• The American Clean Energy and Security Act of 2009 (passed by the House Representatives and stalled in the Senate) and
• The Clean Energy Jobs and American Power Act of 2009 (proposed and stalled in the Senate)

Current political events and a still recovering economy strongly preclude the likelihood of these bills or any compromise being passed during 2010. In other words “Climate Change/GHG” legislation is dead until after the fall elections.

However, as proponents’ hopes for climate change legislation dimmed and in the absence of Congressional action, the U.S. Environmental Protection Agency (EPA) has stepped up to the plate. Conveniently timed to predate the Copenhagen Summit, on September 22, 2009, the EPA Administrator, Lisa Jackson signed a new rule requiring facilities to begin reporting GHG emissions as early as 2011. According to the EPA:

“Under the rule, suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions are required to submit annual reports to EPA. The gases covered by the proposed rule are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), and other fluorinated gases including nitrogen trifluoride (NF3) and hydrofluorinated ethers (HFE).”

Following closely on the heels of this announcement, on September 30, 2009, Administrator Jackson announced in a speech that the EPA has “… taken a significant step to address greenhouse gas (GHG) emissions under the Clean Air Act.” The Administrator announced a proposed rulemaking requiring large industrial facilities that emit at least 25,000 tons of GHGs a year to obtain construction and operating permits covering these emissions and that these facilities must use “best available control technologies and energy efficiency measures” to minimize GHG emissions when facilities are “constructed or significantly modified.” This includes power plants, refineries, and factories. According to the Administrator, small businesses would be excluded from these requirements.

Finally, on January 12, 2010, Administrator Jackson announced her seven priorities for the EPA. They are:

• Taking Action on Climate Change,
• Improving Air Quality,
• Assuring the Safety of Chemicals,
• Cleaning Up Our Communities,
• Protecting America’s Waters,
• Expanding the Conversation on Environmentalism and Working for Environmental Justice and
• Building Strong State and Tribal Partnerships.

The EPA’s top 2 priorities involve Clean Air/GHG emissions. EPA’s first step is making emitters begin submitting annual reports on GHG emissions mandatory.

However new environmental regulations are often challenged in court and we expect the EPA’s reporting requirement will witness a similar fate. Groans already being heard about why some industries need to report and others not to report are the first such indications of challenges to come. And Republicans, emboldened by their surprise victory in Massachusetts, are already raising the ante. Last week, Alaska Republican Sen. Lisa Murkowski proposed a “resolution of disapproval” seeking to keep the EPA from regulating GHG emissions. This is a rarely used Congressional action authorized in the Congressional Review Act of 1996. If Sen. Murkowski can get both Houses of Congress to pass the resolution and the President to sign it, then the EPA’s rule will not take effect.

This year’s trend? It’s looking like yet another year of “wait and see” with respect to GHG emissions or “cap and trade” regulation and without clarity, all that’s left for those most likely affected by potential legislation or regulation is to continue reading the political tea leaves. UtiliPoint will continue to closely monitor events in Washington D.C. and at the state level, and will report on important developments.

While COP15 probably fell short of expectations, some of the high-minded agenda items, such as a proposal to create an international body for monitoring national commitments having the power to penalize those not meeting their targets, were always going to prove a tricky issue. As was the idea of essentially making developed countries pay ”reparations” to the developing world for their CO2 emissions to date. In reality, the deal still has to be ratified by the broader United Nations (UN) and that may not prove easy either.

So Exactly What Was Achieved and What Might it Mean?

As an observer, it seems to me that COP15 will be seen as the tipping point for this issue. The active involvement of the United States, including the central role of President Obama in reaching a deal, suggests that this U.S. administration is taking the issue seriously. Secondarily, there does seem to be a consensus among many nations to do something. The question remains, “How much and exactly what!?” COP15 essentially laid some of the basic groundwork to be followed through on during 2010 and perhaps be consolidated at the next COP meeting in Mexico City late next year.

What all of this means is actually still unclear at any level of specificity, but with the actions of the U.S. Environmental Protection Agency claiming they have the right to regulate greenhouse gas (GHG) emissions, and the apparent willingness of the Obama Administration to take a more active role, we do appear to be moving towards the possibility of regulatory certainty that will enable and require U.S. companies to act on CO2. We would anticipate that U.S. companies will need to take the CO2 issue more seriously and both monitor political and regulatory activity closely while preparing for those regulations by at least inventorying their CO2 emissions and sources.

The Other Side of COP15

The United States may also be seeking a more active role because there is a window of opportunity for the United States to provide leadership in new technologies, new industries, new jobs and wealth which otherwise may go elsewhere if the United States takes a back seat on this issue. Living outside of the United States, it is transparently obvious that this (renewable energy, energy efficiency, cap and trade market development etc.) is a major focus for investment and opportunity. The United States is in danger of being left behind—if not in substance then certainly in terms of perception. Despite that, sitting on this side of the pond it seems natural to me that the United States ought to lead such efforts and that the many of the new technologies and ideas required ought to originate there. In short, this isn’t simply an environmental issue which you either agree with or not (often emotively). It is also about jobs, technology leadership and wealth creation.

Summary

I enjoyed covering COP15. While I personally am skeptical about CO2 being responsible for climate change, it has helped me to see the tremendous potential of a new paradigm in which our reliance on fossil fuels could finally be broken. As an analyst on the commodities side, I know we are already at the point of tight supply across most commodities and raw materials. We are rapidly approaching a time when access to reasonably priced raw materials will be of even greater strategic importance. COP15 was a success as it has, I think, truly began the process of focusing global attention on, not just energy efficiency, but on shifting the paradigm altogether.

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