Rhetoric increases over alleged EPA regulatory "train wreck" but will reliability really be imperiled?
As part of their fall jobs agenda, House Republicans are targeting a number of controversial EPA regulations, including the utility MACT and cross-state air pollution (“CSAP”) rules. Opponents of these and other rules argue that they will result in a regulatory “train wreck,” which could threaten the reliability of domestic electricity grid. Next week, the House is expected to consider H.R. 2401, the Transparency in Regulatory Analysis of Impacts on the Nation Act, which would require an analysis of the cumulative economic impacts of EPA’s air, waste, water and climate change rules. In addition, two House Committees held hearings this week regarding the potential impacts of these rules. The House Energy and Power Subcommittee held a hearing with commissioners from the Federal Energy Regulatory Commission (“FERC”) on the potential reliability and costs implications of the utility MACT, CSAP and other proposed EPA regulatory actions. A House Science Committee also heard testimony from EPA, utilities and state regulators regarding the CSAP rule.
The testimony of the FERC Commissioners at the hearing reflects the broad disagreement over the effects of EPA’s regulations. FERC Chair Jon Wellinghoff stated that “with sufficient information and time, the electric industry can plan to meet both its reliability and environmental obligations.” FERC Commissioner Phillip Moeller, however, contended that he is concerned about reliability given EPA time-lines for new regulations.
At a House Science Committee hearing, Trip Doggett, the President of the Electric Reliability Council of Texas, alleged that the loss of 1,200 megawatts would have resulted in rolling blackouts during this summer’s heat wave. This hearing came days after Luminant threatened to close two of its coal-fired power plants due to the CSAP rule. The 1,200 megawatts is approximately equal to the capacity of Luminant’s two coal-fired power plants. At the hearing, Associate Administrator Gina McCarthy defended the CSAP rule, arguing that Luminent could reduce emissions by using scrubbers. McCarthy also contended that EPA has engaged in extensive outreach to Luminant to explore compliance options that would allow for its facilities to remain open while it installed pollution-control equipment.
The fiery and partisan rhetoric over utility MACT and CSAP rules has obscured a non-partisan analysis of the rules by the Congressional Research Service (“CRS”), which was released last month. CRS found that the utility MACT, CSAP and other air rules will affect utilities but concluded that the impacts will be less severe than those claimed by opponents. The report found that new EPA air rules would mostly affect older, less efficient coal-fired units. These plants, however, are already being retired or replaced by more efficiency combined cycle natural gas plants. According to the report, many of the newer coal-fired plants already comply with the new air rules or could make modest investments to obtain compliance.
The CRS report concludes that fears related to reliability are overstated. Currently, there is a significant amount of excess generation due to the recession and increasing number of natural gas combined cycle plants being brought on-line. The report cites an analysis by FBR Capital Markets, which found that even the retirement of 45 gigawatts (GW) of electricity from coal-fired power plants would have a minimal effect on electricity reserve margins. This FBR Capital Markets analysis reported that “summer reserve margins are currently 26% across the U.S. and are likely only to decline by 2014 in a draconian scenario in which 45 GW of generation is retired.” Moreover, the “draconian scenario” is premised on the fact that 45 GW would be retired, an estimate that appears above current projections under EPA’s new air rules.
An important caveat, however, is that the rules will affect various parts of the country differently. The reserve margins in states like Texas are narrower, and the threats to reliability could be more pronounced in areas that rely more on older coal-fired power plants.
Despite the partisan acrimony recently over these rules, the impacts, while real, appear to be more modest than opponents would allege. One potential positive outcome of the House Energy and Power Subcommittee is that FERC Commissioners appeared to agree on the importance of a “safety valve” in a final utility MACT rule. In public comments on the utility MACT rule, Midwest ISO proposed the “safety valve” option, which would provide a retiring generator will an “extension for the time needed to implement reliability solutions to replace the subject resource.” Common-sense solutions such as this one can address reliability concerns while helping to achieve significant health and environmental benefits.
DOE-Commissioned Study Highlights Role that U.S. Can Play in Helping Other Countries Responsibly Develop Shale Resources
Last week, Rice University’s James Baker’s Institute for Public Policy released a Department of Energy-commissioned study entitled “Shale Gas and U.S. National Security.” Consistent with other recent studies, the report concluded the new U.S. domestic shale development offers significant benefits, including reduced liquefied natural gas (LNG) imports and lower natural gas prices.
The report also found that new U.S. shale development can limit Iran and Russia’s share of the global natural gas market, and therefore, reduce these countries’ ability to use their resources as a political tool. According to the report, U.S. production is already affecting global markets; LNG supplies previously intended for the U.S. are now being diverted to Europe and Asia. This development is lowering natural gas prices for Europe, while also providing these countries with an alternative to Russian pipeline supplies. The report argues that these developments represent a “major paradigm shift” and can allow for Europe to more aggressively influence Russia’s foreign policy.
The study’s “reference case” assumes, however, that all known global shale gas resources can be developed with existing commercial technologies and open tendering practices. As noted by the study, one potential impediment globally to development is water scarcity. For instance, the study argues that water scarcity could make production in Western China cost prohibitive. With its increasing demand for natural gas, China’s reliance on supply from Russia will likely be heightened, particularly if shale development in China is limited.
As the report notes, there is fortunately a role for the U.S. to play in helping countries develop technologies to manage water impacts of shale development. Last year, the State Department launched the Global Shale Gas Initiative to help countries responsibly develop their shale resources. The initial meeting last August included 50 delegates from 20 countries, including China, Poland, India and Chile. The meeting also included U.S. producers and service companies, and representatives from 13 federal agencies, including EPA, Department of Energy and the Bureau of Land Management. This initiative can help provide these countries with information on practices to reduce the overall environmental footprint of development, particularly focusing on technologies to recycle and reuse water.
