Download Ch 10 – Climate Change

Chapter 10
Climate Change: Regulating Emissions
This chapter covers climate change and its impact on the energy sector. It
discusses (i) climate change and the energy sector; (ii) international climate control
strategies; (iii) domestic climate change control strategies; and (iv) the cost and
effectiveness of greenhouse gas controls.
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10.1 causes/impacts of climate change, including GHG emissions from power
plants
10.2 international politics behind climate control, including Kyoto Protocol and
post-2012 negotiations
10.3 domestic climate change strategies at federal, state and regional levels, as
well as judicial responses to those strategies
10.4 costs, benefits, and effectiveness of GHG controls.
When reading this chapter, think about the greenhouse gas (GHG) effect on
climate change. Compare the approach of the United States with the approach taken
throughout Europe. Should the U.S. have adopted mandatory GHG emission standards
when most European countries did? Next, consider the reasons why the United States is
so reluctant to sign the Kyoto Protocol. Think about the actions individual states have
taken to moderate GHG emissions, and the impact state regulations have on federal law.
Finally, consider the cost of reducing GHG emissions. At what point will the U.S. decide
that the benefits of reducing GHG emissions outweigh the costs?
Some questions to consider when reading the chapter:
1. What is a “safe” amount of climate change, and what emission patterns over
time are consistent with that level of “safe” change?
2. At what point should the United States take action to change our patterns of
energy use?
3. What impact would a cap-and-trade emissions scheme have on reducing GHG
emissions?
4. What are the problems of the EU-ETS? Should the U.S. adopt a similar
model?
5. What are the significant flaws in the Kyoto Protocol, and can they be fixed?
6. What impact will the Regional Greenhouse Gas Initiative (RGGI) have on
other states seeking to reduce GHG emissions?
7. Do you agree that the benefits of taking steps to solve global warming
outweigh the costs of taking action?
10.1 Climate Change and the Energy Sector
There is a consensus among most climate scientists that GHG emissions are
transforming the Earth’s climate. No other environmental issue poses as great a difficulty
to the energy sector as does GHG emissions. GHG emissions come from the combustion
of fossil fuels that contain carbon (fuels such as coal, oil and natural gas). Those
emissions have increased the levels of carbon dioxide in the atmosphere. Scientists
believe that if action is not taken to reduce these emissions, temperature levels will
increase and cause drastic changes to the planet. Fortunately, it seems as though there is
an international trend that advocates reducing those emissions.
10.1.1 GHG Emissions from Power Plants
In 2006, the U.S. total for GHG emissions was 7,054 million metric tons carbon
dioxide equivalent. The amount of GHG emissions a power plant emits depends on the
type of fossil fuel burned. Coal-fired power plants emit the most emissions out of the
fossil fuels.
10.1.2 What Causes Climate Change?
The greenhouse effect is the process that occurs when GHG accumulate in the
atmosphere and trap heat at the surface of the earth. This contributes to the increases in
temperature levels. Though it is true that a certain level of GHG is needed to keep the
earth at a habitable temperature, the increase in the levels of GHG means that more heat
is trapped, and temperatures rise in correlation. There are three unchallenged facts about
the greenhouse gas effect: (1) the atmospheric levels of GHG are increasing because of
human activities; (2) the GHGs absorb and re-radiate in a way that heats the planet; and
(3) these atmospheric changes are long-lasting, because the GHG stay in the atmosphere
anywhere from decades to centuries.
Most of the science related to global warming was developed by the
Intergovernmental Panel on Climate Change (“IPCC”). The IPCC was established by the
United Nations Environment Programme and the World Meteorlogical Organization.
Those organizations directed the IPCC to prepare a report every five years that indicates
the consensus of scientists about the extent of climate change that was taking place, and
what was causing the change. In November of 2007, the IPCC stated that the planet is
warming, that human-generated emissions were the cause, and that reductions in GHG
emissions needed to start immediately to mitigate the global climate.
