On the cusp of the Poznan U.N. Climate Change Conference, data just published by the U.N.’s climate secretariat show that many industrialized nations’ greenhouse gas (GHG) emissions have been rising.  The emissions data underscore the difficulties that some industrialized countries are having in meeting their existing emissions reduction commitments under the Kyoto Protocol, which run through 2012, as well as the enormity of the challenge in reaching the deep emissions cuts that many U.N. members say are urgently required.  The new data will also likely re-open a longstanding debate concerning the reliability of the various methodologies employed to calculate national emissions levels.

Under Article 4.1(a) of the 1992 U.N. Framework Convention on Climate Change (UNFCCC), all member states are obligated to report, on a periodic basis, GHG emissions from anthropogenic sources and the removal of GHG sinks (such as through changes in land use or forest cover).  Pursuant to a series of decisions of the Conference of the Parties to the UNFCCC, the 41 industrialized countries identified in Annex I to the Kyoto Protocol must provide more detailed emissions data on an annual basis.  Non-Annex I countries, which include China, India, and other large industrializing countries, are not subject to these more rigorous emissions reporting obligations.

The report, which covers the period 1990 through 2006, confirms that the United States, the EC and Russia remain the largest three Annex I emitters.  The report also shows for each of these jurisdictions that, while 2006 emissions represented a slight drop from 2005 levels, those same emissions were somewhat higher than 2000 emissions.  The United States remained by far the largest Annex I emitter, at just over 7 billion tons in 2006 (according to some sources, China has now eclipsed the United States as the world’s largest GHG emitter).  Total EC emissions were just over 4.1 billion tons, while Russian emissions were 2.2 billion tons.  This represented a drop from those countries’ 1990 emissions of 2.2% and 34%, respectively.  In contrast, U.S. emissions grew 14.4% over the same period.

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On Tuesday, November 18 global leaders met at the international climate change summit hosted by California Governor Arnold Schwarzenegger to discuss strategies for cutting global emissions in advance of the December U.N. conference in Poznan, Poland. The delegates expected the biggest news of the first day would be an agreement to reduce greenhouse gas emissions from deforestation between US states and developing countries. But before the discussions fully commenced, President-elect Barack Obama greeted attendees with video message pledging “a new chapter in America’s leadership on climate change.” Consistent with past statements, Obama promised a federal cap-and-trade system to “establish strong annual targets that set us on a course to reduce emissions to their 1990 levels by 2020 and reduce them an additional 80 percent by 2050.”

While Obama’s pledge did not break new ground, the message energized attendees by sending a clear signal that the U.S. will join the international community in making a real commitment to reduce greenhouse gas emissions.  Many believe Obama’s commitment sets a new tone for talks at the Poznan conference, where leaders hope to advance the negotiations over a successor to the Kyoto Protocol.  While the President-elect has made it clear that he will not appear in Poznan, he declared that after he takes office, “you can be sure that the United States will once again engage vigorously in these negotiations.”

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Russia’s top leadership  is on record supporting the development of solar power projects in the country. At a March 2008 meeting with Vladimir Putin and Dmitry Medvedev, Chairman of the State Duma Boris Gryzlov stressed the importance of solar power for electricity generation and mentioned a patented Russian technology for solar power applications that could be marketed.  Gryzlov’s August 2008 article in the  Russian Journal “Expert” noted  that “Development of renewable energy will  make it possible not only to address the problem of energy supply, reduce dependence  on  hydrocarbon raw materials and improve the ecological situation, but also to make money from the production and export of high-tech products and engineering solutions.” 

In October 2008, Prime Minister Vladimir  Putin supported a proposal  made by  the state corporation Rosatom to invest in polysillicon production  and  to construct  a solar equipment plant in Krasnoyarsk Region to produce solar modules.   This project would involve Rosatom’s Zheleznogorsk polysilicon plant, the state-owned Krasnoyarsk Machine-Building Plant (Krasmash), and OJSC Krasnoyarsk Non-Ferrous Metals Plant (KrasTsvetMet).   Other state corporations, Rosnanotekh and Vheshekonombank, might participate in co-financing the project, whose goal is to create a vertically integrated manufacturing value chain  from the supply of  raw materials  to the assembly of solar modules.

In September 2008, Rosnanotekh signed a strategic cooperation agreement with Oerlikon, a Swiss industrial technology corporation partly   owned by  the  Renova Group of Companies,  a  leading asset management company  in Russia. In May 2008, Renova Industries Ltd increased its stake in Oerlikon to 39.1 percent.  Oerlikon’s subsidiary, Oerlikon Solar, is a  major producer of equipment for manufacturing solar cells.

