BLM Issues Internal Memo Discussing the Use of the Social Cost of Carbon in the Agency’s NEPA Analyses

(Federal GHG regulations) Permanent link
 
In April 2015, the Bureau of Land Management (BLM) issued an internal memo stating that it will be soon be issuing a comprehensive instruction memorandum discussing how the agency will consider climate change and the social cost of carbon (SCC) in National Environmental Policy Act (NEPA) reviews. These changes will likely extend the time and increase the costs associated with such reviews.

Background

BLM reviews and approves permits and licenses for companies to explore, develop, and produce energy on the 700 million sub-surface acres of mineral estate under federal and Indian lands. BLM currently regulates roughly 6 percent of domestic onshore oil production and 13 percent of onshore natural gas production.

NEPA requires federal agencies including BLM to evaluate the environmental impacts of any major federal action significantly affecting the human environment before taking such an action. Major federal actions can include granting permits, making certain areas available for drilling, and issuing rules regulating leases on BLM lands. The Council on Environmental Quality (CEQ) is tasked with creating overarching guidance and regulations for complying with NEPA. Agencies like BLM then create their own internal policies for implementing NEPA’s requirements with respect to their own programs.

As discussed in a previous post, the CEQ released new Draft Guidance in December 2014 on how climate change should be considered in NEPA reviews. The guidance suggested that the SCC could play a role in assessing a project’s Greenhouse Gas (GHG) emissions in a NEPA cost-benefit analysis. As discussed in this post, industry groups have pushed backed on CEQ’s guidance, arguing that it is contrary to NEPA case law, and would impose costs, time delays, and litigation risks on federal projects and permits. The industry groups argue that the draft SCC guidance inappropriately directs agencies to include the SCC estimates when seeking to monetize costs and benefits in NEPA reviews.

What is the Social Cost of Carbon?

As discussed further here, the SCC was designed as a tool to quantify the incremental, future global impact of a single unit of GHG emissions in present economic terms. The models attempt to calculate world-wide impacts over the next several hundred years, and then to apply a discount rate in order to determine what the future impact means in current economic terms. There are multiple competing SCC models, each of which makes different predictions about future interactions between human behavior and the climate, and tend to include predictions regarding changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services due to climate change. After a model creates a present value for a single unit of GHG emissions, that value is then used as a point of comparison for actions that increase or reduce GHG emissions. There is ongoing debate over whether the SCC should consider global, or only domestic impacts, and what discount rate should be applied to determine the present economic value of a unit of GHG emissions. Each of these considerations has serious implications for the dollar-amount assigned to a unit of emissions under a cost benefit analysis.

A federal Interagency Working Group first amalgamated three of the competing SCC models to create a set of values for the federal government to use when considering regulations in 2010. The IWG revised its report in 2013, increasing the SCC estimates for 2020 to $12, $43, $65, and $129/ton CO2 (in 2007 dollars). For practical purposes, this means federal agencies are valuing the SCC at about $37/ton CO2 for 2015, which is based on a 3 percent discount rate. According to a recent GAO report, these 2013 figures raised public interest because they were approximately 50 percent higher than the 2010 estimates.

Environmental groups have brought lawsuits and applied pressure to CEQ to try to require federal agencies to give additional consideration to climate change impacts in their NEPA analyses, such as by including the SCC in a cost-benefit analysis.

BLM Memo

An internal BLM memo, reportedly authored by BLM's assistant director of resources and planning, begins by noting that BLM “continue[s] to refine detailed BLM guidance for the consideration of climate change in the NEPA and land use planning processes. We expect to provide a comprehensive Instruction Memorandum in the next few months.” The memo explicitly notes that “[n]o court case or existing guidance currently requires that estimates of the SCC associated with potential GHG emissions be included in a NEPA context, although SCC is currently used in a regulatory context.” Although BLM is not legally required to include an SCC analysis in its NEPA reviews, the memo strongly suggests that they should do so nonetheless.

The memo indicates that BLM sent an email to state directors providing informal interim direction on the treatment of climate change and the SCC under NEPA in August 2014. According to the memo, BLM currently uses quantitative estimates of GHG emissions or sequestration as a “reasonable proxy for the effects of climate change in its NEPA analyses” based on a 2011 “draft direction to the field.” The memo states that this 2011 guidance remains in effect until BLM circulates new guidance.

