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Cooperative Federalism: State Perspectives on EPA Regulatory Actions and the Role of States as Co-Regulators
Mar 9, 2016 | U.S. Senate Committee on Environment and Public Works
Location: 406 Dirksen / 9:30 AM -
(ACC Mentioned) After 11 Months, US PVC May be Rebounding
Mar 5, 2016 | ICIS
By Bill Bowen
An 11-month slide in US values for polyvinyl chloride (PVC) may be coming to an end as the markets realign on a new set of dynamics. -
(ACC Mentioned) Persistent Headwinds Bring Lower Chemical Sales and Earnings
Mar 7, 2016 | Chemical & Engineering News
By Melody M. Bomgardner
The U.S. chemical industry is struggling with challenges that started in earnest in the fourth quarter of 2014 and have continued unabated into 2016. They include the financial effects of the strong dollar, price pressures on commodities, and slow demand growth—particularly in China. -
(ACC Mentioned) Chemical Giants Spend $55 Million To Weaken Toxic Chemicals Law
Mar 4, 2016 | Environmental Working Group
By Robert Coleman
The American Chemistry Council, along with chemical giants Dow, DuPont, BASF, 3M, Honeywell and Koch Industries, spent more than $55 million last year to lobby lawmakers – bringing their four-year total to just over $245 million, according to updated data from the Center for Responsive Politics and lobbying disclosure forms filed with Congress. -
(ACC Mentioned) U.S. Chemical Expansion Would Boost Emissions
Mar 7, 2016 | Chemical & Engineering News
By Glenn Hess
Spurred by the shale revolution and low natural gas prices, the petrochemical and energy sectors proposed or received permits in 2015 to construct or expand 44 plants across the U.S. But this increase in production would boost greenhouse gas emissions by about 78 million metric tons per year, a watchdog group warns -
Senate Energy, Flint Package Hits Roadblock
Mar 7, 2016 | BNA Daily Environment Report
By Rachel Leven
The Senate's compromise language for sending federal funds to Flint, Mich., hit another roadblock March 4, and a major ratings entity warned of potential financial troubles for the water sector. -
NRDC: Energy Efficiency Fast Way for States to Cut Emissions
Mar 7, 2016 | BNA Daily Environment Report
By Rebecca Kern
Energy efficiency programs are a quick and inexpensive way for states to cut emissions in order to comply with the Clean Power Plan, the Natural Resources Defense Council and other groups said in a series of letters sent to 34 states. -
Panel to Scrutinize Agency's Relations With States
Mar 7, 2016 | E&E Daily
By Amanda Reilly
The Senate Environment and Public Works Committee this week will delve into U.S. EPA's relationship with the states in a hearing that's likely to pit Republicans against Democrats. -
Highway Bill Whittles Down Crude-By-Rail Legal Challenges
Mar 7, 2016 | BNA Daily Environment Report
By Ari Natter
A requirement that railroads use electronically controlled pneumatic brakes is one of the only remaining legal issues in a lawsuit challenging the Transportation Department's crude-by-rail rule after recent legislation addressed most other challenges, the Pipeline and Hazardous Materials Safety Administration said in a court filing (Scenic Hudson v. DOT, D.C. Cir., No. 15-1195, motion filed 3/1/16). -
California Plan To Align Cap & Trade With ESPS Draws Stakeholder Concern
Mar 4, 2016 | InsideEPA
By Curt Barry
Utility officials and environmentalists are expressing initial concerns over a new California air board staff plan to align the state’s existing greenhouse gas cap-and-trade rules with EPA’s GHG rule for existing power plants, known as the Clean Power Plan (CPP).
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Mar 9, 2016 | U.S. Senate Committee on Environment and Public Works
The Senate Committee on Environment and Public Works will hold a hearing entitled, “Cooperative Federalism: State Perspectives on EPA Regulatory Actions and the Role of States as Co-Regulators.”
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(ACC Mentioned) After 11 Months, US PVC May be Rebounding
Mar 5, 2016 | ICIS
By Bill Bowen
An 11-month slide in US values for polyvinyl chloride (PVC) may be coming to an end as the markets realign on a new set of dynamics.