This initial meeting was an important first step, but it’s important that the State Department continue to devote time and resources into the Global Shale Gas Initiative. Federal agencies are reassessing their priorities as they prepare for significant budget cuts. Helping other countries responsibly develop their shale resources, which can reduce the influence on countries like Russia and Iran, should be an important priority, and the State Department should remain committed to programs like the Global Shale Gas Initiative that can help achieve this goal.
SCOTUS Holds That Plaintiffs Cannot Maintain Federal Common Law Nuisance Claims Against GHG-Emitting Utilities but Leaves Window Open for State Common Law Claims
On June 20, 2011, the Supreme Court reversed the Second Circuit’s decision in American Electric Power, Co., Inc. v. Connecticut, No. 10-174, but on narrower grounds than some had hoped. The Court held 8-0 that Connecticut and a coalition of seven other states, the City of New York, and three land trusts could not proceed with their federal common law public nuisance claims against carbon dioxide emitters (four private power companies and the federal Tennessee Valley Authority).
The Court held that the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel power plants. While the Court’s decision effectively precludes the plaintiffs and similarly situated parties from seeking to limit greenhouse gases under federal common law, it leaves open the possibility that parties may pursue similar claims under state common law.
The Court was split (4-4) on whether plaintiffs had standing to bring this claim. This means that the Second Circuit’s finding that plaintiffs did have standing (and that the court therefore had jurisdiction to hear the case) stands, although that ruling is not binding on other circuits. Thus, the Court’s decision does not provide a jurisdictional bar to future climate change tort lawsuits, which was sought by the power company defendants. The industry had hoped to limit the Court’s standing holding in Massachusetts v. EPA, 549 U.S. 497 (2007). The Court did not address whether the political question doctrine bars tort suits related to climate change, which potentially would have been a more broadly applicable basis for reversal.
Thus, in future actions seeking damages for harm resulting from climate change based on state common law theories, issues of preemption of state law, standing, and the political question doctrine still may need to be adjudicated. The Court did hint, however, that state law actions would be preempted by the Clean Air Act. On the other hand, plaintiffs will point to the fact that the Court specifically noted that the test for displacement of federal common law presents a lower threshold than preemption of state law. The next tort battles will likely be in state courts or federal courts with diversity jurisdiction. Plaintiffs also may follow the Court’s advice and file actions pursuant to the Clean Air Act.
Proposal to Handicap EPA's Regulation of Greenhouse Gases Evaporates in Senate
Earlier this week, Senate Republicans failed in their attempts to limit the Environmental Protection Agency’s regulatory authority over carbon dioxide and other greenhouse gases under the Clean Air Act. While this is a short term victory for the Obama administration, the nature of the vote raises questions about the EPA’s congressional support in the not so distant future.
Republican leader Mitch McConnell (R., KY.) and Sen. James Inhofe (R., OK.), introduced an ambitious measure that would reject the EPA’s finding that climate change is a threat to public health and welfare, and rein in the Obama administration’s environmental policies. Ultimately the proposal failed with only four Democrats joining the ranks of Republicans seeking to restrict the EPA’s authority. A companion measure in the Republican-held House passed 255-172 the next day, but was more a symbolic vote given the lack of Senate support and promised presidential veto.
Senate Democratic leadership countered the Republican proposal with a handful of less comprehensive measures to restrict the EPA’s plan of action. This tactic allowed moderate Democrats to cast votes against the EPA on proposals that were meant to be defeated, and provided them with the necessary political cover to eventually block the McConnell and Inhofe rider.
In total, 17 Democratic Senators voted for at least one of the four measures, and a majority of the Senate is now on record supporting some type of restriction to the EPA’s authority. Coupled with the passing of the doomed-yet-symbolic House bill that sought to nullify the EPA’s scientific findings and resulting greenhouse gas regulations, the outlook for the Obama administration’s climate policies may be cloudy.
The EPA had taken the stance that greenhouse gas emissions pose a threat to human health, and in 2009 began to assert its power under the Clean Air Act to set standards for power plants, refiners and other major emitters. But, with an additional 17 Democrats supporting the House measure, and the 2012 Campaign season fast approaching, one wonders if the White House will be able to rally the support needed to continue its climate initiatives.
EPA, Clean Air Act & Climate Change: Consider the Facts
The U.S. Environmental Protection Agency (EPA) has taken a lot of hits from those opposed to greenhouse gas regulations in the past week. In the House of Representatives, tough hearings led by U.S. Rep. Ed Whitfield, (R-KY), Chairman of the House Subcommittee on Energy, were held with EPA Administrator Lisa Jackson. Jackson’s testimony followed that of lead witness Senator James Inhofe (R-OK) who promoted his upcoming book, “The Hoax,” which takes aim at the science of climate change. The House subsequently passed an amendment to the proposed Continuing Resolution that would strip EPA of its authority to regulate GHG emissions and significantly decrease funding for environmental and clean energy programs. Meanwhile, outside of Washington, D.C., the first two permits considered by EPA suggest cleaner facilities and job creation can be compatible with new regulations as opposed to some of the concerns expressed in the hearings and continuing resolution.
