Ohio Environmental Law Blog : Ohio Environmental Lawyer & Attorney : Joseph Koncelik : Frantz Ward Law Firm : Environmental Regulation, Land Use, Compliance : Cleveland, Ohio

Representatives Waxman and Markey released their much anticipated re-write of their proposed cap and trade climate legislation earlier this week. Much speculation has been offered in the media that the bill had no chance of passing as it was originally structured, if it had any chance at all. 

Well, there has apparently been a lot of horse trading going on to shore up Democratic support for the bill.  Most notably, President Obama's proposal to have 100% auction of allowances (pollution permits) has been completely tossed out.   The revised legislation allocates that majority of allowances to industry. 

The majority staff provided a summary of the American Clean Energy and Security Act of 2009 (ACES Act) to the Committee.  While the summary is helpful to get an overview of this complex bill, I thought one of the most interesting statements appears in the introduction to the summary appearing on the first page:

In the past two and half years, the Committee has held dozens of hearings on energy and climate change policy and has built a detailed factual record on the need for legislation in this area.  The nation's dependence on foreign oil has significantly increased over the last decade.  Consumers have faced increasing and volatile energy prices.  Other countries have overtaken us in the manufacture of wind and solar energy.  Energy company investments are paralyzed because of uncertainty about what policies the Congress will establish.  Meanwhile, global warming has increased unchecked.

Let's rank the staff's reasons for passing climate change legislation:

1. Reduce dependence on foreign oil
2. Volatile energy prices
3. Increase production of renewable energy
4. Regulatory certainty
5. Global warming

Isn't iit a little odd that global warming is not emphasized as the main reason for the legislation.  There is no discussion at all of the increased threat of climate change and the need to act.  Rather, its about foriegn oil and renewable power.  That seems strange to me, after all it is a multi-billion dollar cap and trade program to reduce greenhouse gases.

It is clear the choice in messaging is in reaction to the headway Republicans and conservative Democrats have made in raising concerns about the timing and cost of the legislation.  In a very difficult economy its hard to gain support for costly new programs, especially programs on the scale called for in this legislation. 

In reaction to this strong criticism we find a re-worked bill that provides the lion share of allowances to industry as well as other hedges against the potential cost of the program.  I am not criticizing the approach, rather I am commenting on the unrealistic nature of the President's 100% auction proposal.  This is a massive new environmental regulatory program, one that is greater in scope than any previous programs.  It makes sense to transition toward a carbon regulated economy.

Here are some of the more notable provisions in the legislation:

1. Reduction Targets- Reductions from covered sources to 97% of 2005 levels by 2012, 83% by 2020, 58% by 17% by 2050.  Here is one of the changes that is meant to ease into a carbon constrained world.  The reductions have been diminished in the early years to ease the transition.  While it helps out in the early years, at some point we face a major spike in needed reductions.  That may be a difficult issue to overcome.
2. Who is covered by the Cap?- By year the cap kicks in--- Group 2012: Electricity generators, liquid fuel refiners, and fluorinated gas manufacturers. Group 2014: Industrial sources that emit more than 25,000 tons of carbon dioxide equivalent per year. Group 2016: Natural gas local distribution companies.
3. Allowance allocation- Coal related: 30% to local electric distribution companies regulated by the states. 5% to merchant coal generators. Natural gas related: 9% of allowances to local distribution companies.  Home heating oil and propane: 1.5% to state programs for users of home heating oil or propane.
4. Auction- approximately 15% of allowances will be auctioned beginning 2011 and proceeds directed to low and moderate income families to address increases in energy prices. This is a far cry from the President's proposal of 100% auction.
5. Offsets- Covered entities are able to offset up to 2 billion tons of emissions by using EPA-approved domestic and international offset credits.  The ability to use the credits is divided according to the legislation's allocation formula.  By 2017, the price to use international offsets is increased.  Covered entities must use five tons of international offset credits for every four tons of emissions being offset.  Offsets are designed to reduce the cost of compliance.  Industries covered by the cap can purchase credits generated by projects outside of the cap.  Offset credits would be cheaper than allowances thereby reducing the cost of compliance.  It also creates a whole new business for companies that specialize in carbon offset credit projects.
6. Offset Integrity Advisory Board-  Board provides recommendations to EPA as to type of offset projects that should be listed by EPA as eligible; appropriate quantification methodologies, etc...  The bill contains multiple safeguards to try and improve the integrity of offsets.  These provisions have been included to address the criticism the European Trading Scheme has received regarding the lack of creditability of offsets used in Europe's Cap and Trade program.
7. National Renewable Portfolio Standard- Includes a requirement that retail electric suppliers provide 6% from renewable energy sources by 2010.  The standard rises to 20% by 2020.  Up to one quarter of the 20% requirement can be met through energy efficiency projects.
8. Clean Air Act Exemptions-  The bill would specifically exempt greenhouse gases from coverage under the Title V program, New Source Review Program, NAAQS, and HAPs. 