US spot exports this month saw their fifth straight week of increases out of the US Gulf. And producers now see their best chance in months to gain value from contract prices for March.
“I think we hit bottom when you couldn’t get PVC for less than $600/tonne,” a trader said of the spot export prices in late January.
2015 became the year of disappointment for PVC producers, who were expecting a pick up in demand on greater construction activity. PVC is used for vinyl siding, window and door profiles, fencing and electric wire insulation. Its demand is tightly coupled to construction activity.
But the expected demand from a construction boom failed to build during the year. And nagging worries about China’s economy seemed to sap the market every time positive signs began to appear elsewhere.
US producers were able to get contract prices up slightly in March 2015 – a 3 cents/lb increase. But prices began falling in late summer and lost 7 cents/lb by the time of a 1 cent/lb decline in January.
Likewise, spot export prices peaked in April in a range with a mid-point of $880/tonne FOB (free on board) USG (US Gulf). But then fell throughout the rest of the year to start 2016 at a mid-point of $612.50.
Some prices briefly dipped below $600/tonne for pipe grade material in the last two weeks of January.
US exports – fueled by low spot ethylene feedstocks in the Gulf Coast that travelled through the fall at a 6-11 cents/lb discount – actually grew by 21% to China compared with 2014 volumes, according to figures from the US International Trade Commission (ITC).
But, overall, US export volumes through 2015 remained flat with 2014 volumes. Exports are an important sales sector and the destination of 35% of US production annually. Flat exports were unable to make up for slack demand in the US domestic market, according to the American Chemistry Council (ACC).
Even in January, with prices at their lowest since March 2009, demand was stalled as buyers held off in hopes of even further discounts.
“People are hesitating to buy right now,” a glum trader said during the last week of January as crude oil prices found new lows. “It may be recovering, but it’s slow.”
That was when things changed.
Demand from India became surprisingly strong. And China seemed stronger than expected, as well.
Buyers who had postponed purchases through 2015 suddenly had to restock ahead of the looming construction season.
Additionally, a number of plant maintenances in the US Gulf over March and April tightened supply.
US producer price increase initiatives, which failed in January and February, now look to have some hope in March.
Producers are now seeking a 5 cents/lb hike for March after efforts to get 2 cents/lb in January and 3 cents/lb in February were postponed and then discarded.
“They’ll probably get a penny or two,” one trader said of market sentiment.
One producer is seeking an additional 3 cents/lb for April.
Most importantly, perhaps, spot prices for feedstock ethylene started to track higher in the second half of January and are up almost 8 cents/lb over the past six weeks. That fueled a 1 cent/lb increase for ethylene contract prices for February.
“The market is a lot stronger than anybody expected,” a buyer said during the first week of March.
Major US PVC producers include Axiall, Formosa Plastics, Occidental Chemical, Shintech and Westlake Chemical.
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(ACC Mentioned) Persistent Headwinds Bring Lower Chemical Sales and Earnings
Mar 7, 2016 | Chemical & Engineering News
By Melody M. Bomgardner
The U.S. chemical industry is struggling with challenges that started in earnest in the fourth quarter of 2014 and have continued unabated into 2016. They include the financial effects of the strong dollar, price pressures on commodities, and slow demand growth—particularly in China.
Company earnings reports for 2015 show that timely decision-making by executives made an impact: On average, earnings declined much less than sales. For the 18 firms tracked by C&EN, earnings shrank by . .
.Also last month, the American Chemistry Council said its leading economic indicator, the Chemical Activity Barometer, slipped 0.1% after a flat January....
For full story: http://cen.acs.org/articles/94/i10/Persistent-headwinds-bring-lower-chemical.html?type=paidArticleContent
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(ACC Mentioned) Chemical Giants Spend $55 Million To Weaken Toxic Chemicals Law
Mar 4, 2016 | Environmental Working Group
By Robert Coleman
The American Chemistry Council, along with chemical giants Dow, DuPont, BASF, 3M, Honeywell and Koch Industries, spent more than $55 million last year to lobby lawmakers – bringing their four-year total to just over $245 million, according to updated data from the Center for Responsive Politics and lobbying disclosure forms filed with Congress.
