[Federal Register: July 30, 2008 (Volume 73, Number 147)]
[Proposed Rules]
[Page 44353-44520]
[DOCID:fr30jy08-36]

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Part II

Environmental Protection Agency

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40 CFR Chapter I

Regulating Greenhouse Gas Emissions Under the Clean Air Act; Proposed
Rule

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Chapter I

[EPA-HQ-OAR-2008-0318; FRL-8694-2]
RIN 2060-AP12

Regulating Greenhouse Gas Emissions Under the Clean Air Act

AGENCY: Environmental Protection Agency (EPA).

ACTION: Advance Notice of Proposed Rulemaking.

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SUMMARY: This advance notice of proposed rulemaking (ANPR) presents
information relevant to, and solicits public comment on, how to respond
to the U.S. Supreme Court's decision in Massachusetts v. EPA. In that
case, the Supreme Court ruled that the Clean Air Act (CAA or Act)
authorizes regulation of greenhouse gases (GHGs) because they meet the
definition of air pollutant under the Act. In view of the potential
ramifications of a decision to regulate GHGs under the Act, the notice
reviews the various CAA provisions that may be applicable to regulate
GHGs, examines the issues that regulating GHGs under those provisions
may raise, provides information regarding potential regulatory
approaches and technologies for reducing GHG emissions, and raises
issues relevant to possible legislation and the potential for overlap
between legislation and CAA regulation. In addition, the notice
describes and solicits comment on petitions the Agency has received to
regulate GHG emissions from ships, aircraft and nonroad vehicles such
as farm and construction equipment. Finally, the notice discusses
several other actions concerning stationary sources for which EPA has
received comment regarding the regulation of GHG emissions.
    The implications of a decision to regulate GHGs under the Act are
so far-reaching that a number of other federal agencies have offered
critical comments and raised serious questions during interagency
review of EPA's ANPR. Rather than attempt to forge a consensus on
matters of great complexity, controversy, and active legislative
debate, the Administrator has decided to publish the views of other
agencies and to seek comment on the full range of issues that they
raise. These comments appear in the Supplemental Information, below,
followed by the June 17 draft of the ANPR preamble prepared by EPA, to
which the comments apply. None of these documents represents a policy
decision by the EPA, but all are intended to advance the public debate
and to help inform the federal government's decisions regarding climate
change.

DATES: Comments must be received on or before November 28, 2008.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2008-0318, by one of the following methods:
     www.regulations.gov: Follow the on-line instructions for
submitting comments.
     E-mail<EMAIL_ADDRESS>     Fax:<PHONE_NUMBER>.
     Mail: Air and Radiation Docket and Information Center,
Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania
Ave., NW., Washington, DC 20460. In addition, please mail a copy of
your comments on the information collection provisions to the Office of
Information and Regulatory Affairs, Office of Management and Budget
(OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC
20503.
     Hand Delivery: EPA Docket Center, EPA West Building, Room
3334, 1301 Constitution Ave., NW., Washington DC, 20004. Such
deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2008-0318. EPA's policy is that all comments received will be included
in the public docket without change and may be made available online at
www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through www.regulations.gov or e-mail.
The www.regulations.gov Web site is an ``anonymous access'' system,
which means EPA will not know your identity or contact information
unless you provide it in the body of your comment. If you send an e-
mail comment directly to EPA without going through www.regulations.gov
your e-mail address will be automatically captured and included as part
of the comment that is placed in the public docket and made available
on the Internet. If you submit an electronic comment, EPA recommends
that you include your name and other contact information in the body of
your comment and with any disk or CD-ROM you submit. If EPA cannot read
your comment due to technical difficulties and cannot contact you for
clarification, EPA may not be able to consider your comment. Electronic
files should avoid the use of special characters, any form of
encryption, and be free of any defects or viruses. For additional
information about EPA's public docket visit the EPA Docket Center
homepage at http://www.epa.gov/epahome/dockets.htm. For additional
instructions on submitting comments, go to Section VII, Public
Participation, of the SUPPLEMENTARY INFORMATION section of this
document.
    Docket: All documents in the docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
in www.regulations.gov or in hard copy at the Air and Radiation Docket
and Information Center, EPA/DC, EPA West, Room 3334, 1301 Constitution
Ave., NW., Washington, DC. The Public Reading Room is open from 8:30
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is<PHONE_NUMBER>, and the
telephone number for the Air Docket is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: Joe Dougherty, Office of Air and
Radiation, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone
number:<PHONE_NUMBER>; fax number:<PHONE_NUMBER>; e-mail address:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Preface From the Administrator of the Environmental Protection Agency

    In this Advanced Notice of Proposed Rulemaking (ANPR), the
Environmental Protection Agency (EPA) seeks comment on analyses and
policy alternatives regarding greenhouse gas (GHG) effects and
regulation under the Clean Air Act. In particular, EPA seeks comment on
the document entitled ``Advanced Notice of Proposed Rulemaking:
Regulating Greenhouse Gas Emissions under the Clean Air Act'' and
observations and issues raised by other federal agencies. This notice
responds to the U.S. Supreme Court's decision in Massachusetts v. EPA
and numerous petitions related to the potential regulation of
greenhouse gas emissions under the Clean Air Act.
    EPA's analyses leading up to this ANPR have increasingly raised

questions of such importance that the scope of the agency's task has
continued to expand. For instance, it has become clear that if EPA were
to regulate greenhouse gas emissions from motor vehicles under the
Clean Air Act, then regulation of smaller stationary sources that also
emit GHGs--such as apartment buildings, large homes, schools, and
hospitals--could also be triggered. One point is clear: The potential
regulation of greenhouse gases under any portion of the Clean Air Act
could result in an unprecedented expansion of EPA authority that would
have a profound effect on virtually every sector of the economy and
touch every household in the land.
    This ANPR reflects the complexity and magnitude of the question of
whether and how greenhouse gases could be effectively controlled under
the Clean Air Act. This document summarizes much of EPA's work and lays
out concerns raised by other federal agencies during their review of
this work. EPA is publishing this notice today because it is impossible
to simultaneously address all the agencies' issues and respond to our
legal obligations in a timely manner.
    I believe the ANPR demonstrates the Clean Air Act, an outdated law
originally enacted to control regional pollutants that cause direct
health effects, is ill-suited for the task of regulating global
greenhouse gases. Based on the analysis to date, pursuing this course
of action would inevitably result in a very complicated, time-consuming
and, likely, convoluted set of regulations. These rules would largely
pre-empt or overlay existing programs that help control greenhouse gas
emissions and would be relatively ineffective at reducing greenhouse
gas concentrations given the potentially damaging effect on jobs and
the U.S. economy.
    Your input is important. I am committed to making the data and
models EPA is using to form our policies transparent and available to
the public. None of the views or alternatives raised in this notice
represents Agency decisions or policy recommendations. It is premature
to do so. Rather, I am publishing this ANPR for public comment and
review. In so doing, I am requesting comment on the views of other
federal agencies that are presented below including important legal
questions regarding endangerment. I encourage the public to (1)
understand the magnitude and complexity of the Supreme Court's
direction in Massachusetts v. EPA and (2) comment on the many questions
raised in this notice.
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Department of Transportation

    The Department of Transportation (``the Department'' or ``DOT'')
hereby submits the following preliminary comments on the Environmental
Protection Agency (``EPA'') staff's draft Advance Notice of Proposed
Rulemaking ``Regulating Greenhouse Gas Emissions under the Clean Air
Act,'' which was submitted to the Office of Management and Budget on
June 17, 2008 (``June 17 draft'' or ``draft''). In view of the very
short time the Department has had to review the document, DOT will
offer a longer, more detailed response by the close of the comment
period.

