Post-Inaugural Reflections on the White House and Greenhouse Gases
Posted: January 30th, 2013Author: All4 Staff
Within an impassioned second inaugural address, President Barack Obama recently offered the following motivated remarks concerning climate change:
“We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity. We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms. The path towards sustainable energy sources will be long and sometimes difficult. But America cannot resist this transition. We must lead it. We cannot cede to other nations the technology that will power new jobs and new industries. We must claim its promise. That’s how we will maintain our economic vitality and our national treasure, our forests and waterways, our crop lands and snow capped peaks. That is how we will preserve our planet, commanded to our care by God.”
Strong words, surely. But what exactly lies ahead? Mr. Obama’s specific second-term plans for mitigating climate change are anticipated to be revealed in greater detail within his upcoming State of the Union address scheduled for February 12, 2013. But in the interim, it’s possible to speculate where we may be headed if we take a look at efforts related to climate change executed by the President during his first term.
International Climate Change Efforts
At an international level, the President focused on the following during the period 2009 through 2012:
- International climate negotiations.
- The Major Economies Forum on Energy and Climate.
- The Clean Energy Ministerial.
- The Asia-Pacific Economic Cooperation (APEC) Summit.
- The Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollution.
Throughout his first term, the President joined numerous world leaders first in Copenhagen, then in Cancun, and then in Durban to negotiate resolutions to climate change and clean energy on an international scale. Out of these efforts, the Copenhagen Accord, the Copenhagen Green Climate Fund, and the Cancun Agreement were negotiated. The Copenhagen Accord marked a milestone in which, for the first time, all major developed and developing economies agreed to implement measures to limit their greenhouse gas (GHG) emissions and to do so in an internationally transparent manner. The Copenhagen Green Climate Fund was established to contribute to the United Nations Framework Convention on Climate Change (UNFCCC) by promoting a paradigm shift toward low-emission and climate-resilient development pathways and providing support to developing countries to limit or reduce their greenhouse gas emissions. The Cancun Agreement confirmed and substantially extended the core elements of the Copenhagen Accord in the areas of finance, technology, adaptation, mitigation, and transparency. At the Durban Climate Change Conference in 2011, Obama joined other world leaders in formalizing important steps to make all of the key elements of the Cancun Agreement operational, including a transparency regime to monitor and review mitigation efforts by developed and developing countries.
In April 2009, the President launched the Major Economies Forum on Energy and Climate (Forum) which consists of the following 17 major economies: Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the United Kingdom, and the United States. The Forum is intended to facilitate dialogue among major developed and developing economies regarding the challenges concerning climate change and clean energy.
In December 2009, the President announced the establishment of the Clean Energy Ministerial (CEM) led by United States Energy Secretary Chu. The CEM is comprised of the Leaders of the Major Economies Forum on Energy and Climate. The goal of the CEM is to drive transformational low-carbon, climate friendly technologies by providing tools and platforms to improve the policy environment for energy efficiency, renewable energy, and clean energy access.
During 2011, President Obama chaired the Asia-Pacific Economic Cooperation (APEC) Summit in Honolulu, where leaders agreed to eliminate non-tariff barriers to environmental goods and services, including local content requirements, and cut applied tariffs on such goods and services to five (5) percent by 2015. The intent of this effort is to lower costs, increase the dissemination of clean technologies, and create jobs. Leaders further committed to the phasing out of inefficient fossil fuel subsidies and aiming to reduce the energy intensity of APEC economies by 45 percent by 2035.
Finally, in February 2012, the United States launched the Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollution (Coalition) in order to initiate rapid progress on climate change and air quality. The coalition believes reducing pollutants that are “short-lived” in the atmosphere, such as methane, black carbon, and hydrofluorocarbons (HFCs), which together account for one (1) third of current global warming, are believed to be able to prevent more than two (2) million premature deaths a year, avoid the annual loss of over 30 million tons of crops, increase energy security, and address climate change. Founding coalition partners include Bangladesh, Canada, Ghana, Mexico, Sweden, and the UN Environment Program.
At a national level, activity related to climate change has occurred rapidly over the past four (4) years, and, as the following timeline will have you recall, our nation’s industry was steadily and directly impacted by each of the actions finalized under Lisa Jackson, Administrator of the U.S. EPA during Mr. Obama’s first term:
- October 2009: U.S. EPA finalized the Mandatory Reporting of Greenhouse Gases Rule.
- December 2009: U.S. EPA issued the “Endangerment Finding” which found that current and projected levels of six (6) GHGs threaten the health and human welfare of current and future generations.
- April 2010: The Endangerment Finding enabled U.S. EPA and National Highway Traffic Safety Administration (NHTSA) to issue the first rule to control emissions of GHG (the Light Duty Vehicle Rule).
- May 2010: U.S. EPA issued the “Prevention of Significant Deterioration (PSD) and Title V Greenhouse Gas Tailoring Rule (GHG Tailoring Rule).” The GHG Tailoring Rule set the timing and established the thresholds for addressing GHG emissions from stationary sources under the Clean Air Act (CAA) permitting programs, tailoring existing air permitting guidelines to apply to only the largest stationary sources of GHGs, excluding smaller factories, restaurants, and farms.