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While the United States grapples with its design of a regulatory framework for carbon capture and storage (CCS) under its existing Safe Drinking Water Act authority, Australia has forged ahead to develop national legislation to support aggressive CCS development.  Australia, a heavily-coal dependent nation, last week passed the Offshore Petroleum Amendment (Greenhouse Gas Storage) Act 2008 (Act) which establishes a national regime for the capture and burial of carbon emissions under Australian sea beds.  The Act will commence on a day to be proclaimed by the Governor-General, which is a legal pre-requisite in the Australian law-making process.  This presents a unique opportunity for the US to garner important lessons as Australia experiences the inevitable teething problems in implementing its regime.

As the CCS provisions constitute an amendment to Australia’s key oil and gas legislation, the Offshore Petroleum Act 2006, there are three key features of that regime which must be understood.  Firstly, the Crown (i.e. the Federal Government) owns virtually all land containing minerals and petroleum and grants rights to miners to explore for and produce the resource (this contrasts with the ownership regime in the US, where most mineral land is privately held).  Secondly, the oil and gas regulation reflects Australia’s federal system.  The Offshore Petroleum Act at the Commonwealth level applies beyond State coastal waters (which are nominally within 3 nautical miles of the coast).  Although this is Commonwealth legislation, it is administered by joint authority of the Commonwealth and State.  Mirror legislation in each State applies to State coastal waters, with the aim that the same rules apply, regardless of jurisdiction.  Separate State petroleum legislation applies in each state to the onshore area and islands.  Finally, it is worth mentioning that health, safety and environmental issues relating to the oil and gas industry are dealt with under regulations made under the Act, and therefore CCS operators will also inherit that existing system.

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 On November 17, 2008, California Governor Arnold Schwarzenegger signed Executive Order S-14-08 (EO S-14-08) to expedite the approval process for renewable energy projects and increase California’s renewable portfolio standards (RPS) to 33% by 2020. 

As previously raised by ClimateIntel, current inefficiencies and red tape in the permitting process have been holding up progress towards meeting California’s existing 20% by 2010 RPS goal.  Thus, the effectiveness of the RPS procurement process has been tempered by the slow pace of actual renewable development coming online.  The Governor’s EO S-14-08 directly addresses this problem through the following:

• Streamlining the application process for renewable energy development by creating a “one-stop” process for concurrent review of permit applications by the California Energy Commission (CEC) and the Department of Fish and Game (DFG).  On November 17, the CEC and DFG signed a Memorandum of Understanding (MOU) to create a joint Renewable Energy Action Team (REAT) that will concurrently review permit applications filed at the state level.  This streamlined process is expected to halve the application time for specific projects.  Beyond this, the CEC and DFG entered into a further MOU with the U.S. Fish and Wildlife Service and the U.S. Bureau of Land Management to include the federal partner agencies in the expedited permitting process for projects on federally-owned California land. 
• Initiating the Desert Renewable Energy Conservation Plan in the priority Mojave and Colorado Desert Regions.  Under this Plan, the REAT will, among other things, collaborate with federal partners and stakeholder groups to identify and map pre-approved areas for streamlined RPS project permitting and environmental review.  The REAT will also develop a Best Management Practices manual to assist applicants in designing projects to emphasize siting considerations and minimize environmental impacts.  The Plan is expected to reduce both the time and uncertainty normally associated with renewable project development.  
• Further accelerating and raising California’s RPS Goal from 20% by 2010 to 33% by 2020.  The Governor will be unveiling proposed companion legislation to codify this higher RPS standard and require all utilities, public and private, to meet the 33% target.  The legislation will also reform the renewable energy market structure to spur new development while providing consumer safeguards.

About half of the states in the U.S. have renewable energy mandates, but California’s 33% by 2020 will be the most aggressive.  With California again pushing the envelope, hopefully, the Obama Administration will be next to push for a strong federal renewable portfolio standard.

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This is the second of a three-part series discussing select legal or policy aspects of EPA’s proposed rule for regulating commercial scale carbon and capture (CCS) projects, scheduled to close for public comment November 24, 2008.  Friday’s post addressed the proposal’s treatment of financial assurance requirements for project owners and operators.  Today’s post analyzes the proposed standards for care and monitoring of a CCS injection site following closure of the facility.   The final post in the series will analyze the proposal’s treatment of long-term liability issues associated with CCS projects. 

