Key InformationSponsor: McDermott (D-WA)
Status: Assigned to Committee (
H.R. 6338 creates a price on the carbon content of fuels based on statutory emissions targets. Revenues are dispersed via dividend payments to the public that are designed to offset any increase in energy costs. The bill establishes an emissions reduction schedule to reduce CO2 emissions to 20% of 2005 levels by 2055. The Secretary of Treasury will issue Federal Emissions Permits, each representing one-quarter ton of CO2 equivalent, at a price that is determined by the Secretary based on the statutory GHG emissions targets. Permits are to be purchased by the producers of covered GHG emissions substances within 14 days before or after production of a covered substance. Permits are not allowed to be traded and can only be purchased from or refunded by the Treasury. Requirements to hold permits take effect two years after passage to provide industry with enough time to prepare.
On June 26, 2012, a three-judge panel of the D.C. Circuit Court of Appeals upheld four EPA rules related to the regulation of greenhouse gas (GHG) emissions under the Clean Air Act (CAA). The rules and related actions were challenged by state and industry petitioners in four related cases. (Lead case: Coalition for Responsible Regulation v. EPA, D.C . Cir., No. 09-1322).
In a unanimous unsigned opinion, the three-judge panel denied challenges to the EPA’s Endangerment Finding, Light Duty Vehicle Rule, and application of the Prevention of Significant Deterioration program to GHGs. The court found that the agency’s actions were not arbitrary or capricious and affirmed that the agency’s interpretation of the Clean Air Act (CAA) was “unambiguously correct.” The court also dismissed related challenges to the Tailoring Rule and Timing Memorandum for lack of standing.
Pursuant to Massachussetts v EPA, the Supreme Court held that EPA was required to undertake an endangerment analysis. In December 2009, EPA found that greenhouse gases endangered public health and welfare. This finding triggers other regulatory obligations under the CAA, and therefore serves as the legal foundation for EPA’s GHG regulatory actions. The court denied claims that the EPA’s findings were arbitrary and capricious, deferring to EPA’s scientific judgments regarding endangerment and specifically approving EPA’s partial reliance on “major assessments” such as the Intergovernmental Panel on Climate Change. It also held that the Clean Air Act does not permit EPA to consider policy implications in this determination, contrary to the arguments of petitioners.
Similarly, the court rejected petitioners’ arguments that the EPA had discretion not to issue GHG emission standards for passenger vehicles in the Tailpipe Rule, holding that EPA was compelled by the CAA to issue regulations after finding endangerment. (Petitioners did not challenge the substance of the rule; auto manufacturers supported EPA in defending the regulations).
In its final ruling on the merits, the court upheld EPA’s longstanding interpretation on the applicability of the Prevention of Significant Deterioration (PSD) program, holding that EPA’s interpretation that the PSD section applies to “any air pollutant” regulated under the Clean Air Act was “unambiguously correct” given the text of the statute and the Supreme Court’s ruling in Massachusetts v. EPA. Petitioners had argued that a more narrow interpretation that would have excluded or limited PSD regulation of GHGs was required.
Challenges to the Tailoring Rule and Timing Memorandum were dismissed for lack of standing, with the court finding that the petitioners failed to show that either rule caused them an “injury in fact” that could be redressed by vacating the rules. The court noted that the effect of the rules was actually to ease the compliance and administrative burdens of industry and state petitioners, in that the rules delayed permitting requirements and limited the number of sources subject to permitting at the current time.
In summary, the decision strongly affirms EPA’s authority to regulate GHGs under the Clean Air Act.
Petitioners may now request an en banc hearing in front of the full D.C. Circuit Court of Appeals or review by the U.S. Supreme Court. In both cases, review is discretionary and requires support from judges in the respective courts.
For more information about the petitioners’ challenges, see Debrief of the D.C. Circuit Court's Oral Arguments in GHG Cases.
On March 27, 2012, the Environmental Protection Agency (EPA) proposed greenhouse gas emission limits for newly constructed power plants. The New Source Performance Standards would specifically limit carbon dioxide emissions from new power plants to 1,000 pounds of carbon dioxide per megawatt-hour of electricity produced.
The proposed standard applies to fossil fuel-fired electric utility generating units larger than 25 megawatts, but would not apply to existing power plants or new permitted plants that start construction within the next twelve months.
EPA expects that new natural gas combined cycle power plants will be able to meet the proposed standard without additional controls; new coal-fired or petroleum coke-fired plants could meet the standard by implementing carbon dioxide emission reduction technology such as carbon capture and storage (CCS). New power plants that employ CCS are given the flexibility to meet the proposed standard on average over a 30-year period to allow for phasing in new technology over time.
