Topic: regulation

STATEMENT: Obama Administration Finalizes Emissions Standards for Light-Duty Vehicles

Lauren Zelin — Tue, 28 Aug 2012 12:56:16 -0400

The Obama Administration announced the finalized historic fuel economy and greenhouse gas emissions standards for light-duty vehicles. The final program for model year 2017-2025 passenger cars and trucks will require an average CO2-level of 163 grams per mile, which is equivalent to 54.5 miles per gallon by 2025, if all reductions are made through fuel-economy improvements.

Today’s action builds on the first phase of the Obama Administration’s national program (2012-2016), which would raise fuel efficiency equivalent to 35.5 mpg by 2016 and lower CO2 emissions standards to 250 grams per mile.

Following is a statement by Kevin Kennedy, U.S. Climate Director, World Resources Institute:

“These rules will take a real bite out of U.S. greenhouse gas emissions, and in a way that’s good for consumers and the auto industry. Following the summer of extreme weather and with mounting evidence of climate change all around, the need for greater action could not be clearer.

“EPA and National Highway Traffic Safety Administration (NHTSA) estimate that the national plan will reduce greenhouse gas emissions by 6 billion metric tons. Light-duty vehicles account for approximately 17 percent of U.S. greenhouse gas emissions.

“These standards will also save consumers money by reducing the amount of fuel needed by drivers in America. EPA and NHTSA estimate together the plan will save 12 billion barrels of oil, which is more than the total gasoline the United States consumed in 2011 (approximately 3.2 billion barrels).

“Even with a recent dip, U.S. emissions are expected to grow and will significantly impact our planet—bringing more extreme weather and other dangerous impacts to people and the economy. While more needs to be done, these rules will play an important role in driving down U.S. emissions over time.”

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For more background on the auto standards, read: What To Look For In The EPA’s Forthcoming Standards On Emissions From Light-Duty Vehicles.

Vulnerability and Adaptation: Institutions

Kevin Lustig — Wed, 20 Jun 2012 09:47:11 -0400

There is a need for change in the structure and function of many national institutions if policies are to address the decision-making challenges posed by climate change, and to meet the needs of poor and vulnerable populations. WRI works to strengthen key institutions – such as an agriculture ministry, river basin authority, or village development committee – so that vulnerability and adaptation is integrated into core planning and programming.

An Updated Response to EEI’s Timeline of Environmental Regulations

Kevin Lustig — Mon, 21 May 2012 10:16:48 -0400

This fact sheet updates the analysis done in our earlier response to EEI’s timeline of environmental regulations.

EPA remains on track in issuing rules that provide a path to a cleaner power fleet.

After years of delay, the U.S. Environmental Protection Agency (EPA) is working to reduce dangerous and toxic pollutants released to the air and water by electric power plants, as required by the Clean Air Act (CAA) and other statutes. Four key points about EPA’s actions are clear:

Clarifying EEI’s Timeline

Figure 1: Edison Electric Institute’s Timeline of Environmental Regulatory Requirements for the Utility Industry (Click to enlarge)

Figure 2: Modified Edison Electric Institute Timeline, Removing All But New Compliance Obligations (Click to enlarge)

Figure 3: Timeline of Actual Compliance Obligations for Electric Power Plants (Click to enlarge)

Contrary to assertions by industry groups, EPA is pursuing a realistic timeline over the next five to ten years to bring the electric power industry into compliance with the law.
In most cases, the electric power sector has been on notice for several years (in some cases several decades) that these pollutants would be regulated.
Without new regulations, these pollutants will continue to impair America’s waterways, heat the planet, perpetuate acid rain, and lead to preventable hospital visits and premature deaths.
In each of its rulemakings, EPA provides for an extensive, open, and evidence-based public process. This leads to more robust and fair rules for the electric power sector. As EPA finalizes each rule, it will establish an increasingly clear pathway for investments in an American electric generation fleet for the 21st century.

CEOs and other representatives of major electric power corporations have suggested that EPA’s regulatory timeline is unworkable. The largest industry trade group, the Edison Electric Institute (EEI), produced a slide in 2010 (updated in May 2011) that purports to display an onslaught of new requirements for power plants. EEI has distributed this slide (reproduced in Figure 1) widely on Capitol Hill, where it presumably hopes to win lawmakers’support for additional delays in EPA rules or even a stripping of EPA’s regulatory authority.

WRI has identified four categories of EPA activities on the EEI timeline that are potentially misleading. When these activities are removed, only the timing of actual new compliance obligations is left. In Figure 2, “X”s (color coded for each filter in the screening process) have been applied to remove events from EEI’s timeline that are not consequential from a compliance standpoint.

Rules that have been remanded or vacated by court decisions that do not impose compliance obligations.
Rules that were already in effect when EEI circulated its chart, representing compliance obligations that already exist; there are no new requirements imposed by these rules.
Public input through the rulemaking process (which leads to more robust and fair rules for the electric power sector, and should not be conflated with new compliance obligations).
National Ambient Air Quality Standard (NAAQS) rules for various pollutants that set standards for states to achieve. They do not establish new requirements for electric generation units.

The EPA regulatory process is far from a “train wreck.” EEI’s misleading timeline consists mostly of procedural events and activities that will not impose a direct compliance obligation on power plants. This serves only to spread confusion about EPA’s actual regulatory schedule.

Figure 3 shows a more accurate picture of the timeline for new requirements applicable to electric power plants.

EPA is carrying out the intent of Congress (through the passage of the bipartisan Clean Water Act, Clean Air Act, and subsequent amendments) to clean the nation’s air and water. These rules can help the United States transition to cleaner and more efficient power plants by establishing a clear pathway for investments in an electric generation fleet for the 21st century.

The CAA requires EPA and states to regulate and reduce harmful pollutants from major emissions sources, including power plants. To date, this framework has delivered substantial improvements in air quality and significant public health benefits estimated between $82 and $556 billion annually. Over the next decade, power plants will be subject to new rules under the CAA as well as the Clean Water Act (CWA) and the Resource Conservation and Recovery Act (RCRA) to control substances that cause serious health problems and substantial damage to America’s natural resources. These rules will take effect after long lead times; in most cases industry has been on notice for years that these pollutants would be regulated.

Many of the regulations under consideration by EPA have been in the regulatory pipeline for over a decade. Due to administrative delays and litigation resulting in court decisions remanding or vacating previous rules, many of these rules have not been finalized or the final rules were reversed. In many cases Congress has set statutory deadlines for EPA to act, EPA has missed the deadlines, and courts have ordered EPA to act.

Download the complete fact sheet (includes additional figures, footnotes, and references) (PDF, 476 Kb)

Summary of EPA Proposed Performance Standards for Power Plant GHG Emissions

Nicholas Bianco — Wed, 18 Apr 2012 10:22:30 -0400

This summary provides an overview of EPA’s proposed New Source Performance Standard (NSPS) for greenhouse gas (GHG) emissions from new power plants under Section 111 of the Clean Air Act. It was drafted in partnership with the Pace Energy and Climate Center.

On June 21, 2012, WRI submitted an official comment to the EPA on its proposed NSPS. Read the full comment below.

Download the Complete Summary (PDF, 221 Kb)
Download the Full NSPS Comment

Fact Sheet: EPA Mercury Rules and Power Reliability

Kevin Lustig — Wed, 14 Dec 2011 10:30:45 -0500

Recent Electricity Reliability Assessments

North American Electric Reliability Corporation (NERC). (November 2011) 2011 Long-Term Reliability Assessment.

M.J. Bradley & Associates, LLC; Analysis Group. (November 2011) Ensuring a Clean, Modern Electric Generating Fleet while Maintaining Electric System Reliability; Fall 2011 Update.

DOE. (December 2011) Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations.

Bipartisan Policy Center. (June 2011) Environmental Regulation and Electric System Reliability.

CERES. (November 2011) New Jobs-Cleaner Air Part II: An investment in American Businesses and American Jobs.

Edison Electric Institute. (January 2011) Potential Impacts of Environmental Regulation on the U.S. Generation Fleet.

Electricity generation capacity adequacy and transmission and ancillary services reliability are difficult to quantify and forecast due to the inherently local scale of power flow modeling. However, the lack of reliability problems over decades of previous Clean Air Act regulation and the flexibility of the standards suggest that the U.S. can keep the lights on while cost effectively removing toxic pollutants from power plant emissions.

Power plants are the largest source of mercury emissions to the air. This mercury eventually makes its way into water, and can cause neurological problems for people who eat contaminated seafood. Because of the dangers of mercury emissions, especially to children and pregnant women, a court order mandated that the EPA issue a final set of Mercury and Air Toxics Standards (MATS) by December 16, 2011.

Recent modeling assessments have typically focused more broadly on the cumulative impacts of EPA regulations, including: the Cross-State Air Pollution Rule (CSAPR), the Coal Combustion Residuals rule, the 316 (b) Cooling Water Intake Structures rule, and the yet-to-be announced New Source Performance Standards for greenhouse gases. Recent studies have varied largely based on assumptions regarding the stringency of pending regulations, the costs of compliance measures, and the legal flexibility of regulatory enforcement.