This past week, South Dakota issued a draft permit for Best Available Control Technology for greenhouse gases under the Clean Air Act (CAA) to the Hyperion Energy Center. Project owners describe the facility as a “HEC is a 400,000-barrel per day (BPD) highly-complex, full-conversion refinery which will produce clean, green, transportation fuel such as ultra-low sulfur gasoline (ULSG) and ultra-low sulfur diesel (ULSD).” South Dakota regulatory officials found that significant energy efficiency improvements to the refinery were the most cost-effective manner to move forward. The officials considered carbon capture & storage as an alternative path, but decided that while the technology is technically feasible it is not cost-effective or environmentally appropriate in this instance. EPA will now have 30-days to review the decision, but don’t expect any radical changes to the State-level decision. Construction will create an estimated 4,500 jobs and when finished, 1,826 permanent jobs will be created for the ongoing operation of the refinery and associated utility plant according to company officials.
In Louisiana, State regulators recently approved an air quality construction and operating permit that includes emissions control requirements for greenhouse gases as well. The permit clears the way for an iron production facility, the initial phase of the construction of a larger Nucor iron and steelmaking facility in St. James Parish. Under the permit granted, the greenhouse gas limits rely on energy efficiency measures and set a 13 million British thermal units of natural gas per metric ton of direct reduced iron. State regulators estimate the plant will emit 3.39 million metric tons of carbon dioxide per year. 500 construction jobs and 150 permanent jobs will be created according to Nucor, although they would like the facility to be larger and note regulatory uncertainty as a cause of concern. On the other hand, some environmental groups including the Tulane Law Clinic may challenge that the permit is not strict enough. EPA will now conduct a review here as well.
Congress would be well-advised to consider these case studies as it moves forward in its deliberations.
Can Congress get behind a "Clean Energy Bank?"
With Washington focused on a clean energy standard and legislative efforts to block EPA’s greenhouse gas (GHG) regulations, proposals to establish a “clean energy bank” are quietly gaining significant support. Last Congress, both the Waxman-Markey and Senate Energy Committee bills included provisions that would have established a clean energy deployment administration (i.e. a clean energy bank). These bills differed slightly on how to establish and structure CEDA, but generally the agency would operate as either an independent or quasi-independent agency to provide loan guarantees and other financing to support clean energy. CEDA addresses a critical problem many renewable projects face – gaining access to capital to move beyond the R&D phase to deployment.
Two events occurred last week that could spur momentum for CEDA. First, the Senate Energy Chair Jeff Bingaman (D-NM) outlined his energy agenda for 2011 in which he called for the creation of CEDA. This development was expected given that Senator Bingaman has been an ardent supporter of CEDA, but his comments reflect that this issue will be a priority for him this year.
Secondly, the U.S. Chamber of Commerce unveiled its 2011 Energy Plan that included explicit support for a “clean energy bank” that provides financing for nuclear and renewable projects. The Chamber’s endorsement could provide some political cover for Republicans, particularly in the House, to support CEDA. House Republicans are expected to ratchet up oversight of DOE’s loan guarantee programs initially created by the 2005 Energy Policy Act and expanded by the stimulus bill, along with other tax incentives for renewable production. The establishment of CEDA as an independent agency could offer a way to reform these programs.
Moreover, in a period of fiscal austerity, CEDA is an attractive option to spur clean energy since supporters argue that it would only need some initial seed money to get off the ground. Waxman-Markey proposed that the Department of Treasury provide CEDA with the authority to issue $7.5 billion in “green” bonds to support the project. Under the Senate bill, the Treasury would transfer $10 billion to help start CEDA. After the initial start-up funding, CEDA is designed to operate on a self-sustaining basis with any resulting profit from its activities going to the U.S. Treasury.
The adoption of any energy legislation is never easy, and there is concern that CEDA could allow for unlimited loan guarantees that reward the more expensive and risky technologies. Nonetheless, the Chamber’s endorsement, coupled with Sen. Bingaman’s commitment to the issue, provides a significant opportunity for the nuclear and renewable industries.
"Our generation's Sputnik moment": President Obama calls for 80% "clean" electricity by 2035
In his State of the Union address, President Obama challenged Congress to pass legislation establishing a clean energy standard (CES) that would require that 80 percent of America’s electricity come from “clean” sources by 2035. President Obama signaled that a standard would recognize electricity derived from not only renewables but also nuclear, clean coal and natural gas. Calling the clean energy push “our generation’s Sputnik moment,” the President’s speech framed a CES in the larger context of improving U.S.’s competitiveness in the changing global economy. The focus on clean energy and not GHG emissions also reflects a dramatically altered political landscape than what President Obama faced over his first two years in office. With cap-and-trade legislation off the table, President Obama is reaching out to Republicans by expressing his support for clean coal and nuclear in any energy legislation.
In a conference call today, Secretary of Energy Steven Chu reiterated President Obama’s comments that the U.S. faces a “Sputnik moment” where it must make a concerted commitment in clean energy to compete with China, Europe and other countries. With regard to a CES, Secretary Chu acknowledged that the President’s proposal was “ambitious” but “not over-the-top.” Secretary Chu noted that the details of a CES proposal will be left to Congress and that any legislation will require bipartisan support.
President Obama’s State of the Union address, coupled with Secretary Chu’s press conference, could provide momentum to energy legislation. Despite environmental organizations prior opposition to nuclear, some mainstream environmental organizations like the Pew Center on Global Climate Change and the National Resource Defense Council reacted favorably to President Obama’s CES proposal. The renewable energy industry also praised the President’s comments and argued that a CES can help fuel job growth. Senator Lindsay Graham (R-SC) is planning on working with a bipartisan group of Senators on drafting a bipartisan energy bill that includes a CES. Senate Majority Leader Harry Reid (D-NV) is also indicating that energy policy will be a top legislative priority this year.