The disclosure forms often do not link lobbying spending to specific bills, but EWG found that most forms referred to the Toxic Substances Control Act of 1976 (often shortened to TSCA) or chemical safety legislation as one focus of the lobbyists’ work.
EWG’s analysis shows that over the past four years, the chemical industry spent more than $221 million on lobbying as efforts intensified in Congress to lobby for an overhaul of the Toxic Substances Control Act, which all sides acknowledge is badly broken.
Seven of the largest chemical companies -- Ashland, Celanese, Dow, DuPont, Eastman, Ecolab and Monsanto --spent nearly $25 million last year to craft a TSCA overhaul bill that favored their industry.
In recent months, the biotech giant Monsanto added chemical reform to its lobbying portfolio, spending nearly $2 million since June. Last week (Feb. 29), the New York Times reported that the House version of the industry-backed bill that aims to update the federal chemical safety law contained a little-noticed provision that would relieve Monsanto of liability for damages caused by PCBs, which are highly toxic industrial pollutants manufactured by Monsanto until they were banned 1979.
Industry lobbyists are now seeking to influence Congressional efforts to combine Houseand Senate versions of TSCA overhaul bills – both of which fall short of what is needed to achieve true reform of the nation’s chemical safety law. As EWG has pointed out many times, real chemical reform would require that the Environmental Protection Agency quickly investigate the most dangerous chemicals to ensure their safety.
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(ACC Mentioned) U.S. Chemical Expansion Would Boost Emissions
Mar 7, 2016 | Chemical & Engineering News
By Glenn Hess
Spurred by the shale revolution and low natural gas prices, the petrochemical and energy sectors proposed or received permits in 2015 to construct or expand 44 plants across the U.S. But this increase in production would boost greenhouse gas emissions by about 78 million metric tons per year, a watchdog group warns. Although natural gas is often touted as an environmentally friendly fuel, a report by the Environmental Integrity . . .
The American Chemistry Council, an industry association, says the U.S. expansion may actually lower overall greenhouse gas emissions by drawing market share away from other parts of the world where production is less energy-efficient...
For full story: http://cen.acs.org/articles/94/i10/US-chemical-expansion-boost-emissions.html?type=paidArticleContent
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Senate Energy, Flint Package Hits Roadblock
Mar 7, 2016 | BNA Daily Environment Report
By Rachel Leven
The Senate's compromise language for sending federal funds to Flint, Mich., hit another roadblock March 4, and a major ratings entity warned of potential financial troubles for the water sector.
Meanwhile, Democratic lawmakers took aim at Republicans for not focusing enough on the public health crisis in Flint during the March 3 presidential debate in Detroit. The Democratic presidential hopefuls debate March 6 in Flint.
The switch of the drinking water source in Flint resulted in more than 8,000 children potentially being exposed to high lead levels in their water. Lead exposure for children can lead to a number of brain development issues such as mental retardation and behavioral problems, according to the World Health Organization.
Energy, Flint Package
Sen. Mike Lee (R-Utah) said March 4 his hold remains on a legislative package that would allow votes on an energy bill and sending federal aid to Flint.
“Federal aid is not needed at this time,” Lee said in a statement. “The state of Michigan has an enormous budget surplus this year and a large rainy-day fund, totaling hundreds of millions of dollars.”
In addition, Lee took issue with how the funding to help Flint with its lead-tainted water supply would be paid for, saying a redirection of $250 million from an Energy Department automotive loan program would not occur until 2020, when it would be “high likely” that “there will be none left and the fund will be depleted.”
Sen. Debbie Stabenow (D-Mich.) said she was surprised and frustrated about Lee's hold.
“If Senator Lee opposes this bipartisan bill, that is fully paid-for, he should vote against it, but he should not block it from even getting a vote,” Stabenow said in a statement March 4.
Water Sector Impact
Funding for removing lead service pipes from Flint and across the country became more complicated after a ratings group warned March 4 against forcing action too quickly. Lawsuits filed by Flint residents and Chicago residents alleging their water was contaminated by lead could stress the water sector, Fitch Ratings said.