10.1.3 Impacts of Climate Change
One of the significant impacts of climate change is the direct effect on crop
yields. Further, the range or number of pests that affect plants, or diseases that threaten
animals and human health will also be impacted by the climate change. Water supplies
throughout the world will be affected; episodes of drought and flooding will also impact
the global community. Additionally, the effect on natural ecosystems (such as a
rainforest) is also a cause for concern. In 2009, the EPA issued a summary saying that
GHG emissions threaten public health and welfare.
10.2 International Politics of Climate Change
[introduction]
10.2.1 Early Initiatives
In 1992, the world’s industrial leaders and developing nations pledged to reduce
GHG at the United Nations Conference on Environment and Development. However,
implementation of the non-binding goal to reduce emissions proved ineffective. The
developing nations, as well as the already developed nations, found it hard to coordinate
positions. The convention failed to provide any targets or timetables; instead, it only
relied on the goodwill of nations.
10.2.2 The Kyoto Protocol
Then, in 1997, the Conference of Parties to the UN Framework Convention on
Climate Change (UNFCCC) adopted the Kyoto Protocol. Under this protocol, the EU
will be responsible for an 8% reduction in GHG emissions, but will have the authority to
assign different targets to different countries. Although most nations involved signed and
ratified the protocol, the United States did not. In 2001, President Bush rejected the
Kyoto Protocol, saying it was too costly and unfairly excluded developing nations such as
India, China and Brazil. President Bush argued that the protocol would place an unfair
burden on developed countries, particularly the United States.
The Kyoto Protocol established three “flexibility mechanisms” to help Annex B
nations lower the costs of achieving admissions targets. First, it established Joint
Implementation. This allows Annex B nations to undertake emission reduction projects
in other Annex B nations, and then receive a share of the emissions reduction. Secondly,
it created a Clean Development Mechanism (“CDM”). This allowed Annex B nations to
undertake projects to reduce emissions in developing nations without targets (called nonAnnex B), and then claim credit for the emission reduction the projects achieve. Finally,
the Kyoto Protocol established Emissions Trading. Emissions trading allows nations
which have excess emissions reduction units to sell them to countries that are over their
emissions targets.
Emissions trading gained popular support with the European Union. After the
Kyoto Protocol was founded, the then existing 15 nations of the EU agreed to an 8%
reduction in GHG. In an effort to incorporate more countries into the emission reduction
program, the E.U. emissions trading system (“EU-ETS”) was officially founded in 2005,
and included 25 countries. The trial period of the program went from 2005-2007, and
although there were flaws in the system, the trial period succeeded in creating
mechanisms for effecting greater GHG emission reduction in the future.
10.2.3 From Bali to Copenhagen: Negotiating a Post–2012 Agreement
The Kyoto Protocol garnered a great deal of criticism for not including enough
countries, including the United States-one of the greatest producers of GHG emissions.
In fact, because the agreement didn’t incorporate some of the largest producers of GHG,
less than one-third of total global emissions were covered. Proponents of the Kyoto
Protocol claim that it was a great step in the right direction and offer examples of other
diplomatic successes like the WTO or the European Union, which took time to form and
adapt. Soon after ratification of the Kyoto Protocol, further meetings took place in Bali
and Copenhagen to make changes that would help lower GHG emissions further.
The achievements in Bali were focused on getting a greater number of countries
to address global warming. In Bali, the parties wanted to make sure that GHG output
peaks in the next 10 to 15 years and will then decline dramatically afterwards to about
half as much by the middle of the twenty-first century. In order to obtain that goal, the
parties recognized that industrialized and developing countries would have to make
substantial cuts. Further, the United States, India, and China would have to greatly lower
their emissions. The terms put specific cuts on countries, but the United States was
unwilling to accept those terms.
In addition, the Bali meetings addressed issue revolving around technology. The
developing countries wanted already developed nations to be accountable for actions to
better technology for clean energy. This would be accomplished by requiring the
developed nations’ actions to be immeasurable, reportable and verifiable. Although the
United States did not agree with the language used, it went along with the proposal
because most other countries believed it was a good idea. Developed nations also wanted
language incorporated that provided steps for developing countries to take to mitigate
emissions.