In response to public comments, the memo notes that some BLM field offices have included estimates of the SCC in project-level NEPA documents. Until BLM issues further guidance, the memo instructs BLM managers to “contact the BLM [Washington Office] for technical assistance before issuing any NEPA documents.” The BLM memo also states that the Interagency Working Group’s 2013 estimates are the “authoritative estimates of SCC” for federal agencies, suggesting that the agency is currently using the $37/ton figure in any SCC analysis that it is currently performing.

Posted by Corinne Snow at 05/20/2015 1:42 PM

U.S. Senate Hearing on the President’s U.N. Climate Pledge

(Federal GHG regulations, Climate Change Science) Permanent link
 

On April 15, 2015, the U.S. House of Representatives Committee on Science, Space, and Technology held a hearing on the President’s U.N. Climate Pledge. The hearing focused on the Administration’s Intended Nationally-Determined Contribution (INDC) for the December 2015 COP 21 climate conference in Paris. The Administration is pledging to reduce U.S. Greenhouse Gas (GHG) emissions 26 percent to 28 percent below 2005 levels by 2025.  For more information about the U.N. Framework Convention on Climate Change, please see this previous post.

Committee Chair Lamar Smith has written a Hearing Charter, which provides a fulsome overview of U.N. Framework Convention on Climate Change treaties. Four witnesses testified: 

  • Dr. Judith Curry, Professor Earth and Atmospheric Sciences, Georgia Institute of Technology
  • Hon. Karen Harbert, President and CEO, Institute for 21st Century Energy, U.S. Chamber of Commerce
  • Mr. Jake Schmidt, Director International Programs, Natural Resources Defense Council
  • Dr. Margo Thorning, Senior Vice President and Chief Economist, American Council on Capital Formation

According to Dr. Curry, a growing body of evidence suggests that the climate is less sensitive to increases in carbon dioxide emissions than policymakers generally assume—and that the need for reductions in such emissions is less urgent. According to the U.N. Framework Convention on Climate Change, preventing “dangerous human interference” with the climate is defined as limiting warming to no more than 2 degrees Celsius (3.6 degrees Fahrenheit) and 0.02 inches of sea-level rise above preindustrial levels by 2100. Dr. Curry observed that total emissions reductions in the U.S.’ INDC would avert only 0.03 degrees Celsius of warming by the end of the century, according to EPA’s MAGICC model. She added that if climate models overestimate the warming effect of carbon emissions, then the amount of warming prevented by an international agreement would be even smaller.

Mr. Schmidt, who testified in support of the administration’s climate policy, argued that U.S. action is essential to ensure commitments from countries that have already announced their INDCs (i.e., the European Union, Russia, and Mexico) and those that are still developing a proposal (i.e., China, India, South Korea, Brazil, and Indonesia). In other words, if America leads other nations will follow, and their combined contributions can achieve meaningful warming mitigation. Dr. Curry countered that even if the treaty achieves the U.N. IPCC’s most aggressive emission-reduction scenario, the impact on the climate would not be noticeable until the second half of the twenty-first century, and therefore it is unclear what the INDC commitments are expected to accomplish.

Dr. Curry also observed that the complexity of the climate change problem militates against a “command and control” solution based on a narrow set of policy options. Rather, she suggested that “robust and flexible policy strategies can be designed that account for uncertainty, ignorance, and dissent.” Specifically, she pointed to a report prepared the World Bank entitled Investment decision making under deep uncertainty – application to climate change, that proposes a risk management approach based on the economics of preventing losses from climate change. She also noted that the bipartisan Breakthrough Institute has proposed a “pluralistic, pragmatic strategy” toward climate change that centers on accelerating energy innovation, building resilience to extreme weather, and reducing emissions of short-lived climate pollutants. According to Curry, these efforts have justifications independent of their benefits for climate mitigation and adaptation, and they do not depend on unanimity about climate models or the risks posed by uncontrolled greenhouse gases.