General Considerations

    In response to Massachusetts v. EPA and multiple rulemaking
petitions, the EPA must consider whether or not greenhouse gases may
reasonably be anticipated to endanger public health or welfare, within
the meaning of the Clean Air Act. Such a determination requires the
resolution of many novel questions, such as whether global or only U.S.
effects should be considered, how imminent the anticipated endangering
effects are, and how greenhouse gases are to be quantified, to name
just a few. Without resolving any of these questions, let alone
actually making an endangerment finding, the June 17 draft presents a
detailed discussion of regulatory possibilities. In other words, the
draft suggests an array of specific regulatory constructs in the
transportation sector under the Clean Air Act without the requisite
determinations that greenhouse gas emissions endanger public health or
welfare and that regulation is feasible and appropriate. In fact, to
propose specific regulations prejudices those critical determinations
and reveals a predilection for regulation that may not be justified.
    Policymakers and the public must consider a broader question: even
if greenhouse gas regulation using a law designed for very different
environmental challenges is legally permissible, is it desirable? We
contend that it is not. We are concerned that attempting to regulate
greenhouse gases under the Clean Air Act will harm the U.S. economy
while failing to actually reduce global greenhouse gas emissions. Clean
Air Act regulation would necessarily be applied unevenly across
sources, sectors, and emissions-causing activities, depending on the
particular existing statutory language in each section of the Act.
Imposing Clean Air Act regulations on U.S. businesses, without an
international approach that involves all of the world's major emitters,
may well drive U.S. production, jobs, and emissions overseas, with no
net improvement to greenhouse gas concentrations.
    The Department believes that the Nation needs a well considered and
sustainable domestic climate change policy that takes into account the
best climatological, technical and economic information available. That
policy--as with any significant matter involving Federal law and
regulation--should also reflect a national consensus that the actions
in question are justified and effective, and do not bring with them
substantial unintended consequences or unacceptable economic costs.
Reducing greenhouse gas emissions across the various sectors of our
economy is an enormous challenge that can be met effectively only
through the setting of priorities and the efficient allocation of
resources in accordance with those priorities.
    It is an illusion to believe that a national consensus on climate
policy can be forged via a Clean Air Act rulemaking. Guided by the
provisions of a statute conceived for entirely different purposes--and
unconstrained by any calculation of the costs of the specific
regulatory approaches it contemplates--such a rulemaking is unlikely to
produce that consensus.
    Administrator Johnson of the EPA said in a recent speech, ``now is
the time to begin the public debate and upgrade [the Clean Air Act's]
components.'' Administrator Johnson has called for fundamental changes
to the Clean Air Act ``to consider benefits, costs, risk tradeoffs and
feasibility in making decisions about how to clean the air.'' This, of
course, is a criticism of the Clean Air Act's ability to address its
intended purposes, let alone purposes beyond those Congress
contemplated. As visualized in the June 17 draft, the U.S. economy
would be subjected to a complex set of new regulations administered by
a handful of people with little meaningful public debate and no ability
to consider benefits, costs, risk tradeoffs and feasibility. This is
not the way to set public policy in an area critical to our environment
and to our economy.
    As DOT and its fellow Cabinet departments argue in the cover letter
to these Comments, using the Clean Air Act as a means for regulating
greenhouse gas emissions presents insurmountable obstacles. For
instance, Clean Air Act provisions that refer to specific pollutants,
such as sulfur dioxide, have been updated many times over the past
three decades. In contrast, the language referring to unspecified
pollutants, which would apply to greenhouse gases, retains, in fossil
form, the 1970s idea that air pollution is a local and regional scale
problem, with pollution originating in motor vehicles and a few large
facilities, for which ``end of pipe'' control technologies exist or
could be invented at acceptable cost. Greenhouse gas emissions have
global scale consequences, and are emitted from millions of sources
around the world. If implemented, the actions that the draft
contemplates would significantly increase energy and transportation
costs for the American people and U.S. industry with no assurance that
the regulations would materially affect global greenhouse gas
atmospheric concentrations or emissions.

Transportation-Related Considerations

    As the Nation's chief transportation regulatory agency, the
Department has serious concerns about the draft's approach to mobile
sources, including, but not limited to, the autos, trucks, and aircraft
that Section VI of the draft considers regulating.
    Title II of the Clean Air Act permits the use of technology-forcing
regulation of mobile sources. Yet Section VI of the draft appears to
presume an endangerment finding with respect to emissions from a
variety of mobile sources and then strongly suggests the EPA's intent
to regulate the transportation sector through an array of source-
specific regulations. Thus, much of Section VI is devoted to describing
and requesting information appropriate to setting technology-forcing
performance standards for particular categories of vehicles and engines
based on an assessment of prospective vehicle and engine technology in
each source category.
    In its focus on technology and performance standards, the draft
spends almost no effort on assessing how different regulatory
approaches might vary in their effectiveness and compliance costs. This
despite the fact that picking an efficient, effective, and relatively
unintrusive regulatory scheme is critically important to the success of
any future program--and far more important at this stage than
identifying the cost-effectiveness of speculative future technologies.
    The draft fails to identify the market failures or environmental
externalities in the transportation sector that regulation might
correct, and, in turn, what sort of regulation would be best tailored
to correcting a specific situation. Petroleum accounts for 99 percent
of the energy use and greenhouse gas emissions in the transportation
sector. Petroleum prices have increased fivefold since 2002. Rising
petroleum prices are having a powerful impact on airlines, trucking
companies, marine operators, and railroads, and on the firms that
supply vehicles and engines to these industries. Petroleum product
prices have doubled in two years, equivalent to a carbon tax of $200
per metric ton, far in excess of the cost of any previously
contemplated climate change measure. Operators are searching for every
possible operating economy, and capital equipment manufacturers are
fully aware that fuel efficiency is a critical selling point for new
aircraft, vehicles, and engines. At this point, regulations could
provide no

more powerful incentive for commercial operators than that already
provided by fuel prices. Badly designed performance standards would be
at best non-binding (if private markets demand more efficiency than the
regulatory standard) or would actually undermine efficient deployment
of fuel efficient technologies (if infeasible or non-cost-effective
standards are required).
Light Duty Vehicles
    On December 19, 2007, the President signed the Energy Independence
and Security Act (``EISA''), which requires the Department to implement
a new fuel economy standard for passenger cars and light trucks. The
Department's National Highway Traffic Safety Administration (``NHTSA'')
has moved swiftly to comply with this law, issuing a Notice of Proposed
Rulemaking (``NPRM'') on April 22, 2008. The comment period for this
NPRM closed on July 1, 2008. If finalized in its present form, the rule
would reduce U.S. carbon dioxide emissions by an estimated 521 million
metric tons over the lifetime of the regulated vehicles.
    This NPRM is only the latest in a series of NHTSA Corporate Average
Fuel Economy (``CAFE'') program rules proposed or implemented during
this Administration. Indeed, these proposals together represent the
most aggressive effort to increase the fuel economy (and therefore to
reduce the emissions) of the U.S. fleet since the inception of the CAFE
program in 1975.
    In enacting EISA, Congress made careful and precise judgments about
how standards are to be set for the purpose of requiring the
installation of technologies that reduce fuel consumption. Although
almost all technologies that reduce carbon dioxide emissions do so by
reducing fuel consumption, the EPA staff's June 17 draft not only
ignores those congressional judgments, but promotes approaches
inconsistent with those judgments.
    The draft includes a 100-page analysis of a tailpipe carbon dioxide
emissions rule that has the effect of undermining NHTSA's carefully
balanced approach under EISA. Because each gallon of gasoline contains
approximately the same amount of carbon, and essentially all of the
carbon in fuel is converted to carbon dioxide, a tailpipe carbon
dioxide regulation and a fuel economy regulation are essentially
equivalent: they each in effect regulate fuel economy.
    In the draft's analysis of light duty vehicles, the external
benefits of reducing greenhouse gas emissions account for less than 15
percent of the total benefits of improving vehicle efficiency, with the
bulk of the benefits attributable to the market value of the gasoline
saved. Only rather small marginal reductions in fuel consumption or
greenhouse gas emissions would be justified by external costs in
general, and climate change benefits in particular. Thus, the draft
actually describes fuel economy regulations, which generate primarily
fuel savings benefits, under the rubric of environmental policy.
    Though it borrows an analytical model provided by NHTSA, the draft
uses differing assumptions and calculates the effects of the Agency's
standard differently than does the rule NHTSA proposed pursuant to
EISA. The draft conveys the incorrect impression that the summary
numbers such as fuel savings, emission reductions, and economic
benefits that are presented in the draft are comparable with those
presented in NHTSA's NPRM, when in fact the draft's numbers are
calculated differently and, in many cases, using outdated information.
    The draft does not include the provisions of EISA or past, current,
or future CAFE rulemakings in its baseline analysis of light duty
vehicle standards. Thus, the draft inflates the apparent benefits of a
Clean Air Act light duty vehicle rulemaking when much of the benefits
are already achieved by laws and regulations already on the books. The
draft fails to ask whether additional regulation of light duty vehicles
is necessary or desirable, nor gives any serious consideration how
Clean Air Act and EISA authorities might be reconciled.
    The draft comprehensively mischaracterizes the available evidence
on the relationship between safety and vehicle weight. In the draft,
EPA asserts that the safety issue is ``very complex,'' but then adds
that it disagrees with the views of the National Academy of Sciences
(NAS) and NHTSA's safety experts, in favor of the views of a two-person
minority on the NAS panel and a single, extensively criticized article.
    Much of the text of this portion of the draft is devoted to a
point-by-point recitation and critique of various economic and
technological assumptions that NHTSA, the Office of Management and
Budget, and other Federal agencies--among them EPA--painstakingly
calculated over the past year, but that EPA now unilaterally revises
for this draft. It is not clear why it is necessary or desirable to use
one set of analytical assumptions, while the rest of the Federal
Government uses another.
    The public interest is ill-served by having two competing
proposals, put forth by two different agencies, both purporting to
regulate the same industry and the same products in the same ways but
with differing stringencies and enforcement mechanisms, especially
during a time of historic volatility in the auto industry and mere
months after Congress passed legislation tasking another agency with
regulation in this area. The detailed analysis of a light duty vehicle
rule in the draft covers the same territory as does NHTSA's current
rulemaking--and is completely unnecessary for the purposes of an
endangerment finding or for seeking comment on the best method of
regulating mobile source emissions.
Setting Air Quality Standards
    The discussion of the process for setting National Ambient Air
Quality Standards (``NAAQS'') and development of state/Federal
implementation plans for greenhouse gases is presented as an option for
regulating stationary sources, and is placed in the discussion of
stationary sources. The draft describes a scenario in which the entire
country is determined to be in nonattainment.
    Such a finding would reach beyond power plants and other
installations to include vital transportation infrastructure such as
roads, bridges, airports, ports, and transit lines. At a time when our
country critically needs to modernize our transportation
infrastructure, the NAAQS that the draft would establish--and the
development of the implementation plans that would follow--could
seriously undermine these efforts. Because the Clean Air Act's
transportation and general conformity requirements focus on local
impacts, these procedures are not capable of assessing and reducing
impacts of global pollutants without substantial disruption and waste.
    If the entire Nation were found to be in nonattainment for carbon
dioxide or multiple greenhouse gases, and transportation and general
conformity requirements applied to Federal activities, a broad range of
those activities would be severely disrupted. For example, application
of transportation conformity requirements to all metropolitan area
transportation plans would add layers of additional regulations to an
already arduous Federal approval process and expand transportation-
related litigation without any assurance that global greenhouse gas
emissions would be reduced. Indeed, needed improvements to airports,
highways and transit systems that would make the transportation system
more efficient, and thus help reduce greenhouse gas and other
emissions, could be precluded due to