The lawsuits and public attention on lead in drinking water likely will push Environmental Protection Agency's revisions to the lead and copper rule to “move the industry toward removing all lead service lines,” Fitch said. While the transition, which Fitch said could cost more than $275 billion, could be manageable if done over the long term, a shorter transition “may create stress for individual credits,” it said.
When asked for comment on the Fitch Ratings announcement, the Association of Metropolitan Water Agencies Chief Executive Officer Diane VanDe Hei said rules are updated “as science improves and our knowledge expands.”
The water agencies' association “supports the scientific underpinnings of the [Safe Drinking Water Act] statute and the ongoing process to revise the existing Lead and Copper Rule (LCR) by the U.S. Environmental Protection Agency (EPA),” VanDe Hei said in a statement, e-mailed through a spokesman.
Political Rhetoric
Meanwhile, some Democratic lawmakers expressed disappointment the Republican debate in Detroit didn't delve deeper into the Flint public health crisis. In the sole question on Flint at the debate, Sen. Marco Rubio (R-Fla.) backed Michigan Gov. Rick Snyder (R) in his handling of the crisis.
Rubio also expressed frustration with what he called the “politicizing” of the crisis.
“This should not be a partisan issue. The way the Democrats have tried to turn this into a partisan issue, that somehow Republicans woke up in the morning and decided, ‘Oh, it's a good idea to poison some kids with lead.' It's absurd. It's outrageous. It isn't true,” Rubio said.
But Democratic members of Congress said March 4 in a conference call with reporters that Republicans didn't have a serious debate and didn't give the time warranted to discuss the issue.
“I agree with Sen. Rubio that we shouldn't make it political, but how are we going to fix this?” Rep. Debbie Dingell (D-Mich.) said.
Watchdog Research
Meanwhile, the EPA Office of Inspector General has begun preliminary research for an evaluation of “the circumstances of, and the EPA's response to,” the crisis, the government watchdog told Bloomberg BNA March 4.
Jennifer Kaplan, deputy assistant inspector general for congressional and public affairs for the office, said in an e-mail it is unclear when those findings might be available. Kaplan said the research project is separate from work the office is doing as part of a Justice Department-led task force, which “is looking for potential criminal misconduct and, for our part, any misuse of EPA funds.”
The research project was announced in a separate Jan. 21 letter.
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NRDC: Energy Efficiency Fast Way for States to Cut Emissions
Mar 7, 2016 | BNA Daily Environment Report
By Rebecca Kern
Energy efficiency programs are a quick and inexpensive way for states to cut emissions in order to comply with the Clean Power Plan, the Natural Resources Defense Council and other groups said in a series of letters sent to 34 states.
“Energy efficiency is the cleanest, fastest, most cost-effective compliance strategy available, and has the most direct impact on controlling consumers' utility bills,” the NRDC and 40 other environmental advocacy groups and businesses said in the letters mailed to state governors March 2. Every letter includes a fact sheet specified for each state that details how energy efficiency policies could help cut emissions in that state.
The groups are targeting states, including the majority of the 27 states that filed lawsuits against the Environmental Protection Agency's Clean Power Plan, in an effort to encourage them to keep planning to comply with the plan despite a stay issued by the U.S. Supreme Court (West Virginia v. EPA, U.S., No. 15A773, order issued 2/9/16);(27 DEN A-1, 2/10/16).
Keep Negotiations Going
“States should still keep planning for a world where carbon pollution for power plants is regulated,” and not stop because of the stay on the Clean Power Plan, Dylan Sullivan, an NRDC senior scientist, told Bloomberg BNA March 4.
“As they go through that process, we think energy efficiency is going to rise to the top on compliance approaches,” he said. “A lot of states have had really productive engagements, including some of the states that have been litigating this, and we're encouraging states to continue to pursue those.”
The U.S. Court of Appeals for the District of Columbia Circuit has scheduled oral arguments for West Virginia v. EPA June 2 (West Virginia v. EPA, D.C. Circuit, No. 15-1363, order issued 1/21/16).