Mrs. Harbert provided a U.S. Chamber of Commerce analysis that suggests EPA’s current GHG regulations fall well short of the administration’s INDC: “According to EPA’s most recent greenhouse gas (GHG) inventory, net GHG emissions—which include sinks (e.g., removals of carbon dioxide from the atmosphere by forest growth)—were 6,455 million metric tons of carbon dioxide equivalent (MMTCO2 eq.) in 2005 and 5,860 MMTCO2 eq. in 2013. To achieve a 28% reduction by 2025, emissions would have to drop by a total of 1,808 MMTCO2 eq. from the 2005 level, or 1,212 MMTCO2 from the 2013 level, to meet the 28% goal.”

If implemented as proposed, EPA’s regulations of existing power plants (the “Clean Power Plan”) would result in an estimated 500 MMTCO2 eq. in reduction by 2025 from the power sector. EPA also anticipates reductions from existing automobile efficiency standards and new standards for heavy trucks, regulations on methane emissions from oil and gas operations, appliance efficiency standards, voluntary measures to reduce hydrofluorocarbons under EPA’s Significant New Alternatives Policy program, and programs to enhance carbon sinks through land use management.  According to Harbert’s analysis, the Clean Power Plan combined with these other policies will likely achieve no more than 700 MMTCO2 eq. in reductions, leaving about 40 percent of necessary reductions unidentified.

Mrs. Harbert also maintained that a new international agreement should reflect changing trends in global emissions and economic developments. According to the International Energy Agency’s most recent mid-range forecast, developing countries will account for 141 percent of the increase in CO2 emissions from energy between 2012 and 2040. To achieve significant GHG emissions reductions, Harbert said, large emerging economies will have to assume ambitious commitments—a questionable prospect given their overriding desire to increase energy access, boost economic growth, and lift their populations out of poverty. Only the European Union has pledged reductions in line with the administration’s INDC.

Dr. Thorning focused on how trends in global energy use could influence global GHG concentrations over the next 25 years. According to the International Energy Agency’s 2014 World Energy Outlook, global energy demand is expected to increase 37 percent by 2040. Although some developing nations have made renewable energy investments, natural gas, LNG, and nuclear power will likely be the foundation of their energy portfolios during the ensuing decades. For these nations, Dr. Thorning argued, achieving carbon reductions will take a back seat to their desire to increase energy supplies and improve living standards for populations currently living without electricity.

Dr. Thorning also presented two policy proposals intended to increase U.S. economic growth while also stemming the rise in global CO2 emissions. A recent study prepared by the American Council for Capital Formation suggested replacing the federal income tax with a consumption tax that allows full expensing as a first year write off for all new investment and caps corporate tax rates at 30 percent (in contrast to the current U.S. corporate tax rate of 40 percent). The study estimated that these changes could reduce capital costs by 20 percent, while also facilitating investment in technologies that emit less CO2 per unit of energy or per unit of output. In addition, Dr. Thorning urged policymakers to encourage LNG exports and to share clean coal technology with developing countries to further facilitate reductions in global GHG emissions.

Conclusion

As these hearings demonstrate, Congress is continuing to seek input from a variety of experts and sources as the administration pursues both domestic and international policies to limit GHGs.

Posted by Jordan Rodriguez at 05/14/2015 3:50 PM

California Executive Order Sets Ambitious New GHG Emission Reduction Target

(Federal GHG regulations) Permanent link
 

On April 29, 2015, Governor Jerry Brown issued Executive Order B-30-15, establishing a statewide greenhouse gas (“GHG”) emission reduction target of 40 percent below 1990 levels by 2030. This new goal supplements existing GHG emission reduction targets initially set out in a 2005 executive order (“2005 Order”) signed by Governor Schwarzenegger. The 2005 Order established targets of reducing GHG emissions to 1990 levels by 2020, and to 80 percent below 1990 levels by 2050. The 2020 goal in the Order was later codified in the California Global Warming Solutions Act of 2006 (AB-32). 

Research by the Berkeley National Laboratory suggests that California is on track to meet its 2020 emission reduction target, but that additional efforts are needed to achieve the 2050 goal of reducing emissions by 80 percent below 1990 levels. To that end, Executive Order B-30-15 establishes an interim target to ensure that California continues to progress towards its 2050 target. In particular, the Order explains that the 2030 target “is necessary to guide regulatory policy and investments in California in the midterm, and put California on the most cost-effective path for long term emission reductions.”

