This blog looks into the impact of the EPA finalizing an update on the CSAPR which established a group 3 program tightening regulations in 12 states.
The March 2021 update to CSAPR, Cross-State Air Pollution Rule, established a new Group 3 trading program and tightened emission regulations for the 12 upwind member states. The EPA’s target goal in creating a NOx ozone season Group 3 trading program is to reduce harmful toxins in the environment and address the Good Neighbor requirements of the CCA which prohibits upwind states emissions from negatively impacting downwind states emission levels. The CSAPR update not only influenced emissions, but also drove ozone season allowance prices up significantly in the affected states.
To reduce emissions as a quickly as possible in these upwind states, Group 3 is not allowed to trade allowances with Group 1 or 2, and is expected to have plant owners optimize existing abatement technology starting this year and install or upgrade controls in 2022. While emissions are slated to decrease, allowances prices are expected to increase. In this quarters Energy Watch report, we detail potential factors that could mitigate upward pricing.
Depending on allowance price, total emissions may or may not stay below the target cap. Using ESAI Power’s forecasted 2021 allowance price as a basis, allowance prices are expected to escalate in the next few years and begin to see annual emissions fall in line with the caps at these prices.
A variety of factors such as Covid-19, upcoming legislation, and the generation queue are all key parts to understanding the potential fluctuation of allowance prices and their future trajectory. ESAI Power explains these scenarios and their impact on power prices in the ISO-NE section of the Energy Watch Report You can read more here about the EPA CSAPR Rules Update
We’ve recently launched our Renewables Watch Quarterly report which takes a deep dive into the Renewables markets in PJM, NYISO, and ISO-NE, including RECs forecasts out to 2030. For more information and specific Capacity and Energy price forecast data, email Tom Bausemer on firstname.lastname@example.org or request ESAI Power’s Free Trial Service here: ESAI Power Free Trial.