GHG emissions controls, monitoring and reporting will affect vast economic sectors.

Potential Greenhouse Gas Regulation Under the Clean Air Act

Two years ago, the Supreme Court of the United States, in Massachusetts v. Environmental Protection Agency (2007), determined that the Environmental Protection Agency (EPA) has the statutory authority to determine whether carbon dioxide and other greenhouse gases from new motor vehicles, as air pollutants, endanger public health or welfare under the Clean Air Act, finding that the EPA “must ground its reasons for action or inaction . . .” EPA Administrator Lisa Jackson told the Wall Street Journal last week that the EPA could make a determination on the endangerment issue as early as April 2, 2009, the second anniversary of the Massachusetts decision.

If the EPA finds that carbon dioxide and other greenhouse gases, for example, endanger public health and welfare, it would be required, under the Clean Air Act, to develop regulations governing carbon dioxide and other greenhouse gas emissions. Such a finding also could cover other new and existing emission sources, not just new motor vehicles, and could set precedent for other air quality standards. The complete scope of Clean Air Act regulation and authority will undoubtedly be subject to litigation. However, it is anticipated that an endangerment finding likely will result in significant carbon dioxide and other greenhouse gas emissions controls, which likely will affect not only tailpipe emissions but also could affect the power generation industry, chemical plants, cement manufacturers, refineries, agricultural plants and dozens of other industrial sectors in which carbon dioxide emissions are significant.

The U.S. Congress is actively considering a national, economy-wide greenhouse gas cap-and-trade regime, with allowance auctions and offsets. Therefore, the full scope and breadth of these standards and controls are likely to be debated both within the agency and in Congress for some time to come (for more information, see http://www.mwe.com/info/news/ots0708i.htm and http://www.mwe.com/green).

Greenhouse Gas Monitoring and Reporting Rulemaking Announced

On March 10, 2009, the EPA proposed regulations to require reporting of greenhouse gas emissions from all sectors of the economy. The rule would apply to fossil fuel suppliers and industrial gas suppliers, as well as to direct greenhouse gas emitters, including manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of greenhouse gas emissions, including carbon and methane. According to the EPA, approximately 13,000 facilities, accounting for approximately 85 to 90 percent of GHG emitted in the United States, would be covered under the proposal. The “direct emitters” sources required to report would include energy intensive sectors such as cement production, iron and steel production, and electricity generation, among others. According to the proposed rule, the first annual report would be submitted to the EPA in 2011 for calendar year 2010 emissions, except for vehicle and engine manufacturers, which would begin reporting for model year 2011. The EPA would be responsible for verifying the data.

The EPA anticipates that the approximate cost to the private sector to comply with the reporting requirements will be $160 million for the first year. In subsequent years, the EPA expects the annualized costs for the private sector to be approximately $127 million.

The proposed rule explicitly does not require control of greenhouse gases, requiring only that sources above certain threshold levels monitor and report such emissions. The EPA indicates that the rule is not meant to be a registry tracking individual projects or reductions. The EPA also stated that one of its goals in developing the rule is to utilize and to be consistent with the GHG protocols and requirements of other state and federal programs. Making use of existing cooperative efforts ensures that the data management approach in the proposed rule will lead to efficient submission of data to multiple programs. Indeed, the reporting methods for the proposed rule were based on existing GHG reporting programs and guidance from documents including international, national, state and regional programs. However, such national, economy-wide monitoring and reporting of greenhouse gas emissions could help support a national greenhouse gas cap-and-trade registry and, in turn, trading regime.

Prior to settling on a final rule, the EPA will accept public comments within 60 days after publication of the proposed rule in the Federal Register. The EPA is seeking comments on, among other issues, whether the conclusions drawn during its review of existing programs are accurate and invites data to demonstrate if, and if so how, the goals and objectives of the proposed reporting rule could be met through existing programs. The EPA has also scheduled two public hearings in April 2009.