Efforts to address global climate change by regulating greenhouse gas emissions continue to increasingly impact national renewable fuel policy.

The new renewable fuels standard as part of the Energy Independence and Security Act of 2007, which now requires a minimum of 9 billion gallons of renewable fuel in 2008 and 36 billion gallons in 2022, was enacted in part to reduce greenhouse gas emissions in the transportation sector. The bill also contains specific greenhouse gas reduction goals for renewable fuels. For instance, renewable fuels produced at new biorefineries are required to reduce by at least 20 percent the lifecycle greenhouse gas emissions relative to the lifecycle emissions from gasoline and diesel. More stringent requirements are included for advanced biofuels, biomass-based diesel and cellulosic biofuel. As described below, the act's requirement to increase the corporate average fuel economy standards to 35 miles per gallon for passenger cars by 2020 will have a significant impact on renewable fuel policy in the years to come.

As Congress continues to look at further greenhouse gas regulation, much of the greenhouse gas initiatives driving renewable fuel policy are coming from the states, in particular California.

Under the Clean Air Act, states generally cannot adopt motor vehicle emissions standards. However, the act includes a special condition that allows California to adopt separate vehicle emission regulations, but only if the EPA grants the state a waiver. The act also allows other states to adopt the California standards as their own if the waiver is granted. Seventeen states had indicated that they too are interested in developing their own vehicle greenhouse gas regulations.

Over the years, California has used the special provision in the Clean Air Act to establish ambitious vehicle emission reduction programs for nitrogen oxides, particulates and other vehicle emissions. For some time, the state has also sought to implement greenhouse gas emission regulations that establish declining fleet average greenhouse gas emissions standards for passenger vehicles, beginning with 2009 model year sales. In December 2005, the California Air Resources Board wrote the U.S. EPA seeking a waiver of preemption under the Clean Air Act for its proposed vehicle greenhouse gas rules.

In its letter and accompanying materials, California took the position that its greenhouse gas emission reduction proposal should be exempt from the Clean Air Act because the EPA has thus far declined to set federal standards for greenhouse gases and because of "serious air pollution problems unique to the state."

However, on Dec. 19, the same day President George W. Bush signed the Energy Independence and Security Act, the EPA announced that it was denying California's request for separate vehicle greenhouse gas regulation. In its response to Gov. Arnold Schwarzenegger, the EPA found that the state's request was far different than previous requests. Unlike emissions covered by prior requests, the EPA noted that greenhouse gases are fundamentally global in nature and contribute to the global climate change problem that "poses challenges for the entire nation and indeed the world." Unlike the emissions covered by past requests, the EPA found that greenhouse gas emissions "harm the environment in California and elsewhere regardless of where the emissions occur" . . . and that therefore the "challenge is not unique to California." Importantly, the EPA cited the Energy Independence and Security Act, including its 35-mpg CAFE standard, as a reasonable "national approach to this national challenge" and stated that a national approach was preferable to a piecemeal, state-by-state approach.

The EPA's denial of California's request is expected to have wide implications beyond California and sectors of the economy beyond transportation. California, other states and environmental groups have announced they will seek judicial review of EPA's decision not to grant California its request for waiver.

Todd J. Guerrero is an attorney practicing with the Agribusiness & Energy group at Lindquist & Vennum PLLP, a leading provider of legal assistance on renewable energy projects across the country. For more information, visit www.lindquist.com or call (612) 371-3211.