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Today, House Energy and Commerce Chair Henry Waxman (D-CA) and Subcommittee on Energy and Environment Chair Ed Markey released their long-awaited climate change and energy bill, entitled, “The American Clean Energy and Security Act of 2009 (ACEA).”  The bill has four separate titles:

1)         Clean Energy - devoted to renewable energy, carbon capture and sequestration (CCS), “clean” vehicles and the “smart grid;”

2)         Energy Efficiency - focused on economy-wide efficiency improvements from electrical appliances to the utility industry;

3)         Global Warming - establishing a cap and trade system; and

4)         Transitioning to a Clean Energy Economy - designed to provide industry and consumers assistance during the transition to a clean energy economy.

The centerpiece of the Clean Energy title is a renewable energy standard that would begin at 6% for utilities in 2012 and rise to 25% by 2025.  For states disadvantaged in meeting this target, a governor of any state is allowed to meet one fifth of the renewable goal through energy efficiency measures.  This title also provides for the development of carbon capture and sequestration, a vital interest for Committee Democrats from energy producing states.  The draft also establishes a new low-carbon fuel standard on biofuels, authorizes support to cities and states for large scale demonstrations of electric vehicles and directs the Federal Energy Regulatory Commission (FERC) to reform the planning process to modernize the electric grid and provide for new transmission lines to carry electricity generated from renewable sources.

The Energy Efficiency title establishes federal funding assistance to states that implement advanced building standards along with funding for retrofitting existing commercial and residential properties to improve efficiency.  The bill also strengthens lighting and appliance efficiency standards and incentives for retailers who sell high volumes of “best-in-class” appliances.  Probably the most contentious issue in the energy efficiency section addresses the beleaguered auto industry.  Far from the fights between California and auto producing states, which had characterized previous attempts at the issue, the legislation seeks to harmonize “to the maximum extent possible” the California standard within a national framework.  According to the committee’s summary, the goal “is to preserve environmental benefits in a way that simplifies compliance for the auto companies.”

Title III, Reducing Global Warming Pollution, largely tracks the goals set out by the US Climate Action Partnership (USCAP).  The program of using tradable federal permits to offset emissions of greenhouse gasses is targeted to lower greenhouse gas emissions by 83% below 2005 levels by 2050.  On the contentious issue of offering free allowances the legislation directs EPA to establish a strategic reserve of 2.5 billion allowances to be used if the price of carbon increases faster than expected.  The bill places responsibility for carbon market oversight in the FERC.  In a major concession to industry, the legislation forbids the regulation of CO₂ as criteria or hazardous air pollutants under the Clean Air Act.

The Transitioning title is geared towards helping industries, individuals, and communities that might be most affected by new regulation.  To ensure that manufacturers do not pull up stakes for overseas, non-constrained markets the draft legislation incorporates Rep. Doyle’s and Rep. Inslee’s bill to provide rebates to manufacturing due to increased costs.  If rebates are not enough, the President would be able to impose tariffs on U.S. bound goods based on their carbon content.  There would also be export assistance for U.S. produced clean energy technology.

This legislation is a first step in what will ultimately be a long process filled with multiple compromises, that still might not end in passage this year.  The Energy and Commerce Committee is planning on holding a hearing on the legislation when Congress returns from its Easter recess, followed by a mark-up in the subcommittee, then full committee with an ultimate Committee vote slated for the week of May 11.

Construction of a new source of air pollution or modification of an existing source that causes a significant net increase in emissions of certain pollutants triggers applicability of the Environmental Protection Agency’s (EPA) new source review (NSR) program.  One critical aspect of the NSR program is the requirement that measures to control the emissions be established by the permitting authority before the beginning of construction and be in place before the source commences operations. 

