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Climate Change Regulation via the Back Door

Arnold W. Reitze, Jr.

Professor of Law

University of Utah

Copyright May 18, 2011

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Introduction

• World CO2 emissions up 36% in 18 yrs.

• U.S. CO2 emissions up 16% in 19 yrs, but down 6.1% in 2009.

• U.S. CO2 emissions 85.1% of GHG.

• 94% of CO2 from fossil fuel combustion.

• 39.91% from electric power generation.

• 30.15% from transportation sector.

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Population/ Consumption

• World Population Growing by over 75 million a year--about 25% of U.S.

• World Coal Consumption 2005-2008 up 12%.

• World Petroleum Demand 1990-2009 up 26%, but consumption flat 2005-2009.

• World Net Thermal Electricity Generation 2000-2006 up 28.64%.

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U.S. Population Drives Emissions

• 1940 129,824,939

• 1970 205,052,174

• 1990 249,438,712

• 2010 309,050,816

• Population growth since 1990-- 59,612,104.

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Atmospheric CO2 Concentration

• 1960 <320 ppm.

• 1990 about 350 ppm.

• 2000 about 360 ppm.

• 2010 about 388 ppm.

• 2011 about 391 ppm.

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Federal Control Efforts

• International

• Proposed Domestic Legislation

• Using Existing Domestic Legislation--Clean Air Act

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International Developments

• Kyoto Protocol (1997) ends in 2012.

• Cancun, Mexico Dec. 2010 generally a failure; pledge of $100 billion annually by 2020 unlikely to materialize; no agreement on binding reductions.

• Bangkok April 2011 -- little progress

• COP-17 scheduled for Nov. 28, 2011 in Durban, South Africa.

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International Emissions

• Kyoto --191 members.

• 20 nations produce nearly 80% of CO2.

• 8 nations plus EU have emissions of 2% or more of the world’s CO2 emissions.

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U.S. Domestic Legislative Proposals

• H.R. 2454 Clean Energy and Security Act of 2009 (Waxman-Markey)

– House approved June 26, 2009.

– 2020 target of 17% GHG reduction.

– Comprehensive approach with cap-and-trade.

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H.R. 2454

• Reductions based on allowances that decrease over time. An allowance allows emissions of one metric ton of CO2e

– 70.4% to 82.5% are free.

– About 75% of all allowance are to fund non-GHG reductions.

– Ten year value of allowances $ 825 billion.

– Those in the bottom 20% of incomes are allocated 15% ($124 billion over 10 yrs) §321

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Senate Bills S. 1733 (Kerry-Boxer)

– Clean Energy Jobs and American Power Act.

» Similar to H.R. 2454.

American Power Act (Kerry Lieberman)

Cap & Trade plus expanded nuclear, oil & gas production and renewable energy mandates.

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S. 1462

American Clean Energy Leadership Act of 2009 (Bingman)

– Funds energy efficiency, clean energy technology, domestic oil & gas development, grid improvement, and requires 15% of electricity to be renewable energy by 2021.

– It does not have cap-and-trade.

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May 2011

• Cap-and-Trade is dead.

• Many bills with a narrow focus that seek to expand energy development are pending.

• Budget deficit effects all climate change funding efforts. EPA’s budget is being cut.

• Most Republicans and some Democrats seek to limit/delay EPA’s authority over GHG control, e.g. H.R. 910. Passed House 4/7/11.

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GHG Control Using Existing Federal Law

• Mandatory Reporting of GHGs, 74 Fed. Reg. 56,260 (Oct. 30, 2009).

– Based on CAA §§ 114 & 208 authority

• Compliance required for sources of 25,000 mt/yr, some motor vehicle manufacturers, and listed industries.

• First reports due September 30, 2011.

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GHGS and the Clean Air Act

• Massachusetts v. EPA 127 Sup. Ct. 1438 (2007) GHGs are air pollutants under § 302(g). – Three additional requirements to regulate motor

vehicle • Endangers public health or welfare

• Appropriate cost effective technology exists

• Adequate time to comply is provided.

• EPA made endangerment finding December 15, 2009, but many lawsuits are challenging finding.