High Priority Energy Efficiency Policies
Sullivan said there are a wide variety of energy efficiency policies states could enact to help cut emissions.
These include an energy efficiency resource standard, or an obligation for electric distribution utilities or electric utilities to save a certain amount of electricity each year, and state building codes, he said.
The letters are part of larger effort by NRDC to work on the state level with governors, utilities, public utility commissions and companies to ensure states continue work to comply with the Clean Power Plan.
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Panel to Scrutinize Agency's Relations With States
Mar 7, 2016 | E&E Daily
By Amanda Reilly
The Senate Environment and Public Works Committee this week will delve into U.S. EPA's relationship with the states in a hearing that's likely to pit Republicans against Democrats.
The hearing centers on cooperative federalism, the basic tenet of environmental regulation in the United States.
Under cooperative federalism, which is codified in major laws such as the Clean Air Act, EPA sets standards and processes and then gives states leeway to come up with ways to meet them.
At the hearing Wednesday, GOP and state critics likely will say EPA is going against that principle with recent regulations such as the Clean Power Plan.
The hearing follows a letter Chairman James Inhofe (R-Okla.) sent in January to the 20 states from which members of the Environment and Public Works Committee hail, asking for their "perspective" on EPA regulations.
The chairman said he hoped to figure out whether the cooperative federalism system of environmental regulation was working. In the letter, Inhofe had hinted at future oversight activity on the subject.
"EPA programs may require substantial time and resources from your department to comply, including myriad regulatory, permitting and enforcement obligations," Inhofe wrote. "Your input on these actions is invaluable to the committee's understanding of the dynamics between states and EPA in achieving environmental regulations."
Majority staff did not respond to a query on whether the chairman had received responses from states. A witness list was not available in time for publication, but state officials are likely to testify.
EPA critics on and off Capitol Hill have argued that EPA has usurped states' control of their energy systems with the Clean Power Plan.
Through that program, which is currently stayed by the Supreme Court, states are required to draft and put in place plans to reduce carbon dioxide emissions from power plants.
"It may be touted as cooperative federalism, but there is nothing cooperative about it," Utah Attorney General Sean Reyes (R) said in a recent statement. "It is coercive, offensive to notions of federalism, and will drastically increase energy costs and put thousands of already suffering Americans out of work."
Environmentalists and Democratic supporters of EPA say the program is well within the agency's authority.
Critics have levied the same type of criticism about other rules issued by the agency, including the Waters of the U.S. rule and federal plans to implement the Clean Air Act's regional haze program.
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Highway Bill Whittles Down Crude-By-Rail Legal Challenges
Mar 7, 2016 | BNA Daily Environment Report
By Ari Natter
A requirement that railroads use electronically controlled pneumatic brakes is one of the only remaining legal issues in a lawsuit challenging the Transportation Department's crude-by-rail rule after recent legislation addressed most other challenges, the Pipeline and Hazardous Materials Safety Administration said in a court filing (Scenic Hudson v. DOT, D.C. Cir., No. 15-1195, motion filed 3/1/16).
The filing comes after the U.S. Court of Appeals for the District of Columbia Circuit halted litigation over the crude-by-rail rule (RIN 2137-AE91), which sets requirements for tank cars, train speed, liquid classification and other issues, to allow PHMSA to determine how changes made by the FAST Act (Pub. L. 114-94), would affect the rule (28 DEN A-14, 2/11/16).
While the FAST Act requires further study of the braking requirement, “it does not repeal or suspend” it “or modify the implementation deadline,” PHMSA said in a March 1 motion to govern future proceedings. Still, the agency said the law “by requiring testing and reconsideration leaves open the possibility that the Final Rule will be altered before the effective date of this requirement.”
Among other legal issues that still need to be addressed, PHMSA said, is a challenge brought by the American Short Line and Regional Railroad Association and the American Association of Railroads alleging the agency gave inadequate consideration to the Final Rule's impact on short line railroads.
The agency asked that it be given 14 days to respond to any proposals filed by petitions on how the litigation should proceed.
