Carbon emissions pose danger, EPA finds

Agency’s move lays the foundation for expanding US regulation of thousands of companies.

In deciding that carbon dioxide poses a danger to human health and the environment, the Environmental Protection Agency has laid the groundwork for new and expansive federal oversight of carmakers, utilities, and a host of other large emitters of the greenhouse gas.

The EPA’s finding, announced Friday, is likely to act as a big nudge to Congress to take quicker action on new energy and climate legislation that sets carbon-emissions limits. Many lawmakers and companies would prefer to see limits set by Congress rather than regulations set by the EPA. Indeed, the Obama administration has made clear that it, too, prefers a legislative approach.

The finding also bolsters the Obama administration's standing heading into international talks in December on addressing climate change, in that it is the most assertive stance yet taken by the United States. Moreover, it may also pave the way for the Securities and Exchange Commission, which keeps watch over Wall Street, to require companies to disclose carbon-emissions costs and liabilities that could affect their businesses.

In adding carbon dioxide and five other greenhouse gases to the list of compounds that can be regulated under the Clean Air Act, the EPA creates a legal basis for limiting CO2 emitted from tailpipes – an authority the US Supreme Court has said the agency could claim but that the Bush administration declined. Automobiles are a major source of C02, and the EPA action Friday signals that the Obama administration intends to take a more aggressive approach to addressing global warming.

“This is a victory for the Clean Air Act,” said Martin Hayden of Earthjustice, an environmental group, in a statement after the EPA issued its finding. “The Obama administration has removed a road block in curbing pollution responsible for climate change and signaled a turn toward a clean energy future. We applaud this action and welcome the president’s leadership to overcome the greatest environmental challenge of our time.”

Too much expense to bear?

Others, however, say the prospect that scores of industries and thousands of companies may soon be required to comply with a new environmental regulation is an outrage, especially given the flattened state of the US economy. In a recent letter to EPA Administrator Lisa Jackson, conservative taxpayer and political groups, led by the Competitive Enterprise Institute think tank, declared that the agency’s action “will set the stage for an economic train wreck.” The EPA finding represents a “potent antistimulus package,” CEI senior fellow Marlo Lewis said in a statement.

The worry is that the finding will cover not only vehicle tailpipe emissions of CO2, but also all stationary sources spewing more than 250 tons per year, the CEI argues. Former EPA chief Stephen Johnson, an appointee of President Bush, raised that possibility in a letter last summer.

Environmentalists dismiss as “scare tactics” the claims that myriad businesses will be shuttered and the minutia of daily life will be regulated as a result of the EPA action.
“There are a number of scare stories out there..., the premise of which is that if EPA does anything under any part of the Clean Air Act, it will necessarily have to do everything everywhere to any imaginable source of carbon dioxide,” said David Doniger, policy director for the Natural Resources Defense Council, in a telephone briefing with reporters April 14. “That’s just not true.”

Scare claims, he says, “did not convince the Supreme Court and should not convince anyone [that CO2 regulation] is going to go beyond the big central sources.” The EPA “is able to focus on the big stuff – the big sources of global warming pollution,” the biggest of which are motor vehicles and power plants. Other stationary sources, such as cement plans and oil refineries, would also probably be required to reduce emissions, says Mr. Doniger.

Before the finding becomes final, the public will have the opportunity to comment on it. The EPA says it based its work “on rigorous, peer-reviewed scientific analysis” of six gases – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

“This finding confirms that greenhouse-gas pollution is a serious problem now and for future generations,” the EPA’s Ms. Jackson said Friday in a statement. “Fortunately, it follows President Obama’s call for a low carbon economy and strong leadership in Congress on clean energy and climate legislation. This pollution problem has a solution.”

A prod to congressional action

One immediate beneficiary of the EPA move may be a piece of legislation in the House of Representatives. The Waxman-Markey bill, named after cosponsoring Reps. Henry Waxman (D) of California and Edward Markey (D) of Massachusetts, would reorient the nation’s sources of power generation to renewables and set up a carbon trading system that includes a cap on CO2 emissions from power plants and other key sources.

Many business interests and lawmakers are resisting the legislation – yet they could ultimately come to see it as a lesser evil than EPA regulation. The bill contains two sentences that “succinctly defuse regulatory triggers” under the Clean Air Act, “positioning Waxman-Markey as a way to limit the EPA threat,” writes Kevin Book, an analyst for ClearView Energy Partners, an investment analysis company focused on energy.

Representative Markey, at a conference Monday on climate and energy at the Massachusetts Institute of Technology, described a carrot-and-stick approach to passing the energy-climate bill.

The possibility of EPA regulation of carbon-dioxide emissions “has become a very real factor in our deliberations,” he said. “If Congress doesn’t act, then clearly there is a residual decision by the US Supreme Court for the EPA to regulate greenhouse gases. The only way to avoid that is to have Congress act.... It becomes a real factor.”
EPA at work on another rule

Even without Friday’s finding, thousands of US companies were preparing to report their CO2 emissions in anticipation of another new EPA rule. That proposal would require about 13,000 facilities nationwide to report annual greenhouse-gas emissions beginning in 2011. Companies that emit 25,000 or more metric tons of CO2 equivalents a year are responsible for as much as 90 percent of the nation’s greenhouse-gas emissions, the EPA estimates.

Although that reporting requirement would not impose any limits on emissions, it would be a first step toward establishing a national emissions-reduction plan, regulatory experts say.

Friday’s finding may also accelerate disclosure requirements on Wall Street. For years, environmental groups, state officials, and state pension fund managers have called for public companies to be required to report climate-change risks that could affect firms’ operations, including the cost impact of complying with greenhouse-gas regulations.

Though the Securities and Exchange Commission has not acted, it is likely to feel greater pressure to require more corporate disclosure about climate-change risks as a result of the EPA’s endangerment finding and its mandatory-reporting proposal, David Lynn and coauthors at Morrison & Foerster wrote in a newsletter on the topic.