Rules Are Flexible, and States Are Prepared

While there are modeling and forecasting limits for assessing long-term electricity system reliability, recent studies indicate that MATS and other EPA rules can be effective and implemented in a timely way while allowing for a range of compliance outcomes. The feasibility of cost-effectively complying with new regulations while maintaining electricity system reliability is supported by four key points:

Both state and federal regulators have a suite of flexible enforcement options, which they have been using for decades, to delay power plant closures when this is necessary to preserve grid reliability; for example, the Cooling Water rule requires states to first consider reliability in implementing new regulations;
While states often have the authority to set more protective pollution control standards in the interest of public health and welfare, there is no evidence that they would do so at the risk of grid reliability. Many states have already exercised this authority without imperiling electricity reliability — as of 2011, 17 states have already imposed rules on mercury and other toxic emissions from power plants, including Montana;
Adequate new plant capacity is in the pipeline to replace the majority of potentially affected power plants; most American power companies are on record as already having prepared for expected environmental regulations;
In terms of compliance, the MATS rule allows for temporal and technological flexibility. As this fact sheet goes to press, the final rule has not yet been published but is expected to allow three years for compliance, with an optional 4th year extension from the EPA or additional security-based extension from the President. A wide range of commercially viable, proven compliance technologies from Flue Gas Desulphurization (FGD) to Dry Sorbent Injection (DSI) and Activated Carbon Injection (ACI) are available to help reduce toxic air emissions and can be installed in 10 to 30 months, providing ample time for America’s skilled engineers, manufactures and technicians to conduct plant upgrades within the legally allotted time frame.

Download the fact sheet to keep reading and see full citations.

Is the Fit Right? Considering Technological Maturity in Designing Renewable Energy Policy

Kevin Lustig — Thu, 11 Aug 2011 14:20:52 -0400

Recent studies suggest that the United States can greatly expand its deployment of renewable energy resources beyond current levels. This would reduce emissions of harmful pollutants and enhance energy security by diversifying the nation’s domestic energy supply. This brief describes a number of policy tools that can be employed to drive investment in renewable energy technologies and discusses which policy options may be the best fit based on the commercial maturity of a targeted technology. We examine several policy tools to describe where they have been most effective to advance technology progress along the innovation chain. The findings and recommendations presented are based on a study of the literature on technology innovation and policy best practices, as well as on discussions with experts in the field, policymakers, and private sector companies involved in renewable energy projects.

Key findings:

Grants can be used to fund technologies in their earliest stages—research and development (R&D) and early-stage demonstration. The R&D stage involves significant uncertainty as to whether the concept will ever lead to a viable technology application. Grants help overcome this risk because they provide an important cost share for investment to research and develop the technology further. Technologies in the demonstration stage typically have difficulty accessing commercial investment due to uncertainty on technical performance and the inability to provide performance warranties. It is unclear whether they will eventually be financially profitable, particularly in the near-term. Demonstration grants allow commercial investors time to pilot and evaluate a new technology with appropriate due diligence. This can reduce risk perception and facilitate further investment.
Loan guarantee programs are well suited for technologies in the commercialization and early deployment stages. In these stages, project performance remains uncertain, making it difficult to attract investors. Loan guarantees help attract private investors by sharing the risk of technical failure with a financially secure and credible entity (namely, a government agency).
Tax credits and feed-in tariffs (FITs) can help advance technologies in the later stages of innovation, namely commercialization and early deployment. These policies allow projects to earn more profit for electricity produced so that they earn the revenues needed to offset higher upfront investment costs.
Renewable electricity standards (RES) are most effective for more mature technologies that are in early deployment. An RES creates demand for renewable electricity and allows the market to determine how to most efficiently supply it; thus the market sets the premium paid to renewable resources. RES mandates can allow for open competition among a range of different technologies, or can be tailored with a carve-out to promote specific technologies that are not yet cost competitive with other renewables. The carve-out option can be a good fit for technologies that are still in the commercialization phase.
A favorable regulatory environment is important to ensure that renewable energy technologies do not face inherent disadvantages due to interconnection standards, utility pricing structures, and other legal hurdles. Failing to address regulatory barriers to renewables can increase their cost of deployment and reduce the effectiveness of incentive programs.

U.S. Federal Agencies and Climate Change

Kevin Lustig — Mon, 13 Jun 2011 15:07:26 -0400

The Obama Administration has committed globally to reduce U.S. greenhouse gas emissions by 17% below 2005 levels by 2020. To reach this goal, the Administration is developing standards for combating harmful emissions. WRI engages with federal agencies, offering guidance as the agencies shape policy and take action. WRI also works to educate a variety of stakeholders, including Congress, business, and state and local governments, about the impacts and value of these federal policies.

Key Resources

Analysis Series: EPA, Greenhouse Gases, and the U.S. Economy

Interactive Tools:

What are federal agencies doing to reduce emissions?

Explore emissions, reduction scenarios, and agency actions.

Power Almanac of the American Midwest

The Power Almanac is a data-rich web-based platform designed to provide easily accessible information on Midwestern electricity resources, including power plants, natural resources, and industrial facilities. Explore >

U.S. Climate & Energy Legislation

Kevin Lustig — Mon, 13 Jun 2011 14:55:43 -0400

The United States Congress has a critical role to play in reducing domestic greenhouse gas emissions and positioning the United States to maintain its competitive position in a low-carbon global economy. Congress works in tandem with federal agencies like the EPA, state governments, and businesses to achieve needed and pledged reductions in greenhouse gases.

The non-partisan World Resources Institute works with committees and members of Congress throughout the House of Representatives and Senate to provide objective analysis of legislative proposals and their impacts. Explore the wide variety of resources we have available for congressional decision makers below:

Regulation and Bill Summaries

EPA

Description	WRI Analysis
Proposed Performance Standards for New Power Plants (April 2012)	Summary

112th Congress

Bill	WRI Analysis
Bills That Would Limit U.S. EPA’s Clean Air Act Authorities	Summary
Clean Energy Standard Act of 2012 (S. 2146)	Summary
Clean Energy Standard Act of 2012 (S. 2146)	Projected Greenhouse Gas Emissions Reductions from the Power Sector

111th Congress

Summary and Chart: Emissions Reductions Under Pollution Reduction Proposals in the 111th Congress

Bill	WRI Analysis
American Power Act (Kerry-Lieberman)	Summary
	Summary of Offset Provisions
	Summary of Carbon Dioxide Capture and Storage (CCS) Provisions
Practical Energy and Climate Plan Act (Lugar)	Review of Emissions Reductions
American Clean Energy Leadership Act	Summary
Carbon Limits and Energy for America’s Renewal Act (Cantwell-Collins)	Summary
Clean Energy Jobs and American Power Act (Kerry-Boxer)	Summary
	Summary of Carbon Dioxide Capture and Storage (CCS) Provisions
American Clean Energy and Security Act (Waxman-Markey) passed by the U.S. House of Representatives on June 26, 2009.	Summary
	Summary of Carbon Dioxide Capture and Storage (CCS) Provisions
	Analysis of Allowances to the States
	Overview of Offset Quality
	A Closer Look at ACES

Testimony

All WRI Testimony on Energy and Climate

Date	Title	Witness
January 26, 2012	Testimony: China’s Prospects for Shale Gas and Implications for the U.S.	Sarah Forbes
April 4, 2011	Testimony Before the Subcommittee on Energy and Power: The Transformation of China’s Energy System	Deborah Seligsohn
April 1, 2010	Testimony Before the Congressional-Executive Commission on China: Measuring, Monitoring, and Reporting Energy and Climate Data	Deborah Seligsohn
October 29, 2009	Testimony Before the Senate Committee on Environment and Public Works: Getting to Yes on Climate Change	Jonathan Lash
March 11, 2009	FutureGen And The Department of Energy’s Advanced Coal Programs	Sarah Forbes
March 10, 2009	Green and Mean: Can the U.S. Economy Be Both Climate Friendly and Competitive?	Rob Bradley
February 4, 2009	Testimony Before the Select Committee On Energy Independence and Global Warming	Rob Bradley
January 15, 2009	Statement To the U.S. House of Representatives Committee on Energy and Commerce	Jonathan Lash

Information and Analysis Tools

Good decision making depends on high-quality information. WRI has developed a range of products that provide valuable and easily accessible data to help decision makers effectively respond to climate change:

Power Almanac of the American Midwest

Explore >

Fact Sheets

Download these informative fact sheets on the key climate issues:

Environmental Protection Agency (EPA)

What Are Limits on EPA? Clean Air Act Holds Answers (PDF, 64 Kb)
EPA, The Clean Air Act, and U.S. Manufacturing (PDF, 386 Kb)
For EPA Regulations, Cost Predictions Are Overstated (PDF, 265 Kb)
Response to EEI’s Timeline of Environmental Regulations For the Utility Industry (PDF, 810 Kb)
EPA Mercury Rules and Power Reliability (PDF, 197 Kb)

International and U.S. Action

U.S. Climate Action in 2009-2010 (PDF, 252 Kb)
Reviewing and Verifying International Climate Action (PDF, 169 Kb)
Role of Adapation (PDF, 123 Kb)
International Negotiations on Climate Change (PDF, 188 Kb)
Midwest States Show Leadership in Addressing Climate Change (PDF, 193 Kb)

Wind, Solar, and Renewable Energy

Policy Design for Maximizing U.S. Wind Energy Jobs (PDF, 122 Kb)
Concentrating Solar Thermal Power: Clean Energy for the United States (PDF, 341 Kb)
Mitigating Recession: How Stimulus Policies Can Serve Economic and Environmental Goals (PDF, 129 Kb)
Capitalizing on Renewable Energy (PDF, 247 Kb)

China

China’s Carbon Intensity Target
China: Energy and Climate Policy Action (PDF, 242 Kb)
China: Policy Insights (PDF, 543 Kb)
China: Key Statistics (PDF, 435 Kb)

Biofuels, Forests and Ecosystems

Stacking Payments for Ecosystem Services (PDF, 160 Kb)
Climate Change, Forests and Finance (PDF, 113 Kb)
Biofuels and Climate Change Impacts (PDF, 129 Kb)

Coal and Carbon Capture and Storage (CCS)

Midwest Coal States Endorse Aggressive Regional Climate Action (PDF, 172 Kb)
Carbon Capture & Sequestration: Frequently Asked Questions (PDF, 189 Kb)
U.S. Electricity Markets Increasingly Favor Alternatives to Coal (PDF, 464 Kb)

Official Comments

WRI’s official comments on proposed standards.

