SC example: Cash for credits creates mercury pollution loophole

[Guest guest]

Two studies have found an association between environmental mercury and

autism rates (Palmer RF et al; Windham et al). The article describes a

loophole that contributes to increased rates of autism.

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Cash for credits creates mercury pollution loophole

By TONY BARTELME

The Post and Courier

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=localnews & tableId=124449 & pubDate=12/30/2006

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Baseball cards.

Gold.

Mercury-tainted air.

All of these have something in common, or will soon: They're commodities

that can be bought, sold and traded sometimes for big bucks.

Mercury pollution?

In a controversial trading plan, South Carolina and other states plan to

dish out special mercury emissions credits to power companies. Each

credit will have its own serial number, just like a dollar bill, and

each credit will represent an ounce of mercury pumped into the air.

In South Carolina, these credits could be worth $40 million a year,

maybe more.

Welcome to the high-stakes world of emissions trading, where utilities

buy and sell the right to pollute.

Supporters, including the state's power companies, say these trading

programs harness free-market forces to reduce pollution.

They point to a trading plan for sulfur dioxide that helped lower

emissions that cause acid rain. Largely because of that program's

success, California and several other states are working on ambitious

trading programs to curb carbon dioxide, a gas that many believe causes

global warming.

But mercury is different, critics say. They argue that it's wrong to buy

and sell a potent neurotoxin that can cause birth defects and learning

disabilities.

They point out that the trading program applies only to coal-fired power

plants not private factories and incinerators, which are among the worst

mercury polluters in the state. And they question the program's fairness

to communities around power plants, because mercury tends to fall near

these plants rather than drift hundreds of miles away. " South Carolina

can do better, " said Suttles, an attorney for the Southern

Environmental Law Center in North Carolina.

The debate over emissions trading is particularly important in South

Carolina, which has mercury contamination on 1,683 miles of rivers and

lakes, including many near ton.

For sale: an ounce of quicksilver

Emissions-trading programs work like this: The Environmental Protection

Agency establishes a nationwide emissions cap that's lower than existing

pollution levels.

In the case of mercury, the nation's 450 coal-fired power plants are a

primary source of mercury and currently spew about 1.56 million ounces

of mercury into the air every year. Under the mercury-trading program,

the EPA would cap annual mercury emissions at 1.2 million ounces by 2010

and 480,000 ounces by 2018 an overall reduction of 68 percent.

In 2010, with a flick of its regulatory pen, the EPA will create credits

for these ounces, a new commodity that can be bought, sold and traded.

The EPA estimates that a one-ounce credit will be worth nearly $2,200

three times the price of an ounce of gold.

In theory, turning emissions into credits creates an economic incentive

to reduce pollution.

Power companies with goodpollution-control equipment should end up with

extra credits they can then sell to other utilities.

Meanwhile, power companies that continue to pollute must buy credits,

effectively penalizing them for their inactions.

Millions of dollars are at stake.

The EPA plans to give South Carolina 18,560 credits every year until

2017, when that number drops to 7,328. At $2,200 an ounce, the South

Carolina credits would be worth $40.8 million a year.

Lawmakers hold the cards

So far, private industries have been left out of this mercury-trading

push. The Nucor steel plant in Berkeley County, for instance, pumped 447

pounds of mercury into the air in 2004 more than twice as much as the

worst-polluting power plant, EPA records show.

But the mercury-trading effort for power plants will pick up momentum soon.

The state Department of Health and Environmental Control has proposed

putting 20 percent of its 18,560-credit allotment in a special bank.

Power companies then could withdraw the credits when needed.

The remaining 80 percent would be given free of charge to SCANA, Santee

, Duke Energy and Progress Energy the utilities that operate the

state's 12 coal-fired power complexes.

On Jan. 11, DHEC will hold a public hearing in Columbia to discuss the

trading proposal's pros and cons. The agency eventually must submit its

plan to the General Assembly, which has the final say on the program's

implementation.

Energy industry officials hope the trading plan gets a green light.

" We believe in the cap-and-trade program, " said Varn, a

spokeswoman for Santee .

Randy Mahan, director of corporate environmental services for SCANA,

said the trading program would give the company more flexibility to

upgrade its plants.

Without the program, utilities might be scrambling all at once to

install scrubbers and other pollution-control equipment, a situation

that would drive prices sky high.

Mahan added that SCANA probably will need many of the credits to cover

its mercury emissions. And even if the company sells the credits, that

revenue won't come close to making up the costs of installing new

scrubbers. The company expects to spend roughly $350 million to clean up

its coal-fired plants.

Trading in toxins

Some conservation groups think that state lawmakers should hold on to as

many credits as they can, a move that would drive up the credit's prices

and give utilities more incentive to install pollution equipment.

Suttles of the Southern Environmental Law Center said the EPA's cap in

South Carolina of 18,560 ounces theoretically allows power companies to

dump 9 percent more mercury into the air than it would without the

trading program a situation he called " unconscionable. " He described

DHEC's proposed 20 percent set-aside as " a Christmas club account " for

utilities.

He suggested that instead of simply giving the credits to utilities for

free, the state could auction them off. " That would create a real market. "

Vinson of the Coastal Conservation League said that mercury

shouldn't be traded at all. It's too poisonous, and it tends to create

mercury hot spots around plants. The result, she said: Power companies

can get away with polluting one community simply by buying their way out

of it. " They stand to make millions of dollars per year and not do

anything about mercury. "

Groups such as the SouthernEnvironmental Law Center are challenging the

EPA's entire trading plan in federal court. What happens to that case

could have a ripple effect on a relatively new industry. Already,

traders and brokers list prices for emissions in much the same way stock

exchanges list prices for company's shares. Some analysts are predicting

that the greenhouse gas market alone could be worth $1 trillion in 2010.

CLICK FOR A LARGER IMAGE.

Still, the mercury market may be particularly volatile because some

states aren't allowing their utilities to trade credits, according to a

recent report by Evolutions Markets, a brokerage firm active in

emissions trading. Meanwhile, utilities are realizing just how expensive

it is to retrofit old power plants.

The firm's prediction: The price for an ounce of mercury pollution " will

gain significant strength. "

Reach Tony Bartelme at tbartelme@...

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