Climate Policy and Law

1. Climate Policy and Law Bob Wyman October 27, 2011

2. How Tough Will This Be?

3. Now You Have Our Attention! • Coffee - "We see a significant risk to our supply chain in the future, and we are a company that relies completely and solely on this one product, called the arabica coffee bean," Hanna said. "And if that's not around anymore, our company doesn't exist in its current format anymore." (Jim Hanna, Starbuck’s Environmental Impact Director) • Chocolate – International Center for Tropical Agriculture: climate change poses a significant threat to cocoa in West Africa (Ghana and Ivory Coast, responsible for more than half of the world’s chocolate • And Wine?

4. Some obvious (but often neglected) points • This is not traditional pollution control; it is transforming our energy and transportation systems • A carbon price signal is not enough • Infrastructure gaps are material • Example – transmission lines • Technology and resource gaps are material • Example – energy storage limitations, biofeedstocks, CCS • Regulatory barriers to investment are material • Examples – California Environmental Quality Act (CEQA), National Environmental Policy Act (NEPA), Endangered Species Act (ESA) substantially delay, increase project costs and often stop even new, low-carbon investment (e.g., cogeneration increases local emissions despite reducing regional emissions) • Case-by-case Clean Air Act BACT program will hinder, not accelerate, desired investment • A national (and regional) strategic energy investment plan should clear the way for desired investment

5. Land Use Intensity of Energy Choices Source: The Nature Conservancy (McDonald et al), “Energy Sprawl or Energy Efficiency: Climate Policy Impacts on Natural Habitat for the United States of America”

6. Congress

7. State of the Law - Overview PROCEDURAL ENVTL REVIEW STATUTES COMMON LAW NUISANCE PERMIT PROGRAMS REGULATORY PROGRAMS NEPA CEQA ESA CT v AEP – X (US) COMER KIVALINA CAA PSD/BACT STATE PROGRAMS EPA MOTOR VEHICLE REG CAA §111 (NSPS) AB32/WCI RGGI degree of (legislative or regulatory) action on GHGs little or no action very specific action displacement? partial yes – Sup Ct

8. Slides 7-9 reprinted w/ permission of Arnold & Porter & Columbia Law School Center for Climate Change Law (Michael B. Gerrard)

11. EPA • US Supreme Court (Mass v. EPA, April 2007) • GHGs are “air pollutants” under federal Clean Air Act • EPA must determine whether GHGs from new motor vehicles cause or contribute to air pollution that may reasonably be anticipated to endanger public health and welfare • December 7, 2009 – EPA finds that current and projected concentrations of 6 GHGs threaten public health and welfare. • April 1, 2010 – EPA finalizes light duty vehicle regulation. • January 2, 2011 – earliest date that a compliant 2012 model year vehicle may be sold in the US (date as of GHGs are considered “regulated pollutants” under Clean Air Act). • January 2, 2011 – “trigger” date for EPA and state application of “Best Available Control Technology” (BACT) to “major” stationary sources in US. • May 13, 2010 – EPA finalizes “tailoring” rule redefining “major” stationary source thresholds. • December 21, 2010 – EPA signs settlement agreements in power and refining lawsuits committing to develop GHG performance standards – DELAYED?

12. Potential Sources of EPA GHG Authority Endangerment Finding Required NAAQS (§§ 108-10) NSPS (§ 111) NESHAPS (§ 112) Int’l Endangerment (§§ 115) US emissions cause or contribute to air pollution reasonably anticipated to endanger foreign public health or welfare Foreign country reciprocity required SIP tools available (fees, marketable permits, auctions) “Regulated Pollutant” Requirements PSD (§§ 165,169)

13. Potential Sources of EPA GHG Authority Endangerment Finding Required NAAQS (§§ 108-10) NSPS (§ 111) NESHAPS (§ 112) Int’l Endangerment (§§ 115) US emissions cause or contribute to air pollution reasonably anticipated to endanger foreign public health or welfare plus? Possible Paths Forward Foreign country reciprocity required SIP tools available (fees, marketable permits, auctions) “Regulated Pollutant” Requirements PSD (§§ 165,169)

14. Types of Market Programs • Cap and trade/allowance-based • Sources must surrender allowances for their emissions • Traded commodity is certified in advance • Examples: acid rain program, EU ETS, RECLAIM, AB32 cap and trade • Averaging/performance-based • Sources average to a performance standard and must make up any shortfall by purchasing credits • Credits/debits generated automatically by reference to credit line • Performance standard can be periodically adjusted, if necessary • Examples: lead phase-out from gasoline, low carbon fuel standard, EPA recreational marine engine standards • Discrete emission reductions (Offsets) • Requires case-by-case certification • Credits generated for surplus reductions relative to baseline • Examples: ERCs, Clean Development Mechanism (CDM) • Emissions Charges and Financial Vehicles • Examples: carbon tax, clean air investment fund (e.g., AQIP) • Encourages demand-side reductions

16. CLOSED TECHNOLOGY MARKETS OPEN MARKET CA AB32 low-carbon fuel standard Electric power generators (via utility auction) Refineries Glass Plants Cement Plants Other heavy industry, landfills, etc. • CAP AND TRADE: • 85% emissions • 600 facilities • 2-3% annual decline motor vehicle standards 2013 Strategic technologies Internal Trading and Averaging Only renewable electricity standard (33% by 2020) Fuels 2015 + OFFSETS (8% max) NO TRADING Trading & Banking Reserve Auction (4%) SB 375 – Sustainable Communities Strategies +

19. Source: Sweeney/Weyant Draft Analysis of Measures to Meet the Requirements of California’s Assembly Bill 32