Notice to Members
Notice No. 378 07/18/2008
US Court of Appeals CAIR Decision & the NYMEX Annual NOx Futures Contracts
On July 11, a panel of the U.S. Court of Appeals for the D.C. Circuit vacated and remanded in its entirety the Environmental Protection Agency's Clean Air Interstate Rule (CAIR). The 2005 CAIR rule was established by EPA as a means to reduce power plant emissions of sulfur dioxide (SO2) and nitrogen oxide (NOx). As constructed, CAIR applied to 28 states and D.C. and established an interstate cap-and-trade trading program as a means to reduce annual NOx emissions. As related to NOx, the CAIR rule established an annual NOx cap in the CAIR states and D.C. The CAIR cap and trade program was the basis for the annual NOx futures contracts which were listed by NYMEX on trade date 3/17/08 as part of the Green Exchange initiative. The D.C. Circuit’s decision, if upheld on appeal, would invalidate the NOx annual compliance program and require regulatory action by NYMEX to ultimately delist this market. The D.C. Circuit decision becomes effective after issuance of its written mandate which will be filed in 2-4 weeks from the decision date. Additionally, appeals of the decision by various parties or a motion for reconsideration of this initial decision by the full D.C. Circuit could delay the impact on the CAIR NOX annual compliance program. The EPA Allowance Tracking System is at present still enabled to provide transfers of annual NOx allowances. The D.C. Circuit decision does not affect the EPA ozone season NOx program which is also the basis for futures contracts listed by NYMEX. Further, the decision does not impair the SO2 trading program established by EPA following the passage of the Clean Air Act of 1990. NYMEX listed SO2 futures in 2005 and listed SO2 options as part of the Green Exchange initiative. NYMEX will communicate additional developments and any interim action by the Exchange through future notices.
Should you have any questions or require any further information, please contact exchangeinfo@nymex.com