Letter signed by Kevin Kennedy: Docket ID No. EPA–HQ–OAR–2011–0660. Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units.

Old Roads to a New Destination

Nicholas Bianco — Fri, 29 Apr 2011 15:13:16 -0400

This article originally appeared in the May/June 2011 edition of The Environmental Forum (www.eli.org), and is reposted with permission.

Download article as a PDF (PDF, 1.7 Mb)

Given the dim prospects for climate change legislation in the 112th Congress, all eyes have turned to federal agencies and the states as the primary drivers of climate and energy policy in the United States. In a July 2010 report for the World Resources Institute titled “Reducing Greenhouse Gas Emissions in the United States Using Existing Federal Authorities and State Action,” we examined the emissions reduction potential of federal authorities on the books and announced state actions to determine whether the United States could reduce its emissions of heat-trapping gases that cause global warming, even as Congress refuses to tackle the problem. We concluded that federal agencies and states could indeed put the United States far along on a path to meet its international commitment to reduce emissions by 17 percent from 2005 levels by 2020 if the Obama administration pursues a go-getter approach.

Since issuance of the report, we have been tracking actions by federal agencies to reduce global warming pollution. While it is too early to know whether the administration’s actions will be enough to substantially reduce U.S. emissions of heat-trapping gases, it has made significant steps in the right direction. Additional steps can and should be taken, using a variety of laws and regulations under the aegis of several agencies. This article identifies additional steps to drive significant short-term abatement.

As the administration takes action to reduce greenhouse gas emissions, some in Congress have mounted efforts to stop them. A number of bills and amendments have been advanced that, if enacted, would delay or stop EPA and other agencies from driving reductions in greenhouse gas emissions. At the time this article was finalized for publication, no significant anti-regulatory measure had made it to the president’s desk. Should such a measure be passed, the administration has signaled that President Obama would veto the bill. To overcome that veto, anti-regulatory legislators would need to muster a two-thirds vote in both the Senate and House of Representatives — a feat that appears unlikely. Congressional pressure on the administration can nevertheless have a dampening effect on its policy decisions even if Congress fails to strip federal agencies of their authority to regulate greenhouse gases. Political pressure could result in less ambitious regulations and fewer reductions.

As we watch the administration, hope for meaningful reductions also comes from the states. In the past, states have demonstrated capacity to effect change when the federal government has not acted. While the outlook has shifted with last fall’s elections, recent actions by EPA, which require state participation under the federal Clean Air Act, will provide impetus for states to resume some work in this space. Federal agencies currently possess regulatory authority over a wide range of greenhouse gas emitters in the United States. The most significant of these authorities are contained in the Clean Air Act. In 2007, the Supreme Court decided that greenhouse gases fit within the expansive definition of a pollutant under the act. That decision made a range of regulatory tools to reduce emissions available to EPA. The CAA does prescribe limits on EPA action, however, as the major statutory authorities likely to be employed under the act — Title II vehicle emissions standards, Section 111 performance standards for power plants and industry, and Title VI regulation of hydrofluorocarbons, require that EPA base emissions standards not solely on scientific determinations of what is required to stave off the worst effects of global warming, but also on careful considerations of cost and other impacts.

Fortunately, EPA is not alone in its endeavor to reduce emissions of the heat-trapping gases that cause global warming. The National Highway Traffic Safety Administration shares with EPA the authority to establish Corporate Average Fuel Economy standards for light, medium, and heavy-duty vehicles, which together account for nearly one-quarter of all U.S. GHG emissions. The Department of Energy has the ability to drive reductions in emissions through efficiency standards for appliances and equipment, and the Federal Aviation Administration is empowered to regulate the aviation industry. Meanwhile, the Department of the Interior, through its Bureau of Land Management, and the Department of Agriculture, through its Forest Service and farm programs, have the ability to improve the way that public and private lands are managed.

Predicting what EPA and other federal agencies will be able to accomplish when they use the regulatory tools afforded them under current federal law is not an exact science. Because we cannot forecast what each federal agency will do, we developed three scenarios meant to capture the range of reductions we might see. The scenarios are based on a careful reading of the statutory language and published technical studies. The range of reductions projected under these scenarios is depicted in Figure 1. Our analysis finds the United States falling short of the its international commitment to reduce emissions to 17 percent below 2005 levels by 2020 even if federal agencies are aggressive about achieving reductions. If federal agencies fully take advantage of the regulatory authorities and pursue reductions like go-getters, they could reduce U.S. emissions to 12 percent below 2005 levels by 2020, five percentage points shy of realizing the U.S. commitment. If federal agencies fail to capitalize on available reduction opportunities, however, middle-of-the-road or lackluster reductions will result, and the U.S. will fall far short of the 2020 goal. Emissions reductions continue past 2020 as standards are made more stringent and as old, inefficient sources are replaced. Thus, a go-getter approach would net 22 percent reduction from 2005 levels in 2030 due to federal action alone. We depict the president’s international commitment, to reduce greenhouse gas emissions by 17 percent below 2005 levels by 2020, and by 83 percent in 2050, with the straight line labeled 17% and 83% reduction pathway. For comparison purposes we have indicated the reductions necessary to prevent greenhouse gases from rising above 450 parts per million of carbon dioxide equivalent, to prevent global average temperatures from rising more than 2 degrees Celsius.

Figure 1: Projected U.S. Emissions under Different Federal Regulatory Scenarios Figure 2: Projected U.S. Emissions under Different Federal Regulatory Scenarios and State Scenarios

It might be possible to close all or part of the gap through discrete legislative enactments that fill holes in federal agency authorities. For example, the Department of Energy could be granted the authority to establish national energy efficiency codes for buildings. Congress could improve the way that transportation funding is allocated to encourage smart planning that leads to reductions in the growth of vehicle miles traveled. In the long-term, our study suggests that we will need more significant legislative measures as the gap between the go-getter line and the reduction targets grows, and certainly if we are to achieve the much deeper reductions warranted by the science.

States can also help close the emissions gap. Traditionally states have exercised broad authority to regulate energy production and delivery within their borders. States have also been first movers when it comes to enacting environmental laws to reduce pollution. States are demonstrated innovators in the energy space, with over half adopting renewable portfolio standards, which require a stated percentage of renewable generation, and another half adopting energy efficiency promoting policies such as systems benefits charges and energy efficiency portfolio standards.

States have more recently begun to take advantage of their authority to regulate GHG emissions. New Hampshire was the first to pass a law to cap greenhouse gas emissions from power plants in January 2002, and Massachusetts sought to reduce GHGs from its dirtiest power plants through regulations shortly thereafter. In 2009, the Regional Greenhouse Gas Initiative began to regulate carbon dioxide emissions from large power plants in 10 northeastern and mid-Atlantic states. California and New Mexico subsequently passed regulations that would lead to the implementation of multi-sector cap-and-trade programs for GHGs. In addition, a number of states have begun developing low carbon fuel standards. Given this history, it is not a question of whether states will take action, but instead how many will act and how. In an effort to help understand their contribution, we developed state scenarios based on previously expressed ambition. The cumulative reductions that could result from various levels of combined state and federal ambition are depicted in Figure 2. Reductions in the 2020 time frame for a go-getter approach amount to 14 percent reductions from 2005 levels by 2020 if state action is factored in as well, still short of the 17 percent commitment.

