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In so many ways it seems like there has been a lot going on since my last post.  Copenhagen.  States invoking the U.S. Supreme Court’s original jurisdiction to try to take on foreign invaders in the Great Lakes.  The EPA working to combat smog.  The Michigan Department of Natural Resources merged with the Department of Environmental Quality to form the new Department of Natural Resources and the Environment.  The argument over coal’s place in America’s energy mix rages on while we continue to install near-record numbers of renewables.  Some were faced with the not-so-shocking realization that the Engangered Species Act can affect a wind development just like any other activity.  The recurring NIMBY-versus-government-and-developer issues regarding Cape Wind are still with us eight years in.  Europe and China committed to audacious renewable goals that could leave the United States way behind (or ahead, depending on your point of view I guess).  The same old NIMBY arguments were repackaged and deployed against offshore wind development in the Great Lakes.  There was yet more in the push for SEC disclosures regarding climate-change-related risk.  The constant back and forth over domestic climate legislation did anything but die down.  Senator Murkowski is trying to take away EPA’s authority to regulate greenhouse gases.  Again.  Industry is suing EPA over its endangerment finding.  States are trying to intervene.  Politicians are still occasionally tossing out the pros and cons of “comprehensive” legislation verses energy-only legislation.  And there has been the same kind of “will-they-won’t-they” metanews chatter over the always-anticipated-but-never-quite-ready-for-release coal ash rules.

When you really look at it, despite all of the news, not much has actually happened since early December.  In that respect it’s a lot like life itself: full of sound and fury . . . .

Of course, that doesn’t stop people like me from contributing to the din.  And it doesn’t stop prognosticators from insisting that we’ll never see carbon regulation or new energy legislation.  The thing is, they’ll be right.  Until suddenly they’re wrong.  Rest assured, if  lightning finally strikes, you’ll hear the thunder.  And the clatter of keyboards, and the sighs of relief, and the moans of despair, and the clamor and gossip over the sighs of relief and moans of despair, and the bickering over wagers made and lost . . .

Today the EPA brought the United States one step closer to requiring emitters of greenhouse gases to obtain permits under the existing Clean Air Act.  EPA took this step by finalizing its “endangerment finding” under Title II of the Clean Air Act, which applies to mobile sources.

The story behind today’s rule began with a 2007 U.S. Supreme Court decision.  In Massachusetts v. EPA, the U.S. Supreme Court held that greenhouse gases fall under the Clean Air Act’s definition of “air pollutant.”  The Court then considered whether the EPA was required to make an endangerment finding under Title II of the Act with respect to greenhouse gases as air pollutants.  The Clean Air Act requires EPA to “prescribe . . . standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles . . . which in [the EPA Administrator's] judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.”  The Court held that the “EPA can avoid taking further action only if it determines that greenhouse gases do not contribute to climate change or if it provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do.”  The Court added that if the EPA were to make a positive endangerment finding “the Clean Air Act [would then] require[] the agency to regulate emissions of the deleterious pollutant for new motor vehicles.”

Today’s endangerment finding springs from the Court’s command to the EPA under Massachusetts v. EPA to either (1) make an endangerment finding or (2) explain why such a finding cannot or would not be made.  Today the EPA has made a positive “endangerment finding.”  More particularly, the EPA found that the concentration of a mixture of certain greenhouse gases in the atmosphere threatens the public health and welfare of current and future generations.  The listed gases are carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF₆).  The EPA also found that the combined emission of those gases contributes to the concentrations of the gases in the atmosphere and, therefore, contributes to the threat to the public health and welfare.  In other words, the EPA  found under Title II of the Clean Air Act that emitting any of the listed greenhouse gases endangers public health and welfare.  Having made this finding, the EPA is now required, under the clear mandate in Massachusetts v. EPA, to regulate emissions of greenhouse gases for new motor vehicles.