Environmental groups, such as Scenic Hudson, have already had their challenges voluntarilydismissed because the legislation, which was passed in December, addressed many of their concerns.
PHMSA issued the crude by rail rule following a spate of fiery rail crashes involving crude oil and other flammable liquids.
Rail Industry Seeks ‘Pause.'
The brake requirement, which the railroad industry has estimated could cost as much as $15,000 a car, was among the issues the Association of American Railroads, which represents major railroads such as BNSF Railway Company and CSX Transportation, Inc., challenged in a lawsuit it filed in November 2015 that has since been consolidated with other lawsuits, including one brought by the American Petroleum Institute shortly after the final rule was issued in May 2015.
“The freight rail industry feels that since Congress, under the Fast Act, is requiring the DOT to conduct additional studies on all aspects of ECP braking over the next 18 months, the proper procedure in this circumstance is for the court to put the matter on pause until a new determination is made on the ECP brake component of the tank car rule,” Ed Greenberg, a a spokesman for the Association of American Railroads, said in a statement to Bloomberg BNA. “The freight rail industry has experimented with ECP brakes for years in real-world operating environments and found them unreliable and provided no significant safety benefits.”
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California Plan To Align Cap & Trade With ESPS Draws Stakeholder Concern
Mar 4, 2016 | InsideEPA
By Curt Barry
Utility officials and environmentalists are expressing initial concerns over a new California air board staff plan to align the state’s existing greenhouse gas cap-and-trade rules with EPA’s GHG rule for existing power plants, known as the Clean Power Plan (CPP).
For example, some utility officials told California Air Resources Board (CARB) staff at a Feb. 24 workshop that they could face challenges in complying with the cap-and-trade program under staff’s latest plan to reduce compliance periods from three years to two to align it with the CPP, based on the variability of power generation sources from year to year.
At the same meeting, environmentalists questioned the adequacy of the board staff’s proposal for a federally enforceable backstop measure to ensure attainment of the state’s targets if its existing cap-and-trade and other measures fall short of ensuring the necessary reductions.
CARB’s proposed changes are detailed in a Feb. 17 white paper. The paper, and the fact that CARB held the workshop, confirm the board is moving ahead to align its existing cap-and-trade program with EPA’s rule despite the Supreme Court’s Feb. 9 decision staying the regulation pending judicial review.
The stay could be significant as California works to align its program because it raises doubts about whether the EPA rule will survive judicial scrutiny or if it does, whether EPA will have to reset various implementation and compliance deadlines. EPA officials, for example, have suggested they are likely to extend deadlines for states to submit their compliance plans but may seek to retain existing compliance deadlines, which are set to begin in 2022.
But industry groups, including the U.S. Chamber of Commerce, say the stay requires the agency to “toll,” or delay, all of the rule’s compliance deadlines -- not just those that fall within the period of the stay.
Under the CPP, also known as the existing source performance standards (ESPS), California is required to achieve either a rate-based goal of 828 pounds of carbon dioxide per megawatt hour by 2030, or a mass-based annual average goal of 48,410,120 tons of CO2.
The rule allows states a host of options for complying, including using their existing programs under a “state measures” approach, as long as they include a federally enforceable backstop. It also allows states to adopt “trading ready” paths under which states with approved programs could trade without EPA approval.
CARB has indicated it likely will pursue a compliance path using a “state measures” approach, featuring the cap-and-trade program as the centerpiece, while using a mass-based metric and including the federally enforceable backstop. The state measures approach allows a state to use its existing programs rather than using EPA’s default “emissions standards” for regulated entities.
Shorter Compliance Periods
One of the key changes CARB staff wants to make to the cap-and-trade program is to shorten compliance periods from three years to two years to align it with the CPP. The CPP’s compliance periods are Jan. 1, 2022 to Dec. 31, 2024; Jan. 1, 2025 to Dec. 31, 2027; Jan. 1, 2028 to Dec. 31, 2029; Jan. 1, 2030 to Dec. 31, 2031; and every two years thereafter, CARB explains in the paper.