Financing was another major issue in Bali. In order to bring emission levels
down only to the levels in 2007, the convention would need to raise $200–210 billion by
2030. The Bali Action Plan provides action to encourage investment for better
technology and to help developing countries carry out mitigation plans.
During the Copenhagen convention, world leaders wanted to reach an agreement
that would address five main components:
1. Enhanced action to assist the most vulnerable and the poorest in adapting to the
impact of climate change;
2. Ambitious emission reduction targets for all industrialized countries on an
individual basis;
3. Nationally appropriate mitigation actions by developing countries to limit the
growth of their emissions, while safeguarding economic growth and sustainable
development, with the necessary support;
4. Significantly scaled-up financial and technological resources; and
5. An equitable governance structure to guide financial resources.
In the end, participating nations adopted the Copenhagen Accord, even though it fell
short of putting a cap on GHG emissions. The Copenhagen Accord provided that nations
must take action to keep the Earth’s temperature from increasing more than 2* degrees
Celsius, on average.
As we move forward in climate change negotiations, the United States and China
will play a crucial role in accomplishing tactics to curb climate change. Together, these
two countries account for over 40% of the world’s GHG emissions. Although nonclimate related issues between the U.S. and China often puts them at odds, any kind of
resolution going forward must incorporate them both. Each country stands to share in
long terms gains from climate-related policy changes.
10.3
Domestic Climate Change Control Policies
While Europe was busy creating mandatory schemes to reduce GHG emissions,
the United States only promoted voluntary GHG emission reduction. President Obama’s
election changed the way other nations viewed the United States’ stance on GHG
emission reduction. Although some organizations (i.e., the Chamber of Commerce and
the American Petroleum Institute) continue to resist efforts to reduce GHG emissions, a
large number of companies are acknowledging the threat of climate change and are
vowing to take action. Some companies and organizations began to work with
environmental groups to found the U.S. Climate Action Partnership. While federal law
concerning emissions reductions is slow to occur, many states and regions of states are
working together to reduce their emissions.
10.3.1 Federal Government Strategies
Prelude to Clean Air Act Regulation. The EPA did not regulate carbon dioxide
emissions under the Clean Air Act during the Bush Administration, which stressed
voluntary action rather than mandatory federal laws. In 2007, the Supreme Court issued
the opinion for Massachusetts v. EPA, 549 U.S. 497 (2007), which led to a change in the
law and outlook for mandatory constraints on carbon dioxide.
The Massachusetts v. EPA case arose when rulemaking petitions were filed by
private organizations seeking to have a rule made to regulate carbon dioxide emissions
from new automobiles under the Clean Air Act. The EPA decided that carbon dioxide
did not fall under the scope of the Clean Air Act because it was not an “air pollutant” as
defined in the Clean Air Act. When the case reached the Supreme Court, there were two
primary issues: (1) did Massachusetts have standing, and (2) did the EPA have authority
under the Clean Air Act to regulate carbon dioxide emissions. Ultimately, the Supreme
Court disagreed with the EPA and held that carbon dioxide did fall under the definition of
“air pollutant.”
To bring suit, the state of Massachusetts had to show standing. Part of showing
standing is having an injury in fact. The Court found that Massachusetts had shown the
sea level had risen as a result of global warming. Because Massachusetts owns coastal
land, that was enough to show an injury in fact. The Court also found causation since the
EPA did not dispute the relation between GHG and global warming and, despite this
relationship, the EPA refused to regulate GHGs (here, carbon dioxide). Last, the Court
found redressability since reducing emissions would slow the rate of change of global
emissions.
