Climate Change Update: The State of Play in the U.S. in the Run-Up to Paris

Transcription

1 November 12, 2015 Climate Change Update: The State of Play in the U.S. in the Run-Up to Paris ACC Legal Quick Hit NICHOLAS W. VAN AELSTYN AND KRISTIN H. GLADD, BEVERIDGE & DIAMOND, P.C.

2 Topics to be Covered 1. Recent Federal Climate Activity Clean Power Plan ( CPP ) Methane Regulations HFCs 2. Regional and State Climate Programs Regional Greenhouse Gas Initiative ( RGGI ) California AB32 3. Lead up to Paris Talks 4. Takeaways 2

3 EPA s Final Clean Power Plan ( CPP ) Overview Overall goal: reduce GHG emissions by 32% from 2005 levels by 2030 Sets CO2 emission performance rates for affected electric generating units ( EGUs ) that reflect the Best System of Emission Reduction (BSER) Performance rates are applied to each state s unique energy mix to calculate a state goal States must develop plans (SIP-like) to achieve their goal on either a per-egu or statewide basis 3

4 Final CPP Building Blocks Performance rates calculated using three Building Blocks : Inside the Fence Line :! Block 1: Efficiency improvements at existing fossil fuel-fired power plants! Block 2: Substituting existing natural gas generation for existing coal generation Outside the Fence Line :! Block 3: Increasing the use of renewable energy Image: Arnold Paul 4

5 The Future of the CPP Compliance Timeline June 18, 2014: Proposed Rule published in the Federal Register. August 3, 2015: Final Rule issued (published in FR Oct. 23) Sept. 6, 2016: State plans due (two-year extension available to all states). Sept. 6, 2017: Progress update, for states with extensions. Sept. 6, 2018: State plans due for those that request extensions. Sept. 6, 2019: Latest date for EPA approval (must approve or disapprove within one year of submittal). July 1, 2021: Status Reports due. January 1, 2022: Performance period begins. January 1, 2030: Deadline to meet final goals. 5

6 The Future of the CPP Litigation In re: Murray Energy Corp. (D.C. Circuit), decided June 9, 2015 Dismissed as premature held petitioners cannot challenge draft rule. Previewed likely challenges on the merits. West Virginia et al. v. EPA et al. (D.C. Circuit) Consolidated challenges on merits by 26 states and business and industry groups Petitioners also seeking stay to halt implementation of the rule To date, 18 states plus municipalities, environmental organizations, and clean energy entities intervening to support EPA Will likely go to U.S. Supreme Court 6

7 Related Rulemakings Final Carbon Pollution Standards for New and Modified Units Issued under CAA 111(b) New coal plants required to use CCS New natural gas plants required to use combined cycle generation technology Legal predicate to EPA s issuance of the CPP 7

8 Implications for Non-Utilities: Demand-Side Energy Efficiency ( EE ) EE element from Proposed Rule is gone, but states can still include demand-side EE measures in their state plans Demand-side EE measures will be incorporated into states electricity demand forecasts The upshot: State goals no longer partially based on expected energy efficiency improvements BUT states can still impose demand-side EE measures as a method of compliance Non-utilities may therefore still face EE requirements as a result of the CPP implementation in certain states 8

9 Implications for Non-Utilities: Precedential Use of 111(d) EPA may continue to use this model of regulation to address CO2 emissions from other industries Example: 111(b) rule for methane emissions from new oil and gas industry sources issued this fall According to EPA s position in the CPP, that 111(b) rule should trigger a requirement to issue a corresponding 111(d) rule for existing sources Environmental organizations calling for precisely this So far, EPA has remained silent on whether it plans to do so for oil and gas sector 9

10 Reducing Methane Emissions from Oil and Gas Sector Administration s Strategy to Reduce Methane Emissions : cut emissions by 40-45% from 2012 levels by 2025 Creates obligations only for new and modified sources, but reductions from existing sources will be required to achieve the Administration s goals Rules still in proposed form (comment period ends Nov. 17) 10

11 HFCs Potent warmers. Emissions projected to increase twentyfold in coming decades, largely due to increasing demand for refrigeration and air conditioning in developing countries President s 2013 Climate Action Plan sets out goal to reduce HFCs through international and domestic actions U.S. and China agreed to work together to phase down HFCs in 2013 Efforts toward a Montreal Protocol Amendment July 2015: EPA finalizes rule to reduce emissions of HFCs and HFC-blends used in aerosols, foam blowing, motor vehicle air conditioning, retail food refrigeration and vending machines 11

12 Regional Greenhouse Gas Initiative ( RGGI ) Eastern states (CD, DE, ME, MD, MA, NH, NY, RI, and VT) First market-based GHG reduction scheme in U.S. Operates a voluntary cap-and-trade program covering the power sector Cap previously exceeded demand; has been lowered since To comply with CPP, additional states may consider joining RGGI 12

