A Response to Climate Change

Mandatory Reporting of GHGs

The US's Environmental Protection Agency (EPA) has posted to the Federal Register final details of a mandatory reporting rule (MRR) that will extend the Clean Air Act (CAA) to cover the emissions of greenhouse gases (GHG's). The rule to be effective from 29 December 2009 will be codified under Section 40 of the Code of Federal Regulations, Part 98 and will require the owners or operators of plants that emit more than 25,000 metric tons per year of carbon dioxide or equivalent gases (CO2e) to record and submit annual reports to the EPA. The figure is similar to the 20 MW thermal capacity limit for industrial plants set by the European Union under its emissions trading scheme (ETS).

US Legislative Progress

Details of a cap and trade system that would be used to regulate the emissions of green house gases in the United States are incorporated in Title III of the American Clean Energy and Security (ACES) Act. This bill was narrowly approved by the House of Representatives on 26th June and will now proceed to the Senate for review. If passed (possibly as a companion bill), details will have to be reconciled with the ACES Act before a final vote in both chambers and signature by President Obama. It seems unlikely that this process will be completed before December when the US will attend concluding negotiations in Copenhagen for a post-2012 extension to the Kyoto protocol.

The Ownership of Emission Rights

A key issue associated with the operation of a trading scheme is ownership of the pollution rights. A legal challenge has recently undermined performance of the US's cap and trade market in emissions of sulphur dioxide (SO₂) and nitrogen oxides (NO_x), whilst in Europe the right of governments to assign carbon dioxide permits at no cost has been questioned because it could be construed as state aid if recipient organisations are able to generate windfall profits by passing emission costs on to consumers. Such examples have the potential to significantly disrupt the future operation of greenhouse gase trading systems.