Having found that the EPA had the statutory authority to regulate GHG, the Court
needed to decide whether the EPA’s reasoning in not regulating carbon dioxide emissions
were consistent with the Clean Air Act. The EPA stated that even if it had the authority
to regulate GHG emissions, the agency would not do so because global warming was an
international problem making regulation a piecemeal approach to the problem at odds
with the President’s comprehensive approach. The EPA also claimed that they would
have to tighten mileage standards, which would make them regulate something intended
for the Department of Transportation. The Court rejected both of these claims, finding
that their reasoning was not in line with the statutory text. Ultimately, the Court found
that the EPA’s decision was arbitrary and capricious.
Agency regulation of CO2 emissions. Shortly after the Court decided Massachusetts v.
EPA, the EPA Environmental Appeals Board dealt with In re Deseret Power Electric
Cooperative. While the former had dealt with mobile sources of GHG emissions,
Deseret dealt with stationary sources. In this case, Deseret Power proposed a major
modification to an existing stationary generating unit (a coal-powered facility). In order
to add the modification, Deseret Power required a prevention of significant deterioration
(PSD) permit. The permit was initially granted, and the Sierra Club sought review by the
Environmental Appeals Board. The question was whether the permit must contain a
“best available control technology” (BACT) emissions limit for carbons - each side
debated whether carbon was a pollutant subject to regulation under the CAA. The Board
determined that the EPA erred by not appropriately considering carbon dioxide in issuing
an air permit. The Board remanded the permit and asked for the permitting body to
reconsider the permit upon further consideration of carbon dioxide, and, subsequently,
upon consideration of whether carbon dioxide emissions by stationary sources are subject
to regulation under the CAA. While the case did not provide a definitive answer on the
issue, it signaled for the incoming Obama administration that uncertainty relating to the
handling of carbon dioxide in permitting decisions remains an issue of national scope that
required attention.
EPA rulemaking on CO2 emissions. Following Massachusetts v. EPA (which dealt
with GHG emissions from mobile sources) and In re Deseret (which dealt with GHG
emissions from stationary sources), the EPA issued three proposed rules to regulate CO2
emissions directly under the Clean Air Act. The three rules included (1) regulation on
emissions from mobile sources, (2) regulation on emissions from stationary sources that
emit more than specified amounts of GHGs, and (3) regulation on the actual reporting of
GHG emissions. Along with these three rules, the EPA also allowed California’s waiver
so that it could implement its own auto GHG emissions standards.
Vehicle Emissions Standards (CAA §202(a) and California Waiver (CAA
§209)). California was the first state to set its own vehicle pollution standards.
California has asked, and ultimately been granted, a waiver from the EPA to set
its own vehicle emission standards since 1975. California renewed its request in
2005 and, after much deliberation, was again conditionally granted the waiver on
June 30, 2009. California’s waiver was conditioned on, first, the understanding
that the state’s standards would be no less strict than federal standards. Second,
California agreed to conform its own standards to the federal standards between
2012 and 2016, with the flexibility to make standards more stringent before and
after this period. This conditional agreement was centered, in large part, upon
giving the auto industry uniform, rather than individualized, piecemeal standards.
The standards - which require emissions reductions for new passenger
cars, SUVs, and pickup trucks sold in California - may be adopted by other states
under section 177 of the CAA (so long as the standards are identical to
California’s). Shortly after California’s waiver was granted, and other states
adopted the same standards, auto dealers and automakers across the nation
challenged the standard. Auto industry plaintiffs argued that GHG standards were
related to fuel economy standards, which are expressly preempted by the Energy
Policy and Conservation Act (EPCA). Ultimately, these challenges failed. The
winning argument was that automakers had a number of means at their disposal to
reduce GHG emissions, only one of which was to increase fuel economy.
In 2009, the EPA set federal standards for GHG emissions in vehicles. In
response to Massachusetts, the EPA cited two findings as prerequisites to its
authority to regulate GHG emissions from vehicles under the CAA: (1) GHGs in
the atmosphere endanger the public health and welfare, and (2) emissions from
vehicles (and their engines) contribute to the atmospheric concentration of these
GHGs. While the federal standards are less rigid than those in China and Europe,
they are certainly a step in the right direction.