Number 8-  is a huge positive factor arguing in favor of the cap and trade approach. As detailed on this blog many times, regulation of greenhouse gases under the Clean Air Act would be a disaster. It would result in over regulation of small sources, inefficient permitting which would slow projects and significant amounts of litigation.

Dspite the recent media coverage, I don't see how EPA backs away from the cliff at this point.  Three are too many things set in motion for EPA to move away from regulation under the Clean Air Act unless legislation is passed. Cap and trade legislation, especially a bill that calls for a smooth transition to a carbon regulated world is just a far better alternative.

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House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) and Chairman of the Energy and Environment Subcommittee Edward J. Markey (D-Mass.) introduced the “The American Clean Energy and Security Act” as the opening salvo in a contentious and complex debate over a greenhouse cap and trade program.  The bill links two major and independently controversial proposals:  1) a nationwide cap on greenhouse gases (GHGs); and 2) a national renewable standard and energy efficiency. 

The bill would:

• Cut national greenhouse gas emissions 20 percent from 2005 levels by 2020-this is slightly more aggressive than similar measures pushed by the Obama Administration.  Overall the goal is to cut GHG emissions by 85% by 2050 when compared to 2005 levels
• Reduce electricity demand by 15% by 2020
• Nationwide renewable energy standard which requires 25 percent of the Country's energy generation be met through wind, solar and other renewables.

The bill forms a skeletal framework, but leaves major controversial components open to debate.  (See summary of the American Clean Energy and Security Act) For example, the bill does not address whether pollution allowances under the cap and trade program would be 100% auctioned or 100% allocated to industry or somewhere in between.  The fact the bill does not even make a proposal on this component suggest the drafters understand a deal will need to be struck to give a chance for the bill to pass. 

US Climate Action Partnership -- a coalition of businesses and environmental groups -- called the bill a good starting point.  The bill makes several key concessions to Industry:  a)  allowing domestic and international offsets; b)  provides C02 and other GHGs cannot be regulated as criteria pollutants or hazardous air pollutants under the Clean Air Act; c) creates a strategic reserve of allowance in the event allowance prices are too high; and d) allows unlimited banking of allowances.

However, the bill also includes proposals that will raise concerns with Industry beyond the major concern-should the U.S. have a cap and trade system to control GHGs?  While the bill essentially exempts GHGs from traditional regulation under the Clean Air Act (a major advantage of legislation), it directs EPA to set up a new regulatory program to curb GHG emission by sources that are not covered by the Cap.  The bill also does not create any kind of so called "safety valve" which is a limit on the price of allowances.  While the strategic reserve concept allows some cushion, it only provides for release of more allowances into the pool it does not set a ceiling on the price of an allowance.

As reported in the Boston Globe, the House Committee's goal is complete debate on the bill by Memorial Day.  Here is the tentative schedule:

• Week of April 20:  Energy and Environment Subcommittee Hearings
• Week of April 27:  Energy and Environment Subcommittee Markup Period Begins
• Week of May 11: Full Energy and Commerce Committee Markup Period Begins

This appears to be a highly ambitious schedule given the level of controversy and major components of the bill open to debate.  Passage will be still very questionable.  You will have virtually no support among Republicans. You will have Democrats in coal states worried about the cost impacts of cap and trade on utilities.  You will have Democrats and Republicans in Southern states very concerned about the national renewable energy standard. 

For the bill to pass, major components will likely have to be restructured.  I am certain there will be plenty to write about regarding the bill in the coming weeks and months. 

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Here are some snapshots of some of the latest developments regarding the Congressional debate over cap and trade legislation.  For the first time serious consideration of legislation is underway.  As a result, groups are beginning to develop their public positions.  Meanwhile, businesses continue to feel increasing pressure to address the risks associated with climate change.

Congressional Battle Lines Are Forming-  In my last post I apparently underestimated the aggressiveness of the Conservative attack on the Cap and Trade Proposal.  The legislative battle is beginning to take shape. RNC Chairman Steele said the following on a call in talk show: 

We are cooling. We are not warming. The warming you see out there, the supposed warming, and I am using my finger quotation marks here, is part of the cooling process. Greenland, which is now covered in ice, it was once called Greenland for a reason, right? Iceland, which is now green.