- December 2010: U.S. EPA issued guidance to states on implementing the new GHG Tailoring Rule guidelines.
- January 2011: When the GHG Tailoring Rule took effect on January 2, 2011, GHG officially became “subject to regulation” under the CAA. New GHG air permitting began for facilities that would independently have to go through air permitting for non-GHG pollutants.
- January 2011: U.S. EPA proposed a 3-year deferral of GHG permitting when it relates to biomass combustion.
- July 2011: New GHG permitting began for new facilities that would emit more than 100,000 tons of carbon dioxide equivalent (CO2e) per year and also for facilities that will undergo a major modification that would increase emissions by 75,000 tons of CO2e per year.
- July 2011: U.S. EPA finalized the 3-year deferral of GHG permitting for biomass combustion.
- March 2012: U.S. EPA proposed the first GHG regulations to appear under the “New Source Performance Standards” (NSPS) program. The proposed rule applies to new fossil fuel-fired electric utility generating units (EGUs).
- July 2012: U.S. EPA amended the GHG Tailoring Rule to include Step 3 and certain permit streamlining options.
Of the milestones just listed, we’ve been appreciably affected by the promulgation of the Mandatory Greenhouse Gas Reporting Rule, promulgation of the GHG Tailoring Rule, and the proposal of the first GHG regulations to appear under the NSPS program.
Through the GHG Reporting Program, U.S. EPA has collected and published emissions data from individual facilities within the United States for the last two (2) years. To date, the rule has been amended 20 times since its initial publication in October 2009 to add new source categories and to make clarifying amendments. The rule serves as a bottom-up approach for U.S. EPA to account for the country’s GHG emissions from an industry and geographic perspective. ALL4 has been assisting facilities within numerous source categories to comply with the Mandatory Greenhouse Gas Reporting Rule since data collection began at the facility level in 2010. GHG data reported to U.S. EPA under this mandatory program is accessible to the public through U.S EPA’s website. Today, more than 40 types of source categories are required to report facility-level GHG emissions to U.S. EPA annually, accounting for approximately 90% of the country’s GHG emissions. The first annual reports were submitted to U.S. EPA in September 2011 and the second annual report for these source categories were submitted to U.S. EPA in March 2012. An additional 12 source categories began collecting data in 2011, with their first annual reports submitted to U.S. EPA in September 2012. Reports corresponding to the 2012 Reporting Year are due to U.S. EPA by all affected facilities no later than April 1, 2013. What’s immediately new for the upcoming reporting season? For one, the requirement to report data elements whose reporting deadline from the past reporting years of 2010 and 2011 was deferred until 2013 is upon us.
As Neal Lebo recently explained, reporters under the GHG Reporting Program had historically expressed concerns that certain data elements required to be reported under the Mandatory Greenhouse Gas Reporting Rule were Confidential Business Information (CBI). In response to these concerns, U.S. EPA deferred the requirement to report these specific data elements until 2013 to allow time for U.S. EPA to evaluate the potential impact of releasing this information to the public and to make final determinations with regard to CBI status. U.S. EPA recently completed their evaluation and concluded that the data elements under review were either already publicly available or were not the types of information that would allow competitors to gain competitive advantage if released to the public. Therefore, the data elements that had been deferred are now required to be reported by April 1, 2013. U.S. EPA is currently updating the format of the e-GGRT database to require not just the reporting of the data elements used to calculate 2012 emissions, but also the historically deferred information used to calculate 2010 and 2011 emissions. Since e-GGRT may not allow a complete report submission until requested historic information is completely provided, reporters preparing for the upcoming round of GHG reporting must be mindful of the additional effort that will be required to dust off their historic 2010 and 2011 calculations in order to submit their reports this season.
Is there anything new on the horizon regarding the Mandatory Greenhouse Gas Reporting Rule? Although U.S. EPA managed to finalize a staggering 46 subparts within three (3) short years, for now, active rule proposals are limited to proposed amendments to calculation and monitoring methodologies for the Electronics Manufacturing source category (Subpart I). U.S. EPA is also proposing confidentiality determinations for reporting of the new and revised data elements for this same source category.
