On April 17, 2009, the U.S. Environmental Protection Agency (EPA) issued its much-anticipated proposed finding that emissions of greenhouse gases (GHGs) are contributing to air pollution that may reasonably be anticipated to endanger public health and welfare. When finalized, this “endangerment finding” will obligate the agency to regulate GHG emissions from new motor vehicles. More broadly, however, an endangerment finding signals an inexorable move toward regulating GHG emissions from a wide range of stationary and mobile sources, from construction equipment to coal-fired power plants, metal processors, and chemical manufacturers, just to name a few. EPA’s decision thus marks a watershed step toward a carbon-constrained future for major sectors of the U.S. economy, either under the Clean Air Act or as a catalyst to help prompt Congress to enact climate change legislation.  

Many of the actual legal obligations for regulated entities resulting from an endangerment finding will arise from future regulations promulgated by EPA, rather than the endangerment finding itself. Nevertheless, the proposed rule sheds light on the potential scope of subsequent GHG emission-limiting regulations and raises the very real question of whether, in the face of complex GHG regulation under the federal Clean Air Act (CAA), affected parties may prefer GHG emissions to be regulated through comprehensive federal climate change legislation.  

Background  

EPA’s proposed rulemaking is a direct response to the U.S. Supreme Court’s landmark 2007 decision in Massachusetts v. EPA,1 which held that GHG emissions are air pollutants under the CAA and, therefore, EPA may regulate GHG emissions under the statute in the presence of a positive endangerment finding. The Bush EPA had previously responded to the court’s decision with an Advanced Notice of Proposed Rulemaking (ANPR) in July 2008,2 outlining the possible regulatory impacts of an endangerment finding. Then-EPA Administrator Stephen Johnson concluded, “the Clean Air Act, an outdated law originally enacted to control regional pollutants that cause direct health effects, is ill-suited for the task of regulating global [GHGs].”3 The Bush EPA then took no further visible action, leaving this issue for the Obama administration to handle.

President Obama has made clear his commitment to regulate GHG emissions, and the administration has let it be known that—in the absence of congressional action—it would be willing to regulate GHG emissions using existing statutory authorities, including the CAA. The proposed endangerment finding is a vital step toward making that intention a real possibility.  

EPA’s Proposed Findings

Section 202(a) of the CAA, the provision at issue in Massachusetts v. EPA, obligates EPA to regulate “the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in [the Administrator’s] judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health and welfare.” Unpacking that provision, EPA’s proposed rule actually responds to its several components and not merely to the endangerment question.  

First, the proposal would define “air pollutant” as the collective class of the six key GHGs: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (the same gases identified in the United Nations Framework Convention on Climate Change), even though two of the component GHGs are not actually emitted by motor vehicles. The proposed rule would likewise define “air pollution” as the mixture of these six GHGs in the atmosphere. This treatment would allow evaluation and regulation of GHGs on a collective “carbon-dioxide-equivalent” (“CO2-e”) basis.  

Second, the proposed rule includes the key determination that these “air pollutants” cause or contribute to “air pollution” that may reasonably be anticipated to endanger” both public health and welfare. Among other things, EPA cites expected increases in the magnitude and duration of severe heat waves, an up-tick in the intensity of precipitation events in general and along the Gulf and Atlantic coasts, and the potential health effects of such events, including increased mortality and morbidity, increases in respiratory problems caused by heat-induced increases in regional ozone pollution, and increased suffering from disease and injury caused by floods, storms, droughts, and fires. The agency also identifies anticipated significant disruptions to ecological systems, biodiversity, and environmental services as threats to welfare. It even refers to climate change threats to national security.  

Potential Implications

As a technical matter, the proposed endangerment finding is a prerequisite for regulating GHG emissions from motor vehicles. Such regulation could require increases in fuel economy, or it could require fuel suppliers, manufacturers, and refiners to reduce the carbon content of their fuels. Potentially affected entities should focus on how EPA addresses (1) synchronizing EPA’s fuel efficiency requirements with the Department of Transportation’s energy conservation-driven CAFE standards and (2) evaluating the effect of the low-carbon fuels called for by the CAA’s renewable fuel program4 on the extent to which additional measures to reduce GHG emissions from vehicles are actually needed.  

More broadly, the proposed finding lays the groundwork for CAA regulations directly affecting a wide range of stationary sources and other GHG-emitting activities, whether developed in response to pressure from the administration or to petitions for rulemaking by interested parties or in case-by-case proceedings.

An endangerment finding under Section 202(a) will inexorably lead to demands to regulate GHG emissions from stationary sources and other activities because it is impossible to distinguish the effects of gases from such sources from motor vehicle emissions. In addition, Massachusetts v. EPA suggests that there may be no other acceptable basis on which to refuse to regulate.5 Thus, the Obama administration will likely claim that, in the absence of congressional climate change legislation that preempts the Clean Air Act, EPA will have no choice but to broadly regulate GHG emissions from all sources using the full force of the CAA.  

For example, industrial sources could be subject to new source performance standards (NSPS), preconstruction standards under the prevention of significant deterioration (PSD) program, and new source review (NSR) under the CAA’s nonattainment provisions. In addition to major utility and industrial operations, such stationary sources may include commercial buildings never before regulated, agricultural activities, and a host of other activities. Transportation sources other than vehicles are also inexorably affected, since, trucks, jets, ocean vessels, trains and barges all have emissions issues. Business and industry should also note that potential requirements may vary from state to state, as states are generally free to adopt emissions regulations that are stricter than those required by EPA under the CAA.6  

EPA’s proposal, in essence, throws down the gauntlet, and may turn out to be a more concrete reason for Congress to legislate on climate change than all the recent publicity about climate issues or years of international criticism of the United States, because regulation of GHG emissions under the CAA will likely be cumbersome, expensive, and inflexible. Each recent significant proposal for federal GHG emission-limiting legislation— the Waxman-Markey American Clean Energy Security Act of 2009, the Lieberman-Warner Climate Security Act, the Boucher-Dingell Discussion Draft, and the Investing in Climate Action and Protection Act—has contained three key features that arguably ease both compliance costs and administrative burdens: (1) a nationwide cap-and-trade approach, which, rather than requiring any particular source to meet a particular emission standard, could allow sources to take advantage of emission reductions made at other sources; (2) relatively high proposed compliance thresholds, obligating only entities responsible for annual emission greater than either 10,000 tons or 25,000 tons CO2e; and (3) mechanisms like offsets and banking to allow sources to take advantage of previously accomplished reductions and the effects of activities such as agriculture and forestry. The ability of the EPA to implement similar measures under the CAA is limited.  

Next Steps

EPA’s actions portend a dramatic shift in the regulatory scheme applicable to industrial facilities and companies already subject to CAA compliance obligations, as well as a large number of activities not currently regulated under the CAA. Potentially affected facilities and companies should evaluate, and consider advocating for, their preference between regulating GHGs under the CAA and regulating GHGs under entirely new federal legislation. The public comment period for EPA’s proposed rule will run 60 days from its forthcoming publication in the Federal Register.