On January 11, 2012, EPA launched a new online data publication tool that provides the public with information on reported greenhouse gas (GHG) emissions in 2010. The database currently covers nine industry groups, including 29 source categories, that directly emit large quantities of GHGs, as well as suppliers of certain fossil fuels and high global–warming-potential gases. Power plants, petroleum refineries, and chemical plants were the largest sources of emissions required to report. As mandatory GHG reporting expands to more sources, the data from these will be made available in the online tool.
The original Mandatory Greenhouse Gas Reporting Rule was finalized on October 30, 2009, pursuant to authority under the FY2008 Consolidated Appropriations Act. On November 19, 2011, EPA finalized a revised version of the rule, delaying reporting of 2010 GHG emissions data for several source categories from March 31, 2012, to September 28, 2012, in line with the reporting deadline for 2011 emissions data.
On Nov. 21, 2011, the Environmental Protection Agency (EPA) announced that it will not meet a December 15, 2011, deadline to issue new regulations under the Clean Air Act limiting greenhouse gas emissions from oil refineries. The deadline was imposed as part of a settlement agreement with several states and environmental groups in December 2010. The agency says it needs more time to prepare new source performance standards and is in negotiations to set a new deadline.
This announcement comes after a recent EPA decision to delay the release of its greenhouse gas performance standards for power plants, previously scheduled for September 30 (after a postponement of the original July 26 deadline earlier in the year).
On November 29, EPA issued a final rule for GHG reporting, including a six-month extension for several industrial sectors that were previously scheduled to begin mandatory reporting on March 31, 2012. The move extends that deadline to Sept. 28, 2012, for facilities that include petroleum and natural gas systems, electronics manufacturing, industrial waste landfills, coal mining, industrial wastewater treatment and other installations. The August 4 proposed rule would also have required some industrial facilities to report twice, once for sources of pollution required to report in prior years, and again in September for sources reporting for the first time with 2011 emissions data. EPA says the one-time delay avoids this requirement, in line with industry requests received in comments on the proposal. EPA also noted an aim to ensure that there is sufficient time for development and stakeholder testing of the electronic GHG reporting tool.
The final rule also sets a reporting threshold of 36.5 million tons per year of methane for underground coal mines, which EPA says will simplify reporting for the sector and exclude small mines from reporting. The proposed rule required reporting by all underground mines that are subject to quarterly or more frequent sampling by the federal Mine Safety and Health Administration (MSHA), regardless of size. In addition, the final rule makes a number of technical corrections and clarifications to reporting requirements across several industrial sectors.
On December 1, the Environmental Protection Agency (EPA) and the National Highway Transportation Safety Administration (NHTSA) issued a proposed rule to further reduce greenhouse gas emissions and improve fuel economy for light-duty vehicles for Model Years (MY) 2017-2025 (76 Fed. Reg. 74854,75420). The agencies announced the proposed standards in a Supplemental Notice of Intent (NOI) in late July, and originally hoped to issue the proposed rule by late September.
NHTSA’s proposed corporate average fuel economy (CAFE) standards would require an average fleet-wide basis of 49.6 mpg by 2025, while EPA’s proposed standards would require lower fleet-wide emissions of carbon dioxide, equivalent to 54.5 mpg if this level were achieved solely through improvements in fuel efficiency. The combined standards under the proposed rule will achieve an average fleet-wide fuel efficiency of 54.5 mpg by 2025, an increase of roughly five percent annually for passenger cars. Light trucks will have a lower target of 44 mpg, and passenger cars will have a higher goal of 62 mpg by 2025. The combined standards would reduce the amount of GHG emissions by half for MY 2025 light-duty vehicles, compared to MY 2010 vehicles, and EPA estimates that the standards will save four billion barrels of oil over the lifetime of MY 2017-2025 vehicles. CAFE standards are currently set at just over 27 mpg, and are scheduled to reach 35.2 mpg by 2016.
NHTSA has the authority to establish CAFE standards under the Energy Policy Conservation Act, and EPA has the authority to regulate carbon dioxide and other greenhouse gas as pollutants under Massachusetts v. Environmental Protection Agency, (549 U.S. 497 (2007)). EPA and NHTSA have worked closely with the California Air Resources Board (ARB), and ARB recently released a proposal for MY 2017-2025 emissions standards that are consistent with the proposed national standards. California has unique authority under the Clean Air Act to seek a waiver to implement more stringent air pollution standards for motor vehicles, and EPA granted California a waiver for GHG regulations for MY 2009-2016 light duty vehicles on July 8, 2009 (74 Fed. Reg. 32,744). At the same time California worked with EPA and NHTSA to develop a single nationwide federal standard for MY 2012-2016, and subsequently accepted the federal standards that were finalized May 7, 2010 (Joint Light-Duty Vehicle GHG Standards and Corporate Average Fuel Economy Standards, 75 Fed. Reg. 25,324).