Skepticism among "Blue Dog" Democrats:  As serious consideration of a cap and trade bill is now underway, conservative Democrats are questioning the timing and implementation of a cap and trade proposal.  In a Wall Street Journal interview with U.S. Climate Action Partnership member, Fred Krupp, he minimized the concern a divide is occurring within the Democratic Party:

Recently I met with 27 House Blue Dog Democrats, alongside other members of USCAP including [GE boss] Jeffrey Immelt, [Shell’s] Marvin Odum, and [Duke Energy’s] James Rogers. What I heard is that they want to be involved in getting a climate bill right, and making it fair for consumers; I didn’t see a lack of engagement. Until now, there’d been no prospect of legislation. Now, the sorts of concerns are raised that naturally get raised when things could actually happen. This is part of the legislative dance, and that just began in earnest when President Obama called on Congress to deliver a climate bill.

Size of the Climate Bill May 2 or 3 Times Projected in the President's Budget- Jason Furman, deputy director of the National Economic Council, told Senate staffers in late February that the plan could raise two to three times as much as the official budget figures, or between $1.3 trillion and $1.9 trillion, the WSJ reports.

[In order to get projections that high] That leaves carbon-emissions permits that are simply more expensive than the lowish prices that have been bandied about so far. To make the White House math work, the government would have to sell the same number of permits at prices ranging from $20 to more than $40 a ton [compared to $10 to $14 per ton originally projected.  For comparison the most recent RGGI auction, carbon was around $3 per ton]

Cap and Trade Means Jobs-  Understanding the link between a struggling economy and the viability of cap and trade legislation, the Environmental Defense Fund has launched a new web site showing regulating carbon can translate into green jobs.  The site contains maps of select states with push pins representing various companies that EDF argues would benefit from cap and trade legislation. It is no coincidence that EDF uses mainly coal states to highlight the potential for green job growth.  www. lesscarbonmorejobs.org

Insurers Must Disclose Climate Change Risks-  Another indication came last week that climate change is having real world impacts on the business community even before a vote occurs on cap and trade legislation.  The National Association of Insurance Commissioners (NAIC) voted last week to require the annual filing of Insurer Climate Risk Disclosure Surveys for insurance companies with annual premiums topping $500 million. The new rule, set to begin May 1, 2010, is the world's first climate risk disclosure requirement,

Market Solutions Versus Top Down Regulation-  The freight train that is greenhouse gas (GHG) regulation is on track and moving full steam ahead.  I cannot repeat enough to those debating climate change legislation, if you are focusing only on whether to enact cap and trade legislation you are missing the 800 lbs gorilla in the room.  GHG regulation is coming.  The Supreme Court set the train in motion with Massachusetts v. EPA.  No real debate should occur without examining the alternative of allowing Clean Air Act regulation of GHGs instead of a market based solution like cap and trade.

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If you are like me you have noticed a lot more people talking about climate change in the last month.  President Obama's cap and trade proposal has certainly garnered more attention on the subject.  Many opponents tend to ask why we should be pursuing such a massive program in the middle of an economic crisis.  Unfortunately, I have also had more conversations with individuals asserting global warming is a hoax or overblown.

Recent polling data supports that lack of firm public support that will be necessary to pass cap and trade legislation. A recent Gallup poll shows more Americans are beginning to question global warming now that a serious legislative proposal has been offered.

Eroding public support for cap and trade is having its effect on the debate in Congress. A recent Detroit News article cites eroding support even among Democrats:

Citing the burden the standards would put on manufacturing, particularly automobile-related manufacturing, Michigan Democratic senators Carl Levin and Debbie Stabenow are signaling their opposition.

Levin, six other Democrats and 26 Republicans are objecting to a Senate procedural budget reconciliation process that would limit debate and amendments to Obama’s proposed debate cap-and-trade legislation, according to the Detroit News.
 

As many have observed, the political debate in Congress may shape up to be less about political party and more about geography.  Senators, whether Democrat or Republican, from coal states or manufacturing states will find it very difficult to support cap and trade legislation.

What is even more threatening to a cap and trade proposal is that the Republicans have yet to fully seize on their attack message- with the economy in shambles now is not the time to be enacting climate change legislation.  Right now, Republicans are soft peddling opposition to cap and trade, as articulated in Reuters recently by Sen. Murkowski:

Congress will not be able to pass legislation capping carbon emissions in 2009 if the economy continues its downward slide, a key Republican senator said on Monday.

"If the economy is still where we are right now, I would suggest to you it's not happening this year," Senator Lisa Murkowski told reporters at a Platts Energy Podium.

Once the polling numbers show they can win the debate, you know they will ratchet up the heat...so to speak. 

What does the challenge of passing carbon legislation mean? As discussed in prior posts, it means that regulation of greenhouse gases (GHGs) through the Clean Air Act will happen first and in a dramatic fashion.  Many of those opposing carbon cap and trade legislation seem to ignore this reality. 