The requirement for Best Available Control Technology, or BACT, applies both to new major sources and to existing major sources undergoing modification.  These requirements apply to all regulated NSR pollutants for which the increase in emissions is “significant.”  The latter term is defined in the federal regulations in two ways.  For most regulated NSR pollutants, EPA has established (at 40 CFR § 52.21(b)(23)(i)) an annual emission rate threshold, in tons per year.  These thresholds range from 0.6 tons per year for lead to 100 tons per year for carbon monoxide.  To date, the thresholds for all regulated NSR pollutants are less than or equal to the major source thresholds (100 tons per year or 250 tons per year of any regulated NSR pollutant, depending on source type), which are the thresholds that establish initial applicability of the NSR program.  The major source thresholds are specified in the statute and may be changed only by amendment of the Clean Air Act in the event CO₂ is subjected to regulation under the NSR program.  If EPA were to establish a “significance” level for CO₂, there is no express statutory prohibition on establishing that level at an emission rate much higher than the major source thresholds, though any such ruling by EPA would almost certainly bring court challenges. 

The second way in which the “significance” level for a regulated NSR pollutant is defined as follows:

Significant means, in reference to a net emissions increase or the potential of a source to emit a regulated NSR pollutant that paragraph (b)(23)(i) of this section, does not list, any emissions rate.

40 C.F.R. § 52.21(b)(23)(ii).  Thus, if EPA first regulates CO₂ emissions through performance standards for mobile sources (e.g., motor vehicles) without simultaneously establishing a significance level in tons per year, any CO₂ emissions increase resulting from construction or modification at a major source will be subject to the BACT requirement.  The administrative burden of such a requirement on both EPA and industry is incalculable.

If, as outlined in the prior installments of this series, EPA determines that greenhouse gases are subject to regulation under the Clean Air Act and, therefore, may trigger NSR, the critical issues becomes what control technology is BACT for the greenhouse gases.  In the next installment, ClimateIntel offers preliminary thoughts on BACT for greenhouse gases.

With the spring recess fast approaching, Congress will turn to passing President Obama’s budget before departing.  The President’s budget plan made room for revenues derived from a cap-and-trade system to help fund middle class tax breaks.  The House and Senate have changed that formulation somewhat, and senior Energy and Commerce democrats have said they would like to have a cap-and-trade program go through the regular legislative order then go through the budget process.  Also, rumors are swirling that Rep. Ed Markey might release a draft cap-and-trade proposal sometime this week, maybe even as early as tomorrow.

In the committees, Congress will hear from EPA, Department Of Interior and USDA nominees and markup energy legislation in addition to other slated hearings, several of which pertain to transportation, renewable fuels and climate change.

On Tuesday, March 30 the House Science and Technology Committee will conduct a hearing to address the research agenda required to mitigate the environmental impact of the transportation infrastructure on the environment, with an emphasis on climate change.  Witnesses include David Matsuda, Acting Assistant Secretary for Transportation Policy at the U.S. Department of Transportation; Catherine Ciarlo, Transportation Director at the Office of Mayor Sam Adams; Dr. Laurence Rilett, the Keith W. Klaasmeyer Chair in Engineering and Technology and the Director of the Nebraska Transportation Center at the University of Nebraska-Lincoln; Mr. Steven Winkelman, the Director of Transportation and Adaptation Programs at the Center for Clean Air Policy; and Mike Acott, the President of the National Asphalt Pavement Association. The hearing will commence at 10 a.m. in Room 2318 of the Rayburn House Building.

On Wednesday, April 1, The Senate Environment and Public Works (EPW) Committee’s Clean Air and Nuclear Safety Subcommittee will hold a hearing titled “Oversight - the Environmental Protection Agency’s Renewable Fuel Standard” at 10 a.m. in Room 406 of the Dirksen Senate Building.  Witnesses scheduled to testify are Charles T. Drevna, President, National Petroleum Refiners Association; Kelly Tiller, Director of External Operations, University of Tennessee Office of Bioenergy Programs; Michael McAdams, President, Advanced Biofuels Association; Nathanael Greene, Director of Renewable Energy Policy, Air & Energy Department, Natural Resources Defense Council; and Blake Early, Environmental Consultant, American Lung Association.

The following day, Thursday, April 2, Regina McCarthy, nominee for Assistant Administrator of EPA’s Office of Air and Radiation will testify before the EPW Committee.  The hearing is scheduled for 9:25 a.m. in Room 406 of the Dirksen Senate Building.

