Did the EPA just set the course for a cap-and-trade system? 

While Congress vacationed, the EPA announced new rules to reduce the amount of sulfur and nitrogen oxides in the atmosphere. To do this, the agency ruled on specific reduction levels and a mechanism to achieve them in 31 states and Washington, D.C.

Yes, this happened.

While Congress escaped the 100-degree heat — leaving the nation’s energy future a guessing game — the Environmental Protection Agency (EPA) ironed out the details of a system that will allow states to trade emissions permits. As for targets, by 2014 sulfur emissions are to be cut by 70 percent of 2005 levels and nitrogen emissions are to be cut by 50 percent over the same time span.

This was all done under the Clean Air Interstate Rule known as CAIR. It's a George W. Bush administration policy aimed at reducing emissions that travel across state lines. 

Yes. This actually happened. 

Estimated by the EPA to cost about $2.8 billion a year, the costs of the plan are supposed to be offset by healthcare reductions. (How that is calculated is a complete mystery.) Nonetheless, after years of court cases, appeals, and some serious toughening up, these targets are the rule as of today.

The new rule allows for the nation’s first cap-and-trade pollution system to be created since the acid rain decision of 1990. In this case, coal-fired power plants will have to comply with emissions reduction standards or be fined three times the amount it would cost to comply with the reductions in the first place. Polluting will require permits; permits will be tradable.

The timing of this CAIR ruling could not be more intriguing. Energy legislation has been stuck in the mud in Washington, D.C., as several options have failed to gain traction. Yet, the EPA is emerging as perhaps the best tool for cap-and-trade supporters.

It would not be the first time the EPA has made such a bold move.

While, the Senate spent months failing to pass a bill that already passed in the House, it was the EPA in December that ruled that six emissions, including carbon dioxide, could be regulated. The agency is on the verge of taking significant strides towards regulating coal ash. And recently we have seen the EPA’s growing power survive Lisa Murkowski's challenge.

When Congress reconvenes, the first priority will be passing Wall Street reform. Then energy policy may be on the menu if it isn’t leap-fogged by immigration. On every issue, Senate Majority Leader Harry Reid will fight to get 60 votes. To uphold an EPA ruling, he only needs 51. 

Will EPA pave the way for cap-and-trade?
The EPA may be the most powerful weapon in the fight for cap-and-trade legislation. The agency fired another shot on Tuesday with the CAIR announcement.