Clean Air Act – GHG Accounting

Study finds that SO2 Allowance Trading has not led to Environmental Injustice

In a new study entitled “Trading Equity for Efficiency in Environmental Protection? Environmental Justice Effects from the SO2 Allowance Trading Program”, Professor Evan Ringquist at the University of Indiana has found that efficiency gains from sulphur dioxide (S02) allowance trading have not come at the expense of the equitable treatment of minority and low-income groups.

In a study entitled “Trading Equity for Efficiency in Environmental Protection? Environmental Justice Effects from the SO2 Allowance Trading Program”, Professor Evan Ringquist at the University of Indiana has found that efficiency gains from sulphur dioxide (S02) allowance trading have not come at the expense of the equitable treatment of minority and low-income groups.

The study considered the environmental justice impacts of the SO2 allowance trading program, which was established pursuant to amendments to the Clean Air Act in 1990. The program is aimed at reducing SO2 emissions, which cause acid rain and human health problems. In particular, Professor Ringquist considered the potential conflict between the efficiency of market-based tools for pollution control and social equity, and whether the SO2 program inadvertently transferred pollution into minority and poor communities. As part of his research, Professor Ringquist obtained trading records for all facilities participating in the SO2 allowance trading program between January 1995 and March 2009. He then used statistical models to determine whether allowance trading led to concentrated pollution in poor communities. Professor Ringquist concluded that it did not: “There is no inherent tradeoff between efficiency and equity when using market-based instruments for pollution control. Policy makers, however, might make an effort to design and implement future emissions trading programs in a manner that reduces the monitoring costs of tracking emissions trading. By reducing monitoring costs, policy makers may prevent the concentration of emissions in poorly educated communities while preserving the efficiency benefits of these instruments.”

This research could shed some light on the concerns expressed by the Association of Irritated Residents (AIR), which has brought a court challenge against the California Air Resources Board’s decision to use cap-and-trade as the mechanism to reduce California’s greenhouse gas emissions (Association of Irritated Residents, et al. v. California Air Resources Board). AIR believes that companies which buy the right to exceed emission limits will release greater amounts of pollutants in surrounding communities, mostly poor and non-white. As Professor Ringquist suggests, perhaps the most prudent approach would be to design an emissions trading program that makes it easier for the effects of the program to be monitored by local residents.

The study is available online at Link

U.S. EPA Issues Final Rule for GHG Emissions from Large Emitters

On May 13, 2010, the U.S. Environmental Protection Agency (EPA) issued a final rule for addressing greenhouse gas (GHG) emissions from stationary sources under permitting programs of the Clean Air Act (CAA). This rule follows the EPA finding in late 2009 that GHG emissions endanger human health, which allows the EPA to regulate GHGs under the CAA. The final rule sets thresholds for GHG emissions that define when permits under the New Source Review Prevention of Significant Deterioration (PSD) and title V Operating Permit programs are required for new and existing industrial facilities. In particular, regulated facilities would be required to obtain permits showing they are using the best available technology to cut emissions when building new plants or modifying existing ones. The final rule is also referred to as the “tailoring rule” because it tailors the requirements of CAA permitting programs to limit which facilities will be required to obtain PSD and title V Operating Permits.

Starting in January 2011, facilities responsible for almost 70% of U.S. GHG emissions from stationary sources will be subject to permitting requirements. These facilities will include power plants, refineries, factories and cement production facilities that emit 75,000 metric tonnes or more of carbon dioxide equivalent, but will exclude small emitters such as farms, restaurants, hospitals and schools. Without the tailoring, small emitters would also be caught by the rule.

Waste landfills and factories that are not already covered by the CAA that emit at least 100,000 metric tonnes of GHGs per year would get a 6 month extension and would not be regulated until July 2011. Sources that pollute less than 50,000 metric tonnes per year would not be regulated until 2016, if ever, according to the EPA.

The final rule is aimed at giving momentum to the climate bill that was introduced by Senators John Kerry and Joseph Lieberman on May 12, 2010. A number of industry lawsuits have been launched which call into question the EPA’s authority to regulate GHG emissions, however it is President Obama’s hope that the final rule will push lawmakers in states heavily dependent on fossil fuels to support the Kerry-Lieberman bill. As currently drafted, the Kerry-Lieberman bill pre-empts automatic EPA regulations; in the event the Kerry-Lieberman bill is not passed by the Senate, the final rule sets up future regulations for large emitters.

For more information, please refer to the Fact Sheet (Final Rule: Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule) issued by the EPA: link