The EPA is already moving in that direction.  It has already proposed a light-duty vehicle rule to regulate greenhouse gas emissions from new motor vehicles.  But the light-duty vehicle rule, which is scheduled to become final in March, 2010, will do much more than regulate light-duty vehicles.  Finalization of the light-duty vehicle rule will regulate greenhouse gas emissions from not only mobile sources but also stationary sources.  This is because the EPA has taken the position (under both the Bush and Obama administrations) that regulation of an air pollutant under Title II renders that pollutant a “regulated pollutant” and thereby subjects the pollutant to regulation under PSD and Title V.  See In re Deseret Power Electric Cooperative, PSD No. 07-03, slip op. at 63 (Envtl. Appeals Bd. Nov. 13, 2008); Memorandum from Stephen Johnson, Administrator, EPA (Dec. 18, 2008) (interpreting the scope of the PSD program as applying to “regulated NSR” pollutants, which are pollutants subject to regulation under a provision of the Clean Air Act).  This means that upon finalization of the light-duty vehicle rule, new major stationary sources and sources undertaking major modifications will be required to secure permits under the Clean Air Act and to implement Best Available Control Technology (BACT) to control greenhouse gas emissions.

• The DOE has given Exelon an oral commitment to provide a loan guarantee for a $60 million solar development in Chicago.  The ten megawatt project will be on a brownfield site in Chicago’s south side; it will be the largest urban solar plant in the U.S.
• A new 600+ megawatt wind farm in Texas will be funded primarily by Chinese financiers.  It will use Chinese-made wind turbines.
• Senator Boxer announced her plans to move forward with a mark up of her climate bill despite calls from Republicans to slow things down.  “All the Republicans on the committee are expected to vote against the legislation.  Nevertheless, Republicans have said that they would like more time to review the chairman’s mark up, and to see a Congressional Budget Office score for the bill and a more thorough[] analysis by the Environmental Protection Agency before a vote by the committee.”
• Climate regulation speaks in terms of carbon dioxide equivalents.  Methane has a larger warming effect than carbon dioxide; carbon trading schemes assign it a relatively large carbon dioxide equivalent.  A report in Science explains that these equivalencies may need to be adjusted because “methane emissions have a larger impact than that used in current carbon-trading schemes or in the Kyoto Protocol.”

• Communities are “apprehensive” about large wind farms.  But they are more receptive to small installations, such as turbines in commercial parking lots.  In that regard, a “plan for urban wind turbines puts Palmdale [California] in company with blustery cities such as Buffalo, N.Y., and Cleveland that have allowed small wind farms in commercial and business districts.”

• An analysis of the 67 senators “in play” on climate legislation.

• Taiwan passes a carbon tax, in part to circumvent carbon tariffs.  Both cost the Taiwanese economy, but “[a]t least with a carbon tax, the revenues would stay in Taiwan.”

• Over the din of health care legislation, Senator Kerry calls for five committees to take action on climate legislation by Thanksgiving. 

• The EPA’s much ballyhooed tailoring rule was published in the Federal Register.  Deadlines, including the comment deadline for the rule, will run from the publish date, October 27, 2009.  The draft rule would regulate greenhouse gas emissions under the current Clean Air Act, but it would limit its applicability to sources that emit more than 25,000 tons of carbon dioxide equivalent per year.

• The Obama administration announced $3.4 billion in total grants to states to support grid improvements and related technologies.  100 projects in 49 states are receiving funding.  DTE Energy will use $84 million to install new smart meters, install SmartHome technology, and upgrade substations and circuits.  Whirlpool is Michigan’s other recipient.  It was awarded just over $19 million to manufacture smart appliances that will allow customers to schedule their use to coincide with periods of low electricity prices. 

• In case it’s not already hard enough to finance new nuclear, opponents want to make it even harder.  They’re asking the DOE to suspend its consideration of loan guarantees for new reactors pending NRC resolution of design issues.

• The Senate Committee on Environment and Public Works began hearings on the Clean Energy Jobs and American Power Act.  And President Obama announced that “consensus is building” for climate change legislation.  The EPA’s endangerment finding and tailoring rule still lurk in the background as the alternative to legislation, but even the EPA admits that it would rather see greenhouse gases regulated under new legislation than the existing Clean Air Act.  On second thought, the EPA may want to retain the ability to regulate greenhouse gases under the Clean Air Act.  One thing seems certain, though, animal flatulence will escape regulation.  The Wonk Room has an overview of the committee members’ positions. 

