As we have done previously in this blog, we will highlight from time to time U.S. and foreign developments of potential interest in the regulation of greenhouse gases. While there has been relatively little activity in recent months at the Canadian federal government level in the area of climate change policy, such is not the case south of our border.

On September 20, 2013 the U.S. Environmental Protection Agency announced newly revised pollution standards for new power plants. Currently, there are no American limits at the national level on the amount of carbon pollution new power plants can emit. The proposed rules seek to address this regulatory shortfall and replace a contentious 2012 EPA proposal which received more than 2.5 million comments.

While the proposed rules are somewhat more relaxed than the existing draft rules, commentators in the press appear to have largely taken the view that they remain quite stringent. New large natural gas-fired turbines would need to meet a limit of 1,000 pounds of carbon dioxide per megawatt-hour, new small natural gas-fired turbines would need to meet a limit of 1,100 pounds of carbon dioxide per megawatt-hour, and new coal-fired units would need to meet a limit of 1,100 pounds of carbon dioxide per megawatt-hour (with an option of adhering to a lower limit if they choose to average emissions over multiple years instead of meeting them from the outset). In contrast, the average advanced coal-fired power plant emits approximately 1,800 pounds of carbon dioxide per megawatt-hour according to industry estimates.

The proposed rules will now be subject to a 60 day comment period commencing on the date of publication of the rules in the Federal Register. This comment period will likely be followed by lobbying efforts and possible court challenges.

Much of the controversy arises from the fact that in order to meet the proposed standards, new plants would need to utilize carbon capture and storage or sequestration (CCS) technology. While the EPA described CCS technology as a “proven technology”, detractors note that none of the plants cited as examples of the use of CCS referred to by EPA Administrator Gina McCarthy in order to support its use are currently in operation. In addition, legal issues with respect to the underground sequestration of carbon may present obstacles. Ultimately, it is not certain that in necessitating the use of CCS technology, the proposed rules will require technology that has been ‘adequately demonstrated’ and ‘not exorbitant in cost’. Further, there are likely to be arguments as to whether the technology can be considered to be truly ‘available’.

While the proposed EPA rules apply to new plants only, they do set the stage for future regulatory developments. Proposed rules dealing with carbon emissions for the existing American power plant inventory will be coming next June and are likely to provoke fierce debate south of the border.