difficulties in demonstrating conformity. Though the potential for such
widespread impact is clear from even a cursory reading of the draft, it
ignores the issue entirely.
    For these reasons, we question the practicality and value of
establishing NAAQS for greenhouse gases and applying such a standard to
new and existing transportation infrastructure across the Nation.
Heavy Duty Vehicles
    The draft contemplates establishing a greenhouse gas emissions
standard for heavy duty vehicles such as tractor-trailers. The draft's
discussion of trucks makes no mention of the National Academy of
Sciences study required by Section 108 of EISA that would evaluate
technology to improve medium and heavy-duty truck fuel efficiency and
costs and impacts of fuel efficiency standards that may be developed
under 49 U.S.C. Section 32902(k), as amended by section 102(b) of EISA.
This section directs DOT, in consultation with EPA and DOE, to
determine test procedures for measuring and appropriate procedures for
expressing fuel efficiency performance, and to set standards for
medium- and heavy-duty truck efficiency. DOT believes that it is
premature to review potential greenhouse gas emission standards for
medium- and heavy-duty trucks in light of this study and anticipated
future standard-setting action under EISA, and, in any event, that it
is problematic to do so with no accounting of the costs that these
standards might impose on the trucking industry.
    In the case of light duty vehicles, it can be argued that consumers
do not accurately value fuel economy, and regulation can correct this
failure. Heavy-duty truck operators, on the other hand, are acutely
sensitive to fuel costs, and their sensitivity is reflected in the
product offerings of engine and vehicle manufacturers. The argument for
fuel economy or tailpipe emissions regulation is much harder to make
than in the case of light duty vehicles.
    The medium and heavy truck market is more complex and diverse than
the light duty vehicle market, incorporating urban delivery vans, on-
road construction vehicles, work trucks with power-using auxiliaries,
as well as the ubiquitous long-haul truck-trailer combinations.
Further, a poorly designed performance standard that pushes operators
into smaller vehicles may result in greater and not fewer of the
emissions the draft intends to reduce. Because freight-hauling
performance is maximized by matching the vehicle to the load, one
large, high horsepower truck will deliver a large/heavy load at a lower
total and fuel cost than the same load split into two smaller, low
horsepower vehicles.
Railroads
    The Clean Air Act includes a special provision for locomotives,
Section 213(a)(5), which permits EPA to set emissions standards based
on the greatest emission reduction achievable through available
technology. The text of the draft suggests that EPA may consider such
standards to include hybrid diesel/electric locomotives and the
application of dynamic braking.
    As in other sectors, it is hard to imagine how a technology-forcing
regulation can create greater incentives than provided by recent oil
prices. And sensible public policy dictates caution against imposing
unrealistic standards or mandating technology that is not cost-
effective, not reliable, or not completely developed.
Marine Vessels
    The International Maritime Organization (``IMO'') sets voluntary
standards for emissions from engines used in ocean-going marine vessels
and fuel quality through the MARPOL Annex VI (International Convention
for the Prevention of Pollution from Ships, 1973, as modified by the
Protocol of 1978 relating thereto (``MARPOL''), Annex VI, Prevention of
Air Pollution from Ships). Member parties apply these voluntary
standards through national regimes. The IMO is also working to consider
ways to address greenhouse gas emissions from vessels and marine
transportation, including both vessel-based and operational measures.
The U.S. is a participant in these discussions. We believe that the
discussion of ways to reduce greenhouse gas emissions from vessels and
marine transportation should reference the IMO voluntary measures and
discussions, and need not address detailed technological or operational
measures.
Aviation
    The draft includes a lengthy discussion of possible methods by
which to regulate the greenhouse gas emissions of aircraft. For all its
detail, however, the draft does not provide adequate information (and
in some instances is misleading) regarding aviation emissions related
to several important areas: (1) The overwhelming market pressures on
commercial airlines to reduce fuel consumption and therefore carbon
dioxide emissions and the general trends in aviation emissions growth;
(2) expected technology and operational improvements being developed
under the interagency Next Generation Air Transportation System
(``NextGen'') program; (3) the work and role of the International Civil
Aviation Organization (``ICAO'') in aviation environmental matters; (4)
limits on EPA's ability to impose operational controls on aviation
emission; and (5) the scientific uncertainty regarding greenhouse gas
emissions from aircraft.
    First, the draft does not provide the public an accurate picture of
aviation emissions growth. Compared to 2000, U.S. commercial aviation
in 2006 moved 12 percent more passengers and 22 percent more freight
while burning less fuel, thereby reducing carbon output. Further, the
draft's projections of growth in emissions are overstated because they
do not reflect technology improvements in aircraft or air traffic
operations and apparently do not take into account the industry's
ongoing contraction or even the sustained increase in aviation jet fuel
prices in 2007 and 2008. That increase (in 2008, U.S. airlines alone
will spend $60 billion for fuel, compared to $16 billion in 2000)
provides an overwhelming economic incentive for a financially troubled
industry to reduce fuel consumption. Because reduction of a gallon of
jet fuel displaces about 21 pounds of carbon dioxide, that incentive is
the single most effective tool for reducing harmful emissions available
today. Yet the draft makes no note of the trend.
    Second, the draft does not adequately address the multi-agency
NextGen program, one of whose principal goals is to limit or reduce the
impact of aviation emissions on the global climate. This includes
continued reduction of congestion through modernization of the air
traffic control system, continued research on aircraft technologies and
alternative fuels, and expanded deployment of operational advances such
as Required Navigation Performance that allow aircraft to fly more
direct and efficient routes in crowded airspace. Through NextGen, the
Department's Federal Aviation Administration (FAA), in cooperation with
private sector interests, is actively pursuing operational and
technological advances that could result in a 33 percent reduction in
aircraft fuel burn and carbon dioxide emissions.
    Third, the draft gives short shrift to the Administration's efforts
to reduce aviation emissions through a multilateral ICAO process, and
it contemplates regulatory options either never analyzed by EPA or the
aviation community for aircraft (``fleet