• The E.U. provides another valuable lesson in effective climate regulation.  Cap and trade can be effective at reducing emissions, but not if the cap is set too high or if states can bank and flood the market with large amounts of excess allowances.  Arguably overly favorable rules have allowed Europe to amass a glut of pollution allowances; “The availability of so many ‘hot air’ credits could dramatically depress the price that companies pay for emitting greenhouse gases, making it easy for them to meet their targets, and reducing their incentives to adopt more efficient practices and low carbon technology.”

• The EPA announced that it will set MACT standards under the Clean Air Act to address emissions of Hazardous Air Pollutants from oil-and coal-fired power plants.  The LA Times reports that “The agreement — which would probably boost electricity prices but could potentially save thousands of lives — commits the EPA to set pollution standards by 2011 for the power plants that are responsible for nearly half of all emissions of mercury, which can harm brain development in fetuses and children.”

• Silicon Valley companies are taking advantage of Michigan manufacturing facilities—beyond the Ford Wixom Plant—to make solar components. 

• It’s final: Investors can require companies to report the financial risk posed by global warming. 

• Here’s the problem: the wind is blowing in the Dakotas, people in Chicago, New York, and LA need power, and it costs money to upgrade the transmission necessary to get the power from the point of generation to load.  So who pays—the utilities along the line or the wind developer?  According to FERC, the answer is the wind developer. 

• Why the developing world is ripe for solar. 

•  “Officials Hint at Progress Negotiating Climate Deal”  But “Hopes Fade for Comprehensive Climate Treaty”  Seriously.
• Vice President Biden released a report identifying ways to encourage efficiency upgrades in existing buildings.  The report recommends (1) increasing information by creating energy star labeling and national performance standards, (2) helping customers finance the sometimes unaffordable upfront cost of efficiency upgrades by supporting property tax/municipal financing, increasing availability of energy efficiency mortgages, and expanding state revolving loan funds, (3) and supporting the work force with certifications and training standards.
• An article in this week’s New Yorker by James Surowieki discusses the potential significance of and reasoning behind the recent resignations from the U.S. Chamber of commerce. 

• The UK is considering a carbon tax to encourage new nuclear development.  Germany is considering extending the life of its current nuclear plants.  And many in the US are advocating similar extensions here.
• A special energy report in today’s Wall Street Journal examines what Iowa has done right in courting wind developers, what China has done right in courting solar developers, what GE hopes to gain by investing in renewable energy technologies, and more. 
• A New York Times article suggests that an increasingly fractured energy industry—with supporters (e.g., Exelon) and detractors (e.g., Southern Company) both growing increasingly vocal about the need, or lack thereof, for climate change legislation—is evidence that some sort of legislation is on the way.  “‘These fissures are happening because a policy is increasingly seen as inevitable,”’ said David G. Victor, an energy expert at the University of California, San Diego. ‘Old coalitions are splintering and fascinating new alliances are being formed.’”
• The Fifth Circuit found that a group of landowners has standing to bring common law claims alleging harm caused by oil and gas companies’ emission of greenhouse gases.  In particular, the plaintiffs allege that the companies’ emissions contributed to global warming, which increased the ferocity of hurricane Katrina and caused them harm.  The Fifth Circuit held that plaintiffs satisfied the three-part test for standing (i.e., an injury (actual, imminent, concrete, and particularized) that is fairly traceable to the complained-of conduct and that is capable of being redressed by a favorable ruling from the court).  Having cleared the high hurdle of standing, to succeed on their claims the plaintiffs will have to establish all of the elements of a well-pleaded complaint, including causation.  That will not be easy.  Still, it appears that common law environmental claims may live on.
• Old headline: environmentalists throw up roadblocks to energy development.  Increasingly common headline: environmentalists throw up roadblocks to “green” energy development.
• Smart meters sound like a great thing.  Most people seem in favor of them.  Maybe that’s just because no one wants to demand a dumb meter.  Well, almost no one.
• The Senate climate bill has an ally in Senator Murkowski?  Maybe. 
• The SEC is considering abandoning a Bush-era staff bulletin in favor of two options that would require companies to disclose climate-related liabilities.  “One option could be a rulemaking to set specific rules for disclosing climate risks, and the other is to issue a reinterpretation of Form 10-K disclosure rules requiring companies to comment on operations tied in with mitigating climate-change risks.”

