Weekly Climate Change Policy Update - June 7, 2010

Article by Kyle Danish, Shelley Fidler, Kevin Gallagher, Megan Ceronsky and Tomás Carbonell

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Commentary

In a speech at Carnegie-Mellon University, President Obama pledged to round up votes for a bill that will regulate GHG emissions . . . Citing the Gulf oil spill, Majority Leader Reid has asked Committee Chairmen for ideas by July 4^th for a "comprehensive energy bill." A spokesperson later clarified that "comprehensive" means climate-included . . . On Thursday of this coming week, the Senate will consider Sen. Murkowski's "Resolution of Disapproval" of EPA's finding that GHG emissions endanger public health and welfare. Passage of the resolution would remove EPA's authority to regulate GHG emissions under the Clean Air Act, which would scuttle the Obama Administration's deal with the states and the automakers for GHG standards for new motor vehicles. No filibusters or amendments are allowed for such a resolution; it needs 51 votes for passage. While most observers believe the resolution is unlikely to pass both chambers and survive a Presidential veto, no one is taking it lightly. The vote will be complicated for moderate Democrats concerned that Republican opponents will spin a "nay" vote into a vote in favor of EPA regulation. Lurking off-stage are potential "safety-valve" alternatives that would authorize motor vehicle regulation but cabin EPA's authority to regulate stationary sources, including a possible Carper-Casey bill (which would limit stationary source regulation only to larger sources, echoing EPA's "Tailoring Rule") and a Rockefeller bill (which would delay EPA regulation of stationary sources for two years). Of course, there is also the Kerry-Lieberman bill, which would supplant most traditional Clean Air Act regulation with a comprehensive, market-based regime. In any event, expect the floor debate on Thursday to provide opportunities for Senators to take a stand on a path forward; it could indicate the likelihood and form of Congressional action on climate this year.

Executive Branch

• Obama Vows to Marshal Votes to Pass Climate Change Legislation. President Barack Obama reaffirmed his support for comprehensive climate change and clean energy legislation at a speech at Carnegie Mellon University in Pittsburgh, PA, in which he argued that the ongoing oil spill in the Gulf of Mexico demonstrated the need to develop clean sources of energy. Declaring that "the next generation will not be held hostage to energy sources from the last century," the President vowed to work with Congress to pass climate change legislation. "The votes [to pass a climate bill] may not be there right now," said the President, "but I intend to find them in the coming months . . . I will work with anyone to get this done." The President's remarks are available at http://www.whitehouse.gov/the-press-office/remarks-president-economy-carnegie-mellon-university .
• State Department Submits Fifth Climate Action Report to UNFCCC. The Department of State submitted its fifth National Communication, titled the "Climate Action Report 2010," to the secretariat of the United Nations Framework Convention on Climate Change (UNFCCC). The UNFCCC requires parties to submit periodic reports documenting policies and initiatives to mitigate greenhouse gas (GHG) emissions. According to the report, U.S. GHG emissions are anticipated to increase to no more than 4% over 2005 levels by 2020 under current policies. Specific initiatives highlighted in the report include: $90 billion in investments in clean energy financed by the American Recovery and Reinvestment Act; the federal government's first-ever joint vehicle GHG and fuel economy standards, the planned vehicle standards for model years 2012-2016; and the President's October 2009 executive order requiring federal agencies to set and meet GHG reduction targets for 2020. The report does not describe or ascribe any reductions to any proposed cap-and-trade legislation (such as the Kerry-Lieberman bill), or to regulation of stationary source GHG emission under the Clean Air Act (such as through the Prevention of Significant Deterioration program). The report is available at http://www.state.gov/g/oes/rls/rpts/car5/index.htm .
• EPA To Release Economic Analysis of Kerry-Lieberman Bill by June 10. The Environmental Protection Agency (EPA) announced that it would deliver its long-anticipated economic analysis of the Kerry-Lieberman climate change bill to Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) on June 9, and would release the report to the public on June 10.
• EPA Proposes Clarifications and Technical Amendments to Reporting Rule. EPA proposed a package of amendments to its rule for mandatory reporting of GHG emissions (the "Reporting Rule"), affecting the general provisions of the Reporting Rule as well as specific reporting requirements for approximately 18 different categories of sources. The preamble explains that the amendments do not require additional data to be collected or change the substantive requirements of the Reporting Rule, but instead provide compliance flexibilities; clarify ambiguous terms; correct errors; and provide information. The amendments are expected to be finalized before the end of 2010, and will take effect before the first emission reports under the Reporting Rule are submitted in March 2011. Categories of emission sources affected by this action include municipal landfills (Subpart HH of the Reporting Rule); suppliers of natural gas and natural gas liquids (Subpart NN); and suppliers of petroleum products (Subpart MM). The proposal is available at http://www.epa.gov/climatechange/emissions/downloads10/MRR_FR-Technical-Correction-Notice.pdf .
• EPA Publishes Tailoring Rule, Opening Window for Legal Challenges. EPA published in the Federal Register its final rule "tailoring" the Clean Air Act's Prevention of Significant Deterioration (PSD) and Title V permitting programs so that they can be applied to stationary sources of GHG emissions. This "Tailoring Rule," which was signed by Administrator Lisa Jackson on May 13, 2010, establishes a three-stage "phase-in" of PSD and Title V requirements beginning on January 2, 2011. Petitions for judicial review of the Tailoring Rule must be submitted by August 2, 2010. Legal challenges have already been filed by the Southeastern Legal Foundation and by a coalition of plaintiffs that includes the Center for Responsible Regulation, the Industrial Minerals Association-North America, the National Cattlemen's Beef Association, Great Northern Project Development LP, Rosebud Mining Co. and Alpha Natural Resources Inc.

