On April 17, 2009, the Environmental Protection Agency (“EPA”) ended months of speculation by issuing a proposed endangerment finding (the “Proposed Finding”) for greenhouse gases (“GHGs”) under the federal Clean Air Act (“CAA”). The Proposed Finding, which comes in response to the U.S. Supreme Court’s 2007 decision in Massachusetts v. EPA, relates specifically to emissions of GHGs from new motor vehicles and new motor vehicle engines, and is a critical first step in any effort by EPA to regulate emissions of GHGs under the CAA. In the Proposed Finding, EPA provides clear indications of its intentions to do just that.

Drivers for EPA’s Action

The Proposed Finding is the result of a lengthy battle between EPA and environmental interests regarding EPA’s obligations under the CAA, which was ultimately resolved against EPA by the Supreme Court in 2007. The conflict centered on Section 202(a) of the CAA, which stipulates that EPA “shall by regulation prescribe ...standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in [her] judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” (Emphasis added.)

This statutory requirement was at the center of the much-publicized 2007 Supreme Court decision in Massachusetts v. EPA, in which the Supreme Court rejected several arguments offered by EPA and held that GHGs do meet the CAA’s definition of “air pollutant.” Specifically, the Court held that the four GHGs emitted by motor vehicles1 – carbon dioxide (“CO2”), methane, nitrous oxide, and hydrofluorocarbons – are “without a doubt” physical and chemical substances which are emitted into the ambient air, thus satisfying the “sweeping” and “unambiguous” definition of “air pollutant” under the CAA. As a result of this holding, the Court found that EPA is compelled to regulate GHGs from new motor vehicles and engines unless it determines that GHGs do not contribute to air pollution, or concludes that the science is too uncertain to make a reasoned decision on that issue. In the Proposed Finding, EPA concludes that that the science is sufficiently certain to establish a link between GHGs and climate change. In fact, EPA goes so far as to state that it is “very likely” that “the heating effect caused by the humaninduced buildup of [GHGs] in the atmosphere [is] the cause of most of the observed global warming over the last 50 years.” By “very likely,” EPA states that its degree of certainty on this issue is 90 to 99 percent. EPA’s certainty on this point will trigger the statutory obligation to commence regulation of GHG emissions once the Proposed Finding is made final.

Breaking Down the Finding

In EPA’s view, Section 202(a) actually required it to make two separate but related determinations. First, EPA had to determine whether the air pollution in question may reasonably be anticipated to endanger public health or welfare. Second, EPA had to determine whether emissions of any air pollutant from new motor vehicles or engines cause or contribute to that air pollution.

EPA is proposing to make an affirmative determination on both questions. EPA has provided a lengthy discussion of the basis for each determination. For these technical bases, which may be found in the Proposed Finding and the accompanying Technical Support Document, EPA relied primarily upon reports issued by the Intergovernmental Panel on Climate Change and the U.S. Climate Change Science Program. Certain components of the two determinations are particularly notable for the insight they provide into EPA’s regulatory intentions.

The Public Health and Welfare Determination

EPA based its public health and welfare determination on scientific findings that (a) atmospheric concentrations of the six GHGs are at recordhigh levels compared to the recent and distant past, (b) these elevated levels are unambiguously the result of human activities, and (c) these levels are the “fundamental and underlying driver of human-induced climate change.” Significantly, for purposes of this determination EPA defines the air pollution in question as “the combined mix of the six key GHGs which together constitute the root cause of human-induced climate change.” In covering all six GHGs as opposed to just the four emitted by motor vehicles and engines, EPA is laying the groundwork for future regulation of industries beyond the transportation sector. Its stated rationale for doing so is that the six GHGs share common properties and have been the common focus of climate change science and policy to date. By including all six GHGs in its Proposed Finding, EPA has laid the groundwork for future expansion of the determination beyond the mobile sources subject to Section 202(a) of the CAA to all GHG emissions sources.

