co 2 regulation – soon a reality ruth h. silman nixon peabody llp 100 summer street boston, ma...
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CO2 Regulation – Soon a Reality
Ruth H. SilmanNixon Peabody LLP100 Summer StreetBoston, MA 02110
Scott M. TurnerNixon Peabody LLP1100 Clinton SquareRochester, NY 14620
Daily Coverage
Source: The New York Times1/10/07
Source: The Wall Street Journal1/11/07
Pressure From All Angles
CO2
State
Initiatives
State Legislation
Permit Proceedings
Litigation
Federal Legislation
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Federal Legislation
• The mid-term elections changed everything in the Senate– Sen. Boxer as key chair instead of Sen. Inhofe
– Sens. Bingaman, Boxer, Feinstein, and McCain/Lieberman, drafting legislation
• Things are less clear in the House
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Litigation
• Cases arise in three different contexts– Clean Air Act litigation
– NEPA litigation
– Nuisance litigation
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CAA Litigation
• Massachusetts v. EPA• Coke Oven Environmental Task Force v. EPA
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NEPA Litigation
• Border Power Plant Working Group v. DOE• Friends of the Earth v. Watson• Mayo Foundation v. Surface Transportation Board
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Nuisance Litigation
• Connecticut v. American Electric Power• California v. General Motors• Comer v. Murphy Oil
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Permit Proceedings
• IGCC and BACT determinations• State NEPAs
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State Laws and Initiatives
ME, NH, VT, CT, NY, NJ, DE, MD (as of 1/07) = RGGI
DC, MA, PA, RI – Observing RGGI Process
AZ: 2000 levels by 2020; 50% below 2000 levels by 2040
CA: 2000 levels by 2010; 1990 levels by 2020; 80% below 1990 levels by 2050
NM: 2000 levels by 2012; 10% below 2000 levels by 2020; 75% below 2000 levels by 2050
OR: Stabilize by 2010; 10% below 1990 levels by 2020; 75% below 1990 levels by 2050
www.pewclimate.org/what_s_being_done/in_the_states/emissionstargets_map.cfm www.rggi.org/about.htm
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Regional Greenhouse Gas Initiative (RGGI)
• Cooperative regional effort to reduce carbon dioxide emissions from electric power generators in participating states
• Cap-and-trade program with a market-based emissions trading system
• In future, may include other sources of CO2/GHG emissions, and GHGs other than CO2
Source: www.rggi.org
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RGGI Process
Source: http://www.ccap.org/domestic/srt05presentations/(Franz_Litz)_%20RGGI_Update.pdf
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Memorandum of Understanding – 12/20/05
• Commitment to address the challenge of climate change while increasing energy efficiency investments and stimulating emerging clean energy technology markets
• 2009-2015: stabilize CO2 emissions from region’s power plants at current levels
• By 2019: 10% reduction in CO2 emissions from region’s power plants
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RGGI Model Rule – August 15, 2006
• CO2 budget unit = at any time on or after January 1, 2005, serves electricity generator with a nameplate capacity equal to or greater than 25 MWe
• Program begins 1/1/2009 (or date unit commences operation)
• State regulatory agency issues CO2 budget permit
• Compliance Certification Report due by March 1 of year following control period
• CO2 Allowance Tracking System
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RGGI – Issues
• Allowance Allocation– Auction v. Giveaway?
– 25% of allowances must be to consumer benefit or strategic energy purpose
– Early reduction CO2 allowances
– Voluntary renewable energy market set-asideVoluntary limited industrial exemption set-aside
– Banking allowed
• Leakage
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RGGI – Offsets
• CO2 equivalent emission reductions or carbon sequestration
• Real, Additional, Verifiable, Enforceable, Permanent• Offset project types (must commence after 12/20/05)
– Landfill methane capture and destruction
– Reduction in SF6
– Carbon sequestration due to afforestation
– Reduction/avoidance of CO2 emissions from natural gas, oil or propane end-use combustion due to end-use energy efficiency
– Avoided methane emissions from agricultural manure management operations
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RGGI – Offsets (cont’d)
• If average price of allowance < $7.00, offsets may be used from across the US; 50% discount from outside RGGI region; up to 3/3% of generator’s emissions
• If average price of allowance > $7.00, offsets may be used from across North America at 1:1 ratio; up to 5% of generator’s emissions (“Offset Trigger”)
• If average price of allowance = $10.00, offsets may be used from international projects; up to 20% of generator’s emissions (“Safety Valve Offset Trigger”)
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RGGI – Next Steps
• Governors of participating states have agreed to propose regulations by 12/31/08
• Regional Organization (“RO”)– Administration of Allowance Auctions
– Emission and Allowance Tracking
– Guidance Documents
• NY – 12/5/06 Pre-Proposal Draft • www.dec.state.ny.us/website/dar/preproposal.htm
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AB 32 – California Global Warming Solutions Act of 2006 (9/27/06)
• Reduce GHG emissions to 1990 levels by 2020• By 2050, ↓ GHG emissions to 80% below 1990 levels• CARB must develop regulations and market
mechanisms• Adopt mandatory reporting rules for GHG sources
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Examples from Other States
• NM: Executive Order (12/28/06) - Reduce GHG emissions to 2000 levels by 2012, 10% below 2000 levels by 2020 and 75% below 2000 levels by 2050
• AZ: Executive Order (9/8/06) - Reduce GHG emissions to 2000 levels by 2020, and 50% below 2000 levels by 2040.
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Conclusions
• CO2 regulation is a reality, at least locally and regionally
• National regulation is a question of “when,” not “if”
• Owners of existing power plants should push for broad cap and trade systems, rational allowance allocations, new source set asides, and a wide array of offset opportunities
• Developers of new coal-fired power projects early on must develop strategies to deal with CO2 in the permitting process