averaging''\1\) or previously rejected by ICAO itself (flat carbon
dioxide standards). The FAA has worked within the ICAO process to
develop guidance for market-based measures, including adoption at the
2007 ICAO Assembly of guidance for emissions trading for international
aviation. ICAO has established a Group on International Aviation and
Climate Change that is developing further recommendations to address
the aviation impacts of climate change.\2\ The FAA's emphasis on
international collaboration is compelled by the international nature of
commercial aviation and the fact that performance characteristics of
engines and airframes--environmental and otherwise--work best when they
maximize consistency among particular national regulations.\3\
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    \1\ The concept of ``fleet averaging,'' though used for
automobiles, has never been applied to aviation or considered by
either ICAO or FAA as a basis for standard setting. The draft offers
little indication of why the concept would be worth serious
consideration, and it is difficult to understand how that could be,
given that manufacturers turn out only several hundred commercial
airplanes for ``averaging'' annually, compared to over a million
light duty vehicles per year built by large manufacturers. In any
event, if further analysis supports the viability of fleet
averaging, the appropriate venue for pursuing this would be through
ICAO--so that aviation experts from around the world can assess the
concept.
    \2\ In this context, we note that the draft invites comment on
proposals in the European Union regarding an emissions trading
scheme to be imposed by the EU on all Europe-connected commercial
operations. The U.S. Government, led by the Department of State, has
repeatedly argued that any of these proposals, if enacted, would
violate international aviation law and has made clear its opposition
to the proposals in ICAO and other international fora. It is curious
that the EPA would solicit comments on the benefits of proposals
that the United States (along with numerous other nations) opposes
as unlawful and unworkable.
    \3\ The draft is potentially misleading in suggesting that the
fuel flow rate data reported for the ICAO landing and takeoff cycle
engine emissions certification process, and the carbon dioxide
emissions concentrations data collected for calculation and
calibration purposes may be used as the basis for a carbon dioxide
standard.
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    Fourth, the draft invites comments on potential aviation
operational controls that might have emissions benefits. But proposals
for changes to airspace or air traffic operational procedures usurp the
FAA's responsibility as the Nation's aviation safety regulator and air
traffic manager. It is inappropriate for the EPA to suggest operational
controls without consideration of the safety implications that the FAA
is legally required to address.
    Finally, the draft does not accurately present the state of
scientific understanding of aviation emissions and contains misleading
statements about aviation emissions impacts. The report of the
Intergovernmental Panel on Climate Change (cited in the draft but often
ignored) more clearly conveys cautions about underlying uncertainties
associated with regulating aviation emissions. For instance, the IPCC
specifically concludes that water vapor is a small contributor to
climate change, yet the draft focuses on condensation trails produced
by water vapor and includes an inaccurate statement that carbon dioxide
and water vapor are ``the major compounds from aircraft operations that
are related to climate change.'' Further, the draft does not convey the
significant scientific uncertainty associated with measuring
particulate matter (PM) emissions from aircraft engines. That
understanding needs to be significantly improved before any
``tailpipe'' PM standard could sensibly be considered.

Conclusion

    The EPA has made an enormous effort in assembling the voluminous
data that contributed to the draft as published today. However, because
the draft does not adequately identify or discuss the immense
difficulties and burdens, and the probable lack of attendant benefits,
that would result from use of the Clean Air Act to regulate GHG
emissions, DOT respectfully submits these preliminary comments to point
out some of the problematic aspects of the draft's analysis regarding
the transportation sector. We anticipate filing additional comments
before the close of the comment period.

Department of Energy

I. Introduction

    The U.S. Department of Energy (Department or DOE) strongly supports
aggressively confronting climate change in a rational manner that will
achieve real and sustainable reductions in global greenhouse gas (GHG)
emissions, promote energy security, and ensure economic stability. In
support of these goals, DOE believes that the path forward must include
a comprehensive public discussion of potential solutions, and the
foreseeable impacts of those proposed solutions--including impacts on
energy security and reliability, on American consumers, and on the
Nation's economy.
    The Department supports the actions taken by the United States to
date to address global climate change and greenhouse gas emissions, and
believes these efforts should be continued and expanded. These actions
have included a broad combination of market-based regulations, large
increases in funding for climate science, new government incentives for
avoiding, reducing or sequestering GHG emissions, and enormous
increases in funding for technology research. The Department has played
a significant role in implementing many of these initiatives, including
those authorized by the Energy Policy Act of 2005 and the Energy
Independence and Security Act of 2007.
    The Department believes that an effective and workable approach to
controlling GHG emissions and addressing global climate change should
not simply consist of a unilateral and extraordinarily burdensome Clean
Air Act (CAA or the Act) regulatory program being layered on top of the
U.S. economy, with the Federal Government taking the position that
energy security and indeed the American economy will just have to live
with whatever results such a program produces. Rather, the United
States can only effectively address GHG emissions and global climate
change in coordination with other countries, and by addressing how to
regulate GHG emissions while considering the effect of doing so on the
Nation's energy and economic security. Considering and developing such
a comprehensive approach obviously is enormously difficult.
    Unfortunately, and no doubt due in part to the limitations of the
Clean Air Act itself, the draft Advance Notice of Proposed Rulemaking
prepared by the staff of the Environmental Protection Agency (EPA) does
not take such an approach. That draft Notice, entitled ``Regulating
Greenhouse Gas Emissions under the Clean Air Act'' (``draft''), which
was submitted to the Office of Management and Budget on June 17, 2008,
instead seeks to address global climate change through an enormously
elaborate, complex, burdensome and expensive regulatory regime that
would not be assured of significantly mitigating global atmospheric GHG
concentrations and global climate change. DOE believes that once the
implications of the approach offered in the draft are fully explained
and understood, it will make one thing clear about controlling GHG
emissions and addressing global climate change--unilaterally proceeding
with an extraordinarily burdensome and costly regulatory program under
the Clean Air Act is not the right way to go.
    DOE has had only a limited opportunity to review the June 17 EPA
staff draft, and therefore anticipates providing additional comments at
a later date. Based on the limited review DOE has been able to conduct
so far, it is apparent that the draft reflects extensive work and
includes valuable information, analyses and data that

should help inform the public debate concerning global climate change
and how to address GHG emissions.
    However, DOE has significant concerns with the draft because it
lacks the comprehensive and balanced discussion of the impacts, costs,
and possible lack of effectiveness were the United States, through the
EPA, to use the CAA to comprehensively but unilaterally regulate GHG
emissions in an effort to address global climate change. The draft
presents the Act as an effective and appropriate vehicle for regulating
GHG emissions and addressing climate change, but we believe this
approach is inconsistent with the Act's overarching regulatory
framework, which is based on States and local areas controlling
emissions of air pollutants in order to improve U.S. air quality.
Indeed, the Act itself states that Congress has determined ``air
pollution prevention * * * and air pollution control at its source is
the primary responsibility of States and local governments,'' CAA Sec.
101(a)(3); that determination is reflected in the Act's regulatory
structure. The CAA simply was not designed for establishing the kind of
program that might effectively achieve global GHG emissions controls
and emissions reductions that may be needed over the next decades to
achieve whatever level of atmospheric GHG concentration is determined
to be appropriate or necessary.
    Although the draft recognizes that the CAA does not authorize
``economy-wide'' cap and trade programs or emission taxes, it in
essence suggests an elaborate regulatory regime that would include
economy-wide approaches and sector and multi-sector trading programs
and potentially other mechanisms yet to be conceived. The draft has the
overall effect of suggesting that under the CAA, as it exists today, it
would be possible to develop a regulatory scheme of trading programs
and other mechanisms to regulate GHG emissions and thus effectively
address global climate change. It is important to recognize, however,
that such programs have not yet been fully conceived, in some cases
rely on untested legal theories or applications of the Act, would
involve unpredictable but likely enormous costs, would be invasive into
virtually all aspects of the lives of Americans, and yet would yield
benefits that are highly uncertain, are dependent on the actions of
other countries, and would be realized, if at all, only over a long
time horizon.
    The draft takes an affirmative step towards the regulation of
stationary sources under the Act--and while it is easy to see that
doing so would likely dramatically increase the price of energy in this
country, what is not so clear is how regulating GHG emissions from such
sources would actually work under the CAA, or whether doing so would
effectively address global climate change. Other countries also are
significant emitters of GHGs, and ``leakage'' of U.S. GHG emissions
could occur--that is, reduced U.S. emissions simply being replaced with
increased emissions in other countries--if the economic burdens on U.S.
GHG emissions are too great. In that regard, CAA regulation of GHG
emissions from stationary sources would significantly increase costs
associated with the operation of power plants and industrial sources,
as well as increase costs associated with direct energy use (e.g.,
natural gas for heating) by sources such as schools, hospitals,
apartment buildings, and residential homes.
    Furthermore, in many cases the regulatory regime envisioned by the
draft would result in emission controls, technology requirements, and
compliance costs being imposed on entities that have never before been
subject to direct regulation under the CAA. Before proceeding down that
path, EPA should be transparent about, and there should be a full and
fair discussion about, the true burdens of this path--in terms of its
monetary cost, in terms of its regulatory and permitting burden, and in
terms of exactly who will bear those costs and other burdens. These
impacts are not adequately explored or explained in the draft. What
should be crystal clear, however, is that the burdens will be enormous,
they will fall on many entities not previously subject to direct
regulation under the Act, and all of this will happen even though it is
not clear what precise level of GHG emissions reduction or atmospheric
GHG concentration level is being pursued, or even if that were decided,
whether the CAA is a workable tool for achieving it.
    In the limited time DOE has had to review the draft, DOE primarily
has focused on the extent to which the draft addresses stationary
sources and the energy sector. Based on DOE's review, we briefly
discuss below (1) the inadequacy of CAA provisions for controlling
greenhouse gas emissions from stationary sources as a method of
affecting global GHG concentrations and addressing global climate
change; (2) the potential costs and effects of CAA regulation of GHG
emissions on the U.S. electric power sector; and (3) considerations for
U.S. action to address GHG emissions from stationary sources in the
absence of an effective global approach for addressing climate change
and worldwide GHG emissions.