EPA has already drafted final emission reporting rules for GHGs.  Next month, EPA is likely to issue their draft endangerment finding.  In addition, EPA will take additional action to regulate GHGs under the Clean Air Act.  Massive litigation will follow all of these rulemaking efforts.  More suits will be filed by environmental groups looking to use existing authority under the Clean Air Act to block new plants or reduce emissions. 

Unfortunately, the command and control approach that will result from regulation under the Clean Air Act will be far more costly and will create great uncertainties.  Cap and trade has consistently been shown to be more effective and a cheaper way of reducing emissions. 

The clash between cap & trade and regulation under the Clean Air Act, was recently highlighted by a project titled "Breaking the logjam."  This project involved N.Y. University School of Law and New York Law School and enlisted 40 environmental law experts across the ideological spectrum.  The conclusion of the report was cap and trade is a far more effective means of addressing climate change:

Experience has shown the cap and trade approach to criteria pollutants can achieve cuts at lower cost than are achievable under the highly prescriptive and cumbersome regulatory method at the heart of the current statute [Clean Air Act]

In my mind, the debate cannot be framed in terms of either regulation or no regulation.  There is no such option. There is certainly enough Congressional support for addressing climate change that any legislative proposal to amend the Clean Air Act to prevent regulation of GHGs will be unsuccessful. 

Rather, the debate must be viewed as which method of regulation is the better option.  When viewed in this manner, we should be debating the elements of the cap and trade legislation- offsets and auction v. allocation-not whether to pass such legislation. 

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On February 18th another permit, Northern Michigan University Ripley Heating Plant, for a new coal facility was remanded by U.S. EPA's Environmental Board of Review.  The Board remanded the permit because the State (the Michigan Department of Environmental Quality), in issuing the permit, failed to address whether CO2 was a regulated pollutant under the Clean Air Act.  The most interesting aspect of the decision is that the Board apparently gave absolutely no weight to former EPA Administrator Johnson's Memo which said CO2 was not a "regulated pollutant" and therefore new permits need not consider BACT controls for CO2.  Here is what the Board said on the issue:

For the reasons set forth in that decision (Deseret Power), we similarly remand the CO issue here, directing MDEQ, guided by our findings in Deseret, to undertake the same consideration whether the CAA’s “pollutant subject to regulation” language requires application of a BACT limit to CO emissions.

The Board does not elaborate or even address the Johnson memo.  Therefore, it is impossible to know whether new EPA Administrator Jackson's grant of the Sierra Club's petition for reconsideration rendered the Johnson Memo meaningless.  That seems like a difficult legal conclusion to reach given the fact Jackson's action specifically did not block the effectiveness of the Johnson memo while it was undergoing review.

The permit had authorized Northern Michigan University (NMU) to construct a new circulating fluidized bed (“CFB”) boiler at the Ripley Heating Plant on its campus in Marquette, Michigan. As permitted, the CFB boiler will function as a cogeneration unit that provides both electrical power and heat to NMU’s facilities through the burning of wood, coal, and natural gas

Another interesting aspect of the decision was the Board also remanded the BACT analysis for the SO2 limit.  The permit called for a mix of fuels- mainly wood and coal.  The Board found there was not enough information provided to justify the limited amount of wood which would lower SO2 emissions.  The Board also questioned the fuel choice relative to coal.  It said the MDEQ needed to provide more information as to why lower sulfur coal was not required to lower SO2 emissions.

The BACT requirements for fuel choice are interesting.  For instance, once (not if) CO2 is regulated would BACT require a coal and biomass mix which can lower emissions of CO2?  This could be very good news for biomass producers who blend biomass with coal to form briquettes or pellets. 

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Kudos to those in Cleveland  responsible for launching the country's first community based carbon offset fund- the Cleveland Carbon Fund.  It is an innovative approach to offsetting your personal or business carbon footprint.  Richard Steubi's Cleantech blog describes the difference between the Cleveland Fund and other offsetting options:

"There are already several options in the marketplace for interested parties to acquire emissions offsets to mitigate their carbon footprint. However, customers of these services usually do not know where the emission reductions will occur. For instance, if I use a service like TerraPass to offset the emissions from my next airline flight, I don't know exactly where the emission reductions will occur. Looking at the emission reduction projects sponsored by TerraPass, they span the width of the entire U.S."

Similar to other carbon funds, green conscious individuals or businesses can calculate their carbon footprint then make a donation to offset their carbon emissions. However most other funds use donations to purchase renewable energy credits to fund renewable energy projects or carbon credits.  The Cleveland Carbon Fund uses donations to fund  and provide technical support for specific projects right here in Cleveland.   An example of the types of projects funded include:

Compact Fluorescent Lamp (CFL) Installation
 [I]t is estimated that $20,000 from the Cleveland Carbon Fund could fund local community development organizations to install 8,000 CFLs in 1,000 low-income homes across Cleveland. In five years, this initiative would save these homeowners $250,000 and reduce carbon emissions by 2,000 tons at a cost of $5 – $10 per metric ton of carbon reduced.

