Embryonic Stages Of Federal Climate Change Policy

Transcription

1 Portfolio Media, Inc. 648 Broadway, Suite 200 New York, NY Phone: Fax: Embryonic Stages Of Federal Climate Change Policy Law360, New York (October 15, 2008) -- While enactment of climate change legislation by the United States Senate has stalled temporarily, the issue remains at the Congressional forefront. Just last week, on Oct. 2, 2008, approximately 150 Congressmen delivered to Speaker Pelosi a set of principals ( Climate Change Principles ) intended to govern Congress efforts to prepare climate change legislation.[1] The letter outlined four clear goals for Congress to achieve in its drafting efforts: (1) reduce greenhouse gas emissions; (2) transition the United States to a clean energy economy; (3) minimize economic impacts; and (4) aid vulnerable countries and ecosystems.[2] The correspondence is significant because it recognizes the need to balance emissions reductions and related economic cost. While Climate Change Principles call for an 80 percent reduction of emissions below 1990 levels by 2050, they recognize legislation must provide a means to address potential trade disadvantage caused by nations that do not reasonably contribute to emission reductions.[3] Near the time that the Climate Change Principles were issued, two federal initiatives affecting different media were distributed. First, Congressmen Dingell and Boucher released a discussion draft of an ambitious 460 page bill ( Dingell-Boucher Bill ) that would comprehensively regulate greenhouse gases through a national cap and trade program and be fully integrated into the existing Clean Air Act ( CAA ). Second, the Environmental Protection Agency ( EPA ) released a strategy document outlining proposed steps to mitigate global warming effects on our nations water bodies.

2 Collectively, the Dingell-Boucher Bill and EPA s pronouncement show the heightened focus climate change initiatives will have on the development of new environmental legal frameworks. The Dingell-Boucher Bill The Bill seeks to integrate the regulation of greenhouse gas emitting sources into the existing CAA framework. It accomplishes this through a federal cap and trade program covering specific sources intended to ultimately reduce covered emissions to eighty percent (80%) below 2005 levels by 2050.[4] A. Sources Covered Sources covered by the Bill include direct and indirect emission sources of carbon dioxide and related gas emissions ( Carbon ). Indirect emissions are those attributed to an entity that produces or imports Carbon equivalents that will ultimately be emitted. Specifically, covered sources include electrical power plants, gas distribution companies, producers or importers of 25,000 tons per year ( TPY ) of fossil fuels and specific gases, stationary sources in a myriad of industrial sectors emitting 25,000 TPY of Carbon equivalents, and geological sequestration sites.[5] These sources are intended to address approximately 88 percent of United States Carbon emissions.[6] Smaller sources, i.e., those which emit less than 25,000 TPY are left to be regulated by EPA in its discretion.[7] Certain sources affected by the Bill may become integrated into the existing Title V operating permit program. Section 717 provides that where a covered source has a Title V permit, it will incorporate the applicable Carbon limitations. Specific Title V Carbon permits, however, do not appear to be contemplated.[8] Thus, under the Bill where a major source is currently regulated by a Title V permit, Carbon emission limitations will ultimately be incorporated into its Title V permit. The Bill, however, mitigates the need for permitting (at least at the federal level) solely on a Carbon specific basis even where the source is above the 25,000 TPY threshold.[9] The Bill also seeks to address difficulties arising from shared emissions sources. As to shared sources, which could include large office buildings or industrial complexes, the Bill seeks to address the thorny issue of distribution of emission allowances, and provides a standard if the parties have not contractually addressed the issue.[10] Further integration of Carbon regulation into the CAA is achieved by requiring EPA to develop New Source Performance Standards for specific categories of industrial sources accounting for 95 percent of industrial sector Carbon emissions.[11]

3 Emission limits may include design or equipment standards, as well as operational or work practices. Special focus is directed toward performance standards for new coal fired power plants. Generally, new coal plants with a capacity exceeding 25 megawatts, fueled by at least 50 percent coal or petroleum coke must capture and geologically sequester 60 percent of all Carbon emissions by the later of July 1, 2025 or the date four years after it commences operation.[12] B. Reducing Carbon Emissions The Dingell-Boucher Bill seeks to reduce emissions through a cap and trade program that is largely modeled after the Clean Air Act s Title IV SO2 program. The Bill is a discussion draft and includes four distinct approaches to allocate emissions among industry sectors. Importantly, the proposed Bill contemplates that its cap and trade program will be handled exclusively at the federal level and specifically pre-empts state and local cap and trade programs. [13] The proposed Bill contains ways that mitigate costs associated with curtailing Carbon emissions. For example, the emissions table in the Bill contemplates short term increases in emissions over the next several years that ultimately will need to be reduced.[14] During the program s phase in, offset credits from United States and international sources will be available to satisfy a percentage of compliance obligations.[15] Further, as is typical of cap and trade programs, banking and borrowing are authorized under specific circumstances.[16] Other programmatic components include encouragement of incentives for renewable energy development, including solar, wind, geothermal, wind energy, ocean energy, and biomass projects. The Bill also provides for allowances to be made available for industries seeking to initiate carbon capture and sequestration.[17] The Bill also calls for establishment of a strategic reserve allowance that may be auctioned from time to time.[18] C. Market Oversight The proposed Bill is mindful of the economic consequences of market speculation and specifically establishes a Carbon Clearing Organization that will be managed by an Office of Carbon Market Oversight within FERC.[19]

