CO 2 Regulation – Soon a Reality Ruth H. Silman Nixon Peabody LLP 100 Summer Street Boston, MA...

CO2 Regulation – Soon a Reality

Ruth H. SilmanNixon Peabody LLP100 Summer StreetBoston, MA 02110

[email protected]

Scott M. TurnerNixon Peabody LLP1100 Clinton SquareRochester, NY 14620

[email protected]

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

NIXON PEABODY LLPNIXON PEABODY LLP

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


Litigation

• Cases arise in three different contexts– Clean Air Act litigation

– NEPA litigation

– Nuisance litigation


CAA Litigation

• Massachusetts v. EPA• Coke Oven Environmental Task Force v. EPA


NEPA Litigation

• Border Power Plant Working Group v. DOE• Friends of the Earth v. Watson• Mayo Foundation v. Surface Transportation Board


Nuisance Litigation

• Connecticut v. American Electric Power• California v. General Motors• Comer v. Murphy Oil


Permit Proceedings

• IGCC and BACT determinations• State NEPAs


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

http://www.pewclimate.org/what_s_being_done/in_the_states/emissionstargets_map.cfm


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


RGGI Process

Source: http://www.ccap.org/domestic/srt05presentations/(Franz_Litz)_%20RGGI_Update.pdf


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


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


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


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


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”)


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

http://www.dec.state.ny.us/website/dar/preproposal.htm


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


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.


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

CO 2 Regulation – Soon a Reality Ruth H. Silman Nixon Peabody LLP 100 Summer Street Boston, MA...

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