• Canada and Alberta announced that they will provide approximately $750 million to fund carbon capture at a TransAlta coal-fired plant near Edmonton.

•  This article explains that the federal grant in lieu of a tax credit has encouraged wind development this year.  In fact, AWEA expects that because of the grants this year’s third quarter numbers will be better than last year’s records.  A federal renewable energy standard would provide an even bigger boost.

•  Preparing to move forward with its regulation of greenhouse gas emissions under the current clean air act, the EPA is seeking ideas for “creative and affordable emissions reduction solutions” that could serve as Best Available Control Technology.  Regulation of greenhouse gases under the clean air act’s prevention of significant deterioration program would require new sources and major modifications to implement BACT to control their greenhouse gas emissions.  Determining what constitutes BACT involves a case-by-case analysis that considers many factors, including cost, and the question that EPA is seeking to answer is what control technologies are available for greenhouse gas emissions.  Efficiency and offsets are two suggestions.

•  The Michigan Wind Energy Resource Zone Board released its final report.  The report designates four wind resource zones in the state.  They are located in Allegan, Antrim, Charlevoix, Benzie, Leelanau, Manistee, Bay, Huron, Saginaw, Sanilac, and Tuscola counties.  The thumb area is identified as having the highest wind potential.  As for next steps, the MPSC will designate a primary zone.  “A wind energy zone designation will not guarantee that wind energy projects will be constructed within the zone; decisions on where to locate wind projects will continue to be left to market forces.  A zone designation will also not abrogate the authority of local governments over the siting and approval of wind energy projects.  It will, however, facilitate the planning, siting, and construction of transmission lines to ensure that wind energy systems can be connected to the system and deliver power to customers in a timely manner.”

•  A good bit of recent news has focused on what will need to be done to address greenhouse gas emissions from the developing world.  The developing world will see extraordinary growth in electricity demand.  And carbon-intensive generation is likely to serve that demand.  The expected increase in carbon-intensive generation has led many to forecast correspondingly enormous growth in CCS.  Luckily, “China has vast underground repositories that could store more than a century’s worth of carbon emissions from coal-fired power plants and industrial facilities, according to a report to be released by the United States Department of Energy’s Pacific Northwest National Laboratory.”

•  Britain considers whether deregulation (and the market more generally) can manage energy and climate change.  An article in the Economist summarizes a recent report concluding that “the market, left to its own devices, is failing to deliver.  Consumers are not buying energy-efficient appliances or insulating their houses, carmakers are failing to get emissions down and power companies still prefer fossil fuels to greener alternatives.  A bracing dose of re-regulation was prescribed: the CCC suggests compulsory emissions caps for cars, feed-in tariffs to help green-power producers and a state-enforced minimum carbon price to encourage nuclear and ‘clean’ coal power stations.  David Kennedy, the committee’s chief executive, put it plainly: ‘We’ve stuck with the market a long time,’ he said. ‘We don’t think we can stick by it any more.’”

•  Nuclear layaway?  Nuclear generation is expensive, and it’s tough to raise sufficient capital to fund construction of new nuclear plants.  The Florida Public Service Commission has approved a cost-recovery program intended to solve that problem: let the utility recover the expected cost of building new plants before they’re ever built.

•  The Canadian Energy Research Institute concludes that expanded oil sand production would result in increased demand for U.S. goods and services.  It might also provide a job boost.

•  How can a lack of regulation spur renewable energy?  Ask Texas.

