Summary: 2012 will be a key time for U.S. climate change policy as the Obama administration appears ready to tackle one industry sector at a time. Toughened fuel economy standards for vehicles are critical to reducing oil consumption, greenhouse gases, and consumer expenses, but much more work remains to be done across a range of industries.
Congress’s momentum to address the climate crisis has died, shifting the debate over U.S. climate policy to the regulatory arena. President Obama has had a poor track record on environmental decisions in 2011, most notably his egregious retreat from stricter national standards on ozone, but 2012 presents a new chance for the White House to support the Environmental Protection Agency’s efforts to develop tougher rules for major polluting industries.
In its landmark decision in Massachusetts v. EPA in 2007, the U.S. Supreme Court concluded that greenhouse gases fall within the Clean Air Act’s broad definition of a “pollutant.” That opened the door for regulatory action by the EPA. In December 2009, the agency took its first major step through that door by issuing a long-awaited finding that six greenhouse gases—including carbon dioxide, methane, nitrous oxide, and fluorinated gases—endanger public health and welfare. Although the endangerment finding was based on 20 years of research by hundreds of eminent scientists, industries are trying to overturn the finding through litigation and legislation. Despite these challenges, the EPA has begun to move forward on a sector-by-sector basis.
To date, the EPA has focused primarily on the transportation sector, which accounts for roughly 25 percent of U.S. greenhouse gas emissions. The agency’s first action to establish controls on greenhouse gas emissions was its standards for passenger cars, light trucks, and SUVs in May 2010 as part of a joint rulemaking with the U.S. Department of Transportation. This rulemaking garnered broad support from automakers because it included many flexibility provisions, and because the EPA persuaded a group of states led by California to postpone their plans to implement more stringent standards. The EPA/Transportation Department rule requires vehicles produced in model years 2012-16 to achieve a fuel efficiency of 35.5 miles per gallon. Over the life of the vehicles, this translates into a reduction of 960 million metric tons of greenhouse gas emissions, a savings of 1.8 billion barrels of oil, as well as $143 billion in benefits from fuel savings alone.
In August 2011, the EPA and Transportation Department finalized a second rule that will control greenhouse gas emissions from semi-trucks, large pickup trucks, vans, and buses produced in model years 2014-18. Over the life of these vehicles, the standards are expected to reduce carbon dioxide emissions by 270 million metric tons, save 530 million barrels of oil, and provide a net fuel savings of $42 billion for vehicle owners. A second phase of regulations for these medium- and heavy-duty vehicles is planned for model years beyond 2018, and we may see some progress on this rulemaking during 2012.
In November 2011, the EPA and Transportation Department proposed a third round of regulations extending and strengthening the rules for passenger cars, light trucks, and SUVs. These standards would apply to vehicles produced in model years 2017-25 and require the industry to achieve a fleet-wide average fuel economy of 54.5 miles per gallon. The EPA has estimated that, over the life of the vehicles, this rule would provide consumers with a net savings of $3,000 to $4,400 per vehicle, save approximately four billion barrels of oil, reduce greenhouse gas emissions by two billion metric tons, and generate $311 billion to $421 billion in net benefits for society. The EPA’s finalization of this rule will be important to watch in 2012.
The agency is also under pressure from citizen groups to expand the scope of its transportation-related greenhouse gas rules to include marine vessels, aircraft, and other nonroad engines, such as locomotives, construction equipment, farm machinery, mining equipment, and off-road vehicles. Keep an eye out for new EPA proposals relating to these types of equipment in the future.
In contrast to its rapid progress with motor vehicles, the EPA has appeared more reluctant to control greenhouse gas emissions from industrial sources. The Clean Air Act authorizes the EPA to establish new source performance standards for industrial facilities on a sector-by-sector basis. Since the EPA has already made an endangerment finding for greenhouse gas pollution, it may control these emissions from an industrial category after finding that it “contributes significantly” to such pollution. The EPA appears poised to issue performance standards regulations very soon for a few key categories.
In August 2011, EPA published proposed revisions to the performance standards rules for multiple components of the oil and gas industry. Most notably, this rule includes the first federal air pollution standards for the hydraulic fracturing (“fracking”) method of extraction, which is becoming more widely used. While the proposed rule targets conventional pollutants (precursors to ozone) and toxic pollutants (such as the carcinogen benzene), the EPA is touting the rule’s collateral benefits in controlling the potent greenhouse gas methane. The agency is under a consent decree deadline to issue a final rule by February 28, 2012.
Additionally, in response to litigation brought by citizen groups and states, the EPA has entered into two settlement agreements under which it has committed to issue performance standards controlling greenhouse gas emissions from power plants and petroleum refineries. The proposed rule for power plants was due by July 26, 2011, and the final rule is due by May 26, 2012. The EPA missed its deadline for the proposed rule, but observers expect it to be issued soon. The proposed rule for petroleum refineries was due by December 11, 2011, and the final rule is due by November 10, 2012.
Another court order has compelled the EPA to review its outdated performance standard for nitric acid plants, which emit large quantities of the powerful greenhouse gas nitrous oxide. Strong data from citizen groups indicates that multiple technologies for controlling nitrous oxide are available and effective at a reasonable cost, but the EPA has declined to include a new standard for nitrous oxide in its proposed revision to the nitric acid plant rule issued on October 14, 2011. The final rule is due by March 30, 2012.
The EPA is also under pressure from citizen groups to begin regulating greenhouse gas emissions from cement plants, landfills, coal mines, and factory farms. As the 2012 election approaches, however, other voices are calling for a reduction in government spending and a relaxation of regulatory controls. The EPA has been the target of numerous legislative efforts to cut its funding and limit its regulatory authority, particularly with respect to greenhouse gas regulations. The future looks uncertain, but with so much at stake and with so many critical decisions ahead, 2012 will certainly affect the outlook of U.S. climate change policy.