The ambitious new target represents a nearly 45 percent reduction from California’s GHG emissions in 2012. The Executive Order does not provide details on how the state will achieve the new interim target. Instead, it provides that all state agencies with jurisdiction over sources of greenhouse gas emissions will implement measures to achieve reductions of greenhouse gas emissions. The Order further directs state agencies to “take climate change into account in their planning and investment decisions, and employ full life-cycle cost accounting to evaluate and compare infrastructure investments and alternatives.” To support these efforts, the Order explains that the Governor’s Office of Planning and Research will establish a technical, advisory group to help state agencies incorporate climate change impacts into planning and investment decisions. 

The Executive Order also directs the California Air Resources Board to update its Climate Change Scoping Plan to incorporate the 2030 target.

The executive order also addresses the need for climate adaptation. The Order directs the California Natural Resources Agency to update the state’s climate adaptation strategy, known as “Safeguarding California,” every three years and specifies that the adaptation strategy should identify vulnerabilities to climate change by sector and region.

Posted by Lauren Sidner at 05/12/2015 5:14 PM

The Administration Highlights Climate Change Impacts and Mitigation for Earth Day

(Federal GHG regulations, Climate Change Science) Permanent link

This year President Obama traveled to the Florida Everglades for Earth Day, where he discussed environmental issues related to climate change. During the week surrounding the trip, members of the administration authored a series of blog posts outlining the administration’s climate change agenda. These posts give insights into the administration’s environmental policy priorities, and suggest that they are looking for additional ways to find public support for their climate change-related programs.

On Monday, April 20, 2015, Senior Advisor Brian Deese highlighted the risk that the Florida Everglades face if sea levels rise. In addition to images showing the natural beauty of the Everglades, the post emphasized the economic impacts of climate change. Specifically, the post notes the importance of the Everglade’s to Florida’s tourist industry and supply of fresh drinking water. Deese reports that rising sea levels won’t “just destroy a beautiful and unique national landscape. It threatens an $82 billion state tourism economy, and drinking water for more than 7 million Americans — more than a third of Florida’s population.” Given that many critics of the President’s climate change policies emphasize their costs, statements such as this a continuing demonstration of the administration’s attempt to change the conversation by emphasizing the economic risks of leaving climate change issue unaddressed.

 


Source: https://www.whitehouse.gov/sites/default/files/image/evergladesemail.jpg


Deese’s post also emphasized the measures that the administration has already taken to limit Greenhouse Gas emissions. According to Deese, “[o]ver the last eight years, the United States has cut more carbon pollution than any other country.” The post also highlights the administration’s proposed rule, known as the Clean Power Plan, “to curb carbon pollution from existing power plants -- the single-biggest source of carbon pollution in the U.S.” For more information on the Clean Power Plan, please see this report.

On Tuesday Dr. John P. Holdren and Dan Utech announced that the administration had released the initial installment of the first-ever Quadrennial Energy Review (QER), a four-year cycle of moving-spotlight assessments designed to provide a roadmap for U.S. energy policy going forward. This first QER “examines how to modernize our nation’s energy infrastructure to promote economic competitiveness, energy security and environmental responsibility, and is focused on energy transmission, storage, and distribution (TS&D), the networks of pipelines, wires, storage, waterways, railroads, and other facilities that form the backbone of our energy system. The QER seeks to identify vulnerabilities in the system and proposes major policy recommendations and investments to replace, expand, and modernize infrastructure where appropriate.” The QER also looks at ways to improve infrastructure, including rails and the electric grid.

EPA Administrator Gina McCarthy also authored a post on Tuesday, which listed a number of EPA’s past achievements. In addition, McCarthy noted that EPA is now focused on climate change. Her post emphasized the link between carbon pollution to more traditional forms of air pollutants:

The carbon pollution driving it comes packaged with other dangerous pollutants like smog and soot that can cause asthma and certain cancers, especially for those living in the shadow of polluting industries. When we finalize our Clean Power Plan this summer, we’ll not only cut carbon pollution from power plants, our nation’s largest source, but we’ll also reduce those other dangerous pollutants and protect our families’ health.

