to be clear: Carbon dioxide can't be controlled using the technologies that remove SO2 or nitrogen oxide (NOX) from power plant emissions, so I'm not suggesting a parallel there.)

More on Genscape's data:

Second-quarter carbon dioxide emissions were down 10 percent in the Regional Greenhouse Gas Initiative service area, where they can be monitored, mostly due to cool weather in the Northeast and the recession, Genscape said.

But the decline in SO2 is largely because of the new rules coming in 2010 and an allowance scheme that favors early implementation, the power data provider said. [[Emphasis mine.]]

"Most of the decline in sulfur emissions is not due to the recession or even to the switch from high-sulfur coal to lower sulfur grades and to gas," Genscape said, noting many plants have installed equipment to remove SO2 from emissions.

"It makes sense to start cutting emissions early if the equipment is in place since pre-CAIR vintage allowances will retain their full face value of a ton of SO2, while from 2010 onward, each permit will be worth only half a ton," Genscape said.