Alert April 23, 2009

EPA Issues Proposed Endangerment Finding for Greenhouse Gas Emissions Under the Clean Air Act

On Friday, April 17, the U.S. Environmental Protection Agency (“EPA”) released a proposed rule under the federal Clean Air Act (“CAA”) that moves the federal government closer to regulating greenhouse gas (“GHG”) emissions.1  The heart of the proposed rule, issued in response to the U.S. Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007), is a determination that GHG emissions from motor vehicles endanger the public health and welfare.

The  proposed rule – commonly referred to as the “Endangerment Finding” – does not contain any measures to limit GHG emissions. However, when formally promulgated, and absent Congressional intervention to adopt a “cap and trade” or other new program to address carbon emissions, the Endangerment Finding obligates EPA to establish such standards under the CAA for certain types of new motor vehicles. Likewise, the findings in the proposed rule will likely trigger the process under the CAA for developing national ambient air quality standards for GHGs and establishing emissions standards for stationary and other mobile sources. In short, the Endangerment Finding is a significant first step toward EPA assuming regulatory control over GHG emissions from a range of sources under the CAA.

The most significant consequence of the Endangerment Finding, however, may occur outside the scope of the CAA. The Endangerment Finding puts significant pressure on Congress to pass comprehensive climate change legislation. Many stakeholders believe that implementation of the command-and-control standards embodied in the CAA would be inefficient and costly. They will continue to lobby Congress and the Administration for a federal cap and trade scheme or possibly a tax on GHGs. Stakeholders and members of Congress who are opposed to any limits on GHGs, however, can be expected to take steps both to delay promulgation of the Endangerment Finding and any subsequent rules under the CAA, and to prevent adoption of any comprehensive new climate change legislation. 

EPA’s Analysis

The Endangerment Finding is based on section 202(a)(1) of the CAA, which states:

The Administrator shall by regulation prescribe (and from time to time revise)...standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in [her] judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.

42 U.S.C. § 7521(a)(1) (emphasis added). The finding that an air pollutant contributes to air pollution that endangers public health or welfare under this and similar sections of the CAA is commonly called an “Endangerment Finding.”

EPA divided its Endangerment Finding into two separate inquiries:

First, the Administrator must decide whether, in her judgment, the air pollution under consideration may reasonably be anticipated to endanger public health or welfare. Second, the Administrator must decide whether, in her judgment, emissions of an air pollutant from new motor vehicles or engines cause or contribute to this air pollution.

Endangerment Finding at 15.

Whether Air Pollution Endangers Public Health or Welfare

To examine the first step of the Endangerment Finding, EPA must identify a type of air pollution and then examine whether that air pollution endangers public health or welfare.

Air Pollution

The relevant “air pollution” that EPA identifies for the purposes of the proposed finding is the set of major GHGs present in the atmosphere – carbon dioxide (“CO2”), methane, nitrous oxide (“N2O”), hydrofluorocarbons (“HFCs”), perfluorocarbons (“PFCs”), and sulfur hexafluoride (“SF6”). Endangerment Finding at 2.  According to EPA, while other gases emitted by human activities may contribute to climate change, these gases “together constitute the root cause of human-induced climate change.”  Id. at 51. These are also the gases subject to control under international climate regimes.2

Endangers Public Health or Welfare

After identifying the type of air pollution relevant to the proposed rule, EPA states that “it is the Administrator’s judgment that current and projected levels of the mix of the six greenhouse gases endanger the public health and welfare of current and future generations.”  Endangerment Finding at 70. While the analysis of public health and welfare is described in more detail in an accompanying Technical Support Document3 that draws heavily on work by the Intergovernmental Panel on Climate Change and the Unites States Climate Change Science Program (“CCSP”), the Endangerment Finding discusses public health and welfare impacts in greater detail. It identifies several impacts that climate change may have on public health and welfare, including more frequent and intense heat waves, more wildfires, and degraded air quality. EPA also points out that by definition, climate impacts are a form of welfare impact. See CAA § 302(h). EPA acknowledges that, on a local level, climate change may have some beneficial effects on aspects of the public health and welfare, such as through more favorable growing conditions for certain crops. However, it nonetheless concludes that, on the whole, climate change has negative effects on public health and welfare under the CAA.