Of the many system design or “architecture” challenges facing U.S. lawmakers now crafting cap-and-trade legislation for greenhouse gas (GHG) emissions, one of the toughest is how best to ensure that a national GHG emissions reduction program does not undermine the competitiveness of domestic manufacturing industries.  The challenge lies in the prospect that such industries, if required to purchase emissions allowances in the context of declining emissions caps, will lose out to foreign-based competitors not subject to comparable emissions compliance burdens.  The problem is most acute for domestic manufacturing industries that compete with imports and cannot pass along higher compliance costs to their customers.  For such industries, which include steel, cement, glass, chemicals and a range of other emissions-intensive goods, inclusion in a cap-and-trade system could lead to “carbon leakage” - that is, pressure to move production, and the associated jobs, to foreign locations under no or less onerous emissions restrictions.

A series of Congressional hearings in recent weeks suggest the emergence of two leading options, already floated in draft legislation in the prior Congress, to preserve the competitiveness of U.S. manufacturers in a cap-and-trade system.  One option would be the distribution of emissions allowances to U.S. manufacturing industries exposed to carbon leakage at no cost (while other industries covered by the cap-and-trade system would still be required to purchase their emissions allowances).  One advantage of this approach is that it would be less likely to invite retaliatory action from U.S. trading partners than alternative proposals that would, in essence, impose new costs on imports.  Moreover, the free allowance model has already been adopted by the EU, which has the world’s largest and most mature GHG emissions cap-and-trade system.  However, the free allowance approach may be at odds with the Obama Administration’s policy goal of requiring all sectors covered by a national cap-and-trade system to purchase allowances.

A second option for preserving the competitiveness of domestic manufacturing industries in light of carbon leakage would be the imposition of so-called border measures, which could take the form of taxes to be paid by importers of emissions-intensive goods from countries with no (or less onerous) emissions restrictions regimes.  A variation on this option would require importers to submit emissions allowances in an amount that would place imports on the same emissions compliance footing as U.S.-made products.  Border measures could, thus, create an incentive for foreign countries exporting to the U.S. market also to curb greenhouse gas emissions.  However, they would also be vulnerable to attack under World Trade Organization (WTO) rules, which prohibit discriminatory treatment of imports over domestically produced goods, as well as discriminatory treatment of imports from some countries over imports from others.  It may be possible to design border measures, so that they do not run afoul of these WTO principles.  Border measures could also potentially be justified under the WTO’s environmental exceptions, so long as any trade restrictions can be shown to advance the border measures’ environmental objectives.

The possibility of border measures imposed as part of a cap-and-trade program has generated considerable controversy in recent years.  Susan Schwab, U.S. Trade Representative during much of the Bush Administration’s second term, repeatedly spoke out against border measures, arguing that they would irritate U.S. trading partners, hurt U.S. exporters and slow progress towards an international climate accord.  The controversy flared up anew last week when Energy Secretary Steven Chu stated that the U.S. might impose duties under a cap-and-trade system to offset any unfair advantage that foreign producers not under similar emissions restrictions would have.  Secretary Chu’s comments prompted a letter from several House Republicans to U.S. Trade Representative Ron Kirk, asking him to clarify the Administration’s policy on this point.

Several committees in the U.S. House of Representatives are currently at work on the issue, including the International Trade Subcommittee of the Ways and Means Committee, the Energy and Environment Subcommittee of the Energy and Commerce Committee, and the Science and Technology Committee.  Rep. Ed Markey, who chairs the Energy and Environment Subcommittee, has announced that he will release a draft bill by the end of March.  The development of draft legislation in the Senate appears to be progressing more slowly.  But Senator Barbara Boxer, chair of the Environment and Public Works Committee, has issued a series of six principles to guide work on a cap-and-trade bill, the last of which is to “ensure a level playing field” for U.S. industries.

 The previous post in this series discussed how the Supreme Court decision in Massachusetts v. EPA has led to permitting authorities considering whether CO₂ emissions must be considered in connection with new source review permits.  Predictably, initial confusion and inconsistent permitting decisions is giving way to the result ClimateIntel believes to be the most likely - that new or modified coal-fired power plants will be required to undergo NSR permitting for CO₂.  In this post, we highlight the major permitting developments of the past several months.

The arguments on the two sides are fairly straightforward.