As with Deese’s economic messaging, McCarthy’s emphasis on the link to other forms of pollution suggests that the administration is working to sell its climate change policies to an audience that is more skeptical of the benefits of the new regulations. Notably, both posts also focus on the Clean Power Plan as the administration’s key initiative to limit GHGs. Holdren and Utech’s announcement regarding the QER suggests that the administration may also look for other areas in America’s electric generation and transmission system where emissions can be cut.

Posted by Corinne Snow at 05/08/2015 3:42 PM

Is the King of Wind Energy Stepping Down from the Renewable Throne?

(Renewable Fuel Standards and Biofuels) Permanent link
 

On April 14, the Texas Senate passed S.B. 931, which aims to end the state’s Renewable Portfolio Standard (“RPS”) at the end of this year. The bill would also repeal the authority of the Public Utility Commission of Texas (“PUC”) over its Competitive Renewable Energy Zones (“CREZ”) program. Opponents of the bill worry that it will hurt the renewables market in Texas and make it more difficult for the state to comply with EPA’s proposed Clean Power Plan.  Proponents claim that the bill is simply recognition of reality—that the RPS has already achieved the goal for renewable development years ahead of the targets previously established.

Background

Texas wind power makes up almost 20 percent of the country’s total renewable energy capacity.  The state has over 13,000 megawatts (“MW”) of renewable energy capacity and plans exist for thousands more to come online over the next few years.  Yet the state legislature is now considering whether it is time for Texas to stop supporting the centerpiece of the renewables legislative framework.  S.B. 931 would end the state’s Renewable Portfolio Standard (“RPS”) at the end of this year.

According to bill sponsor Sen. Troy Fraser, the RPS and Texas renewable energy development have been so successful that there is no longer a need for the requirement. Texas has long since achieved its renewable energy obligation set back in 1999 and has already surpassed its 2025 goal of 10,000 MW – 15 years ahead of schedule.  Wind generation has taken off, providing over 10% of Electric Reliability Council of Texas’ (“ERCOT’s”) electricity last year, according to a U.S. Energy Information Administration (“EIA”) report. The report also shows that wind generation nearly doubled from 2009 to 2014 due to increased installations and completion of the CREZ transmission expansion.

Senator Fraser and others in favor of the bill see this feat as “mission accomplished.” These bill proponents are declaring a victory on the RPS program and believe that it is now the right time to get the “standard off their books,” according to Fraser, who was a co-sponsor of the original 1999 bill establishing the renewables mandate.

Yet, many industry players, nonprofit organizations, renewable coalitions, and state officials ask, “why now?” According to these bill opponents, there are three big problems with removing the PUC’s CREZ program and the renewable energy requirements from state law:

  1. Ending the RPS ten years early would jeopardize the value (and even the existence) of Renewable Energy Credits (“RECs”) and the market for these RPS-required RECs

    The RPS program requires that retail energy companies include in the power they deliver a specified minimum percentage of power from renewable sources.  The RPS program created RECs to allow trading of renewable energy to permit retail energy companies that did not have sufficient renewable power to meet the program requirements.  The REC program subsidizes the cost of developing renewable power. 

    A REC serves as a compliance mechanism for retail energy companies to prove that they had obtained their required share of energy produced from renewable sources.  A REC is a tradable credit that represents proof that 1 megawatt-hour of electricity was produced from a renewable energy source. A power producer can construct renewable power and earn RECs for that power. It can then sell that REC to a municipally owned utility, electric cooperative or other retail provider that does not have sufficient renewable sources for use in complying with the RPS, which mandates electric companies supply a certain percentage of their electricity from renewable generators each year.  These credits play an integral part in the economics of renewable projects. RECs have value that factor into projected returns for investors and project financing among all players in the industry – power companies, investors, and developers – sometimes constituting up to five or ten percent of revenue.  If the RPS is abandoned, these mandatory RECs would not be tied to the program requirements and many believe their value will plummet as power companies will no longer be required to purchase them.  This would hurt current investors, lead to lost revenue for renewable power companies, and potentially adversely affect future investment in the industry. The bill contemplates the creation of a new REC program so that retail providers can substantiate marketing claims made regarding the renewable sources for power sold under different products, but it remains unclear how that change will impact the REC market.