Whether Emissions of an Air Pollutant from New Motor Vehicles or Engines Cause or Contribute to this Air Aollution

In analyzing the second step of the Endangerment Finding, EPA must identify an air pollutant emitted by motor vehicles and determine whether the pollutant causes or contributes to the identified air pollution.

Air Pollutant

Instead of identifying individual air pollutants emitted by motor vehicles, EPA identifies the same class of six air pollutants that may cause or contribute to “air pollution.”  EPA’s decision to identify a single class of air pollutants instead of naming the pollutants individually is not without controversy, and also may be tested in litigation. EPA outlined the reasons for this choice in a PowerPoint presentation that was leaked to the press in March. By identifying a single class of air pollutants, EPA preserves the greatest flexibility in standard setting. Treating the class as a single air pollutant may allow EPA to choose to regulate vehicle emissions based on the global warming potential of the total amount of greenhouse gases each vehicle emits, for example, rather than by creating standards for each gas separately. This could provide engine manufacturers with flexibility in designing cars that minimize climate change impacts.

It is also significant to note that mobile sources only produce four of the six gases that constitute the air pollutant class (all but PFCs and SF6). This affirms that EPA’s definitions of “air pollutant” and “air pollution” will likely have impact beyond this rulemaking. EPA appears to be looking to create a system that will maximize flexibility under the CAA to reduce GHGs from all sources.

Cause or Contribute

In the final piece of the Endangerment Finding, EPA concludes that the air pollutants emitted by mobile sources cause or contribute to the identified air pollution. EPA engages in extensive discussion to show that GHG emissions from mobile sources in the United States are a significant portion of national and global total emissions. For example, EPA states that mobile sources produce 24% of domestic GHGs. Only the electricity generating sector is a larger source category. Further, EPA states that the United States produces about 18% of global GHGs. EPA also emphasizes the “contribute to” language of the statute, interpreting it to mean that it does not have to demonstrate that U.S. mobile sources are the sole cause of climate change.

Next Steps

While the Endangerment Finding is largely silent on its proposed consequences, it has several implications both within and outside the scope of the CAA. Most immediately, the finding requires EPA to establish GHG emissions standards for new motor vehicles and engines under the CAA. However, it also implicates several similar CAA provisions requiring regulation of emissions from other stationary and mobile sources. In addition, the finding will affect the application of other environmental statutes, including the National Environmental Policy Act. Finally, the finding pressures Congress to pass comprehensive climate change legislation.

Clean Air Act

Mobile Sources

The Endangerment Finding obligates EPA to adopt standards for new motor vehicles or engines that fall within the scope of section 202(a). Covered vehicle types include passenger cars, light-duty trucks, motorcycles, buses, and medium/heavy-duty trucks. This obligation is mandatory once the Endangerment Finding is finalized. The statute dictates that EPA “shall by regulation prescribe” relevant standards once the Administrator has made an Endangerment Finding. In fact, in all prior instances, Endangerment Findings have been made concurrent with the issuance of emissions standards. Endangerment Finding at 16-17. Nonetheless, the statute does not explicitly establish a time limit for EPA to set such standards, and appears instead to give EPA discretion on this issue. Nonetheless, EPA indicates in the Endangerment Finding that it is in the process of establishing motor vehicle emissions standards.

Given the state of the nation’s already troubled auto industry, it is not at all clear on what timetable, or through what measures, EPA may proceed to reduce vehicle emissions. Since technology does not yet enable auto greenhouse gas emissions to be captured, emissions standards may effectively require auto manufacturers to make more fuel efficient cars or to use low-carbon fuel.4 EPA could mandate specific technological standards, such as changes in engine design and capacity or the specification of other vehicle characteristics such as weight limits. Alternately, it could set limits on how much GHG a car could emit per mile traveled. However EPA approaches the problem, the requirements ultimately could transform the makeup of new car fleets and raise costs to manufacturers and consumers.