Showerhead Replacement
Low-flow showerhead valves use half as much water while providing the same level of pressure. According to the Department of Energy, installing these valves saves $11 in water heating every three months...a $30,000 grant from the Cleveland Carbon Fund could fund non-profit organizations to install these valves in more than 200 low-income homes...This project would save Cleveland homeowners almost $10,000 in hot water heating and annually reduce carbon emissions by more than 100 tons at a cost of less than $10 per metric ton of carbon dioxide reduced.

Home Weatherization
For approximately $50,000, the Cleveland Carbon Fund can support more than 20 weatherization projects in low-income neighborhoods across the community, employing many local citizens. Sealing and insulating homes to better retain heat during the winter will save Cleveland homeowners more than $5,000 in energy bills and reduce carbon emissions by 40 tons each year.

If we have learned anything from the first few weeks of the Obama Administration its that climate change, renewable energy and sustainability will be key themes repeated early and often.  Rather than fighting this change, Ohio and Cleveland would be smart to see how they can leverage this massive impending change to grow its economy. 

Innovation and leading will be key to securing green jobs in this difficult economy.  We need to see more proposals like the Cleveland Carbon Fund in order to compete with all the other areas of the country that are actively trying to brand themselves green states and cities. 

(Photo: laszlo-photo/everystockphoto.com)

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Al Gore, speaking at the annual meeting of the Clinton Global Initiative, called for young people to perform acts of civil disobedience to stop construction of new coal plants.  He also has called for State Attorney Generals to review whether utilities are committing stock fraud by discounting the threat of global warming. 

I put this post up after writing yesterday about the Arkansas proposal to pass legislation prohibiting construction of new coal plants.  Preventing construction of new coal plants that do not use carbon sequestration appears to be the number one strategy of green groups and those concerned with global warming. 

Ohio could soon be a major battle ground.  While the AMP Ohio facility has received its permit for construction of its new baseload coal power plant, it should be bracing itself for challenges on all fronts. During the public comment period on the new period concern was expressed that the facility would emit 7.3 million tons of CO2 per year.  Right now AMP Ohio appears to be the rare coal plant project that is still moving forward having received its authorization to construct from Ohio EPA.

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As reported in the Texarkana Gazette, the Arkansas State Commission on Global Warming is likely to recommend a ban on new coal fired power plants.  The Commission is also proposing construction of a new $1.5 billion dollar plant be delayed until carbon sequestration technology can be added to the plant. 

What is the Arkansas Governor's Commission on Global Warming?  Here is a description taken right from its web page:

With the signing of Act 696 of the Arkansas 86Th General Assembly (HB2460), Governor Mike Beebe established the Governor’s Commission on Global Warming. By design the Commission represents a wide diversity of views and perspectives with members coming from business, industry, environmental groups, and academia.

The Commission is charged with setting a “global warming pollution reduction goal” for Arkansas and a “comprehensive strategic plan for implementation of the global warming pollution reduction goal.” The Act sets several study and evaluation requirements and requires a final report be provided to the Governor by November 1, 2008.
 

The developments in Arkansas represent yet another in a series of legal, legislative and political attacks on new coal fired power plants.  The attacks have been successful, between 2007 and 2008 plans for at least 69 coal plants have been canceled.

In the article a utility representative comments that the decision would force continued use of older less efficient coal fired power plants.  His argument that the decision will be bad overall for the environment. 

While I sympathize with the argument we should not be adding to the problem, what alternatives are being suggested to replace old plants or meet ever increasing demands for electricity?  While renewables are a great solution, there is no denying they do not provide the baseload generation of either a coal or nuclear plant. 

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As reported in various newspapers, several states have moved forward with the next round of climate change litigation. The States have sued U.S. EPA arguing that the Agency illegally refused to regulate greenhouse gas emissions (GHG) from refineries. 

Thelen's Climate Law Update, had a recent post discussing the lawsuit:

New York, California and 10 other states launched the latest lawsuit this week in the U.S. Court of Appeals for the District of Columbia Circuit. Although the document itself was bare-bones, officials said it's focused on the failure of the U.S. Environmental Protection Agency to adopt regulations known as New Source Performance Standards to control pollutants blamed for causing global warming.

Lawyers working for California Attorney General Jerry Brown told Climate Law Update the case would draw legal support from last year's landmark Massachusetts v. EPA decision last year. In that ruling the Supreme Court held the EPA had the authority under the Clean Air Act to regulate greenhouse gases if it found they endangered human health or welfare.