• Entities seeking to require coal-fired power plants to control CO₂ emissions argue that CO₂ is “subject to regulation” under the CAA and, therefore, NSR is triggered for any project that results in any net increase of CO₂ emissions and that any NSR permit must include BACT-based CO₂ emission limit.

• Electric utilities and project developers argue that the Supreme Court did not require EPA to regulate CO₂ for NSR purposes and that EPA must still decide whether CO₂ is “subject to regulation” and, therefore, BACT for CO₂ is not mandated.

Deseret Power.  EPA Region 8 had issued a permit to Deseret Power to construct a waste-coal-fired generating unit at a Utah power plant.  Sierra Club challenged the permit.  EPA’s Environmental Appeals Board (EAB) flatly rejected Sierra Club’s argument that CO₂ must be considered “subject to regulation” under the CAA.  The Board remanded the permit to the region, however, ruling that the region erred in determining that its discretion was limited by EPA’s historical interpretation of the phrase “subject to regulation.”  The EAB held that “subject to regulation” was ambiguous, that Congress had not considered the precise issue and did not enact language to address it specifically, and that there was no evidence that the use of the term “regulation” in the 1990 Amendments was an attempt to constrain EPA’s interpretation of “subject to regulation.”

EPA Interpretive Rule on Pollutants Subject to PSD Review.  On December 18, 2008, EPA issued an interpretive memorandum providing its “definitive” interpretation of the regulatory definition of “regulated NSR pollutant” — which in turn implements the key statutory term, “subject to regulation under this Act.” EPA explained that it has never treated CO2 as “subject to regulation” under the CAA, and that it was now exercising its discretion formally to interpret its PSD rules as requiring enactment by Congress or regulatory promulgation of an emission standard or limitation for a pollutant before emissions of that pollutant become subject to PSD requirements. On December 31, 2008, EPA provided notice of this interpretation in the Federal Register and designated the interpretation as nationally significant under CAA section 307. 73 Fed. Reg. 80,300-01.

Desert Rock.  Sierra Club and a number of other environmental organizations challenged EPA Region 9’s issuance of a PSD permit to Desert Rock Energy Company for construction of a new 1,500 MW coal-fired plant located within the Navajo Reservation in New Mexico. Before the EAB could rule on the CO₂ BACT issue, EPA Region 9 withdrew the portion of its permit action regarding its decision not to impose limitations on emissions of CO2 to reconsider the issue “in light of the Board’s opinion in Deseret“ and the EPA Interpretive Rule.  EPA Region 9 then issued an Addendum, taking the position that EPA’s interpretive memorandum “reflects a properly adopted interpretive rule” and that the Region “is required to follow the Agency’s interpretation of the federal PSD regulations set forth in that memorandum.” Accordingly, Region 9 determined that CO₂ is not currently a “regulated NSR pollutant” and that it would not revise the permit to include limitations for CO₂.

Sierra Club filed a petition for reconsideration of the interpretive rule on December 31, 2008, and filed a petition to review the interpretive rule in the D.C. Circuit on January 15, 2009.  On February 17, 2009, new EPA Administrator Jackson granted the petition for reconsideration, but denied Sierra Club’s request to stay the effectiveness of the interpretive rule. 

For the time being, therefore, new and modified power plants need not consider potential NSR implications of CO₂, at least at the federal level.  But, since permits are not final until appeals to the EAB are completed, permit proceedings effectively ground to a halt until EPA rules on reconsideration.  ClimateIntel believes that the likely outcome is for EPA to require new or modified power plants to undertake new source review for CO₂, which leads to the issue of what is BACT for CO₂?

Longleaf Energy.  Sierra Club and other environmental organizations, in addition to challenging the Deseret and Desert Rock coal-fired projects for which EPA is the permitting authority, have challenged nearly every proposed coal-fired plant for which state permitting authorities have received NSR permit applications over the past several years.  With one exception, the states that have reached decisions regarding regulation of CO₂ under the NSR program have acted consistently with EPA policy.  However, in the Longleaf Energy case in Georgia, the state court overturned the state agency’s permit issuance, holding that “CO₂ is ‘otherwise subject to regulation under the Act’” and that an NSR permit “cannot issue without CO₂ emission limitations based on a BACT analysis.”

