Bloomberg: States May Look to California for Ways To Meet EPA Rule

Bloomberg BNA — California and other states that have already adopted climate policies have an advantage over states that waited for proposed federal rules mandating plans to curb carbon dioxide emissions from existing power plants, California Air Resources Board Chairman Mary D. Nichols said June 2.


As a result, neighboring states may want to look at what California is doing, Nichols told Bloomberg BNA, referring to rules proposed by the Environmental Protection Agency that would require existing fossil fuel-fired power plants to cut emissions of carbon dioxide by 30 percent from 2005 levels by 2030.


California has always reached out to other states and even nations to collaborate on how to address climate change and held the strategies it has developed up as a template for other governments, she said.


“California’s leadership in climate policies is reflected in this proposed rule,” Tim O’Connor, an attorney at the Environmental Defense Fund, told Bloomberg BNA June 2.


Determining the impacts of the EPA’s proposed rules on California’s climate policies, including its greenhouse gas emissions cap-and-trade program, will take some time, Nichols said.


EPA ‘Framework Looks Very Good.’


“We’re going to have to study the proposal very carefully over the coming months,” she said.


“The framework looks very good, and we’re pleased that EPA took so many of our suggestions,” she said, citing examples of recommendations from California and other states that EPA use a systemwide approach to regulate the emissions and provide incentives for states to work together on joint plans.


In 2012, electricity generation accounted for 21 percent of California’s greenhouse gas emissions, 10 percent from power imported from out-of-state sources, according to state data. Transportation was, and remains, the state’s largest source of carbon emission, weighing in at 37 percent in 2012.


Proposal Validates California Policies


In many ways, the proposed rule is “a validation” of the “tremendous success California has had” with its policies, from the state’s long-standing energy efficiency standards, its 33 percent renewable portfolio standard, 2006 law setting the first greenhouse gas emissions standard for power plants and the cap-and-trade program, O’Connor said.


Early actors, such as California and other states and entities that “invested early and went big” are already saving consumers money with reduced energy costs, he said.


Based on CARB data, California could meet EPA’s 30 percent emissions reduction requirement five years ahead of the 2030 deadline, O’Connor said.


Latham & Watkins partner Robert Wyman, however, was more cautious, saying that the proposals may pose some risks for California. It appears “there are significant reductions targeted for California in the EPA 111(d) plan from now through 2030,’’ Wyman said.


“One important question for California will be whether the EPA plan takes into adequate account the loss of some zero-carbon nuclear generation from the San Onofre Generation Station (SONGS) and whether the state’s anticipated increased electrification of industry and transportation sectors will make it difficult to meet EPA’s power sector targets for California,” Wyman told Bloomberg BNA June 2.


Renewed Interest in Regional Market?


While nothing in the proposal requires states to implement market-based programs, the rule may spur renewed interest in cap-and-trade systems, CARB’s Nichols said.


“Cap-and-trade is a relatively simple approach, and California’s program has already shown benefits,” Nichols said. “Even some states that had considered cap-and-trade and then dropped interest will likely take another look.”


Under way since January 2013, California’s economywide cap-and-trade program covers about 350 businesses with 590 facilities.


Electricity generating plants and large industrial facilities were the first to fall under the scope of the program, with distributors of natural gas and transportation fuels set to be subject to the cap next year.


Initially, California had envisioned other states would join its trading program, especially its partners in the Western Climate Initiative, a group that included Arizona, New Mexico, Oregon, Washington, Montana and Utah and that the Canadian provinces of Ontario, British Columbia, Manitoba and Quebec joined to collaborate on climate policies. The economic recession and political shifts prompted most of the partners to back away from a plan to build a broad regional carbon market.


Quebec, however, moved forward with its cap-and-trade program and, as of Jan. 1, linked its program with California’s.


As a result, the Western Climate Initiative has become largely inactive, although a nonprofit entity did grow out of the effort to handle to administrative duties of the California-Quebec trading system.