Yet prospects for passage of a CES still faces considerable challenges. Senator Richard Lugar (R-IN), a key swing vote on energy legislation, remains undecided as to whether to endorse a CES. He introduced legislation last year that included a similar “diverse energy standard,” but he noted that he is reassessing this standard in light of concerns expressed by utilities. Emboldened conservatives, particularly in the House, will likely be highly skeptical of any mandate even if it were to include nuclear, clean coal and natural gas. Notably, House Energy and Commerce Chairman Fred Upton (R-MI) released a statement after the President’s speech criticizing a call for increased federal mandates. A CES bill could also become a legislative vehicle for contentious debates on other issues like EPA’s GHG regulations and offshore drilling.
To pass a CES, President Obama will need to build and sustain a tenuous alliance of Democrats, moderate Republicans, environmentalists, and utilities, among other stakeholders. The success of the President’s push will depend on his ability to argue that clean energy is essential to “win the future,” as he stated last night, and keep America as an economic leader in innovation and competitiveness.
Climate versus Growth?
The Obama Administration says it is laying the groundwork for a long, green, economic recovery. But plenty of people argue that the recovery part and the green part contradict each other.
One piece of evidence to support the pessimists emerged from Washington last week. Inside EPA reports that the administration environmental champions are not getting their way when it comes to the ongoing restructuring of Chrysler and General Motors.
Environmentalists are noting that neither Chrysler's bankruptcy announcement nor GM's most recent shareholder prospectus mention or endorse some of the administration's major environmental initiatives that impact the auto industry:
- EPA's pending GHG limit on the transportation sector
- National Highway Traffic Safety Administration's pending rule to tighten CAFE standards, or
- EPA's reconsideration of California's request to regulate tailpipe emissions.
As I've indicated before, I tend to be more sanguine about the prospects of melding a green economy and a recovery for the auto industry.
Detroit should take the initiative and leverage the administration's environmental inclinations to the hilt, recommending newer, bolder green innovations in exchange for additional support. For its part, the administration should hold the line and make sure that any auto industry that rises from the ashes because of taxpayer support is an environmentally sensitive industry as well.
Four Bright Green Spots in the Budget
As I’ve mentioned before, I’ve been spending a lot of time this year helping clients see how the American Reinvestment and Recovery Act (ARRA) can help support their environmental initiatives.
But last week, when the President sent Congress the fine print of his proposed Fiscal Year 2010 budget, even I had a start: Never before has US government set out to make its spending so green. Not even the stimulus.
Here’s a list of Four Green Bright Spots:
1. Pouring Money Into Water. The Environmental Protection Agency’s funding will increase roughly 30 percent from the $7.6 billion in the fiscal 2009 omnibus to $10.5 billion.
There’s a massive increase for water infrastructure, including $2.4 billion for the Clean Water State Revolving Fund, a low-interest wastewater loan program that helps states construct water treatment facilities. (The fund received just $689 million in fiscal 2009.) The Drinking Water State Revolving Fund would receive $1.5 billion, up from $829 million this year.
2. Carbon Infrastructure. The EPA will dedicate $17 million to the development of a GHG registry for US greenhouse gas emissions. As we’ve written before, this is a necessary first step toward regulating carbon emissions.
3. Oil is Out. Over at the Department of Energy, the proposed spending is flat from last year. Of course, that doesn’t include the nearly $40 billion showered on the department from the stimulus law for alternative-energy and efficiency initiatives. There are significant changes in emphasis on spending, though when it comes to fossil fuels. The budget completely cuts funding for the oil research and development program authorized by the 2005 Energy Policy Act. Finally, a budget that leaves behind the perverse incentives supporting fossil fuels that are costing us so much more than their sticker price.
4. Adaptation Gets Attention. State Department is contributing $600 million to two World Bank funds, one that supports clean technology in the developing world and the other that helps spur adaptation solutions in countries struggling with climate change. Over at Interior, the department is touting $183 million in increases for clean energy and the mitigation of climate impacts on the home front.
I’m sure there’s more to find, but the four points give some sense of this extraordinary bright green spending plan that, if adopted, will change the federal government’s impact on the economy.
A Carbon Rule is Not a Carbon Law
EPA announced a proposed rule on Tuesday to create a national registry for greenhouse gas emissions reporting.
This step is crucial to any effort to enact a law pricing GHG emissions, be it a cap-and-trade system or a carbon tax. The rule would mandate annual reporting from suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, as well as any other facilities that emit 25,000 metric tons or more per year of GHG emissions.
Of course, this wasn’t news to us. We wrote about the rule and the 25,000 metric ton threshold last month.
While this step is important, far more difficult ones lie ahead. This week’s action simply required the Obama Administration to push a draft rule that had languished under its predecessor’s watch.
Now comes the hard part. The Administration must sell its larger vision for legislating carbon regulation in the halls of Congress and in the court of public opinion.
And the last week hasn’t been so encouraging.
Late last week Senator Jeff Bingaman, who chairs the Energy and Natural Resources Committee, called Obama’s vision of a 100 percent auction model (where a regulated party must purchase all allowances required to cover its GHG emissions, as opposed to initially receiving some allowances free under grandfathering provisions) “unlikely.”
This week, investor Warren Buffet, an Obama economic advisor, reiterated his concerns about embracing a cap-and-trade system at all. And finally, carbon tax advocates have not yet surrendered. Rep. John Larson (D-CT) is said to be close to introducing carbon tax legislation. The House Ways & Means Committee Chairman, Rep. Charles Rangel (D-NY) is also expected to push for a carbon tax.
Cap-and-trade proponents should savor the coming of the national GHG registry. It may be the best news they have for a while.
Getting Our Fill of Ethanol
The support appears to be growing since the request was made to the EPA to grant a Clean Air Act waiver on Friday. Agriculture secretary Tom Vilsack expressed his support for the move today.
