CO2 Regulation Soon a Reality

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CO2 Regulation Soon a Reality

• Ruth H. Silman
• Nixon Peabody LLP100 Summer StreetBoston,
  MA 02110rsilman_at_nixonpeabody.com

Scott M. Turner Nixon Peabody LLP1100 Clinton
SquareRochester, NY 14620sturner_at_nixonpeabody.co
m
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Daily Coverage
Source The New York Times1/10/07
Source The Wall Street Journal 1/11/07
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Pressure From All Angles
State Initiatives
Federal Legislation
CO2
State Legislation
Litigation
Permit Proceedings
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Federal Legislation

• The mid-term elections changed everything in the
  Senate
• Sen. Boxer as key chair instead of Sen. Inhofe
• Sens. Bingaman, Boxer, Feinstein, and
  McCain/Lieberman, drafting legislation
• Things are less clear in the House

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Litigation

• Cases arise in three different contexts
• Clean Air Act litigation
• NEPA litigation
• Nuisance litigation

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CAA Litigation

• Massachusetts v. EPA
• Coke Oven Environmental Task Force v. EPA

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NEPA Litigation

• Border Power Plant Working Group v. DOE
• Friends of the Earth v. Watson
• Mayo Foundation v. Surface Transportation Board

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Nuisance Litigation

• Connecticut v. American Electric Power
• California v. General Motors
• Comer v. Murphy Oil

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Permit Proceedings

• IGCC and BACT determinations
• State NEPAs

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State Laws and Initiatives
ME, NH, VT, CT, NY, NJ, DE, MD (as of 1/07)
RGGI DC, MA, PA, RI Observing RGGI
Process AZ 2000 levels by 2020 50 below 2000
levels by 2040 CA 2000 levels by 2010 1990
levels by 2020 80 below 1990 levels by
2050NM 2000 levels by 2012 10 below 2000
levels by 2020 75 below 2000 levels by
2050OR Stabilize by 2010 10 below 1990
levels by 2020 75 below 1990 levels by
2050 www.pewclimate.org/what_s_being_done/in_the_
states/emissionstargets_map.cfm
www.rggi.org/about.htm
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Regional Greenhouse Gas Initiative (RGGI)

• Cooperative regional effort to reduce carbon
  dioxide emissions from electric power generators
  in participating states
• Cap-and-trade program with a market-based
  emissions trading system
• In future, may include other sources of CO2/GHG
  emissions, and GHGs other than CO2

Source www.rggi.org
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RGGI Process
Source http//www.ccap.org/domestic/srt05presenta
tions/(Franz_Litz)_20RGGI_Update.pdf
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Memorandum of Understanding 12/20/05

• Commitment to address the challenge of climate
  change while increasing energy efficiency
  investments and stimulating emerging clean energy
  technology markets
• 2009-2015 stabilize CO2 emissions from regions
  power plants at current levels
• By 2019 10 reduction in CO2 emissions from
  regions power plants

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RGGI Model Rule August 15, 2006

• CO2 budget unit at any time on or after January
  1, 2005, serves electricity generator with a
  nameplate capacity equal to or greater than 25
  MWe
• Program begins 1/1/2009 (or date unit commences
  operation)
• State regulatory agency issues CO2 budget permit
• Compliance Certification Report due by March 1 of
  year following control period
• CO2 Allowance Tracking System

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RGGI Issues

• Allowance Allocation
• Auction v. Giveaway?
• 25 of allowances must be to consumer benefit or
  strategic energy purpose
• Early reduction CO2 allowances
• Voluntary renewable energy market
  set-asideVoluntary limited industrial exemption
  set-aside
• Banking allowed
• Leakage

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RGGI Offsets

• CO2 equivalent emission reductions or carbon
  sequestration
• Real, Additional, Verifiable, Enforceable,
  Permanent
• Offset project types (must commence after
  12/20/05)
• Landfill methane capture and destruction
• Reduction in SF6
• Carbon sequestration due to afforestation
• Reduction/avoidance of CO2 emissions from natural
  gas, oil or propane end-use combustion due to
  end-use energy efficiency
• Avoided methane emissions from agricultural
  manure management operations

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RGGI Offsets (contd)

• If average price of allowance lt 7.00, offsets
  may be used from across the US 50 discount from
  outside RGGI region up to 3/3 of generators
  emissions
• If average price of allowance gt 7.00, offsets
  may be used from across North America at 11
  ratio up to 5 of generators emissions (Offset
  Trigger)
• If average price of allowance 10.00, offsets
  may be used from international projects up to
  20 of generators emissions (Safety Valve
  Offset Trigger)

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RGGI Next Steps

• Governors of participating states have agreed to
  propose regulations by 12/31/08
• Regional Organization (RO)
• Administration of Allowance Auctions
• Emission and Allowance Tracking
• Guidance Documents
• NY 12/5/06 Pre-Proposal Draft
• www.dec.state.ny.us/website/dar/preproposal.htm

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AB 32 California Global Warming Solutions Act
of 2006 (9/27/06)

• Reduce GHG emissions to 1990 levels by 2020
• By 2050, ? GHG emissions to 80 below 1990 levels
• CARB must develop regulations and market
  mechanisms
• Adopt mandatory reporting rules for GHG sources

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Examples from Other States

• NM Executive Order (12/28/06) - Reduce GHG
  emissions to 2000 levels by 2012, 10 below 2000
  levels by 2020 and 75 below 2000 levels by 2050
• AZ Executive Order (9/8/06) - Reduce GHG
  emissions to 2000 levels by 2020, and 50 below
  2000 levels by 2040.

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Conclusions

• CO2 regulation is a reality, at least locally and
  regionally
• National regulation is a question of when, not
  if
• Owners of existing power plants should push for
  broad cap and trade systems, rational allowance
  allocations, new source set asides, and a wide
  array of offset opportunities
• Developers of new coal-fired power projects early
  on must develop strategies to deal with CO2 in
  the permitting process

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