Having briefly examined the available federal authorities and assessed the potential emissions reductions from federal and state action, and suggesting ways that additional reductions could be accomplished to close the emissions reduction gap, we turn first to the status of federal action. Federal agencies are at various stages of setting regulations that would affect approximately two-thirds of U.S. GHG emissions. In the space that follows we lay out the progress made to date across each major sector of the U.S. economy and identify the areas where significant potential remains. Just over one quarter of U.S. emissions come from the transportation sector. The bulk of these emissions (16 percent of total U.S. emissions) come from lightduty vehicles, a category that includes cars and small trucks. The next largest sources of transportation emissions are medium- and heavy-duty vehicles, categories that account for eight percent of total U.S. emissions and include tractor-trailers, refuse haulers, urban delivery trucks, and very large pickup trucks. Congress has vested authority in both the National Highway Traffic Safety Administration and EPA to drive improvements in these sources. The Energy Policy and Conservation Act of 1975, as amended by the Energy Independence and Security Act of 2007, provides NHTSA with the authority to establish Corporate Average Fuel Economy standards for light, medium, and heavy-duty vehicles. Meanwhile, Title II of the Clean Air Act provides EPA with the authority to establish GHG emissions standards for these sources. NHTSA and EPA have already finalized standards for lightduty vehicles of model years 2012 through 2016, and are currently working to develop standards for model years 2017 through 2025. That proposal is due to be released on September 1, 2011. In addition, NHTSA and EPA proposed the first ever standards for medium- and heavy-duty vehicles in October 2010. These rules will affect medium- and heavy-duty vehicles sold from 2014 through 2018.

The electric power sector represents approximately one-third of U.S. emissions of heat-trapping gases. Industry, chiefly manufacturing plants and refineries and the like, make up another 15 percent of U.S. GHG emissions. When EPA’s regulations for lightduty vehicles went into effect on January 2, 2011, CAA requirements for pre-construction permitting of certain large power plants and industrial facilities were triggered. Under the act, new and modified major stationary sources that emit more than 250 tons of GHGs must apply for pre-construction permits under the Prevention of Significant Deterioration/Best Achievable Control Technology permitting program. Because the statutory threshold would have required EPA to go through permitting processes for hundreds of thousands of sources, EPA issued the so-called “Tailoring Rule” in May 2010 citing “administrative necessity.” This limited what facilities will be covered to only very large greenhouse gas emitters such as new and modified power plants and industrial facilities and prevented regulation of small businesses, like the proverbial mom and pop grocery, under the pre-construction permitting program. The pre-construction permitting program only applies to new and modified units. In addition, it is carried out in a case-specific manner that provides little certainty about the environmental outcomes.

A much more appealing program for the regulation of large sources such as power plants and industry is performance standards under CAA Section 111. Section 111 provides for the establishment of performance standards for new and modified sources under Section 111(b) and mandatory emissions guidelines that require states to regulate existing sources under Section 111(d). In December 2010, EPA announced that it will propose the first GHG performance standards and mandatory emissions guidelines under Section 111 for power plants by July 26, 2011, and finalize those standards and guidelines by May 26, 2012. The agency also announced that it will propose corresponding standards and mandatory guidelines for refineries by December 15, 2011, and finalize those by November 15, 2012. States must follow the guidelines and propose performance standards to cover existing power plants and refineries. Together these sources account for nearly 40 percent of the U.S. emissions inventory.

While EPA is working to reduce emissions by making power generation less carbon intensive, the Department of Energy is doing its part to reduce emissions by driving down energy demand. According to the Appliance Standards Awareness Project, DOE updated 10 different efficiency standards between January 2009 and February 2011 and is scheduled to update another 13 standards by the end of 2011. While the transportation, electric power, and industrial sectors tend to get the most attention when considering policies to reduce emissions, our study finds that some relatively small sectors such as landfills, coal mines, natural gas systems, and hydrofluorocarbons can contribute in major ways at relatively low cost. These sectors only account for 7 percent of U.S. emissions, but can account for 37 to 60 percent of the reductions in 2020.

HFCs are a rapidly growing source of emissions. They are primarily used in refrigeration and air conditioning. Congress granted EPA the authority to regulate these emissions through CAA Title VI. The first indication that the administration intended to regulate these sources was provided by its 2009 joint U.S., Canadian, and Mexican proposal to amend the Montreal Protocol submitted to the United Nations Environment Program Ozone Secretariat. Those amendments were resubmitted in 2010, but have not yet passed. EPA and the State Department have indicated that they intend to continue working with signatories over the coming year in effort to pass those amendments. Once those amendments are adopted, the CAA automatically vests EPA with the authority to meet its commitments under the Montreal Protocol. Independent of this pathway, EPA could also begin to pursue delisting of approved substitutes under its Significant New Alternatives Policy program, which implements CAA Section 612. Though the substitutes currently only account for only two percent of the GHG emissions inventory, significant growth in emissions is expected if action is not taken. If the ramp-down schedule put forth in the joint proposal is followed, then considerable reductions from business-as-usual projections are possible.

The case for reducing GHG emissions from large non-agricultural methane sources such as landfills, coal mines, and natural gas systems is just as strong, though EPA has not yet indicated it intends to regulate these sources. Even though such sources only represent a combined 5 percent of the U.S. GHG inventory, reductions from these sources are available at a relatively low cost. For example, EPA estimates that landfills can reduce their emissions by about 60 percent at $8 per ton of carbon dioxide equivalent emissions (CO2e) and 74 percent at $20 per ton of CO2e, and that coal mines can reduce emissions by 86 percent at only $5 per ton of CO2e.

The contribution of these sources becomes even more significant when one considers the 20-year global warming potential. Global warming is a long-term problem due to the inertia behind our existing energy infrastructure and the fact that the leading greenhouse gas, carbon dioxide, resides in the atmosphere for hundreds of years. Therefore, the most commonly accepted measure of a greenhouse gas’s impact is the 100-year global warming potential. However, recent data suggest that we are starting to see impacts of climate change now, and so some have suggested that we look at short-duration gases as a way to buy ourselves time to make the steep reductions necessary. If we do that, and instead consider the impact that the gases will have over the next 20 years, we find that in 2020 reductions from non-agricultural methane sources could mitigate climate change impacts as much as emissions reductions from power plants and several times the reductions possible from manufacturing. EPA, however, has not yet signaled its intent to begin regulating these sources.

Additional reductions may be possible through improved management of public and private lands. For example, the Forest Service could increase sequestration on federal forest lands while the Bureau of Land Management could increase sequestration on some of the 264 million acres of public lands that it administers. The Department of Agriculture could also encourage practices that would reduce greenhouse gas emissions or increase sequestration on farmland. In the first iteration of the report we could not identify any literature that would allow us to accurately quantify the magnitude of sequestration possible using existing regulatory policies without expanding program budgets. As a result, we did not include such policies in our analysis. We hope to close this gap in subsequent updates to the report. Following our approach in other sectors, once we can associate meaningful greenhouse gas abatement with specific policies, we will track progress towards their implementation. Just as the outlook in Congress has changed, so too has the outlook at the state level. The northeastern and mid-Atlantic Regional Greenhouse Gas Initiative, which covers CO2 emissions from large power plants, was launched in January 2009. RGGI was followed by the Western Climate Initiative and the Midwestern Accord, both of which are designed for implementation in the 2012 timeframe. If fully implemented by all participants, these initiatives would have covered 23 U.S. states. However, of the 13 states engaged in the WCI and Midwestern Accord, only New Mexico and California have taken steps to promulgate regulations to implement the cap-and-trade program, suggesting that these two initiatives will fall considerably short of their goals.

Beginning in 2011, however, states will have new impetus to regulate emissions from existing large stationary sources, such as power plants and industry. EPA sets performance standards for new and modified units under CAA Section 111(b). EPA then establishes guidelines that require states to regulate existing units under CAA Section 111(d). States have considerable flexibility in how they meet those guidelines so long as they can demonstrate that their program is no less stringent than the guidelines established by EPA. States already moving forward with cap-and-trade programs are expected to ask EPA to allow those programs to be used for compliance with emissions guidelines established by EPA via New Source Performance Standards. In our joint WRI and Columbia Law School Center for Climate Change Law working paper “What’s Ahead for Power Plants and Industry, Using the Clean Air Act to Reduce Greenhouse Gas Emissions, Building on Existing Regional Programs,” we find that there is room for EPA to honor such a request. In short the argument is that while Section 111 does not expressively provide for the states’ establishment of a cap-and-trade program for greenhouse gases, it requires states to develop a plan that establishes a “standard of performance” for the air pollutant. EPA has previously interpreted “standard of performance” to allow for cap-and-trade. This was done in both the mercury and greenhouse gas context. While this interpretation was contested in a legal challenge to the Clean Air Mercury Rule, the D.C. Circuit Court of Appeals never decided the legal challenge to the CAMR cap-and-trade program, and instead vacated CAMR on other grounds. The Bush EPA’s Advance Notice of Proposed Rulemaking on greenhouse gas regulations issued in July 2008 recapitulated this interpretation of the CAA, concluding that cap and trade is a permissible option for regulation under Section 111(d).

The Obama EPA, however, has neither endorsed nor disavowed the previous administration’s interpretation of the act to allow cap and trade. Although the Supreme Court in 1978 held in ASARCO v. EPA that trading is not permitted for new plant standards under Section 111(b), EPA has argued that this decision was later overturned by the Court in Chevron v. NRDC and furthermore to the extent that ASARCO is still good law, it applies only to standards of performance for new units under 111(b), and not the more flexible process for existing units under 111(d). Though we find that there is likely to be considerable flexibility afforded to states as they propose plans to comply with EPA’s emissions guidelines, there are likely to be some limitations around certain provisions, such as scope, offsets, and cost-containment. These issues are explored in more detail in the working paper.