These issues can influence investment in, and public support for, CCS as a climate change mitigation strategy. As such, EPA’s framework must establish the necessary human health and environmental safeguards, without posing unnecessary barriers or costs to deployment of CCS.  In critical respects, EPA’s proposal provide insufficient for stakeholders to evaluate the validity of proposed requirements.

Example 2:  Post-closure monitoring requirements at CCS facilities

With the designed storage life for CCS facilities reaching from hundreds to thousands of years, the time period during which active monitoring and management of CCS sites must continue after sequestration activities cease and closure activities are completed is critical in assessing the practical and economic viability of a specific CCS project. 

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 The House and Senate return this week for a week that might not produce much in the way of legislation, but could have reverberations on climate policy for the next few years.  The focus of this week will be attempts in both chambers to swiftly pass a $25 billion bridge loan for the auto industry.  With GM on the brink on insolvency, and Ford and Chrysler not too far behind, Financial Services Chairman Barney Frank and Senator Carl Levin will offer legislation that will allow for $25 billion to be taken from the $700 billion Wall Street bailout for the use of the auto industry.  The Administration, while supportive of emergency loans to the auto industry, opposes using the $700 billion fund as a kitty for non-financial companies.

On Wednesday, the Big Three and the UAW go before Chairman Frank’s committee to make their case.  Chairman Frank, and the Democratic leadership, have been generally supportive of the autos’ request.  Opposition is coming from Senate Republicans such as Sen. Richard Shelby, ranking member of the Senate Banking Committee, and it is unlikely that the bill could survive a Republican filibuster.  President-elect Obama has offered his qualified support for the emergency loans and if they fail this week, it is likely that they could be enacted (possibly by executive order) when the new Administration takes office.  These loans will by no means be unconditional.  They will likely ask the auto companies for increased government scrutiny of their operations, including demonstrating that the companies have a plan to transform themselves into profitable and technologically innovative companies.  That means greater government support for fuel efficiency and weaning away from the fleet mixes that have proven unpopular in an age of higher gas prices.

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On November 24, the comment period on EPA’s proposed framework for regulating commercial-scale carbon capture and sequestration (CCS) projects under the Safe Drinking Water Act (SDWA) will close.  To date, only 20 stakeholders have commented on the draft rule.  While it is common to submit comments on regulatory proceedings on the deadline, the relatively low stakeholder participation so far is somewhat surprising given the significant role CCS is expected to play in any U.S. effort to reduce carbon emissions - particularly for traditionally coal-driven sectors of the US economy. In light of this surprising occurrence, ClimateIntel will run a three-part analysis of the issues of critical importance to project developers and investors, for which EPA fails to propose serious resolution - even signaling in some cases that decisions will be made through informal guidance. The posts that follow highlight issues that the EPA should address further with stakeholders before issuing its final rule.

Example #1:  Financial Assurance Requirements for CCS Projects

EPA proposes to impose a “general duty” on owners or operators of CCS projects to “demonstrate and maintain financial responsibility and resources” sufficient to cover costs associated with closure and post-closure activities.  73 Fed. Reg. 43537 (proposed as 40 C.F.R. § 146.84(a)).  The costs of financial assurance will depend both on the size and scope of the proposed project and on which financial assurance instruments and options are available to owners or operators under the regulation.  The proposal states only that the Agency “will provide guidance to be developed at a later date that describes the recommended types of financial mechanisms that owners or operators can use to meet this amendment.”  Id. at 43520.

EPA’s failure to clarify its financial assurance policy is notable for two reasons.  First, although EPA already administers financial assurance regulatory requirements governing closure and post-closure of underground injection wells for hazardous waste, hazardous waste treatment, storage, and disposal facilities, and underground storage tanks, EPA’s CCS proposal eschews such precedents, stating:

The [EPA’s Office of the Inspector General]  and [U.S. Government Accountability Office] suggest that EPA may need to update or provide additional guidance in the following areas: Cost estimation methodology; pay-in period for trust funds; the type of insurance provider that may be used; requirements for acceptable surety bonds and/or their providers; and the way by which corporations demonstrate financial strength/credit worthiness…  EPA is considering updating mechanisms for demonstrating financial responsibility for GS projects.

The financial assurance regime established for the CCS facilities is likely to be markedly different from that which investors and industry apply under current business models.