13 California and AB 32 AB 32, the Global Warming Solutions Act, adopted in 2006 Cap-and-Trade Program launched January 2012 Just 30% of the emission reductions Phase 1 ( ) covered electricity generation and industrial emitters > 25,000 MTCO2e 35% of GHG emissions Phase 2 ( ) expanded to include transportation fuels, covering 85% of GHG emissions 12 allowance auctions Two compliance events Québec linked

14 California s Next Steps Major New Policy Goals SB 350 adopted September 2015 Extends RPS program and mandates increase to 50% renewables by 2030 Requires doubling of building EE 50% reduction in petroleum usage by 2030 removed SB 32 to extend AB 32 beyond 2020 not adopted Governor s (and CARB s) Policy 50% reduction in petroleum use by 2030 GHG emissions 40% below 1990 levels by

15 CARB s Likely 2016 Rulemaking Extend the Cap-and-Trade Program beyond 2020 Establish a GHG emissions goal for 2021 and for each year thereafter to achieve Governor s 2030 goal Program refinements Streamline and expand offsets program Sector-based forestry offsets (i.e., international REDD credits) to be integrated in Phase 3 Update with new data (e.g., leakage analyses) Maintain environmental and market integrity Implement California s SIP for the Clean Power Plan Linkage with Ontario, Canada Aiming for 2016 rulemaking and full linkage in Phase 3 Perhaps other jurisdictions as well? 15

16 Litigation Challenges to AB 32 Several litigation challenges to the Cap-and-Trade Program have been filed A CEQA challenge delayed implementation for a year Challenge to the offsets program rejected by last court early 2015 Challenge to the auctions program still pending before Court of Appeal Contends auctions are an illegal tax Trial court said it was a close call; Court of Appeal reviews de novo Decision anticipated in 2016 Few in Sacramento believe court will kill the program 16

17 California Advising the World China developing cap-and-trade program with formal assistance from California CARB Chair Mary Nichols rang the bell at the opening of the first allowance exchange in China California has MOAs with several sub-national jurisdictions addressing different aspects of climate change policy, from capand-trade to sector-based offsets California a leader of the subnational movement on the international stage Major presence at last COP in Peru Anticipated to have a major presence in Paris 17

18 COP21, Paris Climate Talks in December INDCs Target: limit global warming to 2 degrees Celsius over pre-industrial levels (UN threshold for avoiding most dangerous climate impacts) Intended Nationally Determined Contributions ( INDCs ): 158 countries, ~ 90% of global emissions. Most set some form of emission reduction target: 32 are absolute 5 are intensity-based (emissions/gdp) 63 are pegged to projected business as usual (BAU) Most set 2030 target dates 65 are fully or partially conditional on international support and finance 18

19 Paris Climate Talks INDCs by Country US 26-28% GHG reduction from 2005 levels by 2025 EU Reduce 40% of GHGs from 1990 levels by 2030 China Peaking of CO2 emissions by 2030 or earlier Reduce CO2 intensity (60-65%) per GDP from 2005 levels by 2030 Increase share of non-fossil fuels to 20% by 2020 India Intensity target 33-35% from 2005 level by 2030 Achieve ~ 40% cumulative installed power capacity from non-fossil fuel resources by 2030 Brazil Reduce GHG emissions 37% from 2005 levels by 2025 Aspirational goal of reducing 43% by

20 Paris Climate Talks: Temperature Rise Projections Under BAU: degrees Celsius UN Report Based on INDCs submitted by 146 countries, covering 86% of global GHG emissions If fully implemented, would limit temperature rise to 2.7 degrees Celsius by 2100 EU Joint Research Center Review 155 countries, covering 90% of global GHG emissions Slightly less optimistic -- projects 3 degree Celsius temperature rise from current pledges 20

21 Paris Climate Talks Status at close of Bonn Last in a series of meetings before Paris talks Hopes -- advance negotiations on draft text for an agreement in Paris Fell short of expectations Process backslid, with some parties reverting to older negotiating positions Not able to engage in actual textual negotiations to prepare draft text for Paris 55-page negotiating text forwarded to, but not where parties hoped it would be 21

22 Paris Climate Talks Key Issues Major issues still outstanding: 1. Common but differentiated responsibilities 2. Binding -- in entirety? Only some provisions? 3. Financing for climate adaptation in developing countries 4. System for accountability 5. Mitigation assistance/climate disaster relief 22

23 Paris Climate Talks Takeaways Coming into Talks Several major substantive issues must be resolved before an agreement is possible Uncertainties in domestic policies may complicate ability of nations to meet commitments Overall sense -- political will still exists to reach a deal, but not clear how ambitious deal will be, or if it will be ready for implementation Despite the above, may create a viable international framework for moving forward 23

24 Questions? Thank you! Nicholas van Aelstyn Principal San Francisco (415) Kristin Gladd Associate Washington, D.C. (202)