Moving forward it is likely that states will continue to develop and implement new programs that drive reductions in greenhouse gas emissions. For example, states may adopt programs that encourage investment in renewable energy and energy efficiency, drive improvements in building efficiency, improve land use management, or reduce the greenhouse gas footprint of transportation fuels. Such policies could drive greenhouse gas emissions reductions beyond what can be achieved through federal action alone, helping us to reach the Obama administration’s 17 percent reduction target.

In the absence of comprehensive climate and energy legislation, federal agencies and states can be major drivers of greenhouse gas emissions reductions. As our WRI report reveals, Congress has provided federal agencies with valuable tools that can help the nation achieve significant reductions in the near term. EPA and other federal agencies have begun the significant task of regulating emissions across a number of economic sectors, including transportation, electricity and some industry. Additional sectors, such as coal mines, natural gas distribution systems, and landfills, present promising areas for low-cost regulation that EPA should address in the near term. While some members of the 112th Congress have expressed an interest in eliminating these authorities, no such legislation has passed, and the Obama administration retains the power of the veto. So, the possibility for significant action remains, and the 17 percent reduction target is still within sight. Readers can track the administration’s progress towards this goal using WRI’s web-based regulations tracker at www.wri.org/federalclimateaction.

Finally, it is worth keeping an eye on the states to see what role they will assume moving forward in crafting creative solutions to the climate problem as they comply with new EPA regulations, and also to see to what extent they will help drive deeper reductions than federal agencies can achieve alone.

Dialogue on Performance Standards for Existing Power Plants: Participant Comments to EPA

Franz Litz — Thu, 21 Apr 2011 14:44:42 -0400

In two legal challenges filed in the wake of the Supreme Court decision in Massachusetts v. EPA, a number of states and non-governmental organizations sought to compel the U.S. Environmental Protection Agency (EPA) to regulate new and existing power plants under section 111 of the Clean Air Act. In December 2010, EPA settled the lawsuit by agreeing to a schedule for regulating power plants. This schedule calls for EPA to issue draft rules and guidelines in July 2011. EPA subsequently reached out to power companies, states, environmental groups, and the public at large to gather ideas on the best path forward.

In effort to inform the ongoing deliberations, the World Resources Institute has been convening a group of businesses, state representatives, and environmental groups. These groups first came together around basic principles for regulation, and presented them at EPA’s listening session on February 23rd. In the following weeks, this group coalesced around a more detailed set of ideas for regulation, and submitted them to EPA for consideration on Tuesday, April 19th.

Download the full comments here (PDF, 100 Kb).

Dialogue Participants

The World Resources Institute convened the Dialogue with the following participants:

State Participants: California Air Resources Board, Minnesota Pollution Control Agency, and the New York Department of Environmental Conservation.
Companies: Calpine Corporation, Consolidated Edison, Inc., Constellation Energy, Entergy Corporation, Exelon Corporation, National Grid, NextEra Energy, New York Power Authority, PG&E Corporation, Public Service Enterprise Group, Inc., Seattle City Light and Sempra Energy.
National environmental organizations: Environmental Defense Fund (EDF) and Natural Resources Defense Council (NRDC).
Advisory organizations and think tanks: Center for Clean Air Policy (CCAP), Georgetown Climate Center, and M.J. Bradley & Associates.

Myths and Facts about U.S. EPA Standards

James Bradbury — Tue, 19 Apr 2011 09:23:59 -0400

WRI experts take closer look at some of the myths, inaccuracies, and misinformation surrounding Environmental Protection Agency regulation of greenhouse gases.

In recent months, the debate over U.S. Environmental Protection Agency (EPA) regulations of greenhouse gas emissions took on a heated tone across the country. At the federal level, the Senate voted down several amendments (detailed summaries available here) that would have restricted EPA’s ability to regulate dangerous greenhouse gas (GHG) pollution. During the same week, the U.S. House of Representatives passed a bill that would severely restrict EPA’s authority to regulate GHGs, while taking the highly unusual step of overturning a scientific finding.¹ Meanwhile, opponents of pollution controls continue to press for further debate and additional votes on bills that would restrict or eliminate EPA’s authority.

Throughout the debate, some of the loudest voices have argued that EPA’s actions would be harmful to industry and the economy. Looking closer, however, we find that these claims are largely inaccurate – many of them are exaggerations or, in some cases, outright misinformation. WRI analysts set the record straight.

Myth #1: EPA does not have the authority to act on greenhouse gases.

The Facts: EPA is legally required to act, and is acting consistent with the authority that Congress has granted it.

EPA, Greenhouse Gases, and the U.S. Economy

As the U.S. Environmental Protection Agency uses its authority to limit greenhouse gases and other pollutants, members of Congress are wondering what these rules mean for the people and industries in their states. In this series, the non-partisan World Resources Institute examines pending actions and what they mean for the U.S. economy:

EPA is acting to fulfill its obligations under the Clean Air Act, as charged by Congress and reinforced by the Supreme Court decision Massachusetts v. EPA. In that decision, the Supreme Court ruled that GHGs are air pollutants under the Clean Air Act. The court instructed the EPA to decide whether GHG emissions endanger public health and/or welfare, or if current science is too uncertain to make a reasonable judgment. In response to the Supreme Court decision, the EPA issued a scientific finding that “[t]he accumulation of CO2 and other greenhouse gases in the atmosphere can lead to hotter, longer heat waves that threaten the health of the sick, the poor, the elderly - that can increase ground-level ozone pollution linked to asthma and other respiratory illnesses.” This finding reflects similar statements made by the world’s leading scientific institutes.

Furthermore, laws require EPA to act reasonably. In the Clean Air Act and its amendments, Congress established limitations on EPA’s regulatory powers, requiring the agency to consider the cost of regulation and other impacts before regulating. In addition, federal courts review EPA regulatory actions to ensure the agency has not exceeded its authority. In practice, EPA has followed the rules and also been cognizant of the practical constraints of regulations. For instance, EPA decided in the tailoring rule, issued in 2010, that it would be unworkable to apply the Clean Air Act to all facilities that would be covered by the law; instead EPA has focused only on the largest emitters.

Myth #2: EPA regulations of GHG emissions will cost up to 1.4 million jobs.

The Facts: The modeling study and accompanying testimony supporting these claims has been discredited by a number of well respected analysts and economists.

In her February 9th testimony before the House Committee on Energy and Commerce, Dr. Margo Thorning relied on an industry-funded modeling exercise to conclude that EPA regulations of GHG emissions would lead to up to 1.4 million job losses in the United States. Since then, these alarming job-loss numbers have been cited repeatedly by anti-EPA interests – industry, policy-makers and others – despite the fact that they are based on faulty modeling assumptions that have been discredited repeatedly by leading economists and analysts. In a recent joint statement by James Bradbury (WRI) and John “Skip” Laitner (ACEEE), Dr. Thorning was called into question for filing with the Energy and Commerce Committee the same discredited arguments for which she had been criticized by Nathaniel Keohane² and Dallas Burtraw³ just months earlier at the U.S. Court of Appeals. Dr. Thorning and those who rely on her unsupported jobs numbers have still not explained the basis for their assumption that a business-as-usual policy scenario is always optimal and that any public policy – including energy efficiency policies – can only slow economic growth and yield net job losses (an assumption that the economic literature has repeatedly shown to be false)⁴. The vocal anti-EPA interests who rely on Dr. Thorning’s opinion have yet to provide any evidence that the EPA’s preconstruction permitting process – which has been in effect for the past four months – will lead to any net costs for U.S. manufacturers, nevermind job losses. Dr. Thorning has also failed to provide any supporting evidence for her claim that U.S. manufacturers have done all that they possibly can to increase their energy productivity and that public policy has no role to play in removing barriers or otherwise increasing private sector investments in industrial energy efficiency.

Myth #3: EPA standards will hurt U.S. manufacturers.

The Facts: EPA regulations can help U.S. manufacturers make important upgrades.

EPA’s guidance can spur energy efficiency upgrades for manufacturing facilities in the United States. In addition to making them cleaner, these much needed efficiency improvements can result in significant cost savings for manufacturers. The manufacturers most exposed to risks from international competition and volatile fuel prices have the most to gain from efficiency. Studies have estimated that efficiency upgrades made with existing technologies could result in a 40 percent total energy savings for these companies.

Myth #4: Current EPA regulations will affect small businesses and farms.

The Facts: Only the biggest emitters will be affected.

Contrary to industry complaints, the greenhouse gas regulations will only apply to the largest emitters in the United States, such as new and modified power plants and industrial facilities. “Mom-and-pop” stores, hospitals and other small businesses remain unaffected by the regulations. Furthermore, the EPA administrator has indicated that there are no plans to regulate these sources.

Myth #5: EPA is imposing a “train wreck” of regulations that create deadlines that are difficult for industry to meet.

The Facts: The number of new regulations is small, and industry has known they were coming for years.

The electric power sector has had substantial notice–in some cases decades–that power plants would be subject to regulations to control dangerous pollutants. Half of the regulations under consideration by EPA have been in the regulatory pipeline for over a decade. Due to administrative delays and litigation resulting in court decisions remanding or vacating previous rules, many of these rules have not been finalized or the final rules were reversed. In many cases Congress has set statutory deadlines for EPA to act, EPA has missed the deadlines, and courts have ordered EPA to act.