  2. Repealing the CREZ would impede further renewable energy development

    The CREZ is a network of power transmission lines that carry energy from the many renewable projects located in the Western and Panhandle areas of Texas into the highly populated urban areas of Texas to the east.  As instrumental as the CREZ lines have been, some parts of the lines are not yet complete, and they could remain unfinished if S.B. 931 is passed.  This means projects in the planning or construction phase in this area that depended on the remaining lines being built will be in jeopardy, because the projects will not have access to transmission interconnection or face potential curtailment from a lack of adequate transmission export capacity. Moreover, future capacity in general will be at risk because without the ability to complete and expand on the CREZ lines, new renewable projects will face an uphill battle connecting their power to the grid. As mentioned above, the recent and rapid expansion of wind energy was in large part due to the transmission grid expansion of the CREZ program that helped allow more generation from the western wind plants to reach the major cities to the east.


Source: Public Utility Commission of Texas

  1. S.B. 931 removes the legislative framework needed for compliance with EPA’s Clean Power Plan

    Opponents also argue that removing the RPS and repealing CREZ authority could make it difficult for Texas to comply with EPA’s proposed Clean Power Plan. As explained in a previous post, EPA has proposed a rule to set individual state greenhouse gas reduction targets for existing stationary sources. The proposal gives states flexibility in the methods used to achieve their target. This includes utilizing the four “building blocks” or emissions reduction measures, one of which is using more zero-emitting power sources such as renewables.  Eliminating the RPS before it expires in 2025 will make it more difficult for Texas to re-introduce renewable requirements.  As a result, Texas would need to make greater use of the other three “building blocks” to achieve the state-specific EPA target for greenhouse gas reductions included in the Clean Power Plan.

The bill will now move to the Texas House for a vote. If passed, it will then be sent to the Governor for final approval. We will keep you updated as the bill continues to move through the legislative process. 

Posted by Michael Malfettone at 05/06/2015 11:42 AM

Group of Associations Representing Industry File Comment Letter Requesting That CEQ Withdraw its New Draft Guidance on GHGs

(Federal GHG regulations) Permanent link
 

On March 25, 2015, a collection of industry groups sent a comment letter (Association Comment Letter) to the Council on Environmental Quality (CEQ) urging the agency to withdraw its recent draft guidance on how to treat greenhouse gas (GHG) emissions in NEPA analyses. The Associations argue that the recent guidance is contrary to NEPA case law, and would impose costs, time delays, and litigation risks on federal projects and permits. Parties to the letter included the U.S. Chamber of Commerce, the American Chemistry Council, the American Farm Bureau Association, and the National Association of Manufacturers.

Background

The National Environmental Policy Act (NEPA) requires federal agencies to consider environmental impacts caused by major federal actions, including granting certain permits or approvals. While NEPA applies to all federal agencies, CEQ is tasked with administering the statute and writing NEPA regulations and guidance documents.

As discussed in this previous post, CEQ first issued guidance on the consideration of climate change impacts under NEPA in 2010 (2010 Draft Guidance). The 2010 Draft Guidance concluded that there are two major areas where climate change is implicated in the NEPA process. First, the 2010 Draft Guidance stated that the GHG emissions of a project should be evaluated in relation to the alternatives under comparison. Second, the 2010 Draft Guidance stated that the impacts of climate change should be considered in evaluating a proposed project and alternatives and that this evaluation should include an assessment of how climate change will impact proposal design, environmental impacts of the project, and climate change mitigation and adaptation.

On December 18, 2014, CEQ released a new Draft NEPA Greenhouse Gas Guidance Document (2014 Draft Guidance) for sixty days of public comment. The 2014 Draft Guidance was released in response to a recommendation in the November 2014 report of the President’s Task Force on Climate Resilience and Preparedness, and provides guidance on both the consideration of climate change impacts caused by a potential project and the physical impacts that climate changes may have on project design.