In contrast, assuming California’s cap-and-trade program was extended beyond 2020 and retained the current structure, it would have three-year compliance periods ending in 2023, 2026, 2029 and so on.
As a result, CARB staff is proposing to align the programs on a schedule that begins Jan. 1, 2021 to Dec. 31, 2022 as a beginning “bridge” period; Jan. 1, 2023 to Dec. 31, 2024, which would cover the remainder of the CPP’s first period; Jan. 1, 2025 to Dec. 31, 2027; and so on every three years.
But some California utility officials are concerned that without additional flexibility built into the cap-and-trade rules, they could face challenges meeting their compliance obligations under the shorter two-year compliance periods.
Tim Tutt, representing the Sacramento Municipal Utility District, said during last week’s CARB workshop that the utility faces “potential significant variability” in the types of electricity generation sources it relies on from year to year to meet its customers’ demand.
For example, if hydroelectric supplies are lower than normal for a year or two due to the ongoing drought or other issues, and the utility has to rely on alternative sources of energy that are higher emitting than hydro, meeting its compliance obligations at the end of a two-year period could be “problematic for us,” Tutt said.
He asked CARB staff whether they are considering “additional flexibility” as part of the cap-and-trade rule amendments to address the issue.
Rajinder Sahota, branch chief of CARB’s cap-and-trade program, responded that one of the reasons CARB chose three-year compliance periods when it developed California’s program was to address such variability, but said changing to the two-year periods is necessary not only to align with CPP but to help ensure the state can link to trading programs that may be developed in other states, which are expected to adopt the CPP’s provisions.
However, she said CARB staff is “open and willing” to discuss various ideas for additional flexibility that may ease compliance on utilities in certain situations.
Environmentalists raised concerns about how CARB proposes to implement a federally enforceable “backstop” for affected electric generating units (EGUs), which would be triggered in the unlikely event that California fails to meet its emission reduction obligations under the federal rule.
CARB staff proposes in the white paper to maintain a set-aside pool of GHG allowances available only to affected EGUs from within the post-2020 caps equal to approximately 10 million metric tons CO2 equivalent. “In the unlikely event this initial pool of allowances is depleted, staff is proposing to recharge the pool by redirecting allowances from the program’s Allowance Price Containment Reserve (APCR) proportional to the EGU aggregate share of the program’s reported and verified emissions for the most recent compliance period,” the paper states.
Because all of these allowances are from within the cap, retiring them would reflect real reductions under the cap-and-trade program, according to CARB staff.
If the backstop is triggered, staff proposes that all affected EGUs would be required to take action to bring the state back into compliance with the CPP, the paper says. “This would include a requirement that each affected EGU purchase and retire allowances proportional to their share of the aggregate sector’s GHG emissions that exceed the federal limit.”
Emissions Average
To recognize the potential for annual variability, staff also proposes that each individual EGU’s proportion be established as the average of its annual emissions for the most recent three years of reported and verified data. Affected EGUs would need to purchase and retire allowances from the CPP backstop pool to bring the state back into compliance with the CPP, including a revised “glide path.”
CARB staff is evaluating the CPP to “understand if these allowances could be tradable once purchased, but staff does not believe these allowances could be used for general compliance under the state’s cap-and-and trade program by the affected EGUs or other market participants,” the paper adds. “This will ensure the backstop mechanism is binding, results in direct emission reductions solely from affected EGUs, and ensures that the state is in compliance with the CPP.”
But Dylan Sullivan, a senior scientist with the Natural Resources Defense Council (NRDC), questioned during last week’s workshop whether the CARB proposal ensures that if the backstop is triggered EGUs alone are made responsible for achieving the necessary emission reductions. This would appear not to be the case because the proposed GHG allowance pool comes from the economy-wide cap, he indicated.
NRDC has proposed that CARB require a separate mass-based power-sector only program to kick in automatically for affected EGUs that ensures their aggregate emissions come into compliance with EPA’s target. These “backstop” allowances could be distributed freely to utilities for the benefit of customers, just as current allowances are distributed to the electric sector, but would be tradable only within the California power sector, according to NRDC comments submitted to CARB in January.
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