A graphic circulating on Capitol Hill and in state legislatures claims a difficult regulatory timeline for industry. But upon closer examination, WRI found that many of the rules they claim refer to rules already in effect, remanded by courts, or don’t exist for other reasons.

Reproduction of original EEI timeline

Environmental Regulatory Requirements For the Utility Industry, Removing All But New Compliance Obligations

Myth #6: Reliability of the electric grid will be impacted by EPA standards.

The Facts: The electricity industry has the tools to ensure that the lights stay on.

While there may be power plant retirements as a result of EPA standards, industry, states and federal regulators have numerous tools to ensure that all regions of the grid have sufficient power plant and other capacity (such as demand-reduction capability, transmission reconfigurations) to ensure that reliability requirements are met. Undoubtedly, some work still needs to be done to make sure that appropriate parties – power plant owners, state and federal regulators, regional transmission organizations, demand-side service providers, investors, and others – take action expeditiously and make prudent decisions. Nevertheless, the actions necessitated by the proposed EPA regulations are manageable and will render the resulting fleet of power generators more efficient and with lower emissions.

Myth #7: EPA standards will be expensive.

The Facts: The benefits of EPA regulation have historically outweighed the costs.

The White House Office of Management and Budget recently reviewed federal clean air and water regulations from October 1, 1999, to September 30, 2009 in its thirteenth annual Report to Congress. The report found that the estimated aggregate annual costs of these regulations range from $26 to $29 billion, while benefits range from $82 to $533 billion. Furthermore, researchers from University of Massachusetts Amherst found that compared to overall spending in the economy, on a per dollar basis, spending on environmental protection and clean-up employs more than twice as many workers in construction and 25 percent more in manufacturing.

The Endangerment Finding is a scientific finding by the EPA Administrator that greenhouse gases threaten the public health and welfare of current and future generations. See: Endangerment and Cause or Contribute Findings for GHGs under Section 202(a), 74 Fed. Reg. 66,496 (Dec. 15, 2009). ↩
Keohane, Nathaniel. Declaration to United States Court Of Appeals For The District of Columbia Circuit, October 30, 2010. ↩
Burtraw, Dallas. Declaration to United States Court Of Appeals For The District of Columbia Circuit, October 25, 2010. ↩
See previous footnote (Burtraw). ↩

Bills That Would Limit the U.S. EPA's Clean Air Act Authorities

James Bradbury — Tue, 19 Apr 2011 09:19:55 -0400

While the Senate recently defeated four bills or amendments that would restrict EPA’s authority, it remains to be seen if additional anti-EPA bills will be introduced in the U.S. Congress or in state governments. As this debate continues, it is important to understand the likely practical impacts of each proposal, how legislation would change the regulatory timetable, and how the EPA’s ability to reduce pollution would be affected. A companion piece sets the record straight on common myths relating to this debate.

The following legislative summaries provide an overview of the range of federal proposals that remain part of the ongoing debate over EPA’s authority and actions.

The Current Scope of EPA Regulatory Authorities

US GHG Emissions and the Clean Air Act

	GHG sources subject to existing or expected CAA regulations
	GHG sources not subject to CAA regulations

Figure 1

The pie chart in Figure 1 illustrates the major source categories for greenhouse gas emissions (GHG) from across the U.S. economy. The broad categories highlighted by shades of green represent the main sources of emissions that EPA is regulating, or is expected to regulate, through existing Clean Air Act (CAA) authorities, as an ultimate consequence of the Massachusetts v. EPA, Supreme Court decisionⁱ and the subsequent Endangerment Findingⁱⁱ. In addition, the FY08 Omnibus Appropriations bill included a provision that requires annual mandatory GHG reporting to EPA by more than 10,000 major sources across the economy, representing about 85% of total U.S. GHG emissionsⁱⁱⁱ.

Taking their first concrete steps to regulate GHG emissions, EPA finalized vehicle emissions standards for cars and light trucks in May, 2010^iv. This action automatically triggered a Clean Air Act requirement – which went into effect in January 2011 – for state and local regulators to conduct a preconstruction review process to ensure that “best available control technologies” (BACT)^v are used, to limit greenhouse gas emissions, prior to issuing air permits. The BACT standard only applies to new facilities or facilities undergoing major modifications that would lead to increases in annual emissions above a certain threshold, as defined by the “Tailoring Rule^vi.” Most recently, EPA has opened the docket on an extended comment period for how best to set GHG emissions performance standards – under section 111 of the Clean Air Act^vii – for existing facilities within the two biggest stationary source categories in the U.S.: electric generators and refineries.

In early April, both the House and the Senate debated and then voted on a number of bills that would restrict these EPA regulations. The following discussion briefly summarizes four bills from the perspective of how (and for how long) they would affect the scope, or coverage, of EPA’s authorities, with respect to the major source categories highlighted by the above pie chart.

Energy Tax Prevention Act of 2011 (Upton-Inhofe)

Clean Air Act authorities for GHGs:

	completely prohibited
	prohibited (with short-term exception for existing rules)
	prohibited for 2 years
	remain in place with limitations
	unchanged

Figure 2

Regulatory prohibitions would be economy-wide and permanent.
Prohibition on any new vehicle standards, effective 2016.

The “Energy Tax Prevention Act of 2011” (H.R. 910 and S. 482), introduced by Representative Upton (R-MI) and Senator Inhofe (R-OK), would create very broad regulatory exemptions for GHG emissions, under the Clean Air Act (see Figure 2). Although there are a few notable exceptions (listed below), effective immediately, this bill would prohibit EPA from using the authorities of the Clean Air Act to promulgate, implement or enforce GHG regulations from any U.S. source category for the purpose of addressing climate change (this includes all source categories in Figure 1).

This means that several prior EPA actions and rules would no longer have any legal effect, including the Endangerment Finding, the mandatory greenhouse gas reporting rule and the preconstruction permitting for new or modified sources to meet BACT standards, which took legal effect with respect to GHG emissions in January, 2011. With respect to vehicles, the EPA would be prohibited from setting any new, more stringent GHG emissions standards for light-duty or heavy-duty vehicles and engines after current and proposed standards have run their course, by 2016 and 2018, respectively. However, because this bill would overturn the Endangerment Finding, there is concern that even existing vehicle standards would be undermined and subject to legal challenge^viii.

States: Though states would still be allowed to enact and implement laws to limit stationary-source (i.e., power plant and major industrial) greenhouse gas emissions within their own borders, the bill would exclude GHGs from states’ Clean Air Act “waiver authority,” after model year 2016; meaning that states would be prevented from promulgating or enforcing any new, more stringent vehicle GHG emissions standards.

Exceptions: The scope of the regulatory prohibitions covered by this bill would not apply to:

The existing light-duty vehicle rule^ix; joint standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016;
Proposed GHG emissions standards for medium and heavy-duty engines^x, covering model years 2014 through 2018; and
Implementation and enforcement of the Renewable Fuel Standard.

Comment: This bill takes the aggressive step of legislatively overturning EPA’s scientific finding that GHG emissions are a threat to public health and welfare. Though existing vehicle and renewable fuel standards would be left untouched by this bill, it would otherwise eliminate virtually all of EPA’s authority to regulate – or even monitor – GHG emissions (including by preventing EPA from setting new standards for cars and trucks, effective in 2016). Also, this bill’s limitation on state authority would remove a key point of leverage that California has used to encourage more stringent national vehicle GHG emissions standards^xi. Championed by the GOP leadership in both chambers of Congress, this bill passed through the U.S. House Committee on Energy and Commerce in March and then through the full House on April 7th, 2011 (final vote was 255-172). This bill did not meet the 60-vote threshold in the U.S. Senate, failing on a 50 to 50 vote (April 6, 2011).

EPA Stationary Source Regulations Suspension Act (Rockefeller)

Figure 3

Regulatory prohibitions on stationary sources would last for 2 years.

The “EPA stationary Source Regulations Suspension Act” (S. 231), introduced by Senator Rockefeller (D-WV), would prevent the EPA Administrator from taking any actions under the Clean Air Act to regulate stationary source emissions of carbon dioxide or methane for two years (see Figure 3). This means that any regulations of all such stationary source emissions (i.e., from electric generation, industry, non-agricultural methane) could not be developed, implemented or have any legal effect for a full two years.

The bill explicitly prevents EPA from moving forward with the development of performance standards for new and existing units under section 111 of the Clean Air Act, and would also put on hold regulations that currently require evaluation of GHG control activities for new and modified facilities under the preconstruction permitting/BACT program.

States: This bill would not affect the ability of states to regulate GHG emissions within their own jurisdictions.

Exceptions: As the scope of this bill is limited to EPA regulations of stationary sources, the following EPA authorities would remain untouched by this bill:

Mandatory GHG reporting; and
Authority to develop, implement and enforce any new rules to reduce GHG emissions from vehicles sold in the United States.

