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EPA is moving forward with section 111 regulation of greenhouse gases. The next step could be creating a cap and trade system for the electrical utility industry, using “standard of performance” as the statutory foundation. Past litigation on EPA’s proposed mercury cap-and-trade program provides insights about potential challenges to a carbon trading program. This paper describes those insights and discusses how EPA could define a standard of performance for greenhouse gas emissions in terms of a national cap and then allow regulated facilities to use allowances to cover their greenhouse gas emissions. This paper also looks to the specifics of the proposed California cap-and-trade program, in order to demonstrate how EPA could allow states to use their participation in regional cap-and-trade programs to comply with section 111(d) requirements for existing sources.

Using Section 111 of the Clean Air Act for Cap-and-Trade of Greenhouse Gas Emissions: Obstacles and Solutions