EPA Addresses Climate Change

In keeping with President Obama's commitment to address climate change, EPA is pursuing multiple pathways related to CO2 regulation.
 
Endangerment Finding
In late February, new EPA Administrator Lisa Jackson indicated EPA's intention to issue a CO2 endangerment finding that would classify CO2 as a threat to public health and/or welfare and compel the agency to respond with regulation.  Although the Bush administration had drafted an endangerment finding and draft regulation during its final months in response to the 2007 Court order that required EPA to reconsider regulating CO2, those drafts have not been revealed publicly.  One challenge in trying to address CO2 under the current Clean Air Act is the issue of an appropriate major source threshold.  The New Source Review major source thresholds (100 or 250 tons per year (tpy) of any single pollutant depending on the source type) are hard-wired into the Clean Air Act, and were not established with CO2 in mind. This may become problematic for many sources with emissions of other pollutants that currently qualify them as minor NSR sources (such as apartment complexes, schools, and shopping malls, as well as many small manufacturers), but would be considered major NSR sources were CO2 a regulated pollutant. EPA might provide some relief by setting a significantly higher major modification threshold such that many existing small sources would not trigger NSR.  However, sources that are minor NSR sources under current NSR regulations (but that would be major were CO2 regulated) would see lower major modification thresholds for traditional (i.e., "criteria") pollutants. Furthermore, new sources that are major at 100 or 250 tpy CO2 would still potentially trigger NSR.  Finally, all major sources (even those sources considered major solely by virtue of their potential CO2 emissions) would be subject to Title V according to the 100 tpy major source threshold.
 
Most experts agree that the most expedient and least complicated method for regulating CO2/GHGs under current legislation is through the establishment of a New Source Performance Standard(s) (NSPS).  The NSPS route would allow EPA to potentially assign performance standards (energy efficiency standards) to equipment subject to NSPS standards.  Once an NSPS containing a CO2/GHG emissions standard is established, however, it would have the result of triggering the new regulatory paradigm under both NSR and Title V, as described above.
 
Proposed Mandatory Reporting
In the meantime, on March 10, EPA proposed federal GHG reporting requirements that will require data from an estimated 13,000 sources, needed as a cornerstone to effective climate change regulation.  Emissions data will be required from many sectors of the economy and reporting requirements will draw on reporting protocols already established by other government and voluntary registries such as The Climate Registry.  The proposed reporting threshold is 25,000 metric tpy for numerous energy intensive sectors such as electricity generation, refining, gas processing, automotive manufacturing, chemical manufacturing, pulp and paper, cement production, iron and steel production, coal mining, ethanol production, and food processing, among others. Reporting for most sectors will be required beginning in 2011 for 2010 emissions.  EPA will be accepting public comment on the proposal for 60 days following its publication in the Federal Register.
 
Cap-and-Trade
In its own attempt to address climate change, perhaps more cost-effectively than through current regulatory alternatives, Congress will likely propose a cap-and-trade program as a control mechanism for CO2 emissions.  While the Obama Administration favors a cap-and-trade program to reduce emissions 14% from 2005 levels by 2020 and 83% by 2050, some legislators claim the approach will lack the necessary oversight to effectively reduce emissions and will result in cost increases throughout the economy.
 
What does the strong likelihood of CO2 regulation and/or legislation mean to industrial sources?  A few of Trinity's most practical near-term suggestions include:

  • Monitor developments with EPA's proposed mandatory reporting rule.
  • Develop or refine your enterprise-wide GHG emissions inventory.  Through the process, you'll assess your vulnerability to various scenarios and begin to prepare for reporting.
  • Consider participating in a voluntary reporting registry to formalize your inventory process and document early reductions (which may be creditable toward future reduction requirements.
  • Evaluate the potential exposure that your organization may have if carbon has a future cost (through a cap and trade scheme) and the cost of potential reductions.

For assistance with your climate change strategy, contact Kathy Blue, Trinity's Climate Change practice leader at kblue@trinityconsultants.com.