Comment: This bill was also introduced by Senator Rockefeller during the last Congress and has the support of several moderate Democrats. It was defeated in a Senate floor vote (12-88; April 6, 2011). In addition to the harm caused to public health and the environment by delaying EPA regulation of dangerous GHG pollution and preventing EPA from moving forward with the development of future regulations for a 2-year period, based on precedents set by previous congresses^xii, there is a valid concern that a seemingly harmless 2-year delay would be repeatedly extended^xiii, making regulatory prohibitions effectively permanent.

Senate Amendment #277 (Stabenow-Brown)

Figure 4

Regulatory prohibitions on stationary sources would last for 2 years.
Permanently exempts from stationary source CAA regulations GHG emissions from land use and agriculture.

Senate amendment #277, introduced on March 29th by Senators Stabenow (D-MI) and Brown (D-OH), would generally be similar to the EPA Stationary Source Regulations Suspension Act (S. 231); however, this amendment would have long-term impacts on the ability of EPA to regulate GHG emissions from land-use practices (see Figure 4). Specifically, the amendment would make no stationary source greenhouse gas pollution requirements “legally effective” for two years. This would take away the EPA’s authority to enforce the mandatory GHG reporting rule. In other ways, this approach could be slightly less restrictive than S. 231, in that EPA would still be allowed to study and develop regulations, even if they would be prohibited from implementing any new rules. Meanwhile, the amendment would also permanently block EPA from accounting for GHG emissions associated with agriculture or land-use change (e.g., including forestry and land-conversion) when regulating emissions from stationary sources.

For the next two years, the biggest practical impacts of this two year delay would be to temporarily eliminate EPA’s regulatory authority with respect to the following:

Mandatory GHG reporting rule
Implementing GHG performance standards for the new and existing electricity generators and petroleum refineries (under CAA section 111), which are scheduled to be issued in 2012;
Enforcing BACT standards for GHG emissions through the preconstruction permitting process for new and modified facilities, which went into effect in January of this year.

States: This bill would not affect the ability of states to regulate GHG emissions within their own jurisdictions.

Comment: This amendment was defeated in a Senate floor vote of 7-93 (April 6, 2011.), As with the EPA Stationary Source Regulations Suspension Act, based on precedents set by previous congresses^xiv, there is a valid concern that a seemingly harmless 2-year delay would be repeatedly extended^xv, making regulatory prohibitions effectively permanent. Also, by not allowing EPA to account for emissions associated with land-use change, this effectively makes the assumption that all bioenergy sources have zero emissions, despite abundant evidence to the contrary^xvi.

Senate Amendment #236 (Baucus)

Figure 5

Would limit stationary source regulations to large emitters.
Permanently exempts from all CAA regulations GHG emissions from land-use change.

Senate amendment #236, introduced by Senator Baucus (D-MT) on March 16th, 2011 would codify aspects of the EPA’s “Tailoring Rule,” while also permanently exempting GHG emissions from agriculture and land-use from Clean Air Act regulations (see Figure 5). Specifically, this amendment would write into the Act emissions thresholds from EPA’s Tailoring Rule, limiting the application of BACT standards only to very large GHG emissions sources^xvii. Meanwhile, the amendment would also permanently block EPA from accounting for GHG emissions associated with agriculture or land-use change (e.g., including forestry and land-conversion) for all CAA regulations^xviii.

States: This bill would not affect the ability of states to regulate GHG emissions within their own jurisdictions.

Comment: This amendment was defeated on the Senate floor by a vote of 7 to 93 (April 6, 2011). As with Senate amendment #277, by not allowing EPA to account for emissions associated with land-use change, this amendment effectively makes the assumption that all bioenergy sources have zero emissions, despite abundant evidence to the contrary^xix.

Massachusetts v. EPA, 549 U.S. 497 (2007).
The Endangerment Finding is a scientific finding by the EPA Administrator that greenhouse gases threaten the public health and welfare of current and future generations. See: Endangerment and Cause or Contribute Findings for GHGs Under Section 202(a), 74 Fed. Reg. 66,496 (Dec. 15, 2009).
EPA has been collecting multi-pollutant emissions data (including carbon dioxide) from electric generation units for many years, but this rule extends GHG reporting requirement to other sectors of the economy, including manufacturers and oil-and-gas industry sources. Having well-established and transparent system for collecting high quality emissions data is a critical prerequisite for effective regulation, particularly for any market-based compliance strategies. See: Mandatory Reporting of Greenhouse Gases, 74 Fed. Reg. 56,373 (Sept. 30, 2009).
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 75 Fed. Reg. 25,324 (May 7, 2010).
Under the Clean Air Act, the determination of BACT explicitly takes costs into account, ensuring that regulation does not impose costs that are excessive and it does not require the adoption of technologies or processes that are not available.
To limit the number of affected sources, the EPA issued a so-called “Tailoring Rule”, which sets the specific terms for phasing in the regulation of GHG emissions under this preconstruction permitting process, including by establishing annual GHG emissions thresholds. See: Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed. Reg. 31,514 (May 13, 2010).
U.S. EPA, Fact Sheet, Settlement Agreements to Address Greenhouse Gas Emissions from Electric Generation Units and Refineries (2010), http://www.epa.gov/airquality/pdfs/settlementfactsheet.pdf.
While the bill includes a savings clause to preserve vehicle standards for model years 2012 to 2016 and proposed standards for heavy-duty engines for model years 2014 to 2018, there is concern that by overturning the endangerment finding, this bill would remove the legal basis for both rules, creating uncertainty and increasing the likelihood of legal challenges. Find a copy of the letter from UAW here: http://www.cleancarscampaign.org/web-content/cleanairact/docs/UAW-oppose-Upton.pdf
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 75 Fed. Reg. 25,324 (May 7, 2010).
Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles, 75 Fed. Reg. 74,152 (proposed Nov. 30, 2010).
Under the CAA, California has the ability to establish its own vehicle emissions standards for vehicles and other states have the ability to impose those standards, provided that the EPA grants a waiver. California used this authority to establish the first GHG emissions standards for vehicles in 2004. After the Obama administration granted the waiver necessary to enforce these standards, the federal government, the auto industry, and California and other states reached agreement in 2010 on implementation of federal vehicle standards that matched California’s in stringency by 2016. California is currently working on the next set of standards that would take effect starting with model year 2017 vehicles, and is coordinating with the federal government in this effort.
http://www.pewclimate.org/blog/tubmanm/long-term-impacts-one-year-riders
For example, in 1995 congress passed a one-year delay to updating vehicle fuel economy standards and the delay was extended five times. As the Department of Transportation was already behind schedule when the delay provision first passed and the prohibition barred DOT from developing rules for future updates, this 1-year policy rider resulted in roughly two decades of delay
See footnote xii.
See footnote xiii.
Houghton, R.A. 2008. Carbon Flux to the Atmosphere from Land-Use Changes: 1850-2005. In TRENDS: A Compendium of Data on Global Change. Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak Ridge, Tenn., U.S.A.
The only affected facilities would be those for which CAA preconstruction permitting requirements would have been triggered anyway – based on conventional pollutant emissions – and the construction would also lead to a significant increase in GHG emissions (more than 75,000 tons of CO2 per year).
As drafted, this amendment’s prohibition on accounting for GHG emissions resulting from agriculture and land-use change is not very clear and could be interpreted to apply to all programs under the Clean Air Act. A Clean Air Act-wide prohibition would not only affect stationary sources emissions accounting – under BACT and section 111 – (as is the case with Senate Amendment #277), but also from the Title II Renewable Fuels Standard, which sets volumetric targets and requires qualifying biofuels to meet certain lifecycle emissions standards.
See footnote xvi (Houghton et al).

Statement to the Committee on Energy and Commerce on Economic Implications of EPA Greenhouse Gas Regulations

James Bradbury — Thu, 03 Mar 2011 12:00:49 -0500

In February 9th testimony before the House Committee on Energy and Commerce, Dr. Margo Thorning of the American Council for Capital Formation presented on the economic implications of EPA regulation on greenhouse gases. Following the hearing, analysts from WRI and the American Council for an Energy-Efficient Economy issued the following statement in response to Dr. Thorning’s testimony. WRI’s response highlights questionable assumptions in Dr. Thorning’s modeling and outlines the benefits of industrial sector energy efficiency improvements.

