Greenhouse Gas Regulations and Associated Energy Issues

1.  Greenhouse Gas Regulations and Associated Energy Issues Michael G. McCann Concurrent Technologies Corporation (CTC) Inside Aerospace�An International Forum for Aviation and Space Leaders 11 May 2010

3. State GHG Activity California Global Warming Solutions Act (AB 32) CO2e emissions reduced to 1990 levels by 2020 (25% reduction) and to 80% below 1990 levels by 2050 Enforceable cap on GHG emissions phased-in starting in 2012 Covers power plants, large industrial sources, and transportation sector, but not aviation May be suspended by statewide vote in November 2010 Mandatory Statewide Reporting 18 states (including CA, FL, WA, ME, MA, NC, CT, NJ) Facility size and covered sectors vary Statewide GHG Caps Including New Jersey, Hawaii, Washington, Oregon, Connecticut, Florida

4. State GHG Emissions Targets Statewide GHG Targets 23 States

5. State Climate Action Plans Climate Action Plans 36 States

6. Regional Activity Western Climate Initiative (WCI) Seven Western states & four Canadian provinces Reduce GHG emissions to 15% below 2005 levels by 2020 Two Phases: power generation & large industry in 2012, transportation & residential, commercial, industrial fuel use in 2015. Aviation not included. Midwestern Regional Greenhouse Gas Accord Six states, one Canadian province Long-term GHG emission reduction target of 60-80% below current levels Multi-sector cap-and-trade system The Regional Greenhouse Gas Initiative (RGGI) Ten Northeastern and Mid-Atlantic states Cap, then reduce CO2 emissions from power plants 10% by 2018

7. Federal Legislation Currently no Federal laws specifically targeting GHG emissions Energy Policy Acts of 1992 and 2005, Energy Independence and Security Act of 2007 indirectly impact GHG emissions through energy reduction and alternative fuel requirements Several GHG-specific bills introduced in 111th Congress Favor �cap-and-trade� program for reducing CO2 pollution (similar to 1990s acid rain program) as opposed to carbon tax Some progress in past year House passed bill Several bills introduced in Senate

8. House of Representatives Legislation American Clean Energy and Security Act of 2009 (ACES) (Waxman-Markey) (H.R. 2454) Passed full House 26 June 2009; 1st bill with cap-and-trade to pass Five Titles, including Clean Energy, Energy Efficiency, Reducing Global Warming Pollution (cap-and-trade) Title I � Clean Energy Promotes renewable sources of energy, carbon capture and sequestration (CCS) technologies, low-carbon fuels, clean electric vehicles, and smart grid & electricity transmission Renewable sources: wind, solar, geothermal, some hydropower projects, ocean energy, certain types of biogas and biofuels, landfill gas, coal mine methane, & certain waste-to-energy facilities; Nuclear power not included Last-minute �Manager�s Amendment� added electricity derived by burning trash or landfill gas as renewable

9. Waxman-Markey Bill Title II � Energy Efficiency Seeks to increase energy efficiency across all sectors of economy, including buildings, lighting, appliances, transportation, and industry Sec. 221 � EPA must develop GHG emissions standards for mobile sources New heavy-duty vehicles and engines Certain new non-road vehicles and engines Amendment to Sec. 221 removed provisions for GHG emissions standards for aviation sector

10. Waxman-Markey Bill Title III - �The Safe Climate Act� Amends CAA to create �cap-and-trade� program to reduce GHG emissions; establishes caps on emissions Required GHG emissions reductions: 3% below 2005 levels in 2012; 20% by 2020; 42% by 2030; 83% by 2050 �Covered entities� to obtain tradable emission allowances for each ton of GHGs emitted in prior year Covered entities include retail electric utilities, oil refiners, certain production facilities, & stationary sources emitting >25,000 tons/year of carbon dioxide equivalents (CO2e) Allowances issued by California, Western Climate Initiative or RGGI before 31 Dec 2011 can be exchanged for Federal allowances States may enact more stringent climate regulations; exception for cap-and-trade programs which are pre-empted GHGs include: Carbon dioxide (CO2) Methane (CH4) Nitrous oxide (N2O) Sulfur hexafluoride (SF6) Hydrofluorocarbons (HFCs) from chemical manufacturing process at industrial stationary source Any perfluorocarbon (PFC) Nitrogen trifluoride (NF3) Any other anthropogenic gas designated as GHG by EPA GHGs include: Carbon dioxide (CO2) Methane (CH4) Nitrous oxide (N2O) Sulfur hexafluoride (SF6) Hydrofluorocarbons (HFCs) from chemical manufacturing process at industrial stationary source Any perfluorocarbon (PFC) Nitrogen trifluoride (NF3) Any other anthropogenic gas designated as GHG by EPA