NHTSA and EPA will jointly hold three public hearings in January to accept comments to the rulemaking documents, and NHTSA will also accept comments to the Draft Environmental Impact Statement (EIS) at these hearings. Comments must be received no later than 60 days after the December 1, 2011 publication in the Federal Register. A final rule is expected by July 31, 2012.
On December 7, the California Air Resources Board (ARB) published an Advanced Clean Car package of regulations to be considered for adoption at the ARB meeting on January 26, 2012. The package, containing amendments to California’s Low Emission Vehicle and Zero Emission Vehicle regulations, will require car manufacturers to offer for sale in California an increasing percentage of low emission and zero emission vehicles by 2025, and are designed to help the state achieve its goal of reducing GHG emissions by 80% by 2050.
The proposed Low Emission Vehicle (LEV III) amendments are intended to reduce fleet-wide average emissions to super ultra-low-emission vehicle (SULEV) levels by 2025, and to raise the full useful life durability requirement from 120,000 to 150,000 miles. The LEVIII proposal includes more stringent particulate matter (PM) standards for light- and medium-duty vehicles, which will reduce the health effects and premature deaths associated with these emissions. In concert with the LEV III requirements are proposed GHG emission standards, which closely align with the recent proposed federal GHG emissions and CAFE standards. ARB estimates that its proposed GHG standards would reduce carbon dioxide emissions by 34% compared to 2016 levels, and by 52 million tons by 2025—the equivalent of taking ten million cars off the road.
The package includes amendments to the Zero Emission Vehicle (ZEV) regulation, which will further reduce the environmental impact of light-duty vehicles through increasing the number of ZEVs in the California fleet. ARB estimates that the regulation will result in 1.4 million ZEVs or TZEVs (transitional zero emission vehicle, most commonly a plug-in hybrid electric vehicle) on the road by 2025, and also contains a provision that allows automakers that over comply with the national GHG emission requirements across their fleet to offset their ZEV requirements.
The proposed regulations also contain a provision that will require the construction of hydrogen fueling stations to support the commercialization of hydrogen fuel cell vehicles. ARB estimates that the advanced technologies used to achieve the new smog and greenhouse gas standards will increase a new vehicle’s price in 2025 by about $1,900, but will be offset by $6,000 in fuel savings over the life of the car. It is estimated that these measures will reduce annual fuel costs to operate a car by an average of 25%, with an overall cumulative savings of $22 billion by 2025.
The proposed LEV III and ZEV amendments will be considered at a two-day meeting of the Board, beginning January 26, 2012, at 9am PST.
On December 30, 2011, the D.C. Circuit Court of Appeals issued a stay against implementation of the Cross-State Air Pollution Rule (CSAPR). The CSAPR sets emissions budgets for 28 states whose emissions of SO2, NOx, and/or ozone currently represent a significant impediment to another state’s National Ambient Air Quality Standards (NAAQS) attainment in an average year. The rule was finalized by EPA on August 8, 2011, with technical revisions proposed on October 6, 2011, and was scheduled to take effect on January 1, 2012.
The case in which the stay was issued, EME Homer City Generation LP v. U.S. Environmental Protection Agency, 11-1302, is one of more than three dozen lawsuits challenging the CSAPR. Oral argument has not been scheduled, but the order indicates that the parties should prepare briefs for an April hearing. The stay order does not address the underlying merits of the case, only the issue of irreparable harm. Although the court did not spell out its reasoning, the plaintiffs had argued that the EPA’s six-month compliance timeline imposes a substantial and imminent injury.
The CSAPR replaces the 2005 Clean Air Interstate Rule (CAIR), which was struck down in North Carolina v. EPA on the grounds that CAIR’s region-wide cap-and-trade structure did not address the effects of emissions from each particular state on downwind states. (531 F.3d 896 (D.C. Cir. 2008)). CSAPR seeks to address the defect in CAIR by placing strict limits on interstate trading of emissions allowances, along with other safeguards to ensure that upwind state emissions of SO2, NOx, and ozone do not significantly contribute to nonattainment of the NAAQS in a downwind state.
Under the August 8 CSAPR, Tradable emissions allowances are initially allocated under Federal Implementation Plans (FIPs) to existing units in proportion to their historical heat input values, with a small portion set aside for new units. States can replace these FIP allocations with State Implementation Plans (SIPs) beginning in 2013.
EPA estimates that the CSAPR will reduce emissions of CO2 from electric generating units (EGUs) by about 25 million metric tons (about 1.1% of total domestic electricity sector emissions) annually once fully implemented in 2014, mostly via accelerating retirement of inefficient EGUs.