EPA finding doesn’t clear air on carbon

Whether it becomes the “glorious mess” that Rep. John Dingell (D-Mich.) predicted depends on factors like how much flexibility utilities and other emitters are given to meet the new standards and whether Congress eventually passes a cap-and-trade bill that would clear up some of the uncertainty surrounding the regulation.

The U.S. Supreme Court ruled that the EPA can regulate carbon under its existing authority through the Clean Air Act, setting in motion the process that led to the “endangerment” finding the agency announced on Monday.

That finding was necessary for the EPA to include carbon dioxide and other greenhouse gases as a regulated pollutant subject to the clean air law.

The decision was expected and allows the agency to move forward with efforts to reduce tailpipe emissions in a rule that’s to be finalized in March.

The Obama administration has already reached a deal with automakers over emissions, so the real fight could come with the follow-on efforts to regulate carbon from stationary sources like utilities, manufacturers and oil refiners that also are covered by the Clean Air Act.

Even though the Supreme Court decision paved the way for Monday’s announcement, court challenges to the particulars may follow.

“Unfortunately with the Clean Air Act, litigation is almost inevitable, which could delay things for a couple of years,” said Dan Riedinger, a spokesman for the Edison Electric Institute (EEI), which represents for-profit utilities.

EEI has supported climate legislation in Congress in part to avoid the regulatory action the EPA is now performing.

Businesses largely criticized EPA’s action.

The American Petroleum Institute said the regulation “would be intrusive, inefficient and excessively costly.”

One potential flashpoint could be on what qualifies as the “best available control technology” that is required for a permit to build new plants or expand existing ones.

Similarly, regulating carbon is likely to reignite a fight between energy producers and environmentalists over so-called New Source Review (NSR) standards.

The provision calls on utilities and manufacturers to account for a “significant increase” in air pollution when they expand an existing facility or build a new one by finding ways to offset the extra emissions, including by installing clean air systems.

Decisions will be made on a permit-by-permit basis at the state level, with final approval from the EPA. But Riedinger of EEI said the process could be unwieldy and time-consuming.

“It really will be a new world. We wouldn’t know what the BACT [best available control technology] will look like. In most cases, states will make the determination on CO2,” he said.

Utilities would like to see BACT limited to energy-efficiency efforts that cut emissions by conserving energy.

But environmentalists may push for the installation of techniques like “integrated gasification combined cycle” or carbon capture and sequestration to lower coal’s carbon footprint, technologies that utilities contend aren’t commercially viable.

David Doniger, policy director for the Natural Resources Defense Council, which supports EPA’s move, said NSR tends to be “controversial.”

Still, Doniger believes much of the case law is settled.

“Most of the legal challenges will be an annoyance, like black flies in Vermont,” he said.

NRDC also wants Congress to pass a cap-and-trade bill. It gives emitters extra incentives through allowances to cut their emissions. The EPA decision on Monday is further indication that carbon curbs are coming, Doniger said.

“I think everyone in the utility industry knows the days of building coal plants the old-fashioned way are over, or near over,” he said.

EPA is already in the process of trying to account for the differences between carbon and other pollutants covered by the Clean Air Act.

Because carbon is released in greater amounts, the emissions amounts that trigger Clean Air Act regulations need to be much higher. Otherwise, the act will apply to a variety of small businesses. EPA Administrator Lisa Jackson said the regulations will apply only to large emitters.

The agency is writing a “tailoring rule” that would set the emissions standards at 25,000 tons of CO2 a year. That would affect 13,600 utilities and other large industrial emitters.

But some experts say EPA may be on shaky legal ground in trying to raise the standard on its own.

“It’s an attempt to correct a square peg/round hole of the Clean Air Act,” said Joseph Stanko, a lobbyist and regulatory lawyer at Hunton & Williams. Stanko is a former Republican counsel to the House Energy and Commerce Committee.

Lawmakers have also expressed wariness about EPA regulating carbon dioxide. The approach doesn’t allow for the distribution of allowances that companies would be required to hold to cover their emissions. The allowances would act as a currency in the cap-and-trade market that companies say would help them meet emissions-reduction goals more economically.