Regulation of greenhouse gases under the Clean Air Act

Section 202(a)(1) of the Clean Air Act requires the Administrator of the EPA to establish standards "applicable to the emission of any air pollutant from…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" (emphasis added).[3] On October 20, 1999, the International Center for Technology Assessment (ICTA) and several other parties (petitioners) petitioned the EPA to regulate greenhouse gases from new motor vehicles under the Act.[4] The petitioners argued that carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), and hydrofluorocarbons meet the definition of an air pollutant under section 302(g) of the Act, and that statements made by the EPA, other federal agencies, and the United Nations Intergovernmental Panel on Climate Change (IPCC) amounted to a finding that these pollutants are reasonably anticipated to endanger public health and welfare. Based on these factors, the petitioners asserted that EPA had a mandatory duty to regulate greenhouse gases under section 202 of the Act, and asked the agency to carry out that duty.[4]

On September 8, 2003, EPA denied the ICTA petition on the ground that it did not have authority under the CAA to promulgate regulations to address global climate change and that CO₂ and other GHGs therefore could not be considered air pollutants under the provisions of the CAA, including section 202.[5] The agency further stated that even if it had the authority to regulate GHGs from motor vehicles, it would decline to do so as a matter of policy. The agency maintained that regulating motor vehicle GHG emissions would neither address the global problem effectively, nor be consistent with President Bush's policies for addressing climate change, which centered on non-regulatory efforts such as voluntary reductions in GHGs, public-private partnerships aimed at reducing the economy's reliance on fossil fuels, and research to probe into scientific uncertainties regarding climate change.[6]

The agency's action on the ICTA petition set the stage for a prolonged legal battle, which was eventually argued before the Supreme Court on November 29, 2006.

In a 5-4 decision in Massachusetts v. Environmental Protection Agency, the Supreme Court held that "greenhouse gases fit well within the Act's capacious definition of 'air pollutant' " and that EPA therefore has statutory authority to regulate GHG emissions from new motor vehicles.[7] The court further ruled that "policy judgments have nothing to do with whether greenhouse gas emissions contribute to climate change and do not amount to a reasoned justification for declining to form a scientific judgment." In EPA's view, this required the agency to make a positive or negative endangerment finding under Section 202(a) of the CAA.[8]

On December 7, 2009, the EPA Administrator found that under section 202(a) of the Clean Air Act greenhouse gases threaten both the public health and the public welfare, and that greenhouse gas emissions from motor vehicles contribute to that threat. This final action has two distinct findings, which are:

1) The Endangerment Finding, in which the Administrator found that the mix of atmospheric concentrations of six key, well-mixed greenhouse gases threatens both the public health and the public welfare of current and future generations. These six greenhouse gases are: carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF₆). These greenhouse gases in the atmosphere constitute the "air pollution" that threatens both public health and welfare.

2) The Cause or Contribute Finding, in which the Administrator found that the combined greenhouse gas emissions from new motor vehicles and motor vehicle engines contribute to the atmospheric concentrations of these key greenhouse gases and hence to the threat of climate change.

The EPA issued these endangerment findings in response to the 2007 supreme court case Massachusetts v. EPA, when the court determined that greenhouse gases are air pollutants according to the Clean Air Act. The court made the decision that the EPA must determine whether greenhouse gas emissions from new motor vehicles "cause or contribute to air pollution which may be reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision" (EPA's Endangerment Finding).

The EPA determined that, according to this decision, there are six greenhouse gases that need to be regulated. These include:

• carbon dioxide (CO₂)
• methane (CH₄)
• nitrous oxide (N₂O)
• hydrofluorocarbons (HFCs)
• perfluorocarbons (PFCs)
• sulfur hexafluoride (SF₆)

This action allowed the EPA to set the greenhouse gas emission standards to light-duty vehicles proposed jointly with the Department of Transportation's Corporate Average Fuel Economy (CAFE) standards in 2009.[9]

The Center for Biological Diversity and 350.org had requested earlier in December that the EPA set the NAAQS for carbon dioxide at no greater than 350 ppm. In addition to the six pollutants mentioned in the lawsuit, they proposed that nitrogen trifluoride (NF₃) be added as a seventh regulated greenhouse gas.[10]