So far, as Climate Law Update has reported, government officials have balked at such a move, calling the law "ill-suited" to controlling such emissions, and they have launched a lengthy effort to study the issue.

U.S. EPA pronounced that the Clean Air is "ill-suited" for regulation of GHGs when it issued its proposed rulemaking on regulation of greenhouse gases under the Act.   U.S. EPA's rulemaking is an analysis of the whether and how GHGs could be effectively controlled under the Clean Air Act. 

In U.S. EPA's latest action, refusal to regulate GHG emissions under the NSPS (new source performance standards), U.S. EPA asserted:

1. The Clean Air Act does not mandate U.S. EPA regulate GHGs under the standard
2. The Agency should be allowed to proceed with a more deliberate and thoughtful process in developing greenhouse gas regulations, then simply incorporating regulations as it develops source specific rules
3. Regulating GHG under NSPS could require the Agency to develop regulations for other categories of sources and under several other parts of the Act.

While U.S. EPA may prefer a more deliberative process and a comprehensive approach, it does not prevent Courts from interpreting the Act to require regulation and force application on a case by case basis. As an example, we have already had one Court determine the Clean Air requires analysis of greenhouse gases during the permit process.

There is no doubt the wave of climate change litigation has not even crested. It is also certain that the Clean Air Act structure does not mesh well with regulation of greenhouse gases.  In fact, some of the most complicated provisions in the Clean Air Act, such as New Source Review, are overly complicated when applied to criteria pollutants (SO2, NOx, PM)  However, as long as Congress and U.S. EPA delay comprehensive action on climate change, we are likely to construct climate change regulation by default and in piecemeal fashion. 

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On August 20th, the Public Utilities Commission of Ohio proposed rules governing greenhouse gas reporting and carbon dioxide control planning.  Parties wishing to file comments have until September 6th to file comments.

The most interesting aspect of the rule is it proposes to mandate all electric generating facilities in Ohio become participating members in the Climate Registry.  It also mandates electric generating facilities to report report greenhouse gas emissions according to protocols approved by the Climate Registry.  While Senate Bill 221 provided discretion to the PUCO to establish the level of participation in the Climate Registry, the Commission has decided to mandate participation.

I'm sure the Commission will receive comments on their definition of "electric generating facility" covered by the mandatory reporting requirement.  The definition is as follows:

"Electric generating facility" means an electric generating plant and associated facilities capable of producing electricity.

There is no minimum size requirement specified in the proposed rule.  Therefore, it would appear an electric generating facility of virtually any size under PUCO's jurisdiction faces a mandatory reporting requirement.

I would also expect comments from the Utilities that the mandatory reporting requirements should wait until U.S. EPA proposes its mandatory greenhouse gas reporting rule in September.  U.S. EPA's reporting rule will specify required reporting as well as include limitations on the size of the generating unit covered by the mandatory reporting requirement. 

U.S. EPA propose rule will also shine light on the interplay between the Climate Registry and mandatory federal reporting requirements. Perhaps the Commission left themselves some wiggle room by inserting "or as otherwise directed by the Commission" right after the mandate to participate in the Climate Registry.

The rule also requires each owner and operator of a electric generating facility to file an annual report specifying its control plan for both criteria pollutants (NOx, SO2) and for carbon dioxide.  However, the rule lacks any specificity as to what elements must be included in the plan.  The proposed rule requires the environmental control plan include:

"...all relevant technical information on current conditions, goals, and potential actions based upon the current scientific and engineering design capability of any facility...to control emissions of criteria pollutants and carbon dioxide within the parameters of economically feasible best technology."

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In my last post I discussed corporations that are using a vast array of accounting methods to calculate carbon footprints.    An article in the Seattle-Post-Intellegencer discussed variations found in outputs from household on-line carbon footprint calculators.

While US EPA's forthcoming rule will address measuring emissions of greenhouse gases from large industrial sources, it certainly appears there are more areas needing standardization.  I should not be able to cut in half my personal carbon footprint simply by using a different calculator. 

The article was triggered by a University Washington study of household carbon footprint calculators commonly found and used on the web:

A recent University of Washington study found that when the same values were used with 10 different online calculators, the results varied greatly. In one category, the bottom line for a typical American homeowner varied by more than 32,800 pounds of carbon produced per year.

The variation suggests tallies of carbon emissions have been oversimplified to produce a "one-click" solution to an extremely complicated problem -- global warming. Some experts fear calculators suggesting a person plant a few trees to offset driving a gas guzzler may actually discourage needed lifestyle changes that can benefit the planet.

