Friday, September 30, 2016

State of Washington Takes Executive Action to Regulate Carbon Emissions From Largest Polluters

By Ed Jewell, Energy Fellow

Photo Credit: National Renewable Energy Laboratory
The Washington Department of Ecology recently finalized regulations that place limits on the amount of greenhouse gases (GHGs) that can be produced by the most GHG-intensive industries in the state of Washington. The Clean Air Rule, as the regulations are known (hereinafter “the Rule”), covers entities that emitted an average of 100,000 metric tons or more of carbon pollution annually over the baseline period of 2012–2016. Covered entities will be required to lower their emissions by an average of 1.7% per year over three-year compliance periods. By 2035, the Rule aims to achieve carbon emission levels 25% below 1990 levels. The Rule has drawn criticism from both industry groups and environmental groups for diametrically opposite reasons.

Climate activists, such as the youth and legal team at Our Children’s Trust (OCT), who have filed numerous lawsuits in federal and state courts around the country asserting that a stable climate is a fundamental human right, among other legal claims, are unhappy with what they see as a lack of ambition in the Clean Air Rule. They insist, for good reason, that the agency’s actions must be aggressive enough to putthe state on a path to 8% annual reductions in GHG emissions, the rate that the latest and best available climate science says is required for humanity to have a decent shot at maintaining stable ecological systems on Earth. Meanwhile, industry groups have already filed suit against implementation of the Rule, claiming that the Rule violates the dormant Commerce Clause, regulates extraterritorially, and unduly burdens interstate commerce.

The Rule is set to go into effect on Oct. 17, 2016 and will apply to the state’s 24 largest emitters. This number is likely to grow as the cap drops 5,000 metric tons each year beginning in 2020. Entities covered by the rule include natural gas distributors, petroleum fuel producers and importers, power plants, metal manufacturers, and waste facilities. The Rule contains special provisions for business sectors that the Department of Ecology determines to be vulnerable to out-of-state competition, such as pulp and cement manufacturers. Businesses in such industries are deemed “trade-exposed” and given leeway under the plan in order to prevent leakage (the flight of carbon polluters across state lines to avoid pollution regulation).

The Rule gives trade-exposed businesses an extra three years before they must be in compliance with emission standards. Additionally, trade-exposed businesses can choose to allow the Department of Ecology to set individual production-based emissions targets specifically for their businesses based on how they compare to others in their industry.

The Rule is an executive action under the authority of Washington’s Clean Air Act, and is quite clearly a political compromise. Governor Jay Inslee was not able to win legislative support for a full-fledged cap-and-trade program that would have established a cap on overall emissions. Concurrent to Gov. Inslee’s failure to gain a legislative majority for cap-and-trade, the legal team for Our Children’s Trust won a court decision last April in King County Superior Court that affirmatively declared that the Department of Ecology has a “duty to engage in rulemaking to reduce greenhouse gas emissions in Washington” and that it “shall issue the rule by the end of calendar year 2016.” The order contains strong language about the dangers of climate change and the duties of the Department of Ecology, but because of separation of powers doctrines inherent in the U.S. legal system, stops short of telling the agency how it must write the rules.

Rather than a full-blown cap-and-trade program, the Clean Air Rule instead takes a more streamlined approach and puts an individual cap on each of the state’s largest emitters. The covered sources can still buy and sell emission reduction credits from one another, but there will not be a central market to trade allowances, nor an auction of allowances by the state. The state will, however, maintain a registry of emission allowance transactions so as to ensure integrity in the trading system. Because the rule does not establish a state-run public auction of emission allowances, the rule avoids many of the complexities and administrative burdens associated with a full-on cap-and-trade program.

The Clean Air Rule is designed to help the state achieve and even surpass compliance with the EPA’s Clean Power Plan. The Clean Air Rule goes beyond the requirements of the Clean Power Plan in a few key respects. First, it goes into effect in 2017, whereas the CPP, if upheld against legal challenges, will go into effect in 2022 at the earliest. Second, the Washington Clean Air Rule possibly reaches a broader cross-section of the economy than will EPA’s CPP, which only directly targets emissions from power plants (though states can choose how to reduce GHG emissions across their respective economies). Finally, the GHG emission cuts mandated by the Rule are deeper than the cuts mandated by the CPP.

If Washington chooses a rate of emissions compliance path for the CPP, the average rate of Washington’s GHG emissions (represented in pounds of CO2 per megawatt-hour, or lbs. CO2/MWh) must fall from its current level of 1,566 lbs. CO2/MWh to 983 lbs. CO2/MWh—a 37.2% emissions rate reduction by 2030 compared to Washington’s 2005–2012 baseline. If Washington chooses a mass-based compliance path for the CPP, its overall CO2 emissions must drop from 15,237,542 short tons to 10,739,172 short tons, a 30% drop over the state’s 2005–2012 baseline. Each state may decide whether it wants to be subject to the mass-based or the rate-based limit under the CPP, or alternatively take no action and be subject to a federal implementation plan dictated by the EPA. Under the Clean Air Rule, Washington mandates that each individual covered entity reduce GHG emissions by 25% below 1990 levels by 2035 (or purchase compliance credits equal to that amount of emissions reductions).

If the Clean Power Plan is upheld in court and goes into effect, Washington’s Clean Air Rule contains a provision that specifies that it will no longer apply to power plants in the state. Power plants will be subject only to the federal regulation and its lower emission targets. According to the Department of Ecology’s air quality program manager, the nine baseload power plants that are covered under the CPP make up only about six percent of Washington’s emissions, highlighting the important role that industry in general—and not just the power generation sector—will have in fighting climate change.

While the Clean Air Rule does not give climate activists everything they were looking for, it is a step in the right direction. It is a program that can be built upon in the future. There is much groundwork that needs to be laid in terms of building institutional capacity and political will to regulate GHG emissions, and the Rule helps to further that process. Additionally, the severely entrenched opposition to GHG regulation from industry makes immediate transformative change politically untenable.

Incremental changes, such as the Clean Air Rule and even the Clean Power Plan, which contain the seeds of transformative action but are not by themselves revolutionary, are important pieces that must be put into place in order to create a comprehensive framework for mitigating GHG emissions. While those of us who are deeply concerned by the threat of climate change would like to see all the change happen at once, the nature of the political and economic beast demands that we will have to continue to rack up small but meaningful (and hard fought) victories such as the Clean Air Rule and the Clean Power Plan. With continued pressure on officials, advocacy (and increasingly, defense) in the courts, and refinement of programs, there is hope that such incremental changes will add up to transformative change before the science and physics of climate change slam the door shut on the hope of human civilization living harmoniously within ecological limits.  

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