Other Sources Governed by the Clean Air Act

In the Endangerment Finding, EPA expressly limits the applicability of its findings to mobile sources covered by section 202. See Endangerment Finding at 13. However, the Endangerment Finding has clear implications for several other portions of the CAA. At least five other sections of the CAA have various obligations triggered by Endangerment Findings that are nearly identical to the one contained in section 202. For example, section 108 of the CAA requires EPA to establish a list of criteria pollutants used to determine national ambient air quality standards (“NAAQS”) once an Endangerment Finding has been made. Given that the endangerment language of 108 is nearly identical to 202, EPA likely will be challenged to explain why GHG emissions do not require the promulgation of NAAQS under section 108.5  Similarly, a positive Endangerment Finding triggers mandatory responsibilities with respect to stationary source6 and aircraft emissions, and enables EPA to choose to set fuel standards and emissions standards for non-road vehicles. If EPA does not take regulatory action under these other sections, environmental groups may sue again – as they did in Massachusetts v. EPA – to force action.

National Environmental Policy Act

The National Environmental Policy Act (“NEPA”) requires federal agencies to prepare environmental impact statements (“EISs”) assessing the environmental impacts of and alternatives to major federal actions significantly affecting the environment. To date, it has been debatable whether federal actions that result in increased GHG emissions trigger EIS requirements, and whether climate change must be considered as an environmental impact under NEPA. The Endangerment Finding adds potential support to arguments that GHG emissions trigger EIS requirements and that climate change impacts must be considered in EISs. Parties that oppose federal actions can be expected take advantage of the Endangerment Finding as a basis for slowing or halting projects until the net increase of GHG emissions, and alternatives for avoiding such an increase, have been fully evaluated in the EIS.

Climate Change Legislation

The Endangerment Finding puts significant pressure on Congress to pass comprehensive climate change legislation. As discussed above, the Endangerment Finding constitutes the first step for EPA to take action under the CAA to regulate GHG emissions. This authority, however, consists primarily of traditional command-and-control measures, through which EPA would require the installation of specific control technologies on specific industrial sources. Many economists and industry and environmental groups strongly oppose such emissions standards, and advocate a market-based approach, which they assert would promote development of new and innovative methods for GHG reduction and reduce compliance costs.

The recent climate change bill authored by Representatives Henry Waxman (D-CA) and Edward Markey (D-MA), for example, involves setting a national cap on GHG emissions, distributing emissions allowances, and allowing emitters to trade allowances so that those who can reduce carbon emissions at the cheapest rates will have to purchase the fewest allowances on the market or be able to sell unneeded allowances to other regulated sources. In concept, such a cap-and-trade approach would reward innovators who can cut their carbon emissions using cost-effective techniques. The primary alternative – a direct federal tax on GHG emissions – would disincentivize GHG-intensive activities while providing a stable price on GHG emissions for the purpose of future investment decisions. Although, from an economic perspective, the two alternatives may be very similar, popular and Congressional opposition to any major new tax program casts a dark shadow over any GHG legislation based on a direct federal tax.

No matter the approach, most agree that a separate scheme for GHGs would be preferable to CAA regulation, which was designed for more localized “conventional” air pollution. Even though these approaches are generally considered cheaper and more efficient than the CAA, given the political barriers to passing climate change legislation, it is possible that EPA may proceed well down the road to regulation of GHGs under the CAA before Congress can reach agreement on an alternative.

Conclusion


EPA’s proposed Endangerment Finding regarding GHG emissions from mobile sources is the first significant step toward federal regulation of domestic GHG emissions under the CAA. While the proposed rule nominally affects motor vehicle emissions, the findings in the rule may form the basis for the regulation of stationary and mobile source emissions under numerous other provisions of the CAA. EPA’s undertaking to regulate GHG emissions under the CAA has broad economic and environmental implications. It is likely to spur Congress to attempt to pass economy-wide climate change legislation to pre-empt such potentially intrusive and costly controls.