"Everyone assumes that every calculator they use will produce an accurate result, but in reality, there are vast inconsistencies between the calculations being done," said Anne Steinemann, a UW civil and environmental engineering professor who headed the research. "I was really surprised by the magnitude of inconsistency."

The newspaper also did its own research and included a chart showing the dramatic variations.

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Have you measured your company's carbon footprint yet?  Don't worry if you haven't,  in the wild west that is climate change sometimes it pays to wait and see how things shake out.  For instance, who would have thought just picking an accounting method for measuring greenhouse gas (GHG) emissions would be so complicated. 

There is no doubt that quantifying emissions is gaining in popularity.  A recent survey of North American supply chain executives determined that 60% decided to measure their emissions.  Their motivations may be fear of impending greenhouse regulations, compliance with existing requirements, customer demands or sustainability initiatives within their company.

While many executives have decided to measure emissions, not all executives are going about it in the same way.  A recent study of greenhouse reporting and verification methods found that more than 34 different protocols and guidelines for reporting emissions have been used.  Variation occurs even among companies located in countries or states with mandatory greenhouse gas regulations. 

Such variation leads to a great deal of inconsistency and therefore, a lack in comparability between corporations' reports.  There is ever-growing controversy as to whether within various industrial sectors an apples to apples comparison can be made of company footprints or emission reduction targets.

Perhaps things are beginning to take shape, the States have seemed to coalesce around a greenhouse gas accounting method- The Climate Registry.  (The adjacent map shows those states and Canadian provinces who have endorsed the use of the Climate Registry)  However, until US EPA weighs in, you are still risking having to make adjustments to your calculation of GHG emissions.  Fortunately, the sheriff is about to ride into town.

Recently, Congress directed US EPA to publish a mandatory GHG reporting rule, using the Agency's existing authority under the Clean Air Act. (H.R. 2764, Public Law 110-161).  Congress has required EPA to publish a draft rule by September 2008 and a final rule no later than June 2009.  The long gap between draft and final rule will allow for a rigorous public comment period. 

Congress has directed the Rule must address certain key elements, such as:

• Reporting on emissions from upstream (fossil fuel and chemical producers and importers) and downstream sources (large industrial direct emitters)
• Mandatory reporting thresholds
• Frequency of reporting

The EPA is provided discretion to utilize methods already in use and can build upon existing mandatory and voluntary reporting systems, such as:

• Existing reporting for electric generating units under Section 821 of the Clean Air Act
• Federal reporting program (Title IV, Climate Leaders, 1605(b))
• State programs (California, The Climate Registry, RGGI, other State programs)
• Corporate programs (WRI/WBCSD)
• Industry protocols (API Compedium, CSI Protocol, or International Protocols)

If you're not familiar with all of the references to various protocols that's okay.  It may be prudent to wait until EPA at least releases its draft reporting rule to get an idea of how this shakes out. 

Perhaps EPA will say that use of the Climate Registry method is acceptable for purposes of its rule, in essence endorsing the standard. Due to the number of states and provinces already backing the Registry, that may be very likely.  However, what if EPA decides to build upon or modify requirements?

Keep in mind that even if you wait until September you still risk EPA will make changes during the public comment period.   Companies and organizations that have invested in a certain protocol are going to fight hard to see the EPA rule endorse it.  But in my opinion it would be a grave mistake for EPA to try and avoid controversy by not picking any winners.  Standardization is a must, without it there will always remain issues of inconsistency.

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For the first time a court has revoked a permit due to concerns over C02 emissions and climate change.  While there have been previous instances where states have denied permits due to concerns with C02 emissions, this is the first time a court has revoked a previously issued permit.  Notably, the Court did not base its decision on state law, rather it ruled the Clean Air Act (CAA) requires analysis and control of C02 emissions. 

Other courts are currently hearing similar challenges.  If this decision is a trend it will have major implications for any new facilities seeking an air permit.  In a future blog post I will discuss the implications of using the Clean Air Act, specifically the New Source Review provisions, to regulate CO2.  Much speculation has been made as to whether CO2 will be regulated even without action by Congress on comprehensive climate change legislation.

The CO2 decision was issued on June 20, 2008 in Georgia's Fulton County Superior Court.  The Georgia Environmental Protection Division had approved a permit for the construction of a proposed 1200-megawatt coal-fired power plant.   Environmental groups, including the Sierra Club, challenged the permit saying the plant's emission of 8-9 million tons of CO2 had to be considered. Siding with the Sierra Club, the Court overturned the State's issuance and sent the permit back to perform the analysis it said was required under the CAA. 

Note: According to Sourcewatch, between 2007 and 2008, plans for 69 coal plants have been canceled.

