The Climate Change Scene in Washington Georgia Traditional Manufacturers Association LaGrange, GA November 5, 2009

1. The Climate Change Scene in WashingtonGeorgia Traditional Manufacturers AssociationLaGrange, GANovember 5, 2009 PRESENTED BY Peter Glaser Troutman Sanders LLP 401 9th Street, NW Suite 1000 Washington, DC 20004 202.274.2950 www.troutmansanders.com

2. Congress EPA Courts Copenhagen in December CURRENT STATE OF PLAY

3. Waxman-Markey • Passed House June 26, 2009, 219-212 vote – 8 Rs for, 44 Ds against • First bill to pass either House that mandates GHG Reductions • 1427 pages (!) • 300+ page Manager’s Amendment Filed at 3:00 A.M. the day of vote • Floor debate limited to one afternoon

5. Cap-and-Trade Cap-and-trade program for capped sources, principally large industrial sources emitting ≥ 25,000 tpy CO2e and accounting for 85% of U.S. GHG emissions. Targets and Timetables - 3% below 2005 when program starts in 2012 - 17% below by 2020 - 42% below by 2030 - 83% below by 2050

8. Source: Climate Policy Group

10. The Senate 6 Committees have jurisdiction over bill, leading committee is Boxer’s EPW, but Kerry (Foreign Relations), Baucus (Finance), and Lincoln (new Chair of Ag) expected to play strong roles. Majority Leader Reid has essentially thrown in towel on getting bill this year Problem is Midwestern and coal state Ds

11. Kerry-Boxer • Introduced 9/30 with key sections blank • Chairman’s Mark with key sections filled at 11 PM Fri, 10/23 (900+ pages) • Hearings week of 10/26 • Mark-up this week?

12. Kerry-Boxer v. Waxman-Markey • Similar on cap-and-trade • Kerry-Boxer more aggressive 2020 target: 20% reduction vs. 17% reduction • Kerry-Boxer more liberal on offsets (maybe) • Kerry-Boxer does not provide same trade protections • Waxman-Markey has energy provisions that Kerry-Boxer does not include because of lack of jurisdiction

13. Key Political Considerations • Northeast/West Coast vs. Heartland • Overwhelming complexity of bill and of harmonizing work of different committees in Senate, plus between House and Senate → Key Role for Conference Committee if it gets that far • Health Care • Unemployment Rate • Don’t underestimate President’s determination

14. Supreme CourtMassachusetts v. EPA DecisionApril 2007 GHGs are CAA “air pollutants” which EPA must regulate if it finds endangerment to public health or welfare Case was in the context of GHG emissions from new motor vehicles, but precedent applies to sources across the economy

15. Next Steps • EPA to finalize endangerment finding this year • EPA’s first GHG regulation will be for new motor vehicles by 3/31/10 • EPA will begin proposing GHG performance standards for categories of sources beginning next year

16. The PSD Permit Problem for Major Stationary Sources As soon as auto GHG regs are finalized next March, GHGs are regulated pollutants At that time, “major” new and “major” modified sources of GHG emissions must have PSD permits with GHG Best Available Control Technology EPA “tailoring rule” to define “major” as 25,000 tpy CO2e – questionable legality Expect several years of confusion as to what is BACT for CO2 at various plants

17. CO2 Nuisance Decisions Are a Huge Problem • 2 federal courts of appeals: GHG emitters can be held liable for tort of global warming • Further appeals likely • Potential impact on legislative debate

18. Copenhagen • No one expects any significant agreement at this point: issue is Third World refusal to commit to actual reductions • Blame game commencing • But watch out for last-minute deals: U.S. and China have been talking

19. GHG REGULATION: HOW MUCH PAIN?

20. Peter Glaser Troutman Sanders LLP 401 9th Street, N.W., #1000 Washington, D.C. 20004 202-274-2998 peter.glaser@troutmansanders.com