I was giving a speech to a trade association last night regarding Cap and Trade legislation in Congress. The sentiment of most participants in this manufacturing group was that they had dodged a major bullet because passage of a bill looks very unlikely. While that is true, I told the audience don’t lose sight of the fact regulations are coming even without a bill in Congress. This took many of the members by surprise.
Here is how the battle over climate change regulation is currently unfolding…
While the Senate continues to try and reach a compromise over Cap and Trade legislation that could garner 60 votes, most observers are now saying passage is very unlikely. A range of reasons are cited for the diminishing chances for a Senate bill:
- Loss of the "super" majority with the Massachusetts Senate race- although 60 Democrats were not going to vote for this bill, it is one less vote. This from Reuters:
From a purely numerical perspective, the Massachusetts election makes only a marginal difference. With the real division running through the centre of the Democratic Party, rather than between the parties, cap-and-trade was never going to pass on a 60-40 party-line vote. It was always going to need at least some Republican votes. So the loss of one Democrat makes only a small difference.
- Hard fought legislative battles over health care reform diminishes any potential compromise between Republicans and Democrats
- Failure in Copenhagen to reach a global consensus on climate action
- Health care, financial reform and jobs being much higher legislative priorities
- "Climategate"- the uncovering of unflattering e-mails by climatologists
Pick any combination of the items above and a strong case can be made that cap and trade will not emerge in 2010 or in the near future. A recent New York Times Article does a great job describing how the battle has shifted from Congress to the halls of U.S. EPA.
EPA in March is expected to roll out the first-ever federal standards affecting greenhouse gas emissions from automobile tailpipes. This follows the agency’s move in December declaring greenhouse gases a danger to public health. The tailpipe standards would automatically trigger requirements that stationary sources — such as power plants — install "best available control technology," or BACT, according to EPA. The agency has proposed a separate rule to shield smaller facilities from those requirements, the "tailoring rule," which is also expected to be in place by March.
As set forth above, the dominoes are falling leading to full blown regulation of greenhouse gases using EPA’s existing authority under the Clean Air Act. The regulations have progressed as follows:
- Mandatory Greenhouse Gas Reporting Rule– EPA has already finalized mandatory reporting for large source (25,000 metric tons). Sources must start tracking emissions this year.
- Endagerment Finding– EPA finalized its finding that greenhouse gas emissions from vehicles endanger human health and the environment. This was a pre-requisite to issuance of its Light Duty Vehicle greenhouse gas standards.
- Light Duty Vehicle GHG Standards– EPA has stated in prior rule packages that it expects to finalize this rule this March. This will be the first rule establishing actual emission limits for greenhouse gases. Once mandatory emission limits are established for vehicles, the Clean Air Act automatically requires certain provisions will apply to all other sources. New Source Review (NSR) will be triggered by emissions of greenhouse gases.
- GHG Tailoring Rule– This is EPA’s effort to change the triggers for NSR to fit GHG emissions. Without this rule very small sources would trigger federal air permitting requirements.
As EPA marches toward full blown regulation, attention shifts back to the Senate where a major battle over an amendment to block EPA’s efforts is about to take place. This from Environmental Leader:
U.S. Sen. Lisa Murkowski (R-Alaska) is expected to introduce an amendment that would prevent the Environmental Protection Agency (EPA) from regulating greenhouse gas emissions (GHG) under the Clean Air Act, reports the Los Angeles Times.
Murkowski will either try to block the EPA by seeking an amendment to an unrelated debt bill due to go to vote on Jan. 20 or she will seek a resolution of disapproval, which would not be subject to filibuster and only need 51 votes to pass, reports the Guardian. She has the support of 34 Republicans and is reaching out to Democrats, according to the article.
Its going to be very difficult to find another seventeen votes to support the measure in the Senate. Therefore, businesses must be prepared for the major EPA’s greenhouse regulations in March. Its a good time to be assessing your businesses exposure and risks using the proposed thresholds.