11. Senate Legislation Clean Energy Jobs and American Power Act (Kerry-Boxer) (S. 1733) Early November 09 - Senate Environment and Public Works Committee approved. No further action expected. Carbon Limits and Energy for America�s Renewal Act (CLEARA) (Cantwell-Collins) (S. 2877) Introduced 11 December 2009 American Clean Energy Leadership Act (ACELA) (Bingaman) (S. 1462) Clean Energy Partnerships Act (Stabenow) (S. 2729) International Climate Change Investment Act (Kerry) (S. 2835)

12. Senate Legislation Kerry-Graham-Lieberman Bill - Speculatively 8 Titles � Including Clean Energy Innovation, Energy Independence, Coal, Natural Gas, Nuclear, and Refining New nationwide standards for energy efficiency and renewable energy Sector-based approach to cap-and-trade Electricity generation in 2012; other major industrial sources phased in starting in 2016 Goal: 17% below 2005 levels by 2020; 80% by 2050 Applicability threshold: 25,000 tpy of GHGs Carbon tax on oil and gas industry Regulation of carbon market borrowed from Cantwell/Collins Limits on prices & ownership of GHG emissions allowances Carbon tariff on imports from countries not addressing GHGs Preempt CAA GHG regulation & State programs

13. Federal Legislation

14. EPA Mandatory GHG Reporting Final Rule published 30 Oct 2009; effective 29 Dec 2009 Required by FY2008 Consolidated Appropriations Act Annual GHG reporting requirement that applies to: Specified source categories Suppliers of fossil fuels or industrial GHGs Facilities emitting 25,000 metric tons/year or more of GHG emissions Estimated 10,000 facilities & 85% of total GHG emissions covered GHGs Covered: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, other fluorinated gases including nitrogen trifluoride & hydrofluorinated ethers

15. EPA Mandatory GHG Reporting Examples of covered source categories: Mobile source engine manufacturers Producers, importers, & exporters of coal-based liquid fuels Suppliers of natural gas and natural gas liquids (NGLs) Owners or operators of petroleum refineries and importers and exporters of petroleum products Excludes exporters that transfer products to U.S. military bases and to ships for onboard use Imports/exports exclusively for military purposes exempted Reporting done at facility level

16. EPA Mandatory GHG Reporting Covered sources began collecting data - 1 Jan. 2010 For aircraft engine manufacturers, reporting requirements will apply for engine models in production in 2011 New & existing engines covered Turbofan & turbojet engines with rated output more than 26.7 kilonewtons Covered: CO2 & NOX. Not Covered: N2O or CH4 Little impact on Federal facilities Federal fleets (vehicles, aircraft, & marine) and R&D activities are exempt No GHG emissions reductions required EPA collecting emissions data to inform future decisions

17. EPA GHG �Endangerment� Finding Final finding published 15 Dec 2009, effective 14 Jan 2010 Response to 2007 U.S. Supreme Court decision in Massachusetts v. EPA 2 distinct findings re: GHGs under CAA section 202(a): Endangerment Finding: current & projected atmospheric concentrations of 6 key GHGs threaten public health & welfare of current & future generations carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) Cause or Contribute Finding: combined emissions of CO2, CH4, N2O, and HFCs from new motor vehicles & engines contribute to atmospheric concentrations of key GHGs and hence to threat of climate change

18. EPA GHG �Endangerment� Finding Findings impose no requirements on industry or other entities; merely trigger regulation under CAA Endangerment finding under one CAA provision not automatic trigger for regulation under entire Act Legal responsibility to regulate GHGs only under existing provisions affecting new motor vehicles & engines EPA position: not limited to emissions from motor vehicles; would conflict with purpose of 1977 CAA Amendments Result of EPA position: CAA requires regulation of virtually all sources of six GHGs within current source-based framework

19. EPA �Tailoring� Proposal Published 27 Oct 2009 Would establish new threshold for GHG emissions to define when CAA permits under New Source Review (NSR) and Title V operating permits programs would be required for new or existing industrial facilities As proposed, would apply to facilities emitting over 25,000 tons per year (tpy) GHGs � new major source threshold Threshold would �tailor� CAA permit programs to fit GHGs Current major source thresholds: PSD: 100 or 250 tpy depending on source category Title V : 100 tpy

20. EPA �Tailoring� Proposal 22 Feb 2010 - EPA Administrator Jackson letter to Sen. Rockefeller clarifies EPA approach No GHG permits before 2011 Only sources otherwise needing permit will need to account for GHGs during first half of 2011 GHG-specific permit requirements for other large sources will phase in beginning in latter half of 2011 Strongly considering raising �tailored� major source threshold well above 25,000 tpy No GHG permitting for smaller sources before 2016