Last week, Secretary of the Interior Ken Salazar and then-Acting Chairman (now Chairman) of the Federal Energy Regulatory Commission (FERC) Jon Wellinghoff announced an agreement between the Department of the Interior (DOI) and FERC to work together to facilitate development of renewable energy projects in offshore waters on the Outer Continental Shelf (OCS).

The agreement signals the end of a long jurisdictional conflict between DOI and FERC regarding oversight of offshore renewable resource development, and has the potential to streamline the regulatory process for development of such resources.  Under the Federal Power Act, FERC regulates hydropower projects in the navigable waters of the United States.  The Energy Policy Act of 2005, however, amended the Outer Continental Shelf Lands Act to expand DOI’s OCS energy resource development power and give DOI parallel permitting authority for the production, transportation, or transmission of non-fossil energy resources on the OCS, including renewable projects.  Since the change, DOI’s Minerals Management Service and FERC disagreed on which agency has primary jurisdiction over offshore hydropower projects, preventing progress in rulemaking and resulting in an absence of federal rules governing renewable energy project development on the OCS.

Under the agreement, Interior will cede primary responsibility to FERC to manage licensing of offshore hydropower projects (e.g., wave and ocean current) using procedures developed for hydropower projects under the Federal Power Act and with the involvement of federal land and resources agencies, including DOI.  DOI will retain jurisdiction over wind projects.  The joint announcement notes that DOI and FERC are preparing a Memorandum of Understanding that will outline the principles of the agreement and the new permitting and licensing process for offshore renewable energy projects.

While Salazar and Wellinghoff, along with various renewable energy groups, praised the agreement for its promise to provide greater regulatory certainty for offshore energy developers and speed project development, others are skeptical that the agreement will be effective.  For example, Senate Energy and Natural Resources Committee Chairman Jeff Bingaman has expressed doubt that the agreement will actually streamline the development process and Bingaman and Ranking Member Senator Lisa Murkowski both have suggested that a more definite legislative solution might be included in a forthcoming energy bill.

In the nearly two years since the Supreme Court ruled in Massachusetts v. EPA that carbon dioxide was a “pollutant” within the meaning of the Clean Air Act (CAA), many commentators have posited a cascade of potential regulatory developments flowing from the decision.  In a series of posts, ClimateIntel evaluates one such possible regulatory development—the regulation of CO₂ under the New Source Review (NSR) program.

In this first post, we describe the key elements of NSR regulations and outline the permitting issues that would arise. In the next installment, we discuss some of the recent permitting decisions from the Environmental Protection Agency (EPA) concerning new coal-fired power plants and the current regulatory status. In the third post, we will discuss the likely pollution controls on coal-fired power plants if required to implement Best Available Control Technology (BACT).  The fourth post will discuss technical and policy issues associated with BACT for CO₂ emissions and the five key steps to BACT analyses.  The final installment will discuss whether and to what extent decreases in CO₂ emissions should be required at the expense of increases in emissions of conventional air pollutants and the economic value of avoided CO₂ emissions from a proposed stationary source in the United States.

Massachusetts v. EPA arose from a rulemaking petition seeking to require EPA to regulate greenhouse gases emitted by automobiles.  The Supreme Court held that the plain meaning of the statute was unambiguous and that EPA could not rely on subsequent federal legislation addressing climate change (largely through research efforts) to alter its duties under the CAA.  The Court ruled that EPA “can avoid taking further action only if it determines that greenhouse gases do not contribute to climate change or if it provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do.”

The CAA also establishes a pre-construction permitting program, known as New Source Review, which is aimed at preventing not only violation of the National Ambient Air Quality Standards, but also deterioration of air quality in areas that meet those standards.  The NSR program requires pre-construction review and the issuance of a permit for the construction of any new “major emitting facility,” or for the “modification” of an existing facility.  To obtain a pre-construction permit, the facility must show, inter alia, that the project would not result in either a violation of an ambient air quality standard or an exceedance of the allowable increment in air quality in local or downwind areas.