Important to note is the fact that the Mandatory Greenhouse Gas Reporting Rule does not require control or reduction of GHG at this time, and it is not anticipated to require it in the future. However, numerous companies are expressing a desire to switch to, or further augment, the use of “inherently cleaner” fuels and process materials as a strategic plan to reduce GHG emissions reported for their company. We warn you that such a project, albeit certainly honorable, does not relieve the applicant of the typical air permitting obligations that would be required for any modification. As Mark Wenclawiak recently explained, U.S. EPA’s focus on energy efficiency projects through the Best Available Control Technology (BACT) process as the means to control emissions of GHGs remains intact. U.S. EPA has published a series of industry-specific white papers that may be useful to a facility preparing a BACT analysis, but the complications associated with the analysis are still numerous given the immature nature of the add-on control technologies that exist. The challenges increase with U.S. EPA’s insistence that technology like carbon capture and sequestration, which has yet to be demonstrated to be a technologically and economically feasible option, should be included in the analysis. Look forward to a subsequent article in which we dig further into the numerous issues concerning the viability of potential GHG control technologies. For the time being, continue to be mindful that permitting energy efficiency and GHG reduction projects at existing major stationary sources would, at a minimum, require a determination regarding the applicability of major New Source Review (NSR) requirements. Such determinations can be quite complex and often are subject to questioning by regulatory authorities, including U.S. EPA.
Relatedly, what kinds of changes might we see with respect to GHG permitting? Right now we are within “Step 3” of U.S. EPA’s phased-in GHG Tailoring Rule. We know that the three (3) year deferral period which relieves biogenic stationary sources of CO2 PSD and Title V permitting requirements is scheduled to conclude during July 2014. U.S. EPA has also committed to completing “Step 4” of the phased-in rule by April 2016. In the interim, we could likely see U.S. EPA encourage sources to control GHG emissions through efficiency improvements or the use of other emission reduction procedures, processes, or equipment as a strategy for reducing the number of sources that require complete PSD permitting. However, as I previously explained, facilities interested in executing these types of efficiency and GHG reduction projects will still incur the air permitting requirements that come along with a modification.
As part of Step 3, U.S. EPA provided a mechanism to streamline the GHG PSD permit program by expanding the existing PSD Plantwide Applicability Limit (PAL) provisions to better implement PALs for GHGs. The expanded PAL provisions allow permitting authorities to establish GHG PALs on either a mass basis (tpy) or a CO2e basis, include an option to use a CO2e-based increase provided in the subject to regulation thresholds in setting the CO2e PAL, include an option to issue a GHG PAL to GHG-only sources that have the potential to become major sources under the Tailoring Rule, and allow GHG PALs to be used as an alternative approach for determining both whether a project is a major modification and whether GHG emissions are subject to regulation. As John Egan recently recommended, obtaining a PAL permit, where appropriate, could be the most strategically advantageous move a facility makes for years to come and it now can be done for GHGs in addition to the other pollutants regulated under NSR.
Beyond the Tailoring Rule, we should anticipate increased regulation of GHG in the realm of New Source Performance Standards (NSPS). As I indicated in a historic blog, U.S. EPA’s March 27, 2012 proposal for an output-based NSPS for emissions of CO2 was a milestone in being the very first time a GHG emission standard was proposed for a stationary source. This still active proposal applies to new affected fossil fuel-fired electric utility generating units (EGUs). But U.S. EPA also committed to proposing GHG standards of performance by July 26, 2011 for new and modified EGUs subject to 40 CFR Part 60, Subpart Da (Electric Utility Steam Generating Units), with final action no later than May 26, 2012, and also committed to proposing standards of performance for GHG for new and modified petroleum refineries subject to the following 40 CFR Part 60 subparts by December 10, 2011, with final action no later than November 10, 2012:
- Subparts J and Ja (Petroleum Refineries, and Petroleum Refineries for Which Construction, Reconstruction, or Modification Commenced After May 14, 2007, respectively).
- Subpart Db (Industrial-Commercial-Institutional Steam Generating Units).
- Subpart Dc (Small Industrial-Commercial-Institutional Steam Generating Units).
- Subpart GGG (Equipment Leaks of VOC in Petroleum Refineries for Which Construction, Reconstruction, or Modification Commenced After November 7, 2006).
- Subpart QQQ (VOC Emissions from Petroleum Refinery Wastewater Systems).
Not too surprisingly, U.S. EPA has fulfilled a piece of that which they committed to in the settlement agreements: the standards of performance for new EGUs. However, as committed to within these settlement agreements, U.S. EPA must still propose standards for the remaining sources – first for existing EGUs, then for new and existing petroleum refineries. Interestingly enough, during a recent interview current U.S. EPA Air Chief Gina McCarthy suggested that while U.S. EPA sets NSPS for new facilities, “it’s really states that develop their own processes” for existing plants. “We are going to respect that and make sure that there is a robust” state role. McCarthy did not reveal the specific timing for when U.S. EPA will fulfill the remainder of the consent decree and finalize its proposed NSPS for new power plants as well as propose NSPS for the existing power plants and new and existing petroleum refineries, as is still required by the consent decree. However, it is clear we can expect there will be activity in this area during Mr. Obama’s second term – it is just a matter of when the news will strike.
In summary, the president has signaled a direction to address climate change. Executing his goals will likely come by U.S. EPA either encouraging, and in certain cases requiring, energy efficiency, clean fuel, or control technology installation projects. However, the projects that can achieve these goals will still need to go through the permitting gauntlet and all the while U.S. EPA will be moving deliberately ahead with new standards that directly limit GHG emissions from specific stationary sources.