Critics say the government should study the impact of burning more ethanol on the environment before granting a waiver. But there’s plenty of hard data to examine.
The Brazilians have been driving on rich ethanol blends for years. The country raised its mandatory blend from 22 percent to 25 percent in 2007.
Science and engineering aren’t holding us back, it’s politics. For example, oil producers have recently expressed their opposition to the change.
I’m no big fan of corn ethanol but I appreciate it as a bridge to lower-emissions, high-energy cellulosic ethanol, and other biofuel formations. By expanding demand for ethanol generally, we can create market opportunities for the more promising fuels to come.
How the EPA Forced Congress' Hand
Last week, word surfaced that the EPA would act to regulate greenhouse gas emissions. At first glance, this news might seem like evidence that the Obama Administration would prefer to rely on the Clean Air Act (CAA) to fight climate change as opposed to getting new legislation through Congress. In fact, the news likely means the opposite. Here's why.
The first step toward regulation of carbon dioxide under the CAA is for EPA to declare that these emissions pose a danger to public health and welfare. That’s called an endangerment finding. The agency could have made this finding-- should have done it--long ago. Now, it’s likely to happen on April 2, 2009, the second anniversary of the Supreme Court ruling that explicitly gave EPA the power to regulate CO2 as a CAA pollutant.
EPA Administrator Lisa Jackson told The New York Times that she doesn’t want to spin “a doomsday scenario," but here’s the problem. It’s easy for the EPA to issue an endangerment finding, but what happens next is tricky.
The Clean Air Act was constructed to control emissions, not fossil fuel sources, so the EPA will have a hard time tackling the root of the GHG problems. There’s no real way to go upstream. Also CAA was drafted to address localized pollution and it isn’t well suited to control a global pollutant.
So the agency faces a tough choice: either squeeze carbon dioxide into ill-fitting CAA regulatory programs or face a raft of legal challenges by environmental organizations for not doing it.
Neither option will sit well with Congress, which is under increasing pressure to fight climate change. The evidence of global warming’s seriousness continues to pile up as does the need for the United States to show leadership to credibly prod China and India to action. So when the EPA makes the endangerment finding, Congress will need to take charge. And the Obama Administration knows it.
Praise for a Climate Policy in Regression?
The praise keeps pouring in for the Administration’s recent first steps toward withdrawing EPA’s objections to California's effort to implement tough emission standards for automobiles. I wrote about this earlier, pointing out that Congress needs to act quickly or get left behind.
Today’s editorial page of the Washington Post suggests that the most effective action might not be regulation at all, or at least not regulation alone -- state or federal. The editorial writers at the Post say the best way to proceed would be to “change the incentives so that people want to buy fuel-efficient vehicles; then companies will make such cars, even without commands from Washington.”
The Post is right, and here’s why: we can impose emissions restrictions on the cars Detroit produces or we can shape the demand for Detroit’s products. Emission regulations like the ones California will pursue will do the former, but a consistent and high gasoline price signal will do the latter. If it were adopted, it would likely produce real emissions reductions more quickly and efficiently. There are many ways to do this, and Congress knows all of them. But the important thing is to support gas prices at consistent and high enough levels to allow market incentives to go to work. Cap-and-trade? Perhaps. Or a gas tax? Perhaps. And rebates to the public, as the Post says, are entirely consistent with this strategy.
It’s only been six months since John McCain and Hillary Clinton called for gas tax holidays during the Presidential race. President Obama wisely refused to support those efforts. Is he willing to go even further and work for a “a gradual rise in fuel prices that would not shock the system,” as the Post put it? Is Congress willing to do the same? That would be leadership.
It would also be leadership if the auto manufacturers took the initiative, as I suggested yesterday, and softened the path for the Administration and Congress by convening key interest groups and agencies to join with them in fashioning a single omnibus vehicle performance standard. Who knows? Out of such a group might come consensus on a gradual rise to a sustained gas price level that would incentivize people to buy fuel-efficient low-GHG emissions cars.
Climate Change and Aviation Fuel: A Tough Problem to Solve
Large aircraft require high energy fuel, and lots of it. But jet fuel is very difficult to clean up to satisfy climate protection imperatives, which has led to a major dispute in the US over the role coal-to-liquids and other alternative aviation fuels may play. Congress, the US Air Force, the major airlines, the US Environmental Protection Agency, its Federal Aviation Administration, a special Defense Department task force, coal-state senators, and many, many others are getting into the dogfight, which may go on for a long time.
With all the publicity aircraft greenhouse emissions are receiving, one might conclude that they rank right up there with electrical utilities, vehicle emissions, and other prominent categories in terms of greenhouse threats. In fact, US aircraft operations account for 10 - 12 percent of greenhouse emissions from the transportation sector and for only about three percent of total US greenhouse emissions, which is also about the total percentage contribution to greenhouse gases from aviation worldwide. The difficulty is, controlling aircraft carbon emissions is a particularly intractable problem, and the problem is going to become much worse over the next few years as demand for air travel and transport doubles or even triples by 2025. The issue is exacerbated by scientific uncertainty about just how much more potent at high altitudes aircraft emissions are in causing the greenhouse effect as compared to emissions on the Earth’s surface.
The airline industry has done a great deal already, however, to increase its efficiency and lower the rate of increase in greenhouse emissions per air mile traveled. The industry claims that improvements in operational efficiency over the past 30 years have reduced carbon dioxide emissions 70 percent in the course of improving fuel efficiency 110 percent. The most promising pathways at present to further reduce the carbon footprint of aviation involve improved air traffic control systems, on-ground aircraft operations management, lighter engines and more aerodynamically designed aircraft, and flight altitude and speed adjustments. Still, attempts to improve jet fuel composition and performance have received the lion’s share of attention in recent months.
