Last week, the U.S. Environmental Protection Agency (“EPA”) finalized two greatly anticipated greenhouse gas (“GHG”) regulatory measures. The first details the regulation of GHG emissions from vehicles beginning with model year 2012. The second confirms that GHG emissions from stationary sources will be regulated as early as January 2, 2011.
- Vehicle Emissions. On April 1, 2010, EPA, with the Department of Transportation, promulgated a suite of standards that regulate vehicle emissions – one set governs fleet-wide average fuel economy; a second set applies to fleet-wide average carbon dioxide emissions; and a third set caps the per-vehicle emissions of nitrous oxide and methane. The standards apply to model years 2012 through 2016 and generally apply to passenger cars, light-duty trucks and medium-duty passenger vehicles, which collectively are responsible for almost 60% of all U.S. transportation-related GHG emissions.
The standards are focused primarily on reducing emissions of carbon dioxide, one of the most abundant GHGs, but also regulate three other more potent GHGs: nitrous oxide, methane and hydrofluorocarbons. The nitrous oxide and methane limits are not designed to reduce current emissions, but rather are designed to prevent potential increases in emissions (or “backsliding”) as vehicles begin to rely increasingly on compressed natural gas, ethanol, lean-burn gasoline and other alternative fuels. Hydrofluorocarbons, which are used in air conditioning systems, are not expressly capped, but a reduction of those emissions can lead to credits toward meeting the fleet-wide carbon dioxide emission standards.
- Stationary Sources. On March 29, 2010, EPA reaffirmed an existing policy that any air pollutant subject to “actual control” under any provision of the Clean Air Act is automatically regulated under two air permitting programs: Prevention of Signification Deterioration (“PSD”) and Title V. This policy was implemented in part through a 2008 Bush Administration memorandum that ironically had the effect of excluding GHG emissions from regulation. However, once the vehicle emission standards described above take effect, carbon dioxide, nitrous oxide, methane and hydrofluorocarbons will be subject to “actual control” and therefore will be brought under the PSD and Title V permitting programs. EPA appears to be contending that two other potent GHGs – sulfur hexafluoride and perfluorocarbons – will also become subject to the air permitting programs by virtue of the vehicle standards, even though those compounds are not emitted by motor vehicles or subject to the vehicle emission standards.
- Timing. Because the vehicle emission standards apply first to vehicles with model year 2012, GHG emissions would not be subject to “actual control” until the earliest date on which a 2012 vehicle could be sold. As a result, EPA has determined that the earliest date on which PSD and Title V permitting requirements will apply to GHG emissions from stationary sources would be January 2, 2011. Emitters should be thinking about the implications now, however, because: (i) all permits issued after that date will need to comply with applicable GHG requirements even if the permit application was submitted previously; and (ii) states may include GHG requirements in PSD permits they issue before that date.
- Tailoring Rule. Next, EPA is expected to finalize its “Tailoring Rule,” which will clarify which stationary sources will be subject to the PSD and Title V programs. It is anticipated that that rule will increase the otherwise applicable emission thresholds so as to regulate – at least initially – only the largest emitters of GHGs.
As the first comprehensive federal regulations to limit GHG emissions, these new measures and the forthcoming Tailoring Rule are highly controversial and could impose significant pollution control and other compliance costs. Judicial and legislative challenges have been brought against EPA’s so-called GHG “endangerment finding” on which these rules are premised, and a coalition of industry groups has already filed for judicial review of EPA’s “actual control” permitting policy. Further opposition is inevitable, and preemption of EPA regulation is also a key issue in the ongoing Senate negotiations over a draft climate bill.