Major Stationary Sources (CAA Title I). In September 2009, the EPA announced
a proposed rule that would apply to major stationary sources emitting over 25,000
tons per year (“tpy”) of GHGs. The rule would be applied in determining which
emitters would require certain permits. This threshold was set so that minor
emitters (i.e., small retailers, farms, restaurants, churches, etc.) would not face
government regulation, and because it would cover nearly 70 percent of the
national GHG emissions from stationary sources, including those from the largest
emitters (i.e., power plants, refineries, and cement production facilities).
GHG Reporting Requirement. Also in September 2009, the EPA announced its
rule on mandatory reporting requirements. The Reporting Rule requires certain
direct GHG emitters, fossil fuel and industrial gas suppliers, and manufacturers of
vehicles and engines to collect and report information about GHG emissions of
their operations and/or products. An estimated 10,000 facilities are required to
report under this rule, who collectively account for about 85% of the nation’s
GHG emissions. There are significant fines levied against those required to report
for each day that they violate the rule.
There are pros and cons to addressing the issue of climate change via both
legislation and regulation. Many, including President Obama, have expressed a
preference for the former: legislation is more expansive (regulation often requires
separate rule-making determinations for separate industries), it is more efficient
(individual rulemaking proceedings for specific industries that would be time
consuming and contentious), and legislation allows for creative supplements (i.e.,
market-based mechanisms such as cap-and-trade schemes), unlike the typical
permit-based regulatory schemes.
However, legislation may also have its downsides. The proposed
emissions trading plan proposed under the American Clean Energy and Security
Act (ACES), which ultimately failed, would have required a complex network of
new government entities and regulations, and a complex market for trading
pollution permits. Many, therefore, have advocated the use of a simple carbon
tax. Supporters say that a carbon tax would be a less bureaucratic and more
effective means of reducing GHG emissions than a cap-and-trade scheme.
However, others argue that a carbon tax wouldn’t be so simple or worthwhile. No
tax is “simple,” and every tax contains loopholes and opportunities for firms and
individuals to take advantage of them. Furthermore, a carbon tax would require
frequent readjustment by the government in order to continually reduce emissions
because, unlike a cap-and-trade system, there would not be a market-regulating
incentive/pressure to continually reduce emissions. Some believe that a cap-and
trade system works effectively like a carbon tax. Ultimately, it will be interesting
to see whether regulation or legislation will predominantly control our country’s
emissions; if it is the latter, it will also be interesting to see which system (capand-trade or carbon tax) will prevail. The debate is ongoing.
For a quick explanation on cap-and-trade schemes, see the following video:
http://www.youtube.com/watch?v=zfglMLcjRrM
There are some cap-and-trade systems, both domestic and abroad, already in
place. For example, the Regional Greenhouse Gas Initiative in the northeastern
United States and the European Union Emissions Trading Scheme. Both may
serve as a model for an eventual, federally-implemented system here in the U.S.
10.3.2
State and Regional Strategies
According to the Congressional Research Service, if American states were viewed
as individual nations, 21 of them would rank in the top 60 countries for producing GHG
emissions. Both state and local governments have created a wide variety of laws and
policies to help combat GHG emissions.
Thirty states now have state action plans that examine the sources of GHG
emissions, and then form a task force to work with those sources to reduce emissions.
Additionally, these task forces look at available policy options and GHG-reduction
measures to determine which is most appropriate for the specific state. State action plans
vary greatly between states, but generally do nothing more than recommend legislative
action to state officials. For instance, many plans set statewide GHG emissions targets,
break total emissions down by industry/geographic area, urge industry to record
emissions, report emissions to the climate change task force, and in some states, establish
emissions reduction guidelines.