"Suddenly, combustion of fossil fuels for transportation, power generation, industrial processes, and heating our homes has been abruptly transformed from a great solution to a huge problem…. We have based our cities, or businesses, and our lifestyle on the convenience and relatively low cost of gasoline, coal-fired electricity, and plastic. It's no wonder that the specter of global warming appears so devastating: it threatens the roots of our culture."[12]

While there is a general consensus among the scientific community that anthropogenic GHG emissions are forcing changes in the global climate system,[13][14] there is much less agreement about what should be done to address the problem because both the causes and potential solutions involve significant economic, political, and as Ingrid Kelley points out, social and cultural issues. Addressing climate change has been, and will continue to be particularly difficult for the United States because the U.S. was born during the Industrial Revolution and its growth has been powered by fossil fuels.[12] Coal, for example, was first commercially mined in the United States in 1748, and within a few years after the ratification of the U.S. Constitution, Pittsburgh became the first industrial center in the country to use coal-fired steam power in its manufacturing operations. Electric generating plants first used pulverized coal in 1918, and that same basic method of generation is still in use today.[12] In 2009, coal was used to produce 45% of electricity in the U.S.[15] and that proportion is projected to remain more or less constant through 2035.[16] Largely because of the Country's reliance on coal, electricity generation accounted for 34% of U.S. GHG emissions in 2007, followed by transportation sources (28%) and other industrial sources (19%). In 2005, the United States emitted 18% of the world's total GHG emissions, making it the second largest emitter after China.[17] While the technology that powers our "fossil fuel culture"[12] is part of the climate change problem, and more sustainable technologies will undoubtedly be part of the solution, another important factor in our efforts to stop climate change is the "blindness" that our economic system exhibits toward environmental degradation.[18]

According to Al Gore, "[f]ree market capitalist economics is arguably the most powerful tool used by civilization" but it is also, "the single most powerful force behind what seem to be irrational decisions about the global environment."[18] The force to which Gore refers draws strength from the fact that environmental amenities such as clean air and other public goods do not have a price tag and are feely shared by everyone. The lack of price mechanisms to signal the scarcity of such goods means there are no economic incentives to conserve them. In what is known as the tragedy of the commons, rational individuals are motivated to over-utilize these resources for short-term economic gain despite the potential for collective action to deplete the resource or result in other adverse consequences in the long run.[19] What this means for GHGs is that their effects on climate stability are often disregarded in economic analyses as externalities. As a frequently used measure of a country's well-being, the GDP, for example, places value on the goods and services produced within a country but fails to account for the GHG emissions and other environmental effects created in the process.[18][20] Nations are thus incentivized to utilize their resources and promote consumption at ever increasing rates despite the consequences of those actions on atmospheric concentrations of GHGs and climate stability. In this respect, the ongoing UN climate change negotiations are fundamentally about the economic future of the nations involved.[21]

On December 15, 2009, EPA Administrator Lisa P. Jackson made two important findings under section 202(a) of the CAA:[22]

1. that six greenhouse gases in the atmosphere – CO₂, CH₄, N₂O, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride – may reasonably be anticipated to endanger both public health and public welfare; and
2. that GHG emissions from mobile sources covered under CAA section 202(a) contribute to the total greenhouse gas air pollution, and thus to the problem of climate change.

In the Agency's view, the body of work produced by the IPCC, the U.S. Global Change Research Program, and the National Research Council of the U.S. National Academy of Sciences represents the most comprehensive, advanced, and thoroughly reviewed documents on the science of climate change. Accordingly, the Administrator relied primarily upon assessment reports and other scientific documents produced by these entities in reaching her conclusions.[23]

The IPCC defines "climate change" as "a change in the state of the climate that can be identified (e.g. using statistical tests) by changes in the mean and/or the variability of its properties, and that persists for an extended period, typically decades or longer. It refers to any change in climate over time, whether due to natural variability or as a result of human activity."[24] In its latest assessment on climate change, the IPCC found that "warming of the climate system is unequivocal" and that the anthropogenic component of this warming over the last thirty years has likely had a discernible influence on observed changes in many physical and biological systems.[24] The properties of greenhouse gases are such that they retain heat in the atmosphere, which would otherwise escape to space. GHGs accumulate in the atmosphere when they are emitted faster than they can be naturally removed, and that accumulation prompts changes in the climate system. Once emitted into the atmosphere, GHGs influence the Earth's energy balance for a period of decades to centuries.[25] Consistent with their long-lasting impacts, the IPCC found that even if the concentrations of all GHGs had been kept constant at year 2000 levels, a further warming of approximately 0.1 °C per decade would be expected.[24] The fact that GHGs are long-lived in the atmosphere also means that they become well mixed across the globe – hence the global nature of the problem.[26]