• Light-duty vehicles regulated May 7, 2010 at 75 Fed. Reg. 25,324.

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CO2 Is a Byproduct of Combustion

• HC + O2 + N2_--> CO2 + H2O + N2 + heat

This leaves two options

Don’t combust fossil fuels or

Sequester carbon.

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CO2 as a Criteria Pollutant

• If NAAQS more stringent than ambient air – SIP revisions required, but no hope for attainment

– LAER would apply.

If NAAQS less stringent than ambient air

PSD requirements apply including BACT.

GHGs are not criteria pollutants at this time. Therefore the nation is attainment for GHGs and PSD program applies.

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Construction Permits

• PSD permits required for major new or modified sources as of January 2, 2011.

• Requirements explained in EPA’s March 2011 Guidance for GHGs; EPA seeks energy efficiency improve.

– Case-by-case determination by state permitting authority.

– EPA to issue permits in Texas.ESA issues.

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Tailoring Rule

• EPA promulgated a rule June 3, 2010

– New or modified sources subject to PSD permitting emitting 75,000 tpy of CO2e.

New sources of GHGs without operating permits to be covered if emissions exceed 100,000 tpy of CO2e.

The rule is being litigated.

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Operating Permits

• At a 100 tpy threshold operating permits will be needed for1.2 million commercial buildings 200,000 manufacturing facilities and 20,000 farms-there are now about 150,000 Subchapter V operating permits.

• Tailoring rule limits permit requirements to existing sources greater than 100,000 tpy.

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New Source Performance Standards

• NSPS are a likely tool to be used for GHG control.

• Many NSPS are expected to have new emission standards established for GHGs.

• EPA proposed fossil fuel power industry NSPS rule July 26, 2011; Petroleum industry NSPS rule proposed Dec. 10, 2011.

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Hazardous Air Pollutants

• CO2 does not meet traditional definition of hazardous.

• CO2 can’t be both a criteria pollutant and a HAP.

• There does not appear to be a CO2 control technology that can be used to create a MACT standard.

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Using the CAA to Increase Costs

• Environmental organizations use lawsuits concerning traditional pollutants to make fossil fueled plants uneconomic.

• No new construction starts in the past two years -- claims Sierra Club.

• TVA to retire 18 of its 59 coal plants -- consent decree announced 4/14/2011.

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NAAQS

• October 17, 2006, more stringent PM2.5.

• March 27, 2008, 8 hr ozone standard.

• February 9, 2010, I hr NO2 standard.

• June 22, 2010, 1 hr. SO2 standard.

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PSD

• BACT for major new and modified sources.

• Integrated gasification combined cycle technology as BACT.

• Haze Rule-- BART requirements, SIP modifications including fuel switching.

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Hazardous Air Pollutants

• MACT standards for coal and oil power plants proposed May 3, 2011. 76 Fed. Reg. 24976

• Final regulation to be promulgated by November 16, 2011.

• Covers emissions of mercury, PM (surrogate for metals) and HCl.

• Applies to about 1,200 existing coal-fired units and 150 oil-fired units at 525 power plants.

• March 21, 2011 Industrial Boiler Final Rule.

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Interstate Transport

• CAIR Rule of 2005 remanded by D.C. Circuit.

• August 2, 2010 EPA promulgated a proposed Transport Rule applicable to most eastern states.

• Limits Nox and SO2 emissions.

• §126--EPA grants N.J. request to limit Penn. Utility’s emissions 3/31/2011.

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Resource Conservation and Recovery Act

• Coal Ash proposed rule June 10, 2010. Ash to be regulated as hazardous (high cost to comply) or non-hazardous with new requirements.

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Clean Water Act

• Thermal power plant cooling water intake structures CWA §316(b).

• Proposed rule 76 Fed. Reg. 22174 (Apr. 20, 2011); requires BAT, which requires costs to be considered.

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Conclusion

• The CAA is a poor tool to control CO2-- new legislation is needed.

• Improving the efficiency of energy use is the least costly way to reduce carbon emissions.

• Alternative energy development shoiuld be supported, but it will not solve the GHG problem.

• Nuclear energy needs to be revisited.

• A carbon tax with all the money returned to taxpayers is an economic approach worth considering.