Congress

• Lugar to Release Climate Bill. Senator Richard Lugar (R-IN) has distributed an outline of his Practical Energy and Climate Plan bill, which will be released next week. Sen. Lugar has said that his bill would address GHG emissions without imposing a carbon price, whether through a cap or a tax. According to the outline, the legislation would reduce foreign oil imports by two-thirds (1.75 billion barrels) by 2030, cut energy use by nearly 14 percent by 2030, reduce household electricity costs by an average of 10 percent, and reduce GHG emissions by 25 percent from business-as-usual projections (meeting half of President Obama's 2020 emission reduction goal). The outline also states that the bill would not reduce GDP growth or result in net job loss. The bill includes:
• • A required 4 percent annual improvement in efficiency for new passenger vehicles and rising fuel efficiency standards for medium- and heavy-duty vehicles starting by 2017.
  • A requirement that 90 percent of new vehicles with combustion engines be flex-fuel capable by model year 2015.
  • Mandatory targets for improved energy efficiency building performance for new residential and commercial construction.
  • Accelerated implementation of standards for appliance and equipment energy efficiency.
  • A "diverse energy standard" requiring states to use clean energy sources (including renewable power, coal-fired power with carbon capture and sequestration, nuclear power, and energy efficiency) to meet 15 percent of electricity demand by 2015, 30 percent by 2030, and 50 percent by 2050. States may defer the target by three years, and would be authorized to incorporate "additional sources meeting similar standards."
  • An early retirement program for heavily polluting coal-fired power plants involving the waiver of certain pollution control regulatory requirements in exchange for retirement by 2020.
  • $36 billion in loan guarantees for nuclear power.
• Reid Asks Chairmen for Oil Spill Fixes by July 4^th for Comprehensive Energy Bill. Majority Leader Harry Reid (D-NV) wrote to key committee chairmen asking that they provide recommendations for a "comprehensive energy bill," which would address the oil spill in the Gulf of Mexico. The recommendations or legislation are to be prepared by the Fourth of July congressional recess to be incorporated into a bill that will be considered during July. A Reid spokesperson later said that the Majority Leader intends that any "comprehensive" bill include climate policy provisions. The letter was sent to Finance Committee Chairman Max Baucus (D-MT); Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM); Environment and Public Works Committee Chairman Barbara Boxer (D-CA); Banking, Housing, and Urban Affairs Committee Chairman Christopher Dodd (D-CT); Commerce, Science, and Transportation Committee Chairman Jay Rockefeller (D-WV); Agriculture, Nutrition, and Forestry Committee Chairman Blanche Lincoln (D-AR); Homeland Security and Government Affairs Committee Chairman Joseph Lieberman (I-CT); and Judiciary Committee Chairman Patrick Leahy (D-VT). Sens. John Kerry (D-MA) and Joseph Lieberman (I-CT) issued a joint statement describing the letter as a call for the Chairmen to pass comprehensive energy independence and climate change legislation this year.