After considering the scientific evidence before her, Administrator Jackson found that greenhouse gases could be reasonably anticipated to endanger the health of the U.S. population in several ways. They are:[27]

• Direct temperature effects – Heat is the leading cause of weather-related deaths in the U.S. and severe heat waves are projected to intensify over the portions of the country where these events already occur.
• Effects on air quality – Ground level ozone (the main component of smog) can induce chest pain, coughing, throat irritation, and congestion, and it can exacerbate respiratory illnesses such as bronchitis, emphysema, and asthma.[28]

Elevated temperatures associated with climate change are expected to intensify ground level ozone formation in polluted areas of the U.S.

• Effects on extreme weather events – The IPCC reports evidence of an increase in intense tropical cyclone activity in the North Atlantic since approximately 1970.[24] Increases in tropical cyclone intensity are associated with increased death, injury, water- and food-borne disease, and post-traumatic stress disorder.
• Effects on climate-sensitive diseases – Expected changes in the climate will likely increase the spread of food- and water-borne pathogens among susceptible populations.

Administrator Jackson also found that GHGs could be reasonably anticipated to endanger public welfare in the following ways:[29]

• Agriculture – While higher atmospheric CO₂ concentrations may stimulate plant growth, climatic changes may also promote the spread of pests and weeds, increase ground level ozone formation (which is detrimental to plant life), and change temperature and precipitation patterns. Uncertainty remains about the extent to which these factors will balance each other but the evidence suggests a net disbenefit, with the potential for future crop failure.
• Forestry – As with agriculture, uncertainties remain but there is evidence of an increase in the size and occurrence of wildfires, insect outbreaks, and tree mortality in parts of the U.S. These effects are expected to continue with future changes in climate.
• Water resources – The effects of climate change on the water cycle have already been observed. For example, there is "well-documented evidence of shrinking snowpack due to warming" in the western U.S. These changes in snowfall are likely to affect areas such as California that rely on snowmelt for their water supply. Climate change is also expected to impact the water supply in other areas of the country, increasing competition for its use.
• Sea level rise – The greatest risk to the U.S. associated with sea level rise is the extent to which it will exacerbate storm-surge flooding. Areas along the Atlantic and Gulf coasts including New Orleans, Miami, and New York City are particularly vulnerable to such effects.
• Energy – Climate change is expected to increase peak electricity demand. This may further constrain water resources as power plants rely heavily on water for cooling. A large portion of U.S. energy infrastructure is located in coastal areas and may be at risk to damage from flooding.
• Ecosystems and wildlife – Changes in habitat range, timing of migration, and reproductive behavior have already been observed and are expected to increase with further warming. Ocean warming and acidification are expected to impair marine species such as corals, and the loss of arctic sea ice will reduce habitat for a number of species. Spruce-fir forests are, "likely to disappear from the contiguous United States."

EPA's endangerment finding in 2009 did not impose any limitations on GHGs by itself, but was instead a prerequisite for establishing regulations for GHGs from mobile sources under CAA section 202(a).[30] Actual emissions requirements came later on May 7, 2010 when the EPA and the National Highway Traffic Safety Administration finalized the Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards Rule (LDV Rule).[31] The LDV Rule applies to light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles (e.g., cars, sport utility vehicles, minivans, and pickup trucks used for personal transportation) for model years 2012 through 2016. The EPA estimated that this rule will prevent 960 million metric tons of CO₂-equivalent emissions from being emitted to the atmosphere, and that it will save 1.8 billion barrels of oil over the lifetime of the vehicles subject to the rule.[32]