21. Executive Orders EO 13423 � 24 January 2007 Federal agencies must reduce energy intensity 3% annually through end of FY15 or 30% by end of FY15 Reduction in GHG emissions expected to coincide with reduction in energy intensity No specific goal for GHG emissions reduction EO 13514 - 5 October 2009 Does not revoke EO 13423 Extends & expands energy & environmental goals set by EO 13423 Focuses on: Greenhouse gas emissions reduction Creation of sustainability projects and programs Integrating sustainability goals w/ agency mission & strategic planning

22. Executive Order 13514

23. Executive Order 13514 - GHGs Agency wide GHG reduction goal for Scope 1 & 2 emissions for 2020 based on FY2008 baseline Scope 1: direct GHG emissions from sources owned or controlled by Federal agency Scope 2: direct GHG emissions resulting from generation of electricity, heat, or steam purchased by Federal agency To determine goal, consider: Renewable energy use Reducing building energy use Implementing renewable energy generation projects Using energy efficient vehicles, including alternative fuel vehicles Consolidating vehicle fleets

24. Executive Order 13514 - GHGs Target must exclude direct emissions from �excluded vehicles and equipment� �any vehicle, vessel, aircraft, or non-road equipment owned or operated� by Federal agency that is used in �combat support, combat service support, tactical or relief operations, or training for such operations� Result: GHG emissions from military vehicles, aircraft & associated support equipment not counted against overall target for DoD (up to 75%) Other National Security Exemptions Section 18(c), Subparagraph (i) DoD may exempt �military tactical vehicle fleets� from requirements �Military tactical vehicle fleets� not defined Section 18(d): Any agency head may exempt specific agency activities and facilities from requirements in interest of national security

25. Executive Order 13514 - GHGs GHG reduction goal for Scope 3 emissions for 2020 based on FY2008 baseline �GHG emissions from sources not owned or directly controlled by a Federal agency but related to agency activities such as vendor supply chains, delivery services, and employee travel and commuting.� Work w/ vendors & contractors to make changes in manufacturing processes, utility or delivery services, modes of transportation, or supply chain activities Assess travel, training, & conferencing by agency staff Reductions unique to agency operations Result: May force contractors & vendors to account for & reduce GHG emissions associated with government products & services

26. Executive Order 13514 Includes requirements addressing water efficiency, recycling, waste reduction, stormwater management Implement 2030 �zero-net-energy� building requirement starting in 2020 Operate very efficiently, energy from non-GHG emitting sources Result: no net GHG emissions & economically viable 95% of all applicable contracts to meet sustainability requirements Energy efficient, water-efficient, bio-based, non-ozone-depleting, and environmentally preferable, contain recycled content or be composed of non-toxic or less toxic alternatives Acquisition of weapons systems is exempted

27. Executive Order 13514 Section 7 � Senior Sustainability Officer (SSO) Senior agency official responsible for agency�s EO compliance Prepare GHG emissions reduction targets & inventory Prepare & implement Strategic Sustainability Performance Plan Section 8 � Strategic Sustainability Performance Plans Goal: Prioritize agency actions based on lifecycle ROI Integrate into strategic planning & budget process � significant step beyond previous EO Evaluate agency climate change risks & vulnerabilities

28. Executive Order 13514 Overall Federal GHG Reduction Target Announced 29 Jan 2010 28% by 2020 Aggregate of 35 Federal agency self-reported targets DoD goal: 34% over 2008 levels by 2020; combat operations exempt (60+% of DoD GHG emissions) Next Steps 2 June 2010 Submit Strategic Sustainability Performance Plan Submit Scope 3 emissions target for 2020 5 Oct 2010 - Submit input on agency adaptation actions 3 Jan 2011 - Complete comprehensive 2010 GHG inventory

29. Copenhagen Accord Interim international agreement, not legally binding Results of UN Climate Change Conference in Copenhagen, 7-18 Dec 2009: Prevent average global temperatures from rising more than 2o Celsius $30 billion in financing to help developing nations curb emissions over next 3 years (goal: up to $100 billion by 2020) Goals submitted 31 Jan 2010 � US � �in the range of� 17% by 2020 (2005 base), subject to Congress China � reduce carbon intensity by 40-45% over 2005 levels by 2020 EU � 20-30% reduction by 2020 (1990 baseline) 3 May 2010 - Yvo de Boer, U.N. chief negotiator on climate change: no formal climate treaty this year; December 2010 meeting in Cancun may result in foundation for future treaty Carbon intensity � the amount of carbon dioxide emitted per unit of economic activityCarbon intensity � the amount of carbon dioxide emitted per unit of economic activity

30. Putting ideas into action.SM