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Dave Douglas, Chief Sustainability Officer for Sun Microsystems, recently wrote an article in which he predicts the United State's hit peak carbon in 2007 (meaning emissions will now trend downward).  Here is a quote from his article:

  So, now my prediction: Peak Carbon occurred in the US in 2007.

 Yep, I’m predicting that annual GHG emissions in the US will now drop regularly going forward, with only minor setbacks every once in awhile. My rationale is that there are short-term, medium-term and long-term drivers in place which are capable of, together, sustaining reductions over decades:

His article generated a lot of responses and criticism from many who believe the U.S. will continue to trend higher in emissions until meaningful federal greenhouse legislation passes Congress.  I actually agree with his prediction. 

$4 dollar gas is not going away.  From recent car sale reports, the American consumer is switching from SUV and pickups to compact cars.  Even if people are not buying a new car they are driving less.   The transportation sector makes up roughly one-third of total greenhouse gas emissions in the United States.  Therefore, these consumer trends will translate into significant reductions.

Also, the switch toward renewable energy, the corporate sustainability movement, and greenhouse gas programs passed at the state level will all continue the trend downward.  Finally, federal legislation is inevitable, with many predicting a cap and trade program starting in 2012. 

In April, U.S. EPA released its greenhouse gas inventory report that analyzes emissions trends.  The main take away from the report...greenhouse gas emissions decreased by 1.1 from 2005 to 2006.  U.S. EPA concludes the decrease was attributable to the following:

• compared to 2005, 2006 had warmer winter conditions, which decreased consumption of heating fuels, as well as cooler summer conditions, which reduced demand for electricity;
• restraint on fuel consumption caused by rising fuel prices, primarily in the transportation sector; and
• increased use of natural gas and renewables in the electric power sector.

  We have a long way to go, but it does appear that peak carbon is not such an outlandish prediction.

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Everyday we are bombarded with stories of rising gas and energy prices.  The USA Today recently had a front page article on the increases in electricity rates due to the rise in fuel costs.  The article said utilities are raising rates up to 29% due to soaring fuel cots.   Its not just oil that has skyrocketing prices, natural gas and coal have experienced dramatic increases as well.  Since the beginning of the year coal prices have gone from around $60 per ton to well over $100 per ton (depending on the type of coal purchased). 

Ohio businesses have yet to experience the impacts from what is happening in the energy markets.  Until recent passage of Senate Bill 265, Ohio had frozen its electric rates so recent fuel cost spikes have not been taken into account in rates.  As reported by John Funk in the Cleveland Plain Dealer, the utilities have begun meeting with the State to discuss price increases. 

Ohio better brace itself for even a larger jolt in prices attributable to CO2 regulation.  Federal legislation such as S. 2191 (the Lieberman-Warner Bill), which would regulate carbon emissions, had a quick death a few weeks ago in the Senate.  However, it is inevitable that federal legislation that establishes a carbon cap and trade program will pass soon after we have a new President (both McCain and Obama support the cap and trade approach). 

With 87% of Ohio's power coming from coal, what impact would such a cap and trade program have on Ohio?  Most understand there will be an impact, but I'm not sure most understand the magnitude.  To illustrate the impact, I attached a chart from U.S. EPA's modeling of the impact of the Lieberman-Warner bill on electricity generation.  The two charts project the amount of electricity generation from various sources (blue = coal, yellow = nuclear, green = other sources).

The chart to the left (click to enlarge image) is the status quo- no greenhouse gas regulation.  It projects coal-fired power would continue to dominate generation in the US. The chart on the right shows what will happen if something close to Warner-Lieberman passes. 

Not only does the amount of coal power shrink relative to nuclear and other sources like renewables, the composition of generation from coal dramatically shifts. The change from blue to red in the chart project the conversion of coal to carbon capture and sequestration (CCS).  U.S. EPA projects that ALL coal plants will institute CCS by the year 2035.  Why?  Because the cost of emitting carbon will be so high that the economics will drive utilities to institute CCS. 

Even U.S. EPA notes in its analysis that this projection is "optimistic."  That certainly is an overstatement given the fact there are no successful CCS projects currently being implemented.  So what does it mean if CCS is unrealistic in that time frame?  It means huge cost increases for coal-fired utilities because the price of allowances under the cap and trade program will rise.  

With fewer reductions there is a corresponding increase in the value of the C02 reduction credits used to offset emissions.  Higher costs for C02 credits translates into larger compliance costs for coal-fired utilities. Those huge costs will be passed on to consumers in the form of electricity price increases. 

Seems to me Ohio business and officials better start seriously considering the implications of federal regulation of CO2.  I am not advocating against passage of greenhouse gas regulation.   Ohio better start planning for a carbon constrained world and how electricity prices tied to coal generation may affect Ohio's competitiveness.

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