The 2014 Draft Guidance begins by discussing the difficulties that are associated with addressing the climate change impacts of individual projects. However, the 2014 Draft Guidance then explicitly rejects the currently-common practice of finding that the GHG emissions from a particular project are too small to be of consequence to global climate change on their own. According to the 2014 Draft Guidance, “[t]his approach does not reveal anything beyond the nature of the climate change challenge itself: The fact that diverse individual sources of emissions each make relatively small additions to global atmospheric GHG concentrations that collectively have huge impact.” Instead, the guidance recommends that agencies use GHG emissions and any changes in carbon sequestration and storage that may result as a proxy for climate change impacts in a NEPA assessment. CEQ’s 2010 Draft Guidance does not explain why every ton of GHG emission should be considered an impact but simply moved on to talk about assessing these “impacts.” The 2014 Draft Guidance also suggests that the extent of a climate change analysis should be commensurate with the level of GHG emissions that may result from the project and states that agencies can simply choose to document that evaluation of GHG impacts would not be a useful way of distinguishing between alternatives if that is the case.

The 2014 Draft Guidance provides a “reference point” of 25,000 metric tons of CO2e/year as a level at which GHG emissions from a project may be significant. However, the 2014 Draft Guidance emphasizes that this “reference point” should not substitute for the agency’s own assessment on potential significance of a project’s GHG emissions. For projects with GHG emissions below 25,000 metric tons CO2e/year, the 2014 Draft Guidance says that quantification of a project’s GHG emissions is not warranted unless it is easily accomplished.

Comment Letter

The Association Comment Letter calls on CEQ to withdraw the 2014 Guidance, or at the very least to make some substantial revisions to limit the scope of the climate impacts that agencies can consider.

The Associations began their Letter by emphasizing “[t]he unique nature of GHG emissions and climate change” which “presents fundamentally different considerations than any other environmental issue and, in turn, bars a one-size-fits-all approach for all agencies addressing all projects in all situations as CEQ proposes.” The Letter explained that “[b]ecause the contribution of any project with GHG emissions is minute relative to the atmospheric concentration of GHGs and relative to the GHG emissions from other natural and anthropogenic sources and because the effects of GHG emissions are global in nature, it is virtually impossible to draw connections between a specific federal action and specific climate change effects.”

The Association Comment Letter asserted that CEQ’s 2014 Draft Guidance is contrary to several decades of NEPA case law, and argues that the “distinct challenges of climate change do not authorize CEQ and the agencies to act inconsistently with long-established foundational principles of NEPA review that have been enforced consistently by the courts.” The Associations therefore request that CEQ withdraw the guidance, explaining that “[g]uidance documents serve a limited purpose of explaining and interpreting laws and regulations. They should have no binding legal effect and cannot be used as a tool to amend, revise, or repeal existing regulations without following proper administrative procedures. Where guidance goes too far and effectively expands existing interpretations of laws and regulations, it is unlawful and should not be issued or followed.” Although the guidance states that it is not binding, the Associations are concerned that it would nonetheless be treated as a binding rule or regulation by agencies and courts.

The Association Comment Letter also emphasized the financial burdens and delays that additional analysis under NEPA can place on projects. The Associations warned that unless the 2014 Guidance is revised to prevent agencies “from venturing beyond the scope of what NEPA requires by restricting the evaluation of GHG emissions and related climate change effects that are so unrelated, speculative, or remote,” that there could be greater time delays, costs, uncertainties, and litigation associated with NEPA reviews. The Associations point out that NEPA regulations only require agencies to consider indirect effects of a proposed action that are caused by the proposed action. The Letter gives several examples of how the guidance includes considerations that go beyond the “reasonably close causal relationship” required by NEPA case law. These examples include consideration of transnational environmental effects, and including upstream and downstream emissions in NEPA analyses.

The Letter also argues that CEQ’s proposal inappropriately directs agencies to include the draft social cost of carbon estimates when seeking to monetize costs and benefits in NEPA reviews. For more about the social cost of carbon, please see this previous post.

