EPA continues steps for CO2 regulation under the Clean Air Act

Last week, I told you that EPA administrator Lisa Jackson admitted that when the agency’s endangerment finding for greenhouse gases was finalized, that the agency would be compelled to regulate greenhouse gases from stationary sources.

Today, the EPA sent a draft rule to the White House Office of Management and Budget proposing a 25,000 tons per year of CO2 as a cut-off for EPA regulation of CO2 for stationary sources under the Clean Air Act.  (Currently, once the EPA has listed any pollutant as endangering human health (it now regulates Nitrogen Oxides, Ozone, Carbon Monoxide, Particulates, and lead under this provision), it regulates any source that produces over 250 tons per year of the pollutant).

Proposing a 25,000 ton limit for CO2 fits with the EPA’s earlier proposal about which sources must report emissions, and is consistent with the EPA’s study showing that sources over 25,000 tons produce almost 90% of the CO2 totals, but are a small enough subset to regulate effectively.*

More importantly, this signals that the EPA is seriously moving forward with its GHG regulatory agenda.  Is it coincidence that we are seeing movement from the EPA as we see less optimism about passing the Waxman-Markey bill in the Senate?  I don’t think so.  If the energy industry is concerned about the costs of a comprehensive carbon trading bill a la Waxman-Markey, they should be more concerned about regulation from the EPA.  The original endangerment finding is not just for CO2 but for all Greenhouse Gases.  Refineries are some of the largest emitters.  Regulation under the Clean Air Act means that the EPA will propose the “best available technology” for limiting these emissions, and that states will have to further limit the total emitted to some health based standard.  Coupled with the regulation on automobiles which will vastly change fuel efficiency standards and reduce petroleum demand, this will end up affecting demand for refined petroluem as much or more as predicted by the API from Waxman-Markey.  While the EPA is ultimately thinking of some kind of trading system for regulation, there will be no offset provisions to reduce the costs.  So Senators Hutchinson and Cornyn may bemoan the impact of Waxman-Markey on Texas, but they don’t note that the alternative regulatory agenda might be more expensive.  (Speaking of Senator Hutchinson, how exactly do subsidies for nuclear power address the loss of Texas refinery jobs?  www.chron.com/newswatchenergy/)

You can also be sure that there will not be sufficient votes to bar the EPA from GHG regulation UNLESS we have a comprehensive bill.  I believe that a new bill is ultimately better and will reduce greenhouse gases more cheaply and effectively than regulation under the CAA, but we will have one or the other.  Those opposing the Waxman-Markey bill need to think long and hard about which they prefer.

* I actually think there will be successful legal challenges to the EPA’s ability to change the limit for CO2 from 250 tons per year to 25,000 tons per year since the 250 ton limit is statutory, not regulatory.  If the EPA has to regulate sources of CO2 that produce above 250 tons per year, then regulation becomes much more invasive and much more difficult.

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