Finding less climate-challenging fuels for today’s jet fleet is proving to be a particularly challenging and controversial topic. Some promising experiments in fueling aircraft reminds one of a trip to a botanical garden, to a marsh, or to the supermarket, or of the early days of flight at Kitty Hawk. Recent forays include biofuels derived from babassu nuts, coconut oil, algae, or the central American plant, jatropha (a relation of castor oil). A very light, albatross-like solar-powered aircraft is under development in Germany, while Boeing has actually flown – for twenty minutes at 60 miles an hour – a manned aircraft powered by hydrogen fuel cells and lithium battery-stored electricity. But the major battle over alternative aircraft fuel is taking place over fuel liquids derived from coal or oil (tar) sands.
Coal-to-liquids (CTL), whether for aircraft or for other consumption as a fuel, is hardly new. Germany pioneered the process in the Second World War, and for the past nine years South African Airways has flown its jets on a 50-50 mixture of CTL synthetic and ordinary commercial fuel. The US Air Force has completed a test program very much like the South African fuel mix, using 50 percent Fischer-Tropsch synthetic fuel and 50 percent commercial fuel. Even B-52s can safely burn the fuel.
The Air Force and members of the Senate and House from coal-producing states, not to mention proponents of tapping the vast reserves of oil sands in Canada, are pushing strongly for development and use of CTL aviation fuels. The difficulty is, among other things, that a lifecycle analysis conducted by the US EPA found that CTL fuel releases 118.5 percent more greenhouse gases than conventional fuel (EPA, 2007). Perhaps carbon capture and sequestration technology, were it to be developed, could be used to overcome this large carbon deficit? No, said EPA, even after going to the difficult and expensive effort of capturing and sequestering CTL carbon compounds, emissions would still be 3.7 percent greater than for conventional petroleum. The Defense Department has already asked MIT to study the lifecycle carbon profile of CTL production and use, and Senator Lautenberg intends to re-insert in the Federal Aviation Administration funding re-authorization bill making its way through Congress a provision requiring the National Academy of Sciences to organize a study committee to address the question. While these studies are pending it may be correct to say that the jury is still out on the climate implications of CTL and other alternative aviation fuels, but it is clear that widespread adoption of CTL and oil sands to liquids fuels would be accompanied by major environmental challenges.
The Air Force is particularly partial to CTL as a source of aviation fuel and is aggressively pursuing its development. However, a major study done by the Defense Science Board Task Force on DoD Energy Strategy at the request of the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, titled “More Fight – Less Fuel,” has concluded that domestically produced synthetic fuel will not contribute to the DoD’s most critical fuel problem – delivering fuel to deployed forces. The Task Force, co-chaired by James Schlesinger and retired General Michael Cairns, wrote that full carbon life-cycle analysis should be performed and that synthetic fuels should have a carbon footprint less than conventional petroleum fuels before they are adopted.
This last remark may be directed at a DoD-commissioned legal analysis attempting to show that in the Energy Policy Act of 2005, Congress did not intend for the military services to be considered as “federal agencies.” Why? Because section 526 of the 2005 law bans federal agencies from purchasing any fuels that produce higher levels of greenhouse gases than conventional jet fuels. (This provision is kicking up sand in many quarters and may not survive the political pressure that is being brought to bear.)
The EPA plans to join with the FAA in considering regulation of aviation greenhouse emissions in the course of the climate “town hall” comment period that EPA has called for to gather thoughts about using the Clean Air Act to broadly regulate greenhouse gas emissions, a topic we have covered in an earlier blog. The European Union first tried to ignore aircraft greenhouse emissions in its first round of actions under its climate authority (the issue, is, as we said above, a very difficult one), but it is now considering requiring airlines to participate in the emissions trading system.
The debate over how the US will attempt to come to grips with the difficult issue of direct aircraft engine emissions of greenhouse gases is just getting started.
Who's in the Driver's Seat? Washington vs the States, Agency vs Agency
The National Highway Traffic Safety Administration (NHTSA) recently dealt a blow to both EPA and the states by proposing preemptive federal fuel economy standards (corporate average fuel economy or CAFE standards) that not only negate the states’ efforts to regulate fuel economy and vehicle greenhouse emissions but also directly challenge EPA’s leading role in regulating vehicle emissions. Will the courts, Congress, or a presidential administration sort out the traffic jam over authority to reduce vehicle greenhouse emissions? At this writing, the governors of twelve states are weighing in against what they view as a “cynical” power grab by the NHTSA, but resolution is nowhere in sight. [summary]
It’s a fine mess, the climate traffic jam. Led by California, some eighteen states have asserted a primary role in controlling vehicle greenhouse emissions. But the Environmental Protection Agency attempted to close off independent state action by denying California the Clean Air Act waiver it had to have before it (or any other state) could proceed on its own. Having blocked the states, and having lost a Supreme Court case in which it tried to avoid a role in greenhouse gas regulation, the EPA has begun to scour the Clean Air Act to establish its own primacy, not only over vehicle greenhouse emissions, but over a variety of other greenhouse gas sources as well (see accompanying blog).
The state-EPA-court dispute was bad enough, but it gets worse. The National Highway Traffic Safety Administration recently dealt a blow to both EPA and the states by proposing preemptive federal fuel economy standards (corporate average fuel economy or CAFE standards) that render the states’ efforts a clashing nullity and directly challenge EPA’s lead on vehicle emissions. Will the courts, Congress, or a presidential administration sort out the traffic jam over authority to reduce vehicle greenhouse emissions? At this writing, horns blare, voices are being raised (the governors’ above the rest), but resolution is nowhere in sight.