II. The Ineffectiveness and Costs Associated with CAA Regulation of
Greenhouse Gas Emissions from Stationary Sources

    The draft states that it was prepared in response to the decision
of the United States Supreme Court in Massachusetts v. EPA, 549 U.S. --
----, 127 S. Ct. 1438 (2007). In that case, the Court held that EPA has
the authority to regulate GHG emissions from new motor vehicles because
GHGs meet the Clean Air Act's definition of an ``air pollutant.'' Id.
at 1460. As a result, under section 202(a) of the Act, the EPA
Administrator must decide whether, ``in his judgment,'' ``the emission
of any air pollutant from any class or classes of new motor vehicles or
new motor vehicle engines'' ``cause, or contribute to, air pollution
which may reasonably be anticipated to endanger public health or
welfare.'' If the EPA Administrator makes a positive endangerment
finding, section 202(a) states that EPA ``shall by regulation prescribe
* * * standards applicable to the emission of'' the air pollutant with
respect to which the positive finding was made.
    The Supreme Court stated that it did not ``reach the question
whether on remand EPA must make an endangerment finding, or whether
policy concerns can inform EPA's actions in the event that it makes
such a finding.'' Instead, the Court said that when exercising the
``judgment'' called for by section 202(a) and in deciding how and when
to take any regulatory action, ``EPA must ground its reasons for action
or inaction in the statute.''
    As a result, and based on the text of section 202(a) of the Clean
Air Act, any EPA ``endangerment'' finding must address a number of
issues that involve interpretation of statutory terms and the
application of technical or scientific data and judgment. For example,
an endangerment determination must involve, among other things, a
decision about the meaning of statutory terms including ``reasonably be
anticipated to,'' ``cause, or contribute to,'' ``endanger,'' and
``public health or welfare.'' Moreover, because the Act refers to ``air
pollutant'' in the singular, presumably EPA should make any
endangerment finding as to individual greenhouse gases and not as to
all GHGs taken together, but this also is a matter that EPA must
address and resolve. There are other issues that must be resolved as
well, such as: whether the ``public health and welfare'' should be
evaluated with respect to the United States alone or, if foreign
impacts can or

should or must be addressed as well, what the statutory basis is for
doing so and for basing U.S. emissions controls on foreign impacts;
what time period in the future is relevant for purposes of determining
what is ``reasonably anticipate[d]''; whether and if so how EPA must
evaluate any beneficial impacts of GHG emissions in the United States
or elsewhere in making an endangerment determination; and whether a
particular volume of emissions or a particular effect from such
emissions from new motor vehicles must be found before EPA may make a
``cause or contribute'' finding, since the Act explicitly calls for the
EPA Administrator to exercise his ``judgment,'' and presumably that
judgment involves more than simply a mechanistic calculation that one
or more molecules will be emitted.
    If EPA were to address these issues and resolve them in favor of a
positive endangerment finding under section 202(a) of the Act with
respect to one or more greenhouse gases and in favor of regulating GHG
emissions from new motor vehicles, then the language similarities of
various sections of the CAA likely would require EPA also to regulate
GHG emissions from stationary sources. A positive endangerment finding
and regulation of GHGs from new motor vehicles likely would immediately
trigger the prevention of significant deterioration (PSD) permit
program which regulates stationary sources that either emit or have the
potential to emit 250 tons per year of a regulated pollutant or, if
they are included on the list of source categories, at least 100 tons
per year of a regulated pollutant. Because these thresholds are
extremely low when considered with respect to GHGs, thousands of new
sources likely would be swept into the PSD program necessitating time
consuming permitting processes, costly new investments or retrofits to
reduce or capture GHG emissions, increasing costs, and creating vast
areas of uncertainty for businesses and commercial and residential
development.
    In addition to the PSD program, it is widely acknowledged that a
positive endangerment finding could lead to three potential avenues of
stationary source regulation under the CAA: (1) The setting of national
ambient air quality standards (NAAQS) under sections 108 and 109; (2)
the issuance of new source performance standards (NSPS) under section
111; and/or (3) the listing of one or more greenhouse gases as
hazardous air pollutants (HAP) under section 112. Each of these
approaches, and their associated deficiencies with respect to GHG
emissions and as a method of addressing global climate change, are
briefly discussed below.
a. Sections 108-109: NAAQS
    Section 108 of the CAA requires EPA to identify and list air
pollutants that ``cause or contribute to air pollution which may
reasonably be anticipated to endanger public health or welfare.'' For
such pollutants, EPA promulgates ``primary'' and ``secondary'' NAAQS.
The primary standard is defined as the level which, in the judgment of
the EPA Administrator, based on scientific criteria, and allowing for
an adequate margin of safety, is requisite to protect the public
health. The secondary standard is defined as the level which is
requisite to protect the public welfare. Within one year of EPA's
promulgation of a new or revised NAAQS, each State must designate its
regions as non-attainment, attainment, or unclassifiable. Within three
years from the NAAQS promulgation, States are required to adopt and
submit to EPA a State implementation plan (SIP) providing for the
implementation, maintenance, and enforcement of the NAAQS.
    At least three major difficulties would be presented with respect
to the issuance by EPA of a NAAQS for one or more greenhouse gases: (1)
The determination of what GHG concentration level is requisite to
protect public health and welfare; (2) the unique nature of GHGs as
pollutants dispersed from sources throughout the world and that have
long atmospheric lifetimes; and (3) GHG concentrations in the ambient
air are virtually the same throughout the world meaning that they are
not higher near major emissions sources than in isolated areas with no
industry or major anthropogenic sources of GHG emissions.
    While much has been said and written in recent years about the need
to reduce greenhouse gas emissions to address climate change, there is
far less agreement on the acceptable or appropriate atmospheric
concentration level of CO2 or other GHGs. As the draft
states, ``[d]etermining what constitutes `dangerous anthropogenic
interference' is not a purely scientific question; it involves
important value judgments regarding what level of climate change may or
may not be acceptable.'' While the Department agrees with this
statement, the courts have held that when setting a NAAQS, EPA cannot
consider important policy factors such as cost of compliance. This
limitation inhibits a rational balancing of factors in determining and
setting a GHG NAAQS based on the science available, the availability
and cost of emission controls, the resulting impact on the U.S.
economy, the emissions of other nations, etc.
    Unlike most pollutants where local and regional air quality, and
local and regional public health and welfare, can be improved by
reducing local and regional emissions, GHGs originate around the globe,
and are mixed and dispersed such that there is a relatively uniform
atmospheric GHG concentration level around the world. There is little
or nothing that a single State or region can do that will appreciably
alter the atmospheric GHG concentration level in that particular State
or region. Thus, it is hard to see how a GHG NAAQS, which required
States to take action to reduce their emissions to meet a particular
air quality standard, would actually work. A GHG NAAQS standard would
put the entire United States in either attainment or non-attainment,
and it would be virtually impossible for an individual State to control
or reduce GHG concentrations in its area and, thus, to make significant
strides towards remaining in or reaching attainment with the NAAQS.
    Whatever level EPA might eventually establish as an acceptable
NAAQS for one or more GHGs, EPA's setting of such a level would
immediately implicate further issues under the NAAQS regime, including
the ability of States and localities to meet such a standard. If the
GHG NAAQS standard for one or more gases is set at a level below the
current atmospheric concentration, the entire country would be in
nonattainment. All States then would be required to develop and submit
State Implementation Plans (SIPs) that provide for meeting attainment
by the specified deadline. And yet, as the draft states, ``it would
appear to be an inescapable conclusion that the maximum 10-year horizon
for attaining the primary NAAQS is ill-suited to pollutants such as
greenhouse gases with long atmospheric residence times * * * [t]he long
atmospheric lifetime of * * * greenhouse gases * * * means that
atmospheric concentrations will not quickly respond to emissions
reduction measures * * * in the absence of substantial cuts in
worldwide emissions, worldwide concentrations of greenhouse gases would
continue to increase despite any U.S. emission control efforts. Thus,
despite active control efforts to meet a NAAQS, the entire United
States would remain in nonattainment for an unknown number of years.''
    As the draft also recognizes, if the NAAQS standard for GHGs is set
at a