Judicial

• Deadline Extended for Filing Petitions for Certiorari in Connecticut v. AEP. Justice Ruth Bader Ginsberg granted a request by the Tennessee Valley Authority to extend the deadline for filing petitions for certiorari with the United States Supreme Court in the case of Connecticut v. AEP. The new deadline is July 6, 2010. The case was brought by eight state governments, the City of New York, and several private land trusts against the nation's five largest coal-burning utilities, alleging that the defendants' GHG emissions constitute a "public nuisance" under federal law. The district court dismissed the plaintiff's claims on "political question" grounds, but in September 2009 the United States Court of Appeals for the Second Circuit issued a groundbreaking opinion reversing the district court and holding that the plaintiffs could proceed to trial on their claims.

States and Cities

• WCI Releases Proposal Aimed at Harmonizing WCI and Federal GHG Reporting Rules. The Western Climate Initiative (WCI) released a "Harmonization Proposal" intended to harmonize the requirements of the regional tradition program's GHG reporting rule with the U.S. Environmental Protection Agency's (EPA) September 22, 2009 Mandatory Reporting Rule for GHG emissions. The Harmonization Proposal is intended to prevent the imposition of duplicative or conflicting reporting obligations on facilities subject to both programs, while ensuring that the quantification methods are sufficiently reliable and accurate to be used for participation in a GHG cap-and-trade program. The harmonized WCI reporting rules are expected to be finalized in time for implementation in the 2011 reporting year. The proposal is available at http://carboncontrolnews.com/iwpfile.html?file=jun2010%2Fccn06022010_wci.pdf .

Industry and NGOs

• Report Projects Domestic Ag Revenue Increase from REDD. A report released by Avoided Deforestation Partners and the National Farmers Union projects that incentives in climate bills under consideration by Congress to reduce tropical deforestation forest would increase U.S. agricultural revenue by $190-$270 billion between 2012 and 2030. The report, which was drafted by David Gardiner & Associates, finds that activities for reducing emissions from deforestation and forest degradation (REDD) would reduce sales of agricultural commodities and timber from deforested lands, thereby increasing revenues earned by U.S. producers of competing commodities by $141-$221 billion. Offsets from the REDD activities are projected to reduce the costs of a U.S. climate program, generating an additional $49 billion in savings for the U.S. agricultural and farming sectors. The report is available at http://adpartners.org/pdf/ADP_Report_052410a.pdf .
• Industrial Energy Consumers Oppose Alternatives to Murkowski Resolution. The Industrial Energy Consumers of America (IECA), an association of large manufacturing companies, sent a letter to Senate Majority Leader Harry Reid (D-NV) opposing a proposal being developed by Sen. Thomas Carper (D-DE) and Robert Casey (D-PA) that would exempt small GHG emission sources from PSD and Title V permitting requirements under the Clean Air Act (reinforcing EPA's effort to achieve the same goal under its "Tailoring Rule"). The letter argues that this approach will "create winners and losers within the manufacturing sector and threaten jobs," and would not reduce electricity costs for ratepayers. IECA urged Reid to support a resolution introduced by Sen. Lisa Murkowski (R-AK), which would overturn EPA's December 2009 endangerment finding and effectively eliminate the legal basis for EPA's subsequent Clean Air Act regulations addressing GHGs. The Murkowski resolution is expected to come to a vote in the Senate on June 10, and requires House passage and the President's signature in order to take effect. The IECA letter is available at http://energywashington.com/iwpfile.html?file=jun2010%2Few06042010_iecaletter.pdf .