The dispute focuses attention on the fact that vehicle mileage standards and direct emissions controls are inextricably intertwined approaches to combating greenhouse emissions. Altering one unavoidably clashes with the other. States like California want to set both mileage requirements and emissions controls under their own laws, and the EPA wants to control (well, may be forced to control) direct vehicle emissions under the Clean Air Act, but the NHTSA says that the 2007 Energy Independence and Security Act put it in charge by empowering it to set uniform national mileage standards that must not be impaired either by inconsistent state mileage standards or by state or federal tailpipe emissions standards. That makes NHTSA the lead agency on vehicle emissions, and other climate regulatory wannabes must step aside.
The details are that NHTSA has proposed standards for 2011-2015 model years that would culminate in a 2015 standard for cars of 35.7 mpg and 28.6 mpg for light trucks, which represent substantial increases in mpg over existing CAFE standards. It is very important to understand that these proposed new standards explicitly will take carbon dioxide impacts into account for the first time. NHTSA lost a Ninth Circuit appeal when it tried to bypass consideration of CO2 impacts by arguing that it could not put a value on a ton of CO2 emissions. Although it has asked for reconsideration of this decision, it has nevertheless apparently read the handwriting on the wall and decided to issue a proposed CAFE rule that takes carbon control benefits into account.
The big news recently has been the outrage a dozen governors expressed in companion letters to the President and congressional leaders on April 23rd regarding NHTSA’s “cynical attempt” to “subvert,” “usurp,” and “assault” congressional authority and “rewrite” the Clean Air Act’s provisions covering air pollution, “including greenhouse gases.” The governors could not have been clearer (could they?) that they view state authority to control greenhouse emissions as guaranteed by the Clean Air Act and principles of federalism and that, as far as they are concerned, the only relevant federal greenhouse gas control law is the Clean Air Act (with which they are not entirely pleased, but they like it better than putting the federal Department of Transportation in control).
The NHTSA may not appear at first glance to be an environmental protection agency, but the National Environmental Policy Act (NEPA) may be the “vehicle” for an enforced education for NHTSA in climate science and policy. NHTSA’s debut in climate policy takes the form of a comprehensive NEPA environmental impact statement that the Administration has announced that it will draft on climate science and alternative ways to reduce vehicle greenhouse emissions (Federal Register Notice). The public and other agencies of federal and state government will be asked to provide comment. NHTSA wants to make its own collection of studies of greenhouse gas impacts on temperature, water, biological resources, human health and welfare, regional differences, and the time frame in which impacts may occur. If this sounds somewhat familiar, keep in mind that NHTSA comes somewhat new to the climate debate.
Thus, while EPA is asking for public comment on using the Clean Air Act’s provisions for climate management in the US, the NHTSA is creating another parallel public forum on the topic using the NEPA process and the triggering “major federal action” of its proposal of corporate average fuel economy (CAFE) standards under the 2007 Energy Independence and Security Act. While Congress continues to review climate bills and hold hearings, the federal agencies are far from silent. While this election year grinds on, maneuvering for position quietly goes forward among the states and the federal agencies most involved with climate policy development.
The US's Existing Climate Protection Laws: Will They Work?
Less than a decade has passed since the accepted wisdom was that the US would enact a greenhouse gas control regime to implement the framework climate treaty and the Kyoto Protocol, which the Senate would have ratified after much debate. Yet today it appears that our national climate strategies are going off in unanticipated directions that would have astonished the climate pundits of ten years ago.
Last December, Congress enacted a fuel, vehicle mileage, and overall energy efficiency law that will clearly help lower carbon emissions. The Senate will vote on a comprehensive climate bill in June, if the sponsors have their way, but that bill is a far cry from implementing legislation for Kyoto. The states may soon have blanketed a large part of the nation with regional and state climate initiatives that will be so pervasive that they will set the bar for the key components of over-arching federal legislation – and preserve a major role for state and local governments. There is even talk of bilateral climate agreements with India and China, and also a totally new international approach that would target greenhouse gas emissions sector-by-sector across the economies of the developed nations.
Furthermore, while all this is taking place, it appears that the Environmental Protection Agency and the environmental community have discovered – with the help of the Supreme Court – that the US has had a greenhouse gas regulation law in place for decades, well before Kyoto. By ruling a year ago that greenhouse gases are “air pollutants” under the motor vehicle emissions control provision of the Clean Air Act, the Court made the entire Act a little pregnant with the potential for federal regulation of all manner of greenhouse gas sources – the thousands of sources controlled under state implementation plans to achieve federal ambient standards, new and modified stationary sources, emitters of air toxics, sources in clear-air areas of the country, and others regulated under the Act. The particular trigger for new motor vehicle emissions regulation is a statutory determination that greenhouse emissions may reasonably be found to endanger public health or welfare, but other Clean Air Act provisions contain the same or a similar trigger for greenhouse “air pollutants” as well.
The key Clean Air Act provisions involved were rather elegantly analyzed for a House subcommittee on April 10, 2008 by the EPA’s air program administrator Robert Meyers in 19 pages of testimony, which he prefaced by saying that a full explanation “could easily fill a text book.” The relevant sections, most of which are covered in the seven petitions states and private organizations have filed, are an alphabet soup of the Clean Air Act specialists favorite programs: NAAQS, SIPs, PSD BACT, Non-attainment RACT, NSPS, HAPS MACT, aircraft, ship, and locomotive emissions provisions, and the welter of road and non-road vehicle and equipment engine and fuel emissions requirements that the Act authorizes.
To plunge into the greenhouse ramifications of any one of these programs is to plunge deep. Our Ports and Harbors Practice, for example, is considering the myriad of greenhouse gas controls that may be relevant to shippers, port authorities, transportation networks, and others on, or on the way to or from, the nation’s ports and harbors.