The regulation of CO₂ under the NSR program is likely to make facilities not previously subject to NSR suddenly covered by the program.  The CAA and the rules specify applicability thresholds, in terms of pollutant emission quantities, such as 100 to 250 tons per year for new facilities of various types.  These thresholds were developed based on conventional pollutant emissions.  Combustion sources, such as coal-fired boilers and natural gas-fired water heaters, generally emit CO₂ at a rate that is 3 to 4 orders of magnitude (1,000 to 10,000 times) higher than conventional pollutants.  Commercial and institutional facilities that would never be subject to the current NSR program will be subject, if greenhouse gasses are pulled into the NSR program.

A critical part of the permitting process is the analysis and determination of the pollution controls required to be installed before the new or modified source may operate.  The NSR program requires the permittee to conduct an analysis of the BACT for the applicable pollutants.  BACT represents an emissions limitation based on the “maximum degree of reduction” of regulated pollutants that is achievable for a facility, taking into account facility-specific “energy, environmental, and economic impacts and other costs.”  With respect to coal-fired power plants, for example, BACT for sulfur dioxide emissions typically is some form of flue gas desulfurization device or “scrubber.”  Similarly, BACT for nitrogen dioxide emissions can be a range of control or combustion devices, such as selective catalytic reduction or low-NO_X burners.

Until Massachusetts v. EPA, efforts to have any stationary sources, let alone coal-fired power plants, undergo new source review for emissions of greenhouse gasses were not seriously considered.  Since then, however, EPA regions and state permitting authorities have had to address the issue for nearly every permitting decision.  In the next installment, ClimateIntel reviews the uneven regulatory path the issue has traveled.

The Environmental Protection Agency (EPA) made big news over the weekend when the White House announced that EPA had sent to the Office of Management and Budget a proposed finding that carbon dioxide and five other greenhouse gases endanger human health and the environment and, therefore, must be regulated as pollutants under the Clean Air Act (CAA).  EPA’s proposed finding is in response to the Supreme Court decision in Massachusetts v. EPA.  Many observers believe that EPA will issue a final finding on April 2, the two-year anniversary of the Massachusetts decision.

While many observers are questioning the extent to which an endangerment finding would lead either to massive new regulation by EPA of the domestic economy, others contend that such a finding represents only an incremental expansion of EPA’s regulatory reach.  ClimateIntel looks at certain regulatory actions that could flow from an endangerment finding and on likely real world consequences of those regulatory actions.

In a multi-part series debuting today, ClimateIntel’s Paul Gutermann and Colin Campbell of RTP Environmental Associates in Raleigh, NC, will examine the implications of regulating carbon dioxide (CO₂) as a pollutant under the CAA’s New Source Review program.  The series will focus on issues relating to implementation of Best Available Control Technology for CO₂.

This week, Congress continues its busy scheduling in energy, environment and climate related business, with thirteen hearings on the calendar—six in the Senate and seven in the House. At the same time, the House will take up the Omnibus Public Land Management Act of 2009 (H.R. 146), which contains a number of provisions related to climate change, adaptation and the nation’s water resources.

On Tuesday there will be two hearings in the Senate; the first, by the Environment and Public Works (EPW) Committee’s Subcommittee on Clean Air and Nuclear safety, will focus on safety in the nation’s 104 operating nuclear power plants. The hearing will coincide with the 30 year anniversary of the Three Mile Island nuclear accident. Dale Klein, the Chair of the Nuclear Regulatory Commission, along with a number of other witnesses (see a full list here), will testify. 10:00am, 406 Dirksen Senate Office Building. In the second hearing, the Energy and Natural Resources (ENR) Committee will meet to consider the nomination of Tom Strickland to become the Department of the Interior’s (DOI) Assistant Secretary of fish, wildlife and parks. 2:30pm in 366 Dirksen.

In the House, Tuesday brings three hearings. First, two Subcommittees of the Natural Resources Committee—the Energy and Mineral Resources and Insular Affairs, Oceans and Wildlife Subcommittees—meet to discuss “Energy Development on the Outer Continental Shelf and the Future of Our Oceans.” A full witness list and other information can be found here. 10:00am, 1324 Longworth House Office Building. Also, the Energy and Environment Subcommittee of the Science and Technology Committee meets to discuss federal research and development programs for advanced fuel and vehicle technologies. Steven Chalk, the principal deputy assistant secretary for Energy Efficiency and Renewable Energy in Department of Energy (DOE), as well as others, will testify. 10:00am, 2138 Rayburn House Office Building. Finally, the Ways and Means Committee’s Trade Subcommittee holds a hearing on carbon leakage, U.S. competitiveness and climate change legislation at 2:00pm in 1100 Longworth. Read more about the hearing here.

