The Race to Regulate Greenhouse Gases

It has been an interesting week for the regulation of greenhouse gas emissions with the unveiling of Senator Kerry and Lieberman’s energy and climate change legislation and the Environmental Protection Agency’s (EPA) plans to regulate greenhouse gases. However, Congress’s emergence in the regulation of greenhouse gases may preempt the steps California has already taken and limit EPA’s regulatory authority.

Senators John F. KerryOn May 12, 2010, Senators John F. Kerry, Democrat of Massachusetts and Joseph I. Lieberman, Independent of Connecticut, released the long-delayed climate change bill to address greenhouse gases. The energy and climate change legislation, entitled the “American Power Act,” seeks to reduce greenhouse gas emissions by 17 percent from 2005 levels by 2020 and 83 percent by 2050. The just under 1,000 page legislation includes plans for the use of domestic clean energy, plans for the reduction of greenhouse gas emissions and a federal cap-and-trade program, among other provisions. The introduction of this bill is the Senate’s equivalent to the House’s climate change legislation, entitled the American Clean Energy and Security Act, which the House passed in June 2009.

Not to be outdone, the next day, the EPA released its final rule for regulating major emitters of greenhouse gases. Starting in July 2011, new sources, such as power plants and oil refineries, emitting at least 100,000 tons of greenhouse gases a year and existing sources that increase their emissions by 75,000 tons will have to obtain a permit from EPA. These permits must demonstrate that the facilities are using best available control technologies to limit their greenhouse gas emissions. This follows EPA’s December 7, 2009, finding that greenhouse gases impose an endangerment to human health.

While EPA and Congress have recently entered the race to regulate greenhouse gases, California has both of them beat with its 2006 passage of Assembly Bill 32 (AB 32), the Global Warming Solutions Act. AB 32 requires the California Air Resources Board to develop regulations and market mechanisms to reduce California’s greenhouse gas emissions by 25 percent by 2020. The California Air Resources Board has been actively trying to implement the mandate of AB 32. However, the federal government’s entry into the climate change arena, raises doubts whether California’s own landmark climate change law will be preempted.

Significantly, if Congress passes the American Power Act as drafted, California and other states that choose to regulate greenhouse gases may be preempted in part from doing so. Under the American Power Act, states will not be permitted to operate cap-and-trade programs for greenhouse gases. Thus, while California has identified the establishment of a state-wide cap-and-trade program as a main strategy to reduce greenhouse gases, it may be prohibited from ever implementing the program. The American Power Act also limits EPA’s authority to regulate greenhouse gases. If Congress enacts the climate change legislation, EPA’s authority to regulate greenhouse gases under the Clean Air Act may be limited.

Whether or to what extent Congress will preempt state regulation of greenhouse gases and curtail EPA’s authority is unknown and will be undoubtedly subject to significant political debate. But one thing is clear, this is just the beginning. One only needs to look at other ground breaking environmental laws to know that as the federal government and the states struggle with solutions to address greenhouse gas emissions, there will only be more uncertainty and litigation.