• CCS is sometimes presented as a worthwhile—if not necessary—technology to address greenhouse gas emissions.  And Energy Secretary Chu has made a strong case for CCS.  But there are a lot of costs between here and a world with CCS.  If international carbon emissions are to be reduced, then those costs will have to be shared with developing nations.  All of that has caused the World Bank to entertain the idea of setting up a trust fund to help finance the estimated 3400 CCS plants that will be needed to power the developing world by 2050. 
•  Assuming we implement technologies to capture greenhouse gas emissions in the United States, what will we do with the captured gas?  Some of it can be injected on site.  But some of it will need to be transported to other locations.  And why not transport it to places where it is more than a legal risk and potential nuisance?  Besides, saline injection and permanent storage isn’t commercially ready.  Carbon dioxide is great for enhanced oil recovery, and it’s already being used for that purpose.  To facilitate additional use of carbon dioxide for EOR, “an early step” in a recent Midwestern Governors Association Energy Accord would site and permit a pipeline that would transport carbon dioxide from sources in the Midwest to EOR sites in the gulf coast.  An open question is whether greenhouse gas emissions can be considered effectively sequestered—in terms of their impact on climate change—if they will be used to extract oil, which will be burned to cause additional greenhouse gas emissions. 
•  A thorough piece in The New Republic advocates performance-based ratemaking (referred to more generally as “decoupling”) and distributed generation.  Under the current regulatory framework, a utility’s profits are coupled to the amount of power it sells.  Selling more power, especially after the utility has already recovered its fixed costs for the year, means more profits.  Decoupling decouples the sale of electricity from profits.  It rewards utilities for providing a high standard of living by selling the fewest megawatts possible.  It’s a way for utilities to make money by selling Negawatts instead of Megawatts.
•  A New York Times article looks at the current status of non-food-based ethanol.  It’s not commercial scale yet—and some argue it never will be—but this article presents an optimistic view for the future. 

• The DOE has released a funding opportunity announcement explaining that it will make $55 million available to develop technologies to capture greenhouse gas emissions from existing power plants.  Applicants must provide at least a 20% cost share.  Applications are due December 3, 2009. 
•  How do I get wind power generated in the Dakotas to serve load in New York?  More generally, what do you do when you want to move power among three AC grids connected by DC “safety valves?”  Tres Amigas.
•  A Senate climate bill is ready for discussion. 

• Assume it makes sense over the long term for residents to install solar panels on their homes.  And assume we want to encourage that kind of distributed generation.  How do we get people to pay the high up-front capital cost?  Many say that they would happily buy a system that allows them to reduce or eliminate their electricity bills.  But those kinds of statements have not taken the solar industry very far.  Maybe it’s that people are too short sighted, or maybe it’s just that the payback periods are too long.  Whatever the reason it turns out that even with federal tax credits not very many people are willing (or able) to pay the $18,000–$60,000 necessary to install their own solar system.  So if the promise of avoiding power bills isn’t working, why not start treating this kind of distributed generation as what it is—an extension of the utility?  The customer continues to buy electricity, and in exchange the customer gets a “free”—no upfront cost—solar system.

• A Washington Post article discusses how necessary the White House will be in moving climate legislation through the Senate.  The EPA’s endangerment finding and regulation of mobile sources remains in the background: “‘It seems what we’re observing is pressure from the White House on EPA to do things, rather than pressure from the White House on Congress to do things,’ said American Electric Power chief executive Michael G. Morris, whose company, one of the nation’s biggest electricity providers, has endorsed the House climate bill. ‘That doesn’t seem the best approach.’” 

•  John Kerry and Lindsey Graham wrote an Op-Ed in the New York Times this weekend explaining the steps that Congress might take to pass climate change legislation.  The piece touts cap-and-trade legislation with a price collar, nuclear, carbon capture and storage, and a “border tax” on foreign-made clean-energy technologies.  It also notes some of the national security aspects of energy policy.  And it reminds readers that there is not a no-regulation option: “Failure to act comes with another cost.  If Congress does not pass legislation dealing with climate change, the administration will use the Environmental Protection Agency to impose new regulations.  Imposed regulations are likely to be tougher and they certainly will not include the job protections and investment incentives we are proposing.”

• Still, even Senator Graham admits climate legislation is going to be a tough sell. 

•  California is set to start charging for carbon emissions.  The fee is meant to be a source of revenue to help the state fund its efforts to reduce statewide greenhouse case emissions by 25% by 2020.  It’s not meant to replace the planned cap-and-trade program.

•  Secretary Chu calls for an “aggressive global effort” to achieve affordable deployment of CCS within eight to ten years.