Case Study: California Global Warming Solutions Act. California is one of the
largest emitter of GHGs in the world. In 2006, it established a landmark law to reduce
GHG emissions. The Global Warming Solutions Act required the California Air
Resources Board to develop regulations and implement a state-wide program to reduce
the state’s GHG emissions to 1990 levels by 2020. Additionally, California reviewed
emissions-trading schemes and proposed a cap-and-trade scheme to begin in 2012.
Although there is much debate over carbon off-set programs such as cap-and-trade
schemes, there is no denying the popularity of those programs.
Carbon Capture and Storage (CCS). CCS refers to the technologies used to stop GHG
emissions from getting into the atmosphere. These technologies trap carbon dioxide and
store it underground. Over fourteen states have recently enacted laws that encourage
CCS by state-regulated utilities. The EPA has proposed to regulate CCS under the Safe
Drinking Water Act. As of now, there are three main types of CCS technology: (1) precombustion; (2) post-combustion; (3) oxyfuel technology. Pre-combustion removes
carbon from fossil fuels before combustion. This technology is frequently used with coal
gasification. Post-combustion removes carbon dioxide from power plants before it has a
chance to enter the atmosphere. Finally, oxyfuel technology burns fuels in a pure oxygen
atmosphere. This turns emission from smokestacks into just water vapor and carbon
dioxide. When burned in this manner, carbon dioxide is easily separated from the water
vapor.
Once the carbon dioxide is trapped, it is moved to a dump location and is stored at
least 800 meters underground. While this seems effective way to store carbon dioxide,
the United States has designated very few dump-sites. Further, the cost and time
involved in the process is significant (so much so that there are no commercial carbon
dioxide storage facilities in the U.S.). Besides cost, liability and property rights plague
the use of CCS technology. The potential damage resulting from a carbon dioxide leak is
significant, and tort liability may limit the number of companies willing to run storage
sites. Determining who owns the earth 800 meters below storage facility also presents
numerous issues.
The House created the American Clean Energy and Security Act of 2009
(“ACES”) to help promote CCS technology. ACES would give the EPA regulatory
authority over CCS sites, and would provide liability limits for site owners. ACES also
aimed to establish the Carbon Storage Research Corporation, which would charge a
power-use fee meant to fund CCS projects. Finally, ACES would require all electric
generating units permitted after 2015 to meet a New Source Performance Standard.
10.3.3 Judicial Responses
As global warming awareness increases, so do GHG and climate change-related
lawsuits. These cases are difficult to prove given the wide array of scientific data on
global warming and climate change. Plaintiffs typically rely on tort and property law
principles when filing claims. Defendants use a wide range of defenses in climate related
claims; the defenses range from claims of inconclusive evidence to the political question
doctrine. The sample cases in the text, along with the Supreme Court’s decision in
Connecticut v. American Electric Power Co., demonstrate the broad array of issues in
GHG and climate change-related cases.
10.3.4 Voluntary Reduction Strategies
Many companies utilize voluntary reduction strategies such as offsets and
emissions control technology, but environmentalists argue that these efforts are fruitless
and only delay a mandatory regulation program. Some cynics argue that “offsets” do not
truly offset environmental damage. As some of these cynics say, “You can ‘offset’ the
emissions you generate on a cross-country airplane trip, but you are still taking the trip.”
Industry-set emissions “baselines” are an example of how voluntary reduction strategies
are unreliable. Some companies will compare their emissions to a “baseline” that factors
in alternate – and dirtier – business methods. For instance, a company can increase
emissions by building a gas-burning plant and claim “emissions reductions” based on the
fact that, had they built a coal-burning plant instead, GHG emissions would have been
higher.
10.4 Toward a Low-Carbon Future: The Cost and Effectiveness of GHG Controls
The International Energy Agency (“IEA”) recently released the World Energy
Outlook. This report looked at the global impact of the recent financial crisis, and how
that crisis affected the energy sector. One of the more notable findings was that the
benefits of taking serious steps to combat global warming far outweigh the costs of doing
so. Even with a limited list of benefits, the global community is much better off taking
action against global warming. Overall, taking action against global warming is in the
world’s best interest.