The Cause or Contribute Determination  

Having determined that climate changeinducing GHG emissions endanger public health and welfare, EPA based its cause or contribute determination on the fact that the new vehicles and new vehicle engines subject to Section 202(a) are responsible for 24 percent of total U.S. GHG emissions. In its discussion of this determination, EPA indicates that is has elected to treat the four GHGs emitted by these source categories as a single collective pollutant rather than as separate individual pollutants. EPA notes that both domestic and international policies address GHGs in terms of their CO2- equivalent global warming potential, and expresses its desire to remain consistent with that convention in its regulatory efforts, including in the Proposed Greenhouse Gas Mandatory Reporting Rule (the “Proposed GHG Reporting Rule”) that Administrator Jackson signed on March 10, 2009 (see LLBL’s Climate Alert on the Proposed Rule). EPA notes, however, that in certain circumstances it may be appropriate to set standards for individual gases or some combination of group and individual standards.

Heeding the Signs

The Proposed Finding sets in motion a regulatory process that will eventually result in a new regulatory regime governing mobile sources of GHG emissions. Due to the mandates of the CAA as interpreted by the Supreme Court, there is no turning back from this approach short of Congressional intervention. Unless Congress adopts some form of federal climate change regulation that removes GHGs from regulation under the CAA, EPA is on course to implement what many observers have characterized as the most significant expansion of regulatory authority in its history. Further, sections 108 and 111 of the CAA, which authorize EPA to regulate stationary source emissions, contain language paralleling that found in section 202(a) of the CAA regarding mobile source emissions. Based on the groundwork EPA has laid in the public health and welfare determination set forth in its Proposed Finding, as well as the foundation laid by the Proposed GHG Reporting Rule, it is quite possible that this significant new regulatory scheme will be expanded, either initially or in subsequent rulemakings, to cover stationary sources of GHG emissions as well. Such an expansion would extend regulation from the source categories responsible for 24 percent of U.S. GHG emissions to those responsible for as much as 85 to 90 percent of U.S. GHG emissions.

Tapping the Brakes

It is clear that EPA is cognizant of the implications and the political ramifications of the Proposed Finding. The Obama Administration has indicated on numerous occasions that it favors a legislative solution to the problem of climate change. In fact, EPA Administrator Jackson, as well as Energy Secretary Chu and Transportation Secretary LaHood, are scheduled to testify on April 22, 2009 before the House Energy and Commerce Subcommittee on Energy and Environment on the topic of climate change legislation. Thus, while the Proposed Finding is a clear step towards GHG regulation, it can also be seen as a calculated effort by the Administration to increase the pressure on Congress to adopt such a solution. While there is a material risk that political or economic factors may diminish Congressional will to enact federal climate change legislation, the result of failure by Congress to act would be a regulatory program that most environmental and industry advocates agree is likely to be far less desirable than one crafted carefully and purposefully by Congress.

EPA appears to have built into its regulatory process a significant amount of wiggle room to afford Congress the opportunity to take the matter out of EPA’s hands. Normally, EPA includes the administrative findings necessary to support new regulations in the proposed rulemakings, rather than in advance. In this case, EPA has taken the unique step of subjecting the Proposed Finding on its own to the CAA’s notice and comment rulemaking procedures. This provides a public comment period of 60 days after the Proposed Finding is published in the Federal Register, followed by an indefinite period of time before it is finalized. Only after the Proposed Finding becomes final does the clock start on EPA to develop proposed standards for GHG regulation. Notably, EPA has disclosed in the Proposed Finding that it is currently working to develop proposed GHG emissions standards, but indicates that those standards will not be proposed for public comment for several more months. Those standards will themselves be subject to notice and comment, which means that any new GHG regulations are unlikely to be adopted before the end of the year.

Conclusion

The potential impacts of EPA’s Proposed Finding regarding GHG emissions from new motor vehicles and new motor vehicle engines are significant. Once finalized, this finding will obligate EPA to regulate GHG emissions from mobile sources. Coming on the heels of the Proposed GHG Reporting Rule, which would apply to GHG emissions sources from virtually all sectors of the economy, and based on the groundwork laid by EPA in the Proposed Finding, it should be expected that EPA will eventually propose to regulate GHG emissions from both mobile and stationary sources.

The Proposed Finding, like the Proposed GHG Reporting Rule, will be subject to a 60 day public comment period once published in the Federal Register. EPA will also hold two public hearings on the Proposed Finding during the comment period. These hearings will be held on May 18, 2009, in Arlington, Virginia, and May 21, 2009, in Seattle, Washington.