The EPA has tried to put off the reckoning, but the Clean Air Act has been held to be applicable to greenhouse emissions. The question is, can we live with it – can we make it work as a climate statute? States and environmental groups appear at first to be saying yes, we can, but the EPA is skeptical and has initiated a national head-scratching over the issue. The groups are pressing for a court order for EPA to come clean and issue the endangerment finding, which the groups say they have conclusive evidence that the Agency has already made. The EPA has come to the brink of making the endangerment finding more than once, only to recoil from taking the first fateful step toward conscripting the Clean Air Act into the federal climate arsenal.
Recently, the Agency has contrived to prolong its agony. It announced that it would issue an advanced notice of proposed rule making this spring inviting the public to offer its comments on climate science (endangerment) and “the broader ramifications” to “many relevant sections of the Clean Air Act” of using it as the primary policy tool for controlling greenhouse emissions. These comments would then help the Agency issue a second proposed rule that would set forth the Agency’s views on how to comply with last year’s Court decision.
The environmental plaintiffs are pressing hard for a court order requiring EPA to make the endangerment finding. They argue that the Supreme Court’s decision leaves no room for the EPA to organize a national town hall meeting on the advantages and disadvantages of using the Clean Air Act to control greenhouse gases. They reason that the Court required the agency to make an endangerment finding or give cogent scientific reasons why it could not. No other paths lie open, they say.
The Agency’s invitation for public comment seems designed to resurrect its view, rejected by the Court, that the Act would provide only an “inefficient, piecemeal approach” to controlling emissions and that a regulatory scheme that included “all significant sources and sinks” would be best. Perhaps. But an agency rule making is not the place for this legislative debate, one which Congress has already initiated and seems inclined to bring to a conclusion in a time frame that may turn out to be less protracted than EPA’s two-step rule-making process is likely to be.
In fairness to EPA, regulating greenhouse emissions through the Clean Air Act is likely to be a bit like opening Pandora’s Box to find a Trojan Horse inside. The statute may reach greenhouse “air pollutants,” but just barely, and its extensive implementing provisions were not designed with climate protection in the front of the congressional mind. The Agency appears to have concluded, we think correctly, that if it regulates motor vehicle greenhouse emissions as the states and environmental groups demand, they have to act favorably on petitions that the groups have also already filed to regulate the greenhouse emissions from a full Mother Hubbard’s cupboard of emitter bones and snacks already alluded to – airplanes, ocean vessels, off-road and recreational vehicles, sources in mining, agriculture, and construction, outdoor power equipment, and the like. This may not be the systematic, finely tuned, and comprehensive solution the nation deserves to the climate challenge, but such is the logic of the situation in which US climate policy is now mired.
It may well be that the states and environmental plaintiffs are forcing the issue on the Clean Air Act, not actually expecting or even wanting to remake it as a climate protection statute. Their purpose may be to force Congress to reach the same conclusion EPA has reached and thus pressure Congress into enacting a comprehensive climate law before the courts turn the Clean Air Act into a greenhouse gas nightmare. Chairman John Dingell appears to have fallen hard for the strategy, recently calling for federal cap-and-trade legislation to correct the “hideous mistake” the Supreme Court made. But in the meantime, the EPA is obliged to try to reconcile existing law with demands for piecemeal greenhouse regulation under the welter of Clean Air Act provisions that various groups have lined up like dominoes, ready to ask the courts to tip over.
EPA’s strategy has been dismissed by state and environmental groups as one of delay until the Administration comes to an end January 20, 2009. Listening to the skillful but beleaguered EPA Administrator at press conferences on the President’s program lends some support to this view. But Administrator Johnson does make a point that while the Clean Air Act Endangerment Stew is simmering, Congress has enacted – in important part with Administration endorsement – a law that actually may lower vehicle and other carbon emissions below the steep upward trajectory they were on only a couple of years ago. The Energy Independence and Security Act (EISA) of 2007 specifies a national mandatory fuel economy standard, a “CAFE standard,” of 35 miles per gallon by 2020, which should, the White House says, increase vehicle efficiency by 40 percent. The new law also hikes the renewable fuels mandate passed in 2005 to 36 billion gallons by the year 2022 (although plenty of pundits have begun to point out the climate and air quality downside of corn ethanol.) The new Act includes a lighting efficiency requirement for phasing out incandescent bulbs by 2014 and lighting efficiency improvements of up to 70 percent by 2020. There are also significant appliance and federal operations energy efficiency requirements in the legislation.
Based on the President’s “20 in 10” program set out in his 2007 State of the Union message (20 percent reduction in gasoline use by 2010), the Administration’s other energy savings and “green” source programs, and the EISA, the EPA has argued, somewhat logically, that all these measures are more effective than – or at the least the functional equivalent of – the command-and-control regulations that may in time be served up from the Clean Air Endangerment Stew. In fact, EPA has suggested in the past that these steps comply legally with the Supreme Court’s decision in Massachusetts v. EPA. This is what the national town hall advanced notice of proposed rule making is all about. It is also the current version of the rule making that EPA once wanted to launch, i.e., a multi-departmental rule that would involve several statutes (including the Clean Air Act) and implement the President’s 20-in-10 agenda.
More fundamentally, the Clean Air Endangerment Stew has now locked the courts, the EPA, and Congress in a struggle over how tripartite constitutional government should approach climate policy, a classic separation of powers issue that only lacks the states to make this a battle over federalism as well. As we move forward on climate in Congress, it might be wise to heed the admonition of Chancellor Bismarck. “Do not ask how legislation and sausages are made.”
