US Climate Policy Developments

1
US Climate Policy Developments

• Frederick R. Anderson
• A Proposal for the Academies
• Policy Choices in any legislative scheme
• Congress
• States
• The Courts

2
Basic Policy Choices

• Technology-based standards
• Cap-and-trade
• Taxes and other economic incentives
• Disclosure and voluntary action

3
Issues to be Addressed

• Caps and Baselines plant, company, sector,
  state, nation, globe
• Baselines merger, acquisition, reorganization
• Trading/banking/offsets vs. CAA/AB 32-style
  performance standards
• Sector coverage and economic impact phase-in,
  byes/safety valves, cost-spreading
• Allocating emissions allowances grandfathering,
  auction, allowance retirement
• Economic incentives carbon tax, green
  technology, tax incentives/subsidies
• Early action credits
• At what point should allowance purchase occur?
  upstream/downstream, energy use vs. carbon
  release, double-counting

4
Examples of Federal Bills

• Global Warming Pollution Reduction Act (the
  Sanders-Boxer Gold Standard)
• Climate Stewardship and Innovation Act
  (Liebermann-McCain) (S.280)
• Electric Utility Cap-and-Trade Act
  (Feinstein-Carper) (S.317)
• See handout

5
Congress Sanders-Boxer Gold Standard (S.309)

• US GHG emissions to be reduced to 80 percent
  below 1990 levels by 2050
• US to reduce GHG emissions proportional to world
  emission reductions to achieve maximum 3.6 F
  global temperature increase and maximum 450 ppm
  concentration of CO2 or equivalents
• Regulates CO2, NOx, methane, hydrofluorocarbons,
  perfluorocarbons, sulfur hexafluoride, and other
  compounds found by rule to be climate-forcing
• Regulates biological carbon storage

6
Congress Sanders-Boxer Gold Standard (S.309)
(cont)

• Regulates industries and economic sectors major
  stationary sources that emit 250 tons of any
  pollutant listed in CAA 169A and electric
  utilities and vehicle manufacturers
• Rulemaking sets emissions limits by industry
  sector, to meet reduction standards for each
  decade until 2050
• EPA authorized to create allowance trading
  markets, declining emissions caps, and a
  technology-indexed stop price
• Allowance allocation and pricing by industrial
  sector or emissions source type (not economy wide)

7
Congress Sanders-Boxer Gold Standard (S.309)
(cont)

• Vehicle emissions limits (e.g., 205-405
  grams/mile CO2E based on car weight
• Electric utilities post-2011 new source
  low-carbon standard retrofit of pre-2012 units
  and retail electric suppliers must ensure peak
  demand and total electricity use reductions
• Renewable Portfolio Standard (RPS) for utilities
  (minimum of 5 percent renewables for 2008,
  phasing up to 20 percent in 2020 and after)
• 2020, 2030, and 2040 steps toward 2050 goal (80
  percent reduction below 1990 levels)

8
Congress Sanders-Boxer Gold Standard (S.309)
(cont)

• Recognizes reductions made prior to effective
  date of new law
• Local or state program must have been mandatory
  and as stringent as federal program, and
  reductions must be verifiable
• Voluntary reductions since 1992 under the DOE
  program must meet the verification standards of
  federal law
• Requires SEC reporting on the companys risks and
  potential liability due to its GHG emissions
• Directs US participation in 1992 U.N. Framework
  Convention (Kyoto post-2012 requirements)
• Corresponding House bill would be based on H.R.
  5642 (109th Congress) Waxman-Markey

9
State GHG Emissions Targets

• Most states seek to return GHG Emissions to 1990
  levels by 2020
• Most state goals set by executive order or
  unenforceable action plan
• Arizona, Oregon, New Mexico, Connecticut, Maine,
  New Jersey, New York, Rhode Island, Vermont,
  Illinois
• Exceptions California, Massachusetts, and New
  Hampshire

10
State Carbon Offset Programs

• Oregon new plants face emissions caps that can
  be offset
• Washington new or expanding power plants must
  offset CO2 emissions by specific percentages
• Massachusetts offsets for exceedances of CO2
  caps for older plants

11
General State Initiatives

• Climate change commissions Alaska, North
  Carolina, Illinois
• Climate action plans Connecticut, Maine
• GHG reporting California, Wisconsin, West
  Virginia
• Performance standards for vehicles California,
  New Jersey, Washington (nine states pending)

12
Three New California Laws (all 9/06)

• AB 32
• Statewide cap on GHG emissions at 1990 levels by
  2020
• Air Resources Board to create, implement, and
  enforce standards
• State greenhouse gas emissions reporting and
  monitoring program/enforced compliance
• Authorizes market-based mechanisms (e.g.
  cap-and-trade)
• SB 1368
• California Energy Commission to set a GHG
  performance standards
• Applies to electricity, whether generated within
  CA or imported from other states