level above the current atmospheric concentration, the entire country
would be in attainment. In a nationwide attainment scenario, the PSD
and new source review (NSR) permitting regimes would apply and States
would have to submit SIPs for the maintenance of the primary NAAQS and
to prevent interference with the maintenance by other States of the
NAAQS; tasks, that as applied to GHGs, are entirely superfluous given
the inability of any single State to change through its own unilateral
action the global or even local concentration level of GHGs.
    As the difficult choices and problematic results outlined above
demonstrate, the inability of a single State to appreciably change
atmospheric GHG concentrations in its own area through its own emission
reduction efforts is inconsistent with a fundamental premise of the
Clean Air Act and of the NAAQS program--that States and localities are
primarily responsible for air pollution control and maintaining air
quality, and that State and local governments can impose controls and
permitting requirements that will allow the State to maintain or attain
air quality standards through its own efforts.
b. Section 111: NSPS
    Section 111 of the CAA requires the EPA Administrator to list
categories of stationary sources if such sources cause or contributes
significantly to air pollution which may reasonably be anticipated to
endanger public health or welfare. The EPA must then issue new source
performance standards (NSPS) for such sources categories. An NSPS
reflects the degree of emission limitation achievable through the
application of the ``best system of emission reduction'' which the EPA
determines has been adequately demonstrated. EPA may consider certain
costs and non-air quality health and environmental impact and energy
requirements when establishing NSPS. Where EPA also has issued a NAAQS
or a section 112 maximum achievable control technology (MACT) standard
for a regulated pollutant, NSPS are only issued for new or modified
stationary sources. Where no NAAQS has been set and no section 112 MACT
standard issued, NSPS are issued for new, modified, and existing
stationary sources.
    Regulation of GHGs under section 111 presents at least two key
difficulties. First, EPA's ability to utilize a market system such as
cap and trade has not been confirmed by the courts. EPA's only attempt
to establish a cap and trade program under section 111, the ``Clean Air
Mercury Rule,'' was vacated by the U.S. Court of Appeals for the
District of Columbia Circuit, though on grounds unrelated to EPA's
authority to implement such a program under section 111. DOE believes
EPA does have that authority, as EPA previously has explained, but
there is legal uncertainty about that authority, which makes a GHG
market-oriented program under section 111 uncertain.
    Second, EPA's regulation of small stationary sources (which account
for a third of all stationary source emissions) would require a
burdensome and intrusive regulatory mechanism unlike any seen before
under the CAA. If EPA were to determine that it cannot feasibly issue
permits to and monitor compliance for all of these sources, a section
111 system presumably would cover only large stationary sources, which
would place the compliance burden completely on electric generators and
large industrial sources, and reduce any overall effect from the GHG
control regime.
    However, there are questions about whether it would be permissible
for EPA to elect not to regulate GHG emissions from small stationary
sources. Section 111(b)(1) indicates that the Administrator must list a
category of sources if, in his judgment, it causes, or contributes
significantly to, air pollution which may reasonably be anticipated to
endanger public health and welfare. Given the volume of greenhouse
gases that are emitted from small stationary sources in the aggregate,
it is uncertain whether, if EPA makes a positive endangerment finding
for emissions of one or more GHGs from new motor vehicles, EPA could
conclude that small stationary sources do not cause ``or contribute
significantly'' to air pollution that endangers the public health or
welfare. This might well turn on the interpretation and application of
the terms in CAA section 202(a), noted above. Regardless, it is
uncertain whether, and if so where, EPA could establish a certain GHG
emission threshold for determining what sources or source categories
are subject to GHG regulations under section 111. What does seem clear
is that regulating GHG emissions under section 111 would entail
implementation of an enormously complicated, costly, and invasive
program.
c. Section 112: HAP
    Section 112 contains a list of hazardous air pollutants subject to
regulation. A pollutant may be added to the list because of adverse
health effects or adverse environmental effects. DOE believes it would
be inappropriate for greenhouse gases to be listed as HAPs given, among
other things, EPA's acknowledgment that ambient GHG concentrations
present no health risks. Nevertheless, if one or more GHGs were listed
under section 112, EPA would have to list all categories of ``major
sources'' (defined as sources that emit or potentially emit 10 tons per
year of any one HAP or 25 tons per year of any combination of HAPs).
For each major source category, EPA must then set a maximum available
control technology (MACT) standard.
    It is entirely unclear at this point what sort of MACT standard
would be placed on which sources for purposes of controlling GHG
emissions, what such controls would cost, and whether such controls
would be effective. However, complying with MACT standards with respect
to GHG emission controls likely would place a significant burden on
States and localities, manufacturing and industrial facilities,
businesses, power plants, and potentially thousands of other sources
throughout the United States. As the draft explains, section 112
``appears to allow EPA little flexibility regarding either the source
categories to be regulated or the size of sources to regulate * * * EPA
would be required to regulate a very large number of new and existing
stationary sources, including smaller sources * * * we believe that
small commercial or institutional establishments and facilities with
natural gas fired furnaces would exceed this major source threshold;
indeed, a large single family residence could exceed this threshold if
all appliances consumed natural gas.''
    Compliance with the standards under section 112 is required to be
immediate for most new sources and within 3-4 years for existing
sources. Such a strict timeline would leave little to no time for
emission capture and reduction technologies to emerge, develop, and
become cost-effective.
d. Effects of CAA Regulation of GHGs on the U.S. Energy Sector
    While the Department has general concerns about the portrayal of
likely effects of proposals to regulate GHGs under the CAA on all
sectors of the U.S. economy, DOE is particularly concerned about the
effects of such regulation on the energy sector. The effects of broad
based, economy-wide regulation of GHGs under the CAA would have
significant adverse effects on U.S. energy supplies, energy
reliability, and energy security.
    Coal is used to generate about half of the U.S. electricity supply
today, and the Energy Information Administration (EIA) projects this
trend to continue

through 2030. (EIA AEO 2008, at 68) At the electricity generating plant
itself, conventional coal-fired power stations produce roughly twice as
much carbon dioxide as a natural gas fired power station per unit of
electricity delivered. Given this reality, the effect of regulating
emissions of GHGs from stationary sources under the CAA could force a
drastic shift in the U.S. power sector. As Congressman John D. Dingell,
Chairman of the U.S. House of Representatives Committee on Energy and
Commerce, explained in a statement issued on April 8, 2008:

    ``As we move closer to developing policies to limit and reduce
emissions, we must be mindful of the impact these policies have on
the price of all energy commodities, particularly natural gas. What
happens if efforts to expand nuclear power production and cost-
effectively deploy carbon capture and storage for coal-fired
generation are not successful? You know the answer. We will drive
generation to natural gas, which will dramatically increase its
price tag. We don't have to look too far in the past to see the
detrimental effect that high natural gas prices can have on the
chemical industry, the fertilizer industry, and others to know that
we must be conscious of this potential consequence.''