The Association Comment Letter provides some suggestions for improving the CEQ guidance in the event that CEQ does not withdraw the document, including:

  • Clarifying that any final guidance will not be applicable to proposed actions that have already begun the NEPA scoping process;
  • Excluding transnational climate impacts;
  • Excluding land and resource management actions, or alternatively, providing sector-specific guidance tailored to the unique challenges posed by land and resource management decisions; and
  • Eliminate or substantially increase the 25,000 metric tons CO2e/year presumptive threshold for quantifying GHG emissions.
Posted by Corinne Snow at 04/30/2015 3:45 PM

China: An Update on the Development of a National ETS

(International) Permanent link
 
As discussed in an earlier post, China has seven regional pilot emissions trading schemes (“ETS”). Between June 2013 and June 2014, China implemented pilot programs in five cities—Beijing, Shanghai, Chongqing, Shenzhen, and Tianjin—and two provinces—Guangdong and Hubei. A stated objective of the pilot programs is to guide the eventual design and implementation of a nationwide carbon trading scheme in 2016.

The pilot programs vary considerably. Each of the seven pilot schemes has developed unique systems and rules for establishing emissions caps for covered sectors, allocating emissions allowances, monitoring and reporting emissions, offsetting allowances with carbon credits, and registering and trading allowances and offsets. The various pilot programs have also consistently varied in terms of volume traded and average price.    

Such variation across the existing pilot programs may provide important insight to the National Development and Reform Commission (“NDRC”) in developing a nationwide ETS. NDRC can look to the experience of the various programs and replicate those elements that have worked well, while avoiding problematic aspects of the pilot programs. Despite the benefits, the considerable differences in the pilot ETSs could pose challenges in transitioning from seven regional schemes to a unified program and raise questions regarding the ultimate design of a nationwide ETS.

Regarding the final design of the nationwide ETS, it is not yet clear to what degree local or regional distinctions will remain under the nationwide program. Several of the pilot programs have expressed some interest or willingness to pursue linkages or partnerships with other of the pilot programs. For example, the Guangdong ETS is reportedly exploring the possibility of linking with the Shenzhen ETS. The two markets have significant variations that would complicate such cooperation. For example, the Shenzhen pilot establishes targets based on emissions intensity, while the Guangdong pilot sets an absolute emissions target. Moreover, the two programs cover different sectors and have different coverage and reporting thresholds. Efforts to link the two programs could provide important lessons in designing a nationwide ETS, and a fruitful linkage, despite the many differences, could support the notion that provincial authorities should be allowed some degree of flexibility to maintain distinct features of existing programs.

NRDC has not yet indicated how it will handle the logistical issues that could arise with the transition from seven regional schemes to a unified national program. For example, NDRC has not yet addressed whether and how they will allow for the carry-over of unused allowances from the pilot ETSs.

China’s Transition to the National ETS    
There have been a number of recent announcements and developments relating to the nationwide ETS. On December 10, 2014, NDRC published Provisional Measures for the Administration of Carbon Emissions Trading (“Provisional Measures”), providing basic guidelines for the nationwide ETS. These high-level guidelines focus mainly on core principles and the division of responsibilities between national and provincial authorities, but provide few specific details. According to the Provisional Measures, the NDRC will set caps at the national and provincial levels and will establish national standards for scope and coverage, allowance allocation, and monitoring, reporting and verification. The provincial Development and Reform Commissions will be responsible for the implementation of the ETS in their region.

In February 2015, a senior official with the NDRC’s climate change department announced that China plans to initially cap emissions from six sectors (power generation, metallurgical, nonferrous metal, building materials, chemicals, and aviation).

Also in February 2015, NDRC published an article detailing a basic roadmap for the development of the nationwide ETS. In the remainder of 2015, the State Council will finalize regulations for the national system, while the NDRC issues supporting details and technical standards. For example, the NDRC plans to establish the total emissions levels, as well as allocation methods for national carbon emissions. A trial operations period will begin in 2016 and continue through 2020. The NDRC views this second phase as an operational improvement phase, during which it will gradually incorporate provinces into the scope of the ETS and make all necessary adjustments and improvements. A stabilization and maturation phase will begin in 2020, during which NDRC will work to diversify the types of products traded on the nationwide ETS and potentially explore the feasibility of linking with international carbon markets.

While these recent announcements shed some light on China’s developing carbon market, significant questions regarding the ultimate design of a nationwide ETS in China remain.

Posted by Lauren Sidner at 04/28/2015 10:55 AM






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