13
Three New California Laws (cont)

• SB 107
• The three major utilities Pacific Gas
  Electric, Southern Edison, and San Diego Gas
  Electric must produce at least 20 percent of
  electricity using renewable sources, by 2010
• Plus Governors Executive Order (June 2005)
• Emissions capped at 2000 levels by 2010
• Emissions capped at 1990 levels by 2020
• Emissions reductions to 80 percent below 1990
  levels by 2050

14
Regional Greenhouse Gas Initiative (RGGI)

• A regional GHG cap-and-trade program (one of
  several)
• Memorandum of Understanding signed late 2005 by
  Connecticut, Delaware, Maine, New Hampshire, New
  Jersey, New York, Vermont Massachusetts and
  Rhode Island in 2007
• A state-specific law or rule based on a RGGI
  model rule

15
RGGI

• Cap-and-trade program for CO2 commences on
  January 1, 2009
• Emissions from fossil-fuel-fired electrical
  generating units of 25 MW or greater capped at
  121 million tpy (through 2015)
• No limit on banking of allowances and offsets

16
RGGI

• The regional organization will manage emissions
  and allowance tracking system and evaluate
  offsets
• Initial offset categories (landfill methane
  capture and destruction sulfur hexafluoride
  fugitive emissions capture and recycling at
  electrical transmission equipment carbon
  sequestration through afforestation increasing
  fossil fuel end-use efficiency methane capture
  from agriculture)

17
Courts Massachusetts v. EPA (April 2, 2007)

• The Supreme Court held in a 5-4 decision that CO2
  can be regulated as a pollutant under the Clean
  Air Act
• Under the clear terms of the Clean Air Act, EPA
  can avoid taking further action only if it
  determines that greenhouse gases do not
  contribute to climate change or if it provides
  some reasonable explanation as to why it cannot
  or will not exercise its discretion to determine
  whether they do.

18
Courts Massachusetts v. EPA (cont)

• Based on a petition to EPA to set new tailpipe
  CO2 emissions standards (EPA refused, claiming
  that CO2 is not a pollutant standards would
  accomplish little and conflict with other
  Administrative climate programs)
• Ruling apparently not limited to tailpipe
  standards, i.e., EPA must consider CO2 limits for
  all Clean Air Act pollutants (e.g., New Source
  Review for major facilities/modified facilities.
  Petitions pending at EPA for NSR CO2 rules)

19
Additional Litigation

• New York v. EPA Coke Oven Environmental Task
  Force v. EPA (D.C. Cir. filed April 27, 2006)
• Ten states, two cities, and environmental and
  industry groups challenge EPAs failure to
  include limits on CO2 emissions from new electric
  generating and industrial facilities in NSPS
  regulations
• Litigation is also proceeding under the Energy
  Policy and Conservation Act, the National
  Environmental Policy Act, theories of preemption,
  and the Endangered Species Act

20
Additional Litigation (cont)

• Green Mountain Chrysler-Plymouth-Dodge-Jeep v.
  Crombie (D.Vt.)
• Automakers challenge Vermont GHG emission
  standards for cars and SUVs
• Challengers argue that Vermont law is preempted
  by federal fuel economy standards
• Central Valley Chrysler-Jeep v. Witherspoon (E.D.
  Cal.)
• Automobile dealerships challenge California law
  limiting GHG emissions from new vehicles sold in
  California, arguing that state law is preempted
  by federal law

21
Additional Litigation (cont)

• California v. General Motors (N.D. Cal. 2006)
• California brought suit against automobile
  manufacturers for GHG emissions under federal and
  California common law of public nuisance
• Manufacturers have moved to dismiss (Clean Air
  Act, EPCA, and foreign policy preempt federal
  common law)
• Border Power Plant Working Group v. Dept. of
  Energy, 260 F.Supp.2d 997 (S.D. Cal. 2003)
• Environmental groups challenged Department of
  Energys approval of transmission lines
  connecting new Mexican power plants to California
  power grid
• Court agreed with environmental groups that DOE
  should consider plant emissions in National
  Environmental Policy Act Environmental Assessment
  and finding of No Significant Impact

22
Additional Litigation (cont)

• Center for Biological Diversity v. NHTSA (9th
  Cir.)
• Environmental groups, states, and cities are
  suing EPA for failure to prepare an Environmental
  Impact Statement on revised Corporate Average
  Fuel Economy (CAFE) standards and failure to
  comply with EPCA