Yesterday, in a sweeping move likely to have significant
repercussions for the nation's energy policy, President Obama
announced steps that the Executive Branch will take to address
climate change by reducing carbon dioxide emissions in the United
States. The President's Climate Action Plan calls for
three categories of action: (1) cutting carbon emissions; (2)
preparing the United States for the impacts of climate change; and
(3) leading international efforts to combat climate change and
prepare for its impacts. The electricity generation sector
and the fossil fuel production sector are most likely to be
adversely affected by the initiatives in the Plan. The
building industry and construction materials industry are also
likely to be subject to new regulation.
Energy Sector
The Plan directs the Environmental Protection Agency (EPA) to
establish standards for carbon emissions from both new and existing
power plants. This directive represents a significant change
from EPA's April 2012 proposal to regulate
carbon dioxide emissions only from new power plants. However,
it is important to note that standards for existing power plants
would not go into effect immediately. A new source
performance standard would first apply to new units and
modified existing plants. Standards regulating
emissions from existing plants that make no modifications would be
subject to emissions guidelines that would need to be implemented
through State action. Further, the administrative process
cannot be overlooked: EPA is required to consider and respond
to public comments on its proposals. Companies wishing to
have a voice in this process – including both generators and
users of electricity – should be prepared to submit comments
and provide data to support their arguments.
In addition to calling for limits on carbon dioxide emissions, the
Plan would encourage generation from renewable energy
sources. The Plan notes that the United States has more than
doubled its generation of electricity from wind, solar, and
geothermal sources and sets a goal to double renewable electricity
generation again by 2020. To meet these goals, the
Administration would direct the Department of the Interior to issue
permits for the construction of 10 gigawatts of renewable
electricity generation by 2020. In addition, to facilitate
improvements to the electricity grid, the Administration has
directed federal agencies to streamline the siting, permitting, and
review process for electricity transmission projects. The
Plan also calls for increased investment in clean energy
technology.
The transportation sector would also be affected by the
Plan. Referencing the 2011 fuel economy standards for
heavy-duty vehicles, the Plan pledges to develop fuel economy
standards for post-2018 heavy duty vehicles. The Plan also
encourages the development of biofuels, advanced batteries, and
fuel cell technologies for all transportation sectors, committing
the Administration to "leverage partnerships between the
private and public sectors to deploy cleaner fuels."
Companies in this sector should watch for possible tax incentives
and opportunities to partner with government agencies.
In addition, the Plan would encourage energy-efficient
construction and increased focus on energy efficiency standards for
consumer appliances. Construction companies and appliance
manufacturers should be prepared to participate in the development
of new requirements to ensure that their views are presented.
Infrastructure
While emphasizing that the reduction of carbon dioxide emissions
would not immediately reduce risks from extreme weather events
related to climate change, the Plan encourages safer infrastructure
construction by requiring federal agencies to support
"climate-resilient" infrastructure projects. In
addition to creating a task force on climate preparedness, the Plan
would encourage federal agencies to remove obstacles to developing
climate-resistant buildings and highways. The Plan also
commits to convening representatives from the insurance industry
and other involved sectors to develop best practices for accounting
for climate change risks in insuring for disasters.
International Efforts
The Plan commits the Administration to working with other
countries to reduce greenhouse gas emissions and enhance climate
preparedness. This would include both working on multilateral
initiatives to stimulate efficiency in the building sector and
implementing bilateral agreements with emerging economies to reduce
greenhouse gas emissions. Other initiatives would include
reducing deforestation, encouraging the use of clean energy, and
encouraging free trade in environmental goods such as clean energy
technology.
Other Key Points
The Plan also highlights the Administration's proposal to
eliminate tax subsidies for fossil fuels in the United States and
the Administration's commitment to end government support for
public financing of new coal power plants overseas, except where
there are no feasible alternatives or where carbon capture and
sequestration will be used. The Plan will develop an
international agreement requiring both developed and developing
countries to limit their carbon emissions. The Plan also
commits the Administration to working with the international
community to reduce emissions of short-lived climate pollutants,
such as black carbon, methane, and hydrofluorocarbons.
Conclusion
The Plan calls on executive branch agencies including the
Environmental Protection Agency, the Department of Energy, and the
Department of Interior, to take prompt action to address climate
change. While the Plan describes an ambitious agenda, it can
be implemented only through agency regulation. The
development of those regulations, and the legal challenges to them,
will provide the industrial sector with opportunities to shape the
ultimate fate of the Plan.
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