The LDV Rule accomplishes its objectives primarily through a traditional command-and-control approach. The most substantial requirements come in the form of two separate CO₂ standards (one for cars and the other for trucks, expressed on a gram per mile basis) that apply to a manufacturer's fleet of vehicles. To determine compliance with the requirements of the rule, manufacturers must calculate a production-weighted fleet average emissions rate at the end of a model year and compare it to a fleet average emission standard. The emission standard for a manufacturer in a given model year is calculated based on the footprints of the vehicles in its fleet and the number of vehicles produced by the manufacturer at each footprint. The standards are designed so that they gradually become more stringent each year from 2012 to 2016.[33] The LDV Rule also includes standards of 0.010 gram/mile and 0.030 gram/mile for N₂O and CH₄, respectively. These standards were primarily put in place as an anti-backsliding measure as N₂O and CH₄ are already emitted from motor vehicles in relatively low amounts.[34]

Although prescriptive regulation is among the most common policy approaches for environmental regulation,[19] it is not without its drawbacks. Prescriptive regulations are often criticized, for example, as being overly rigid and uneconomical because they do not necessarily encourage regulated entities to reduce emissions beyond the minimum standards and they may not achieve the intended benefits at the lowest possible cost.[19][35] The LDV Rule addresses these criticisms in a number of ways. First, as noted above, the emissions standards gradually become more stringent over time. This not only prevents stagnation that might occur with a single standard, it gives manufacturers sufficient lead time to adapt to the most stringent requirements. In addition, the LDV Rule includes a number of regulatory flexibilities, the most significant of which is a program that allows for banking and trading of credits. In general terms, the LDV Rule allows manufacturers to bank emissions credits in instances where their fleet average CO₂ emissions are less than the applicable standard. Manufacturers can then use the credits themselves where certain vehicle models fall short of the standard, or they can sell the credits to another manufacturer. According to EPA, these banking and trading provisions promote the environmental objectives of the rule by addressing issues associated with technological feasibility, lead time, and cost of compliance with the standards.[36]

With one exception, the responsibility for regulating emissions from new motor vehicles under the Clean Air Act rests with the EPA. Section 209(a) of the Act states in part: "No state or any political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part."[37] Section 209(b) of the Act provides for the exception; it grants the EPA the authority to waive this prohibition for any state that had adopted emissions standards for new motor vehicles or engines prior to March 30, 1966.[38] California is the only state that meets this eligibility requirement and is thus the only state in the nation, which can seek to obtain a waiver from the EPA. In order to obtain a waiver and establish its own emissions requirements, the State must demonstrate, among other things, that its standards will be at least as protective as public health as any applicable federal standards. Once California obtains a waiver for a particular standard, other states may generally adopt that standard as their own.

On September 24, 2004, the California Air Resources Board (CARB) adopted emissions standards for GHGs from new passenger cars, light-duty trucks and medium-duty vehicles. Not unlike the LDV Rule, California's regulations establish standards for CO₂ equivalent emissions from two classes of vehicles on a gram per mile basis. Also like those in the LDV Rule, California's standards become more stringent over time. CARB initially requested a waiver from EPA for these standards on December 21, 2005. EPA denied that request on March 6, 2008, stating that the State did not need the standards to address compelling and extraordinary conditions (as is required by CAA section 209(b)(1)(B)) because the effects of climate change in California were not extraordinary compared to the effects in the rest of the country.[39] Upon reconsideration, EPA later withdrew its previous denial and approved California's waiver request on July 8, 2009.[40] Fifteen states have adopted California's standards.[41] Further, California and EPA have worked together so that the two programs converge and allow automakers to produce a single national fleet, which complies with both programs.[42]

State regulations outside the Clean Air Act do affect emissions, especially gas tax rates. As of 2020, several states in the northeastern United States were discussing a regional cap and trade system for carbon emissions from motor vehicle fuel sources, called the Transportation Climate Initiative.[43]

"New Source Review" (NSR) is a permitting program established by the CAA, which requires the owners or operators of "major" stationary sources of air pollution to obtain permits prior to the construction or modification of those sources. The major source NSR program has two parts:[44]

1. the Prevention of Significant Deterioration (PSD) Program, which applies to a) sources located in areas of the country that meet the National Ambient Air Quality Standards (NAAQS), and b) to pollutants for which there are no NAAQS;[45] and
2. the Nonattainment New Source Review (NNSR) program, which applies to sources located in areas that do not meet the NAAQS.