Wednesday brings four more hearings. The Senate EPW Committee will meet to discuss increasing investment in the nation’s transportation infrastructure; Ray LaHood, the Secretary of Transportation, will testify, as will Pennsylvania Governor Ed Rendell and Kathleen M. Novak, the President of the National League of Cities. 10:00am 406 Dirksen. Also, the ENR Committee meets to consider draft legislation which would expand the oversight role of the DOE with regards to energy and commodity futures markets. Read the draft bill here. 2:00pm, 366 Dirksen. In the House, the Foreign Affairs Committee meets to address the environmental and security concerns posed by melting Arctic sea ice, at 10:00am in 2172 Rayburn. Scott Borgerson, of the Council on Foreign Relations, Robert Corell of the Heinz Center and Mead Treadwell from the Institute of the North will testify. Finally, the Energy and Environment Subcommittee of the House Energy and Commerce Committee continues its weekly hearings, this time on adaptation measures to climate change. 9:30am, 2123 Rayburn.

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In yesterday’s installment, ClimateIntel discussed California’s draft Low Carbon Fuel Standard (LCFS), which is designed to reduce greenhouse gas emissions in the state by over 16 million metric tons by 2020-nearly 10% of the total reduction goals set by the state. In the draft proposal, California Air Resources Board (CARB) staff set forth an analytical means of calculating relative “carbon intensity” of the competing fuelstocks.  As part of that analysis, CARB staff included a factor for “indirect land use changes” (ILUC). The logic for considering ILUC is that if increased production of a specific type of biofuel in the United States causes a shift in land use, the immediate and future GHG emissions resulting from that land use change should be included in the life-cycle GHG emissions for that biofuel.  The theory for including indirect effects in measure of carbon intensity is generally not controversial.  Difficulties arise, however, when the theory is put into practice.

The debate with respect to the CARB draft proposal centers on the indirect effects of increased demand for certainly biologically-derived fuels and the resulting change in land-use patterns, both locally and globally.  As the report states, “A land use change effect is initially triggered by a significant increase in the demand for a cop-based biofuel.”  That increase demand changes the market dynamics for that particular crop, stimulating increased production, which, “if [it] takes place on land formerly in non-agricultural uses,” results in land use change impacts, such as “the carbon released to the atmosphere from the lost cover vegetation and disturbed soils in the periods following the land use conversion.”

When these land use changes are taken into account, as some studies show, total emissions from biofuels are significantly higher, calling in to question their effectiveness as a barrier to further climate change. This assertion, however, has been fiercely debated, as it requires a number of assumptions about how supply and demand dynamics affect land use, and what practices are used in the production of crops for fuel stocks.

The crux of the debate seems to derive from the notion that many factors drive land use changes.  Other factors that influence land use changes includes urbanization, economic growth that drives demand for land-based food, population growth, feed and fiber production, and extracting lumber or mineral resources.  Perhaps even more important, the modeling of indirect effects should consider the different and rapidly evolving land use policies of the United States and other nations.  The land use impacts of these factors are difficult to quantify and there is considerable uncertainty about predicting their future magnitude and effects.  

In California, the LCFS is determined by examining the carbon intensity of various fuels. When examining corn and sugarcane based biofuels, the analysis included emissions due to indirect effects-to the dismay of some researchers and biofuel executives, who argue in a letter to the California Air Resources Board that the land use analysis is over sensitive and weighted against crop-based fuelstocks.

With indirect land use change included in the analysis, three production methods for creating ethanol (called “pathways” in the report) had comparable or higher emissions than traditional fuels. All three were produced with Midwestern corn stock, though the bulk of their emissions came from direct effects, such as the transport of the products into California.

Actions in California may provide a template for national action: the U.S. Environmental Protection Agency (EPA) has also proposed to consider these indirect land use changes in its national Renewable Fuel Standard, though it has not yet decided how to make those calculations. As with the decision by the state of California, EPA’s decision has also engendered both criticism and praise.