The proposal compounds this uncertainty by suggesting EPA will issue CCS-specific financial assurance standards using mere guidance.  Of even greater concern may be the risk that poorly vetted guidance could hobble US efforts to commercialize CCS when aggressive action is needed to meet US commitments.

To submit comments on EPA’s CCS framework, follow directions provided in the proposed rule.

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Click here to read the next blog post in the three-part series on the proposed rule’s treatment of post-closure monitoring requirements at CCS facilities. 

For further information about this topic, please contact Akin Gump.

The EPA Environmental Appeals Board (EAB) ruled today that EPA’s Regional office in Denver erred in ruling that it did not have authority to require installation of Best Available Control Technology (BACT) to control carbon dioxide (CO₂) emissions at a proposed coal-fired power plant.  In re Deseret Electric Power Cooperative, PSD Appeal No. 07-03 (Nov. 13, 2008).  Effectively, this decision places the extent to which EPA will regulate CO₂ under the Clean Air Act (CAA) squarely in the lap of the Obama Administration.

This decision has immeasurable implications for not only the electric utility industry, but also any industrial facility emitting carbon dioxide.  The issue on which the decision turned was whether EPA had previously interpreted a provision of the CAA as excluding CO₂ as a pollutant “subject to regulation” under the Act with respect to the requirement that a “new” source of pollutants install emission control equipment prior to construction of the source. 

EPA Region 8 had issued a permit to Deseret Electric Power Cooperative to construct a new coal-fired electric generating unit at the existing Bonanza Power Plant in Bonanza, Utah. 

The Sierra Club challenged Region 8’s decision, relying on Massachusetts v. EPA, 549 U.S. 497 (2007), to argue that the CAA required EPA to include a BACT emissions limit for CO₂ in the Deseret permit. 

In a 69-page decision that industry, environmental groups and Agency lawyers will analyze carefully, the EAB categorically rejected Region 8’s interpretation, remanding the permit to the Region for consideration of whether BACT for CO₂ should be included and, as importantly, to develop a record supporting its decision. 

The EAB decision will require the Obama Administration to decide early in its tenure whether and to what extent it intends to regulate CO₂ emission under the CAA.  Moreover, the decision will come in a concrete permit context and not, for example, in a notice of proposed rulemaking pursuant to which the Administration can consider over a longer time frame the direction it wants to go.

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Over the 21 months of his presidential campaign Barack Obama repeatedly stressed themes of change: finding new solutions to the problems of today’s world.  This philosophy certainly extends to the President-elect’s bold and comprehensive plan to overhaul the country’s energy policy and actively engage in the global fight against climate change.  Below, we outline some of the most significant items on the Obama administration’s climate and energy “to-do” list:

Diversify Energy Sources and Reward Energy Efficiency

A major plank of the President-elect’s energy proposals is to focus American ingenuity on renewable energy and other “green” technologies. As he sees it, this focus will have both environmental and energy security benefits, but most importantly in these troubled economic times, help stimulate the economy through the creation of new “green collar” jobs. President-elect Obama indicates that by ensuring that America is a leader in clean energy technology, such as deploying carbon capture and storage, his plan will create at least five million new jobs, and create demand for American expertise around the world. The President-elect’s plan has several strategies for accomplishing this:

1) Accelerating investment in green technology, both by providing incentives for the private sector and by investing $150 billion of federal money over the next 10 years;

2) Extending the Production Tax Credit for five years; and

3) Creating a national Renewable Portfolio Standard beginning at 10% by 2012 and increasing to 25% by 2025.

To support this massive expansion of alternative energy, President-elect Obama’s plan also advocates the creation of a unified national “smart grid,” which has been strongly encouraged by Al Gore’s group Alliance for Climate Protection. 

Design and Implement Comprehensive Cap and Trade Legislation

Throughout his campaign, President-elect Obama advocated for an economy-wide cap and trade program to significantly reduce greenhouse gas emissions. In fact, his proposal, which would slash GHGs to 80% below 1990 levels by 2050, is more aggressive than either GHG control effort undertaken by the House or Senate (the Dingell-Boucher bill proposes reductions of 80% below 2005 levels by 2050 and the Lieberman-Warner bill proposed reductions of 70% below 2005 levels by 2050). Then candidate Obama’s platform advocated a 100% auction of carbon credits, with a portion of the proceeds would go towards supporting clean energy and energy efficiency technology. Read the rest of this entry »

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