Legal Prespectives

Update: Greenhouse gas regulation?
By Todd Guerrero and Mark Hanson | August 01, 2006
Concerns about global warming have received considerable attention lately, especially after the release of Al Gore's movie "An Inconvenient Truth." The U.S. Supreme Court recently accepted review of a case in which the U.S. EPA was asked to regulate greenhouse gases (GHG) as "air pollutants" under the Clean Air Act, and Congress continues to discuss legislation directed at regulating GHG emissions.

According to the U.S. Energy Information Administration (EIA), U.S. man-made GHG emissions come mostly from the combustion of fossil fuels for energy use, including petroleum, natural gas and coal. Of all the GHG, carbon dioxide makes up about 82 percent, while nearly 42 percent of all carbon dioxide emissions originate from the combustion of petroleum, which mostly occurs while powering our vehicles.

Biodiesel, of course, is part of the strategy to end our country's "addiction to oil," and by effect, our country's contribution of GHG emissions. As reported by the National Biodiesel Board (NBB), a recent federal study found that for every unit of energy needed to make biodiesel, 3.2 units of energy are gained. In contrast, the NBB reports that society currently uses 1.2 units of energy to produce one unit of petroleum diesel. Each gallon of biodiesel has the potential to displace four gallons of petroleum.

Regulating GHG, however, is a complicated and controversial matter. First, the greenhouse effect is a natural phenomenon; carbon dioxide and other GHG concentrations in the atmosphere (e.g., water vapor) occur naturally. Second, by definition, GHGs are "global emissions," and therefore it is difficult, if not impossible, to conclude that reduced local emissions would have truly local benefits. Some question the wisdom of attempting U.S. reductions in greenhouse emissions when most of the future increases are expected to come from expanding countries, such as China and India. Nonetheless, pressure continues to mount to implement some sort of GHG regulation.

In 2001, concerned that motor vehicle emissions of GHG contribute to global warming, a dozen states and several environmental organizations asked the EPA to regulate the emissions under the Clean Air Act. The EPA declined, stating that it didn't have the jurisdiction under the act, and even if it did, the EPA would not attempt to do so, given the scientific uncertainty of any linkage between man-made GHG emissions and global warming. In July 2005 in a 2-1 decision, a U.S. Court of Appeals ruled that the EPA was justified in deciding not to regulate carbon dioxide. Several states appealed. This year, on June 26, the U.S. Supreme Court decided to review the lower court's decision. The court will examine whether the EPA has the authority to regulate GHG under the Clean Air Act, and if so, whether it has discretion in doing so.

A Supreme Court determination that the EPA has authority to regulate GHG emissions without any further congressional action would undoubtedly have ramifications on GHG legislation currently being discussed in Congress. One example is a bill sponsored by Sen. Jeff Bingaman, D-N.M. Bingaman's bill, which incorporates the recommendations of the National Commission of Energy Policy (December 2004), would reduce the U.S. carbon intensity, allowing (emissions per unit of gross domestic product) by 2.4 percent per year from 2010 to 2019 and by 2.8 percent per year thereafter. The program would be applied to all fossil fuels and other non-fuel GHG emitters. Based on EIA projections, the emissions targets would require a cumulative 10.5 billion metric tons of carbon dioxide reduction between 2010 and 2025, or 8 percent of covered emissions. The bill also proposes to establish a cap-and-trade program for the trading of carbon dioxide allowances, as well as "safety valve" carbon trading value of approximately $6 per ton. This means any entity needing allowances could purchase them at the maximum price of $6 per ton. Overall, the EIA estimates that the bill would lower the overall national gross domestic product by 0.4 percent by 2025. This bill-as with other similar GHG proposals, including a bill proposed by Sens. John McCain, R-Ariz., and Joe Lieberman, D-Conn.-hasn't come close to enactment, primarily due to economic concerns.

Any sort of GHG regulation will have significant ramifications throughout our energy-dependent economy, including the transportation and heating industries, and other applications in which biodiesel's presence continues to grow. Stay tuned.

Mark Hanson and Todd Guerrero are members of the Energy and Agribusiness Practice Group of Lindquist & Vennum PLLP, a leading provider of legal assistance on bioenergy projects throughout the country. They can be reached at (612) 371-3211.
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