EPA Regulation of Stationary GHG Sources

1. EPA Regulation of Stationary GHG Sources Bob Wyman ROBERT.WYMAN@LW.COM August 7, 2010

2. Potential Sources of Authority Endangerment Finding Required NAAQS (§§ 108-10) NSPS (§ 111) NESHAPS (§ 112) Int’l Endangerment (§§ 115) US emissions cause or contribute to air pollution reasonably anticipated to endanger foreign public health or welfare Foreign country reciprocity required SIP tools available (fees, marketable permits, auctions) “Regulated Pollutant” Requirements PSD (§§ 165,169)

3. Potential Sources of Authority Endangerment Finding Required NAAQS (§§ 108-10) NSPS (§ 111) NESHAPS (§ 112) Int’l Endangerment (§§ 115) US emissions cause or contribute to air pollution reasonably anticipated to endanger foreign public health or welfare plus? Likely Paths Forward Foreign country reciprocity required SIP tools available (fees, marketable permits, auctions) “Regulated Pollutant” Requirements PSD (§§ 165,169)

4. Near-Term: PSD and BACT • Note – Nonattainment NSR does not contain similar “regulated pollutant” language • Applicability of PSD to GHG Sources • Controversy regarding whether a new or modified source (project) must independently trigger PSD for criteria pollutants • EPA says no • Counter-argument • Application of BACT to GHG Sources • Tailoring Rule and Interpretive Memo (see handouts) • EPA Climate Change Work Group • Phase I • Phase II • Upcoming EPA Guidance (BACT White Papers) • State Issues

5. NSPS for GHGs – What Could It Look Like? • Endangerment Finding – by source category • State Plan or FIP Process • Content of Standards • Best “adequately demonstrated” system of emission reduction taking into account cost and non-air quality health, environmental and energy issues • Specifically authorizes “equivalent” methods • Cap and Trade? • Performance-Based Averaging and Trading? • Can EPA Integrate New and Existing Source Standards for GHG Sources? • EPA has taken the position that it must have set new source standards if it is to set existing source standards, but section 111 does not preclude EPA nor the states from setting a single performance standard for both new AND existing sources • NSPS versus BACT • Traditionally, NSPS sets a floor for BACT, but the Act does not preclude EPA nor the states from implementing NSPS in a manner that would satisfy the BACT requirement • To satisfy CAA §169(3) (BACT), EPA should find that compliance with the national GHG existing source program constitutes the “maximum degree of reduction of each pollutant subject to regulation . . . taking into account energy, environmental, and economic impacts and other costs, determine[d]” to be achievable for the permitted units.

6. An Integrated National GHG Market?

7. CLOSED TECHNOLOGY MARKETS low-carbon biomass fuels (cellulosic ethanol, biodiesel), carbon capture and sequestration OPEN MARKET renewable fuel standard Electric power generators Refineries Glass Plants Cement Plants Landfills Other CAP AND TRADE TONS Transition to cap and trade Advanced battery, advanced combustion, other vehicle and engine advances motor vehicles innovative technology credits (ITC) P-B AVERAGING AND TRADING TONS Solar, wind, biomass renewable electricity standard + OFFSETS ONE-WAY TRADING Internal Trading and Banking Only Unrestricted Trading, Banking; No Safety Valve IF Program Linked at Outset; Otherwise Transitional Safety Valve