4 The Bill specifically calls for strict regulation of carbon trading and stipulates that rules must be promulgated to prevent speculation.[20] D. Credit Incentives The Bill encourages covered entities to seek offset credits for certain domestic and international projects. Qualifying projects must reduce, avoid, or sequester Carbon emissions. Projects specifically identified as eligible include methane collection at mines and landfills, manure management, and reforestation.[21] Other projects may be approved as well. International projects may be eligible for offset credits, if the international program is at least as stringent as the United States legislation. Specific rules are to be promulgated to establish eligibility and offset verification. E. Other Dingell-Boucher establishes a nexus between business, climate change, and government. It encourages building energy efficiency programs and supports updating national building codes every three years to enhance energy efficiency.[22] It also seeks an expanded role for NOAA, requiring the organization to develop a National Climate Change Vulnerability Assessment describing impacts and strategies to address regional and national climate change issues.[23] The draft legislation represents a new starting point for discussion on climate change. Importantly, it seeks to integrate emissions regulation and authorization into the existing federal CAA, which can potentially streamline the challenges that industry and administrative agencies will face when eventually implementing any Carbon reduction program. Another programmatic area requiring administrative oversight and adjustment based upon climate change is EPA s water management program. That oversight and adjustment is beginning. Federal Regulatory Action The pace of EPA s actions concerning climate change has varied. Regarding air emissions, EPA has taken a go-slow approach in responding to the Supreme Court s 2007 direction in Massachusetts v. EPA, to determine whether Carbon emissions cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare, and if so, explaining whether and how to regulate such emissions.[24] EPA has to date only published an advance notice of proposed rulemaking inviting public comment.[25] With the comment period expiring Nov. 28, 2008, the problems of

5 Carbon regulation effectively are left to the next administration. Perhaps Dingell- Boucher will be a starting point. Moreover, under the Omnibus spending bill passed in Dec. 2007, Congress required EPA to propose regulations by Sept. 26, 2008 for economy-wide reporting of Carbon emissions to EPA.[26] As of the writing of this article (Oct. 14, 2008), EPA missed its deadline. Despite EPA s measured pace on these fronts, EPA s Office of Water has taken a more pro-active approach and recently published its National Water Program Strategy: Response to Climate Change.[27} Through this strategy document, EPA hopes to focus thought and action with respect to the effects of climate change on water resources, and how the nation s water programs should adapt in light of such effects. A. Effects Requiring Response The consequences of climate change may directly impact water quality and resources as follows: - Air and Water Temperature Increases Warmer air is expected to affect snow pack and water evaporation rates, thus affecting water availability. In addition, warmer water is expected to, among other things, affect the presence and distribution of aquatic species, reduce dissolved oxygen levels in water, increase the concentration of certain pollutants, and increase algal, bacterial and fungal impacts to water. EPA expects that, consequently, more water bodies will not meet water quality standards, drinking water quality could suffer, and discharge permits and non-point pollution-control programs may require revision. - Changes in Rainfall and Snowfall Levels and Distribution Temperature increases may affect snow and rainfall accumulations which could affect stream flow and groundwater recharge. Furthermore, the increased frequency and intensity of rainfall can affect runoff, erosion and sedimentation. Increased run-off, in turn, may exacerbate flood risks, and the transportation of pollutants. Sewer overflow policies, stormwater control, water quality standards, and underground aquifer recharge protections may thus need adjustment. - Storm Intensity

