The Challenge of Carbon Dioxide Regulation and Limitation

June 13, 2009
A look at the new rules and what they mean for industry

"Green" regulation will soon require major changes from American industry, including carbon dioxide and other greenhouse gas tracking and reduction. The federal rules in place and proposed already require greenhouse gas assessment, and the anticipated restrictions will be costly to companies not able to reduce emissions. Plant operators are going to get a lot of questions and will have to innovate.

The following are my answers to frequently asked questions.

What is EPA Saying About Carbon Dioxide?

A. The United States Environmental Protection Agency (EPA) has proposed finding that carbon dioxide is a danger to human health and the environment. This finding was issued earlier this year by EPA Administrator Lisa Jackson, under the EPA's Clean Air Act authority to regulate harmful emissions. The EPA has made a formal finding that there is a significant danger due to what it sees as the capacity of carbon dioxide, a so-called "greenhouse gas," to retain and gain some heat from incoming or reflected energy waves, which might otherwise dissipate into outer space from the surface of the Earth. The EPA says that this is producing unwanted and dangerous climate change. Information on the finding is here: EPA Finding.

Is Carbon Dioxide Really a Threat?

A. The EPA's finding has been hailed by those convinced that the planet is threatened with a catastrophic warming. See e.g. The EPA, relying largely on studies of the Intergovernmental Panel on Climate Change (IPCC), under United Nations auspices, indicates that it finds clear evidence of harm to human health and property and that the recent rise in carbon dioxide levels is mostly man made. The summary of the science that the EPA asserts is the basis for its finding can be found at: EPA Science Summary. There are rather significant contrary skeptical views, some from renowned scientists, indicating that much, if not most, of the recent rise in carbon dioxide is not man made, and that carbon dioxide does not have much effect on the Earth's temperature, in any event. See e.g. Nongovernmental International Panel on Climate Change Study The authors of the Nongovernmental International Panel on Climate Change Study reviewed the studies relied on by the IPCC and other data to reach their contrary conclusions.

What Will Happen Next?

A. The endangerment finding is subject to public comment. Views in favor of or against the finding are being submitted to EPA for consideration. The deadline for comments is currently June 23, 2009. If the finding is confirmed, which is likely, regulation of one sort or another under the Clean Air Act becomes virtually certain.

The EPA also made a determination that new motor vehicle engines are a cause of the harmful gases. So they will face immediate regulation. If, as is possible, the EPA later proceeds to demand carbon dioxide control under the Clean Air Act not only from motor vehicles, but also from stationary sources, American industry and commerce will face regulations that could require substantial process changes.

Comments on whether carbon dioxide is a danger can be submitted by following directions here: Comment to EPA. http:// The EPA may be willing to consider late comments, although that is not certain.

What Is Carbon Control Legislation, Such As Cap and Trade?

A. Carbon control legislation involves laws which mandate that industry, business and other sectors of the private economy keep track of and reduce their "greenhouse gas" emissions. The principle gases to be controlled are carbon dioxide, methane and a few other less common gases. One form such legislation has taken is so-called "cap and trade," whereby a gross limit or "cap" is set, and regulated entities must operate within their subject caps. Businesses can comply with these laws by purchasing credits and/or reducing emissions. If they make extra reductions, some of the laws would allow for the sale of their credits. The government would ratchet down the cap over time to reach an overall goal of carbon emission reduction. An alternative form of carbon legislation is a carbon tax, which simply taxes an entity based on its emissions.

The Waxman-Markey bill (H.R. 2454), a climate change and energy bill that made its way out of committee and is now under consideration by the United States House of Representatives, will price carbon emission credits, impose a cap and trade system, and mandate renewable energy standards and energy efficiency requirements for American business and industry. Proponents of the bill claim that the $900 billion or so raised from carbon credit sales will be used to provide a manageable transition for the economy that will not rely so much on fuel combustion for energy. Waxman-Markey Bill Summary.

What About Carbon Emission Reporting Requirements?