PSD permits are issued by EPA or a state or local government agency, depending on who has jurisdiction over the area in which the facility is located. In order to obtain a PSD permit, applicants must demonstrate that the proposed new major source, or major modification to an existing source, meets several regulatory requirements. Among those requirements are the use of the Best Available Control Technology (BACT) to limit air pollutant emissions, and a demonstration through air quality modeling that the source or modification will not cause or contribute to a violation of the NAAQS.

Under federal regulations, the PSD program applies only to sources that emit one or more "regulated NSR pollutants."[46] In 2008, EPA Administrator Stephen Johnson issued a memorandum to document the Agency's interpretation of this regulatory text. In particular, Administrator Johnson stated that a pollutant becomes a "regulated NSR pollutant" when a provision of the Act, or regulations established under the Act, require actual control of that pollutant but not when the Act or such regulations simply require monitoring or reporting of emissions of that pollutant.[47] Upon request to reconsider this interpretation, EPA Administrator Lisa Jackson confirmed that that Agency would continue to apply the interpretation expressed in the 2008 memorandum but she further clarified that the time at which a pollutant becomes a "regulated NSR pollutant" is when the requirements that control emissions of the pollutant take effect, rather than upon the promulgation of those requirements.[48] Because the LDV Rule requires vehicle manufacturers to meet applicable GHG standards for model year 2012 vehicles, and January 2, 2011 is the first day upon which model year 2012 vehicles can be introduced into commerce, the six GHGs regulated by that rule became regulated NSR pollutants as of January 2, 2011 for purposes of the PSD program.[49]

Among the components of the PSD program, the one that primarily applies to GHGs is the requirement that source owners or operators utilize BACT to limit GHG emissions from the source. Permitting authorities generally establish BACT through a five-step analytical process, the end result of which is the selection of one or more methods to reduce emissions of the pollutant in question, and the setting of one or more emission limits and operational restrictions for the emissions units undergoing review. Because the PSD program and its requirement to utilize BACT apply to any new source or modification at an existing source that meets established applicability criteria, the PSD program represents a traditional command-and-control approach to the regulation of GHGs. However, BACT is established by a permitting authority on a case-by-case basis considering site- and source-specific factors. During the course of a BACT analysis, a permitting authority may, for example, temper the stringency of the final emission limit if there are compelling adverse economic, energy, or environmental considerations.

The PSD program is complex, and obtaining a permit can be costly for both the applicant and the permitting authority. It has been estimated, for example, that permit applicants expend 866 hours of labor and $125,120 on the average PSD permit. The administrative cost to the permitting authority for the same permit is 301 hours of labor and $23,280.[50] Traditionally, this permitting process has been focused on controlling emissions from large industrial sources of air pollution such as fossil fuel-fired power plants, petroleum refineries, and a wide range of manufacturing plants that emit more than 250 tons per year of the regulated pollutants (in some cases the applicability threshold is 100 tons per year).[51] Prior to the regulation of GHGs under the CAA, approximately 280 such permits were issued each year.[52] However, GHGs are generally emitted from sources in amounts far greater than other pollutants regulated under the PSD program. So much so, that sources like office buildings and large shopping malls could easily cross the 250 ton per year threshold and become subject to PSD permitting requirements. In fact, without any action to change how the PSD program is applied, the EPA estimated that as many as 41,000 sources may require permits every year with the addition of GHGs as a regulated pollutant. To prevent the unbearable administrative burdens on permitting authorities associated with such "absurd results," the EPA took action on June 3, 2010 to modify the applicability criteria in the PSD regulations.[53] This action is known as the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule (Tailoring Rule). Through the Tailoring Rule, EPA raised the major source regulatory threshold for GHGs from the 100/250 ton per year levels to 100,000 tons per year of CO2 equivalent emissions.

In a 5-4 decision authored by Justice Scalia, the Supreme Court remanded the Tailoring Rule to EPA on the grounds that the Clean Air Act did not authorize the agency to regulate all the sources encompassed by the Rule. The Court determined that EPA could only require the "anyway" sources – those that participated in the PSD program because of their emissions of non-GHG pollutants—the comply with PSD program and Title V permitting requirements for GHGs. This effectively excluded the "Step 2" sources identified in the final rule.