What are some of the risks and benefits of carbon regulation?
The Obama administration is using carbon regulation as a prod to Congress to enact Cap and Trade Legislation. Many in the public sector and the regulated community view Cap and Trade Legislation as the lesser of two evils when weighed against regulation under the current Federal Clean Air Act. The Cap and Trade system is driven by incentives and market forces, as opposed to a command-and-control regimen under the current Federal Clean Air Act, which can be unwieldy.
Under the current act, Title V permits are normally required for facilities that emit more than 100 tons of regulated air contaminants annually. The pending regulation is pushing the threshold to 25,000 tons for greenhouse gases, because a lower 100 ton threshold would require more than 6 million existing facilities to obtain permits. The U.S. EPA estimates that approximately 14,000 facilities would require permits for greenhouse gas emissions, but 11,000 of those already hold permits for other air pollutants being emitted. The BACT requirement is a costly disincentive for the construction of new large facilities, and/or for the modification of existing major facilities that do not want to run the risk of increasing greenhouse gas emissions.
Why shouldn’t Congress simply let the EPA regulate greenhouse gases under the current Clean Air Act?
Greenhouse gas regulation will ultimately impact too many consumers and businesses, and the EPA does not have the authority or tools to soften the impact on such large numbers. The legislation already passed by the House for Cap and Trade also includes measures such as designated allowances for power distributors to protect consumers from increased utility prices; training funds for displaced workers and for workers in new green energy sectors; protections for companies in trade sensitive industries, such as steel; and offset credits where facilities that reduce greenhouse gas emissions more than required have the opportunity to certify, sell off and profit from those extra reductions.
Many people and businesses stand to be affected if Congress stands back and allows the EPA to regulate greenhouse gas emissions under its current statutory powers. The Obama administration will continue to press forward with its regulatory agenda unless Congress finalizes new legislation.
Should business owners prepare for legislation to return?
Cap and Trade Legislation will likely be revisited in 2011. With the Kyoto Protocol set to expire in 2012, there will be added pressure on the U.S., China and India to reach a new global accord on greenhouse gas reductions. Many of the developed industrialized nations of the world already utilize a Cap and Trade system for greenhouse gas emissions.
Business owners should be proactive and begin to determine their carbon footprints and ways to reduce them now. Both the regulatory and legislative trains have left the station, and it is far too risky to bet that neither one of them will reach their destination.
Ted Esborn is a member and chair of the environmental law practice at McDonald Hopkins LLC. Reach him at (216) 348-5735 or [email protected].