This post is the second in a series from CPR Member Scholars examining different aspects of the Boxer-Kerry bill on climate change, which was released September 30.
Wednesday was a big day for advocates of traditional regulation. While the Waxman-Markey bill proposed exempting greenhouse gases (GHGs) from key Clean Air Act (CAA) provisions, the Boxer-Kerry bill proposes a greenhouse gas (GHG) cap-and-trade program to complement rather than replace the CAA’s standard authority to establish regulations for stationary sources of air pollutants. Almost simultaneously, EPA proposed a rule that would set the stage for applying CAA standards for new and modified sources on the nation’s biggest GHG emitters.
Most of the Clean Air Act’s existing authority is retained under the Boxer-Kerry bill. That means that EPA can establish standards for all new facilities and for existing facilities that significantly modify their plants. (More specifically, EPA can develop generic “new source performance standards” for new and modified facilities, and can require these facilities to go through a more detailed “new source review” process that generally imposes additional requirements.)
In addition, the Boxer-Kerry bill supplements the Clean Air Act’s regulatory authority over brand new coal-fired power plants by setting future emission reduction requirements for them. Plants that receive permits between 2009 and 2019 must achieve a 50-percent reduction in emissions by 2025 (or sooner if commercial large-scale carbon capture and sequestration is already in use). Plants that receive permits from 2020 on must achieve a 65-percent reduction in emissions. (Section 812(b)) The provisions provide utilities considering future investments in coal with advance notice that emissions from coal-fired plants will be constrained.
The Boxer-Kerry bill preempts only a narrow slice of Clean Air Act authority. It temporarily precludes EPA from establishing regulations that would interfere with uncovered sources’ ability to generate offsets. (Section 811.) The preemption is narrow, since it applies only to entities that are not covered by the cap-and-trade program and the trading program covers a broad range of entities. (See section 700(13), defining “covered entity.”)
Full textThis post is first in a series from CPR Member Scholars examining different aspects of the Boxer-Kerry bill on climate change, which was released today.
With respect to offsets, the Boxer-Kerry bill is a distinct improvement over the ACES. It allows a relatively strong approach to offset integrity, avoiding negative social or environmental effects, and facilitating possible integration with other systems. It also addresses some issues that will be important to the functioning of a trading market, but still leaves some uncertainties that could cause problems in the market.
Probably the most important difference between the bills is that the Boxer-Kerry bill does not specify which agency would be in charge of administering and ensuring the integrity of any offset program. In the House bill, a last minute compromise switched all of the administration of biological sequestration offsets to the USDA from the EPA, a change widely criticized by environmentalists because of the belief that the USDA would not be as effective in regulation. The Boxer-Kerry bill doesn’t specify any agency, instead referring to the executive branch actor only as “the President” (which means it could be delegated to one or more different agencies). Of particular interest is that in the 801-page draft which leaked out yesterday, the program was administered by the EPA, but that this provision was dropped from the proposed bill. This might indicate that Senators Boxer and Kerry prefer the EPA as the offsets administrator, but that they are willing to have some ambiguity on the issue if it helps win farm state votes.
With respect to offset integrity, Boxer-Kerry makes accounting for offset reversals (when the anticipated amount of offsetting fails to occur) a key part of the bill; and unlike the Waxman-Markey bill, reversals are to be avoided and accounted for in all offset categories, not just biological sequestration. This is very important as it closes a huge loophole which could have destabilized the system and market. Though expanding the accounting for reversals to all offset categories, Boxer-Kerry does generally follow the lead of Waxman-Markey in dealing with offset reversals. Section 734(b) requires that the President require offset developers to either contribute offset reserve amounts to a central account registry equal to the probability of reversal times the total offset credit amount, or to hold insurance that would allow for the purchase of offset or emission allowance credits for any offset failure. The offset reserve option also features the requirement that the reserve be replenished by the project offset developer with half of the lost credits for an unintentional reversal or all of the lost offset credits if an intentional reversal. One could suppose that since unintentional reversals could be fully accounted for in the initial reserve requirements (since unintentional offsets should coincide with statistically likely failures) having a replacement of only one half of the loss would be more than sufficient to preserve the integrity of the system. The truth is that reversal probability calculations are so unknown at this time that we cannot be sure about the ratio of reserves to failures. Requiring a one-half replenishment might be more than sufficient or not enough. It is really a guess at this point, and though the statutory requirement of one-half is pretty specific, other provisions of the bill would allow the President to take actions to preserve the integrity of the required reductions.
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