A. In March 2009, the EPA proposed the first national comprehensive system for reporting emissions of carbon dioxide and other greenhouse gases produced by major sources in the United States. The regulation is open for comment. If adopted it will require that companies with significant greenhouse gas emissions keep careful tabs on those emissions and report them regularly to the EPA. If this proposal is approved as a rule, as is expected, it will likely provide data that constitute a major basis for future carbon control. Data collection required under the proposed rule is to begin on January 1, 2010. Reporting will be due early in 2011. The data will have to be plant- and operation-specific. Failure to report, and inaccurate reporting, will result in significant penalties. Companies should therefore immediately start gaining an understanding of this issue. Further information is available here: GHG Reporting Rules.

What Will Cap and Trade Likely Mean?

A. Essentially, the adoption of cap and trade legislation will result in businesses, especially transporters, manufacturers and electric utilities having to find ways to cut their use of combustion of fossil fuels for energy or processing, either directly with process change, or indirectly by assuring they receive energy with less dependence on combustion for its source. In some cases this will be a serious and rather expensive challenge. Since the issue is not purely a matter of efficiency, the use of non-carbon energy sources may actually cost more than businesses may realize. A recent report so states: Costs to Industry Report.

Are There Other Important Climate Related Regulations in the United States?

A. In the United States, for publicly owned businesses regulated by the United States Securities and Exchange Commission (SEC), the SEC rules require disclosure of material business information. They provide for a company analyzing new trends, possible legislation, future regulatory costs, and also physical threats to their assets and operations from reasonably foreseeable causes. Many argue that these rules require mandatory inclusion of an explanation of the effects of "climate change" on the business, both pro and con. Failure to disclose material information can expose a company to SEC sanctions or shareholder complaints.

These requirements are fascinating, since, in the context of climate change, there is often an implicit assumption that climatic change will occur more or less in the direction of the global warming that carbon control advocates foresee. However, there are in existence competent scientific papers that predict global cooling, rather than warming. Moreover, there is confusion in the assumptions, since climatologists generally see colder temperatures as producing more violent storms, whereas some global warming alarmists assert the opposite. ASTM International, one of the largest voluntary standards development organizations in the world, has a draft standard on this subject worth noting. It is described here: ASTM Draft Rule Description _documents/UploadLibrary/Upload728.pdf. A number of states, including California, have individual state requirements that business needs to be aware of as well.

Will Carbon Emission Reduction Save the Planet From Warming?

A. Opinions are split as to whether carbon emission reduction will save the planet from warming. My personal view is that carbon reduction by industry around the world will have little effect on the planet, but that it will be extremely costly. The planet could grow warmer with or without it, or the planet could grow cooler with or without it. In other words, based on my review of the literature, carbon dioxide does not control climate. If, as some recent science suggests, man's activity is only responsible for, 20 percent of the rise in carbon dioxide levels over the past 50 years, then there is little or no leverage for man to utilize, even if one asserts a direct cause-effect relationship between carbon dioxide and worldwide temperature. For serious discussions of these and other complexities of climate from a scientific, albeit skeptical, viewpoint, see: International Climate and Environmental Change and Assessment Project and Science & Public Policy Institute Reports are available at: RealClimate

Would Not a "Green Economy" Be a Better and Environmentally Improved Economy?

A. According to most "green advocates" the effects of "green" efforts will be a cleaner environment along with a renewed, sustainable economy. Unquestionably, some "green" measures will save people money in the long run. However, others maintain that carbon control legislation is unnecessary, unworkable and extremely costly. Energy expenditure increases of around $3,000 per household are commonly projected, although tax credits and other proposals are being discussed to mitigate such costs. In California, where some "green" measures are already in effect, critics recently argued that the economic cost projections of green advocates were turning out to be significantly understated.

Harvey M. Sheldon ( is a partner in the Environmental practice group of Hinshaw & Culbertson LLP, based in Chicago. He has extensive experience in the field of environmental law, including both counseling and litigation. Hinshaw & Culbertson LLP is a national law firm that offers a full-service practice, with an emphasis in litigation, corporate and business law, environmental, intellectual property, labor and employment law, professional liability defense, and wealth preservation and taxation matters.

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