Judicial

• 18 Challenges Filed Against EPA Reconsideration of "Johnson Memorandum." A total of eighteen lawsuits have been filed challenging EPA's April 2, 2010 action determining when GHGs would become subject to regulation under Clean Air Act permitting programs. The deadline for filing challenges was June 1, 2010. EPA's action reconsidered a December 2008 interpretive memorandum, known as the "Johnson Memorandum," and concluded that Prevention of Significant Deterioration (PSD) and Title V permitting requirements would apply to GHG emissions from stationary sources beginning on January 2, 2011, which is the date when the agency's new vehicle GHG standards will become legally enforceable. Organizations challenging the decision include the Center for Biological Diversity, an environmental organization; business associations such as the U.S. Chamber of Commerce and the National Association of Manufacturers; and conservative legal organizations such as the Southeastern Legal Foundation.
• Fifth Circuit Judges Allow Dismissal of Climate Change Lawsuit Brought by Katrina Victims. Following the recusal of an appellate judge whose presence was necessary for a quorum, the United States Court of Appeals for the Fifth Circuit let stand the district court's dismissal of a climate change lawsuit brought by victims of Hurricane Katrina. The litigation, captioned Comer v. Murphy Oil, was brought against various energy companies and energy-intensive manufacturers and was premised on the legal theory that the defendants' contribution to climate change exacerbated the destruction caused by Hurricane Katrina. The district court dismissed the suit on the grounds that plaintiffs' claims presented a nonjusticiable "political question." In 2009, a three-judge panel of the Fifth Circuit reversed the district court, prompting defendants to file a petition for rehearing by the entire Fifth Circuit. Because the Fifth Circuit failed to muster a quorum, however, the non-recused judges determined that they could neither hold a rehearing nor reinstate the panel's decision, which was vacated when the Fifth Circuit agreed to rehear the case en banc. The Fifth Circuit's action allows the district court decision to stand, but also means that the plaintiffs may now file a petition for certiorari with the United States Supreme Court. The Fifth Circuit decision is available at http://online.wsj.com/public/resources/documents/052810recusalnote.pdf .

Studies and Reports

• OECD Finds Copenhagen Targets Inadequate. The Interim Report of the Green Growth Strategy released by the Organization for Economic Coordination and Development (OECD) concludes that the developed country emission reduction targets submitted in accordance with the Copenhagen Accord would reduce emissions from those countries by at most 18 percent below 1990 levels by 2020, significantly less than the 25-40 percent reduction recommended by the Intergovernmental Panel on Climate Change to meet the goal of limiting temperature rise to 2˚C. According to the report, if industrialized countries only reach the lower bound of their targets, they would reduce emissions by only 12 percent below 1990 levels by 2020. Achievement of the commitments made by developing countries would result in an 8 percent reduction below business-as-usual levels by 2020. The report is available at http://www.oecd.org/dataoecd/42/46/45312720.pdf .
• Fires Could Erode REDD Emission Savings. Research published in Science found that fire occurrence related to agricultural land management has increased by 59 percent in an area that has experienced reduced deforestation rates. The researchers conclude that the encroachment of land management fires into forested areas can reduce the emission reductions achieved by projects to Reduce Emissions from Deforestation and Forest Degradation (REDD). The study also found that use of fire-free land management techniques can reduce fire incidence by as much as 69 percent. An abstract of the study is available at http://www.sciencemag.org/cgi/content/abstract/328/5983/1275 .

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