Download the full text of this statement (PDF, 142 Kb)

In her February 9th testimony (PDF) before the House Committee on Energy and Commerce, Dr. Margo Thorning based her primary conclusions regarding possible negative economic implications of Environmental Protection Agency (EPA) regulations on modeling and policy analysis supported by questionable assumptions that have been criticized by expert economists on several recent occasions. Dr. Thorning’s approach to economic modeling has been commonly used by opponents of environmental regulations for years. Peer-reviewed studies, based on more supportable modeling assumptions (i.e., grounded in empirical data), have demonstrated that her pessimistic assumptions and one-sided, cost-only modeling practices will inevitably yield gross over-estimates of the economic costs of such regulations. Based on our careful review of Dr. Thorning’s testimony and our own research on the subjects of public policy, industrial energy efficiency and economic modeling, we reached the following conclusions:

The EPA is proceeding in a reasonable manner with the regulation of greenhouse gas emissions by focusing on cost-effective opportunities for energy efficiency and by limiting requirements to the largest pollution sources.
Dr. Thorning makes the unrealistic, unfounded assumption that the U.S. economy is constantly operating under optimal conditions – and that all resources are efficiently allocated at all times – leading her directly to the following incorrect conclusions of core significance to her testimony.
- First, Dr. Thorning’s economic model operates under the assumption that business-as-usual is always optimal and any public policy – including energy efficiency policies – can only slow economic growth and yield net job losses.
- Second, she asserts, without supporting evidence, that U.S. manufacturers are currently operating at optimal energy productivity and that public policy has no role to play in removing barriers or otherwise increasing private sector investments in industrial energy efficiency.
In fact, there are many untapped opportunities for cost-effective investments in industrial energy-efficiency. With roughly half of industrial boilers in the United States now more than 46 years old (Energy and Environment Analysis, 2005), for example, there is abundant evidence that facility upgrades could increase productivity, with net benefits for manufacturers and for the economy as a whole.
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John A. “Skip” Laitner is Director, Economic and Social Analysis Program at the American Council for an Energy‐Efficient Economy.

How U.S. Federal Climate Policies Could Affect Chemical Companies’ Credit Risk

Robert Kimball — Tue, 22 Feb 2011 09:09:12 -0500

New analysis from WRI and rating agency Standard & Poor’s looks at impacts on businesses and credit quality.

Last week, analysts from WRI and Standard & Poor’s, the world’s foremost provider of credit rating, unveiled a new analysis examining how U.S. federal climate change policies could impact the credit ratings of companies in the U.S. chemicals industry. The report is a first of its kind by focusing on the credit (rather than equity) implications for companies.

In How U.S. Federal Climate Policy Could Affect Chemicals’ Credit Risk, experts from WRI and S&P helped demystify the potential impacts of federal climate policy by providing analysts and investors with important information on how company creditworthiness could be affected.

The report finds that the impact of federal climate policy on credit risk will likely be modest for most of the chemical subsectors. Depending on the exact nature of the policy, actions taken by companies, and other variables (like gas and oil prices), many companies could see only minimal credit impacts from policy action.

Understanding Credit Ratings and Risk

This report analyzes how different climate change policies could impact a company’s credit rating. A credit rating is an assessment of a bond issuer’s willingness and ability to pay off the interest and principle associated with its borrowings in full and on time. While an investment grade credit rating is not a guarantee that a bond will be repaid (or vice versa), leading rating providers like Standard & Poor’s inform and guide investors. If climate policies were to positively or negatively impact a company’s credit rating, it could influence the cost of borrowing for the company and its ability to raise capital.

An Innovative New Approach

How U.S. Federal Climate Policy Could Affect Chemicals’ Credit Risk represents a new approach to analyzing and understanding how environmental policies can impact businesses and investors. First, it focuses on credit quality and second, it relies on two detailed policy scenarios:

A market based, economy-wide, greenhouse gas reduction policy (such as “cap and trade” legislation)
Regulation of greenhouse gas emissions by the Environmental Protection Agency

WRI applied its policy and environmental expertise to the process, and turned to S&P to benefit from its world-renown experience in assessing credit risk. Bringing different perspectives of each organization allowed for an evaluation of the potential impacts of different climate change policies on factors that would influence creditworthiness.

Modest Credit Impacts

WRI and S&P’s analysis found that the impacts of the federal climate policy scenarios would be modest for most chemical manufacturing subsectors. The chemical sector as a whole produces approximately $724 billion in products (according to Bloomberg) and accounts for approximately 5% of US greenhouse gas emissions.

The report also found that within these subsectors some energy-intensive companies could see negative impacts—especially among the highest emitters. In WRI’s view, these findings highlight the potential advantages that companies could gain from acting quickly to improve their energy efficiency and reduce their emissions versus their less efficient peers. Although the report did not look at opportunities, there are also clearly benefits that some companies will gain by reducing their emissions, such as being “first movers” toward increased energy efficiency.

The report provides a clear indication to investors and companies trying to measure and manage their exposure to credit risk that environmental issues should be considered as part of their analysis.

Challenges and Opportunities for the Future

While How U.S. Federal Climate Policy Could Affect Chemicals’ Credit Risk provides an exciting look at the potential impacts of climate policy on credit quality, it is only a first step.

The report analyzed an important sector of the economy – chemicals – and provided a clear analytical framework that can be applied beyond this industry. However, ultimately more work will have to be done to fully understand climate policy impacts on the credit for different industries. Among the unknowns, it is unclear what approach the United States will take to address climate change. Clearly, with federal legislation tabled for now, the EPA is moving toward regulations that would cut carbon pollution from the largest industrial emitters—but with each new policy choice comes with its own set of risks and opportunities for businesses.

While the issues are complex, this analysis shows how leaders in the financial and environmental communities can work together to find answers. The analysis conducted in How U.S. Federal Climate Policy Could Affect Chemicals’ Credit Risk shows that it is possible to develop a more meaningful and objective understanding of the real risks and opportunities that companies face in light of future action.

Ultimately, in WRI’s view, much of the world is already moving toward a lower-carbon future, and analysis like this can help provide a smoother transition for businesses and investors alike.

What’s Ahead for Power Plants & Industry? Using the Clean Air Act to Reduce GHGs, Building on Regional Programs

Maggie Barron — Wed, 16 Feb 2011 09:20:06 -0500

Executive Summary

In the absence of congressional action on climate change, all eyes are on the states and the United States Environmental Protection Agency (EPA) to see how they will regulate greenhouse gas emissions from existing large power plants and industrial facilities. Indeed, power plants and industrial facilities are the sources of half of all U.S. greenhouse gas emissions, making those plants and facilities central to any effort to reduce the country’s total emissions. This working paper explores a promising pathway for the states and EPA to make these reductions using the standards of performance under section 111 of the Clean Air Act.

EPA has announced that it will begin the process for regulating power plants and refineries under section 111. EPA has scheduled listening sessions with stakeholders and intends to issue draft performance standards for new and modified power plants by July 26, 2011, and at the same time issue to the states a draft mandatory guideline that requires states to develop plans to impose performance standards on existing power plants. The final performance standards and mandatory guidelines are expected in May 2012. The process for refineries will lag behind that for the electricity sector by about six months, with draft rules to be issued in December 2011 and final rules expected in November 2012.

Like many other requirements of the Clean Air Act (the Act), the standards of performance under section 111 are designed and implemented through a federal-state partnership. EPA lists the categories of sources and establishes performance standards for new and modified emitters within listed categories. EPA also establishes a mandatory “guideline” for states, creating a federal “floor” for regulation of existing sources that applies only if the states fail to set their own standards of performance that meet or exceed this floor. This guideline includes possible “system[s] of emission reduction” that the states may use to set standards of performance. In promulgating these plans, the states will have considerable flexibility, since the standards of performance under section 111(d) may take the form of traditional emissions rate limitations or any number of other more flexible mechanisms. The emergence of state cap-and-trade programs raises the question of whether these cap-and-trade programs could be used to meet a state’s obligations under section 111(d) of the Act.

The traditional approach to regulating power plant and industrial facilities is through performance standards that prescribe specific emissions limitations on individual sources. This approach has been used for years to control conventional pollutant emissions, and is the safest approach from a legal defensibility standpoint. Because many states have already begun regulating some existing sources using cap and trade, the traditional approach may not be the one preferred by the states or their stakeholders. Indeed, states that have already chosen to reduce emissions from power plants and industry using flexible, marketbased approaches, can be expected to develop plans calling for alternatives to the traditional source-specific performance standards. EPA under George W. Bush concluded that the Clean Air Act allows cap and trade as a demonstrated and effective form of regulation under Section 111(d), and the Obama EPA has not contested this interpretation. Until federal courts rule on this approach, however, there will be some uncertainty about its viability.

The assumption that the states and many of their stakeholders will propose cap and trade under section 111(d) of the Clean Air Act has led to a number of questions around program design features, such as whether the Act allows offsets, or trading across listed categories of sources and whether the existing regional cap-and-trade program designs would be acceptable to EPA under section 111(d). Even though many of these issues are questions of first impression and therefore cannot be answered with absolute certainty, this paper explores the arguments for and against specific cap-and-trade design features in the context of section 111, including the implications for existing and planned regional cap-and-trade programs.

Findings

This working paper examines the process for establishing performance standards covering existing power plants and industrial facilities in the United States and finds:

Congress granted the EPA and the states considerable flexibility in determining how to cover existing power plants and industrial facilities under section 111 of the Clean Air Act.
After lengthy collaboration with stakeholders, twenty-three states designed and many implemented flexible, marketbased emissions-trading mechanisms to reduce greenhouse gas emissions from existing power plants and industrial facilities.
The discretion afforded to states under the Clean Air Act should permit them to propose a variety of policy mechanisms, including cap and trade.
The regional cap-and-trade designs present specific opportunities and challenges when reconciling the designs with section 111 of the act, including the following:
- Offsets cannot be used to meet federal minimum reductions but may be allowed above and beyond federal minimums.
- Trading between regulated categories of sources depends on the EPA’s interpretation of the act.
- Borrowing and safety valve mechanisms are problematic unless they can be designed to ensure minimum reductions within federal time frames.