6 If more intense storms occur as a result of climate change, increased coastal and inland flooding would be expected. Greater flooding risks overloading water and wastewater infrastructure capacity in affected areas. In addition, flood plains may expand and the use of wetlands to mitigate storm effects may become more important. - Rising Sea Levels With rising sea levels, greater wetland displacement and greater coastal erosion can be anticipated. Moreover, rising sea levels threaten greater salinity of surface and groundwater resources as salt water intrusion occurs. Harm may also befall our coastal estuaries. In addition, water intake facilities may need possible relocation to avoid drawing saltaffected water. Similarly, waste water treatment facilities may need to move outfalls or treatment infrastructure. - Coastal/Ocean Characteristics Increasing Carbon concentrations in the atmosphere cause increasing Carbon concentrations in the oceans, rendering them more acidic. Coral reefs and certain sensitive ocean wildlife may be especially affected by these events. Consequently, water-shed level protection programs, coral protection programs, and wetlands programs may require re-assessment. - Changes in Energy Generation The development and production of new sources of energy will require substantial water resources and generate new wastewater streams that require management and permitting. In addition, geologic and deep-ocean sequestration of Carbon generated from energy production facilities will likely expand. These practices pose potential risk to water quality if not properly managed. B. "Goals And Key Actions With consideration of the potential effects of climate change, the National Water Program established five major goals: (1) use water programs to contribute to Carbon mitigation, (2) adapt water programs to maintain and improve performance in a changing climate, (3) support climate change research related to water, (4) educate water program professionals and stakeholders concerning climate change impacts on water programs and resources, and (5) bolster management capabilities by which to consistently manage climate change issues in the Water Program.

7 In furtherance of each of these goals, the National Water Program established certain Key Actions. Some of the more significant actions for each goal follow: 1. GHG Mitigation - Improve energy efficiency at water and wastewater utilities through benchmarking programs, energy audits, and use of in-plant alternative energy sources. - Promote water conservation to reduce energy use, including through the promotion of new technologies, and labeling of products produced using water efficiency performance criteria. - Promote Green Building design, including by integrating provisions allowing green infrastructure into stormwater permits. - Develop geologic sequestration regulations and study means of safe ocean sequestration. 2. Adapting Water Programs - Consider climate change effects in identifying contaminants for potential new or modified regulation under drinking water standards. - Develop guidance on coral reef bio-assessments and biological criteria. - Evaluate new industry sectors (e.g., biofuels) and existing effluent guidelines to determine potential NPDES permitting needs. - Establish a Climate Ready Estuaries Program to provide climate change assistance to estuaries. - Modify and expand NPDES training to reflect climate change issues and provide technical assistance to permit authorities and permit writers. - Develop climate change vulnerability analyses for utilities. - Integrate impacts from climate change into emergency planning programs. - Coordinate with the Corps of Engineers to incorporate climate change considerations into wetlands fill-permitting and mitigation efforts. 3. Climate Change Water-Related Research - Monitor report development by the Climate Change Science Program ( CCSP ) and name representatives to the CCSP s Water Cycle Working Group.

8 4. Water Program Education - Expand training programs to address climate change issues. - Regularly brief state and local governmental authorities and other stakeholders on climate change response actions. 5. Water Program Management of Climate Change - Maintain the National Water Program Climate Change workgroup. - Make needed changes in the water elements of EPA s Strategic Plan. Based upon these planned actions, significant adjustments are in store for EPA s water programs that currently are relatively well understood. Conclusion Federal climate change regulation is still in its embryonic stages. Most federal activity has been limited to national policy discussions, and request for stakeholder input. Nevertheless, with the introduction of the Dingell-Boucher Bill, the pending analysis of comments to EPA s Advanced Notice of Proposed Rulemaking regarding Clean Air Act regulation of Carbon emissions, and the publication of EPA s National Water Program Strategy, the stage is set for more robust management of climate change issues in the new Congress and the next administration. --By Gerald J. Pels and Gerald D. Higdon, Sutherland Gerald Pels and Gerald Higdon are both partners in Sutherland's Energy and Environmental Practice Group. They are based out of the firm's Houston office. [1] Correspondence, dated Oct. 2, 2008 to the Honorable Nancy Pelosi, from Rep. Waxman, et al., concerning key goals of global warning legislation. [2] Id. at 1. [3] Id. at 3. [4] Dingell-Boucher Bill 711(e). The Bill s table identifying reduction targets reveals that covered emissions are to be reduced to 6 percent below 2005 levels by 2020 and 44 percent below 2005 levels by See also Executive Summary of the Discussion Draft of the Dingell-Boucher Bill ( Executive Summary ). [5] Dingell-Boucher Bill, 700(8).

9 [6] See Executive Summary at 1. Hydroflurocarbons ( HFCs ) are handled separately by amending Title V of the CAA. HFCs are classified and emissions reduced apart from other Carbon equivalents. See Dingell-Boucher Bill 401. [7] Executive Summary at 1. [8] Dingell-Boucher Bill 717(a)-(b). [9] Id [10] Id. 717(c). [11] Id. 811(a). [12] Id [13] Id. 733(b). [14] Id. 711(e). [15] Id. 712(c). [16] Id [17] Id. 724(a)-(b). [18] Id [19] Id [20] Id. 404(c). [21] Id. 741, 743. [22] Id. 511, 515. [23] Id [24] Massachusetts v. EPA, 549 U.S. 497 (2007). [25] 73 Fed. Reg. 44, 354 (July 30, 2008). [26] Pub. L. No [27] National Water Program Strategy: Response to Climate Change, Office of Water, EPA, September 2008 (Pre-Publication Copy).