Chairman Dingell's view is supported by studies of the climate bill
recently considered by the United States Senate. EIA's analysis of the
Lieberman-Warner bill stated that, under that bill, and without
widespread availability of carbon capture and storage (CCS) technology,
natural gas generation would almost double by 2030. See Energy
Information Administration, Energy Market and Economic Impacts of S.
2191, the Lieberman-Warner Climate Security Act of 2007 at 25.\4\
---------------------------------------------------------------------------

    \4\ DOE's Energy Information Administration (EIA) prepared an
analysis of the proposed Lieberman-Warner Climate Security Act of
2007 and projected that if new nuclear, renewable and fossil plans
with carbon capture and sequestration are not developed and deployed
in a time frame consistent with emissions reduction requirements,
there would be increased natural gas use to offset reductions in
coal generation, resulting in markedly higher delivered prices of
natural gas. See Energy Market and Economic Impacts of S. 2191, the
Lieberman-Warner Climate Security Act of 2007 (EIA, April 2008) EIA
estimated price increases from 9.8 cents per kilowatthour in 2020 to
14.5 cents per kilowatthour in 2030, ranging from 11 to 64 percent
higher by 2030. Id., p. 27, Figure 16. EPA's analysis of the
proposed legislation similarly projected electricity prices to
increase 44% in 2030 and 26% in 2050 assuming the growth of nuclear,
biomass or carbon capture and storage technologies. See EPA Analysis
of the Lieberman-Warner Climate Security Act of 2008 (March 14,
2008), pp. 3, 57. If the growth of nuclear, biomass, or carbon
capture and storage technologies was constrained, EPA projected that
electricity prices in 2030 would be 79% higher and 2050 prices would
be 98% higher than the reference scenario prices. Other analyses of
the legislation also projected substantial increases in energy costs
for consumers. See, e.g. Analysis of the Lieberman-Warner Climate
Security Act (S. 2191) Using the National Energy Modeling System (A
Report by the American Council for Capital Formation and the
National Associate of Manufacturers, conducted by Science
Applications International Corporation (SAIC))(study finding
increases in energy prices for residential consumers by 26% to 36%
in 2020, and 108% to 146% in 2030 for natural gas, and 28% to 33% in
2020, and 101% to 129% in 2030 for electricity). Further, in its
analysis o the bill the Congressional Budge Office estimated that
costs of private sector mandates associated with the legislation
would amount to more than $90 billion each year during the 2012-2016
period, most of which cost would ultimately be passed on to
consumers in the form of higher prices for energy and energy-
intensive goods and services. See Congressional Budget Office Cost
Estimate, S. 2191 (April 10, 2008), pp. 2, 19.
---------------------------------------------------------------------------

    If CAA regulation of GHG emissions from stationary sources forces
or encourages a continued move toward natural gas fired electric
generating units, there will be significantly increased demand for
natural gas. Given the limitations on domestic supplies, including the
restrictions currently placed on the production of natural gas from
public lands or from areas on the Outer Continental Shelf, much of the
additional natural gas needed likely would have to come from abroad in
the form of liquefied natural gas (LNG). This LNG would have to be
purchased at world prices, currently substantially higher than domestic
natural gas prices and generally tied to oil prices (crude or product).
To put this into perspective, natural gas closed on June 27, 2008, at
about $13.20/mcf for August delivery, about twice as high as last year
at this time, despite increasing domestic natural gas production. The
reason is that unlike last year, the U.S. has been able to import very
little LNG this year, even at these relatively high domestic prices.
United States inventories of natural gas in storage currently are about
3% below the five year average, and are 16% below last year at this
time. Among other effects, a large policy-forced shift towards
increased reliance on imported LNG would raise energy security and
economic concerns by raising domestic prices for consumers (including
electricity prices) and increasing U.S. reliance on foreign sources of
energy.
    In order for coal to remain a viable technology option to help meet
the world's growing energy demand while at the same time not addressing
GHG emissions, CCS technologies must be developed and widely deployed.
While off-the-shelf capture technologies are available for coal power
plant applications, current technologies are too costly for wide scale
deployment for both new plant construction and retrofit of the existing
fleet of coal-fired power plants. DOE studies (e.g., DOE/NETL Report:
``Cost and Performance Baseline for Fossil Energy Plants,'' May 2007)
show that capturing and sequestering CO2 with today's
technology is expensive, resulting in electricity cost increases on the
order of 30%-90% above the cost of electricity produced from new coal
plants built without CCS.
    The impact of a policy that requires more production of electricity
from natural gas will be felt not just in the United States but in
worldwide efforts to reduce GHG emissions. Unless U.S. policy supports
rapid development of CCS technologies to the point that they are
economically deployable (i.e., companies are not forced to switch to
natural gas fired electric generating facilities), CCS will not be
installed as early as possible in the China or other developing
nations. In a global climate sense, most of the benefit from new
technology installation will come from the developing countries, and
much of the international benefit would come from providing countries
like China and India with reasonable-cost CCS options for development
of their massive coal resources, on which we believe they will continue
to rely.

III. Energy Policy Considerations for Addressing Climate Change

    The Department is concerned that the draft does not properly
acknowledge collateral effects of using CAA regulation to address
global climate change, particularly in the absence of a regime that
actually will effectively address global climate change by addressing
global GHG emissions. DOE strongly supports efforts to reduce GHG
emissions by advancing technology and implementing policies that lower
emissions, but doing so in a manner that is conscious of and that
increases, rather than decreases, U.S. energy security and economic
security. With these goals in mind, DOE believes policymakers and the
public should be mindful of the considerations briefly described below
as the United States seeks to effectively address the challenge of
global climate change.
    Secretary Bodman has stated that ``improving our energy security
and addressing global climate change are among the most pressing
challenges of our time.'' This is particularly true in light of the
estimate by the International Energy Agency that the world's primary
energy needs will grow by over 50% by 2030.
    In order to address these challenges simultaneously and
effectively, the United States and other countries must make pervasive
and long-term changes. Just as the current energy and environmental
situation did not develop

overnight, neither can these challenges be addressed and resolved
immediately.
    To ensure that we both improve energy security and reduce GHG
emissions, rather than address one at significant cost to the other,
DOE believes that a number of actions must be taken. None of these
actions is sufficient in itself, and none of these actions can be
pursued to the exclusion of the others.
    Specifically, the United States and other nations must: Bring more
renewable energy online; aggressively deploy alternative fuels; develop
and use traditional hydrocarbon resources, and do so in ways that are
clean and efficient; expand access to safe and emissions-free nuclear
power, while responsibly managing spent nuclear fuel and reducing
proliferation risks; and significantly improve the efficiency of how we
use energy. In all of these things, the Department believes that
technological innovation and advancement is the key to unlocking the
future of abundant clean energy and lower GHG emissions. Therefore,
this innovation and advancement--through government funding, private
investment, and public policies that promote both of these--should be
the cornerstone of any plan to combat global climate change.
    In recent years, DOE has invested billions of dollars to advance
the development of technologies that advance these objectives. For
example, in 2007 DOE funded the creation of three cutting-edge
bioenergy research facilities. These facilities, which are already
showing progress, will seek to advance the production of biofuels that
have significant potential for both increasing the Nation's energy
security and reducing GHG emissions. Since the start of 2007, DOE has
invested well over $1 billion to spur the growth of a robust,
sustainable biofuels industry in the United States.
    DOE also has promoted technological advancement and deployment in
other renewable energy areas such as wind, solar and geothermal power,
and these advancements and policies are producing results. For example,
in 2007, U.S. cumulative wind energy capacity reached 16,818
megawatts--more than 5,000 megawatts of wind generation were installed
in 2007 alone. The United States has had the fastest growing wind power
capacity in the world for the last three years in a row. In addition,
DOE recently issued a solicitation offering up to $10 billion in
federal loan guarantees, under the program authorized by Title XVII of
the Energy Policy Act of 2005, to incentivize the commercial deployment
of new or significantly improved technologies in projects that will
avoid, reduce or sequester emissions of GHGs or other air pollutants.
    DOE strongly believes that nuclear power must play an important
role in any effective program to address global climate change. Indeed,
we believe that no serious effort to effectively control GHG emissions
and address climate change can exclude the advancement and development
of nuclear power. DOE continues to seek advancements in nuclear power
technology, in the licensing of new nuclear power facilities, and in
responsibly disposing of spent nuclear fuel. With respect to new
nuclear power plants, DOE has put in place a program to provide risk
insurance for the developers of the first new facilities, and recently
issued a solicitation offering up to $18.5 billion in federal loan
guarantees for new nuclear power plants.
    Significant advancements have been made in recent years toward the
development of new nuclear facilities. There now are pending at the
Nuclear Regulatory Commission several applications, all of which have
been filed in 2007 or 2008, to license new nuclear generating
facilities. DOE views the filing of these applications and the interest
in licensing and building new nuclear power facilities as very positive
developments from the perspectives of the Nation's electric reliability
and energy security, as well as the effort to control greenhouse gas
emissions. But there still is much to be done, and it will take a
sustained effort both by the private sector and by federal, State and
local governments, to ensure that these facilities are licensed, built
and placed into service.
    As noted above, DOE believes that coal can and must play an
important role in this Nation's energy future. Moreover, regardless
what decisions about coal U.S. policy officials may wish to make, it
seems clear that coal will continue to be used by other countries to
generate electricity for decades to come. It has been noted that China
is building new coal power plant capacity at the incredible rate of one
per week. As a result, it is critically important that we develop and
deploy cost-effective carbon capture and sequestration technology, both
to ensure that we can take advantage of significant energy resources
available in the United States, but also to help enable the control of
emissions in other countries as well.
    DOE believes that cost effective CCS technology must be developed
over the next 10-15 years that could be deployed on new plants built to
meet increasing demand and to replace retiring capital stock, and
retrofitted on existing plants with substantial remaining plant life.
DOE is helping to develop technologies to capture, purify, and store
CO2 in order to reduce GHG emissions without significant
adverse effects on energy use or on economic growth. DOE's primary CCS
research and development objectives are: (1) Lowering the cost and
energy penalty associated with CO2 capture from large point
sources; and (2) improving the understanding of factors affecting
CO2 storage permanence, capacity, and safety in geologic
formations and terrestrial ecosystems.
    Once these objectives are met, new and existing power plants and
fuel processing facilities in the U.S. and around the world will have
the potential to deploy CO2 capture technologies. Roughly
one third of the United States' carbon emissions come from power plants
and other large point sources. To stabilize and ultimately reduce
atmospheric concentrations of CO2, it will be necessary to
employ carbon sequestration--carbon capture, separation and storage or
reuse. The availability of advanced coal-fired power plants with CCS to
provide clean, affordable energy is essential for the prosperity and
security of the United States.
    The DOE carbon sequestration program goal is to develop at R&D
scale by 2012, fossil fuel conversion systems that offer 90 percent
CO2 capture with 99 percent storage permanence at less than
a 10 percent increase in the cost of energy services from new plants.
For retrofits of existing facilities, the task will be much harder, and
the penalties in terms of increased cost of power production from those
plants likely will be much higher. We expect that these integrated
systems for new plants will be available for full commercial
deployment--that is, will have completed the demonstration and early
deployment phase--in the 2025 timeframe. Of course, there are inherent
uncertainties in these projections and long-term research, development,
demonstration and deployment goals.
    In line with the Department's CCS R&D goals, DOE is working with
regional carbon sequestration partnerships to facilitate the
development of the infrastructure and knowledge base needed to place
carbon sequestration technologies on the path to commercialization. In
addition, DOE recently restructured its FutureGen program to accelerate
the near-term deployment of advanced clean coal technology by equipping
new integrated gasification combined cycle (IGCC) or other clean coal
commercial power

plants with CCS technology. By funding multiple projects, the
restructured FutureGen is expected to at least double the amount of
CO2 sequestered compared to the concept that previously had
been announced in 2003. The restructured FutureGen approach also will
focus on the challenges associated with avoidance and reduction of
carbon emissions and criteria pollutants through sequestration.
    In order to reduce the demand on our power sector and the
associated emissions of GHGs and other pollutants, we must continue to
support expanded efforts to make our society more efficient, from major
power plants to residential homes. DOE has helped lead this effort
with, among other things, its Energy Star program, a government-backed
joint effort with EPA to establish voluntary efficiency standards that
help businesses and individuals protect the environment and save money
through greater energy efficiency. By issuing higher efficiency
standards for an increasing number of products, the Energy Star program
helps consumers make fully-informed and energy-conscious decisions that
result in reduced emissions of GHGs and other pollutants. Last year
alone, with the help of the Energy Star program, American consumers
saved enough energy to power 10 million homes and avoid GHG emissions
equivalent to the emissions from 12 million cars--all while saving $6
billion in energy costs.

IV. Conclusion

    The Department believes the draft does not address and explain in
clear, understandable terms the extraordinary costs, burdens and other
adverse consequences, and the potentially limited benefits, of the
United States unilaterally using the Clean Air Act to regulate GHG
emissions. The draft, while presenting useful analysis, seems to make a
case for the CAA being the proper vehicle to meaningfully combat global
climate change, but we believe it understates the potential costs and
collateral adverse effects of attempting to regulate GHG emissions and
address climate change through a regulatory scheme that is forced into
the Clean Air Act's legal and regulatory mold.
    Any effective and workable approach to controlling GHG emissions
and addressing global climate change should not simply consist of a
unilateral and extraordinarily burdensome CAA regulatory program that
is placed on top of the U.S. economy with all other existing mandates,
restrictions, etc. simply remaining in place and the Government taking
the position that U.S. energy security and indeed the American economy
will just have to live with whatever results the GHG control program
produces. Rather, the Nation can only effectively address GHG emissions
and global climate change in coordination with other countries, and by
addressing how to regulate GHG emissions while considering the effect
of doing so on the Nation's energy and economic security. Considering
and developing such a comprehensive approach obviously will be very
difficult. But what seems clear is that it would be better than the
alternative, if the alternative is unilaterally proceeding with the
enormously burdensome, complex and costly regulatory program under the
Clean Air Act discussed in the draft, which in the end might not even
produce the desired climate change benefits.

U.S. Department of Commerce

Analysis of Draft Advanced Notice of Proposed Rulemaking

''Regulating Greenhouse Gas Emissions Under the Clean Air Act''
    Overview: This analysis reviews some of the implications of
regulating greenhouse gas (GHG) emissions under the Clean Air Act (CAA)
as outlined in the draft Advance Notice of Proposed Rulemaking
submitted to the Office of Management and Budget on June 17, 2008 (the
draft). The Department of Commerce's fundamental concern with the
draft's approach to using the CAA to regulate GHGs is that it would
impose significant costs on U.S. workers, consumers, and producers and
harm U.S. competitiveness without necessarily producing meaningful
reductions in global GHG emissions.
    Impact on U.S. Competitiveness and Manufacturing: The draft states
that competitiveness is an important policy consideration in assessing
the application of CAA authorities to GHG emissions. It also
acknowledges the potential unintended consequences of domestic GHG
regulation, noting ``[t]he concern that if domestic firms faced
significantly higher costs due to regulation, and foreign firms
remained unregulated, this could result in price changes that shift
emissions, and possibly some production capacity, from the U.S. to
other countries.'' \5\ This is a real issue for any domestic regulation
implemented without an international agreement involving the world's
major emitters.
---------------------------------------------------------------------------

    \5\ EPA draft, pg. 36.
    \6\ EIA International Energy Outlook 2008, http://
www.eia.doe.gov/oiaf/ieo/highlights.html.
---------------------------------------------------------------------------

    However, the draft does not detail the shift in global emissions
that is currently taking place. As the chart below shows, the emissions
of countries outside of the Organization of Economic Cooperation and
Development (OECD) already exceed those of OECD countries. By 2030,
non-OECD emissions are projected to be 72 percent higher than those of
their OECD counterparts.\6\
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    Any climate change regulation must take this trend into account.
Greenhouse gas emissions are a global phenomenon, and, as documented in
the draft, require reductions around the world in order to achieve
lower concentrations in the atmosphere. However, the costs of emissions
reductions are generally localized and often borne by the specific
geographic area making the reductions. As a result, it is likely that
the U.S. could experience significant harm to its international
competitiveness if GHGs were regulated under the CAA, while at the same
time major sources of emissions would continue unabated absent an
international agreement.
    Because the draft does not specify an emissions target level, the
implications of national regulation for the U.S. economy as a whole and
for energy price-sensitive sectors in particular are difficult to
forecast. However, recent analysis of emissions targets similar to
those cited in the draft provides a guide to the estimated level of
impacts.
    In April 2008, the Energy Information Administration (EIA) released
an analysis of legislation that set emission reduction targets of 30
percent below 2005 levels by 2030 and 70 percent below 2005 levels by
2050. The EIA estimated that in the absence of international offsets
and with limited development of alternatives, achieving those emission
targets would reduce manufacturing employment by 10 percent below
currently projected levels in 2030. Under the same scenario, the EIA
estimate indicated the emission targets would reduce the output of key
energy-intensive manufacturing industries, such as food, paper, glass,
cement, steel, and aluminum, by 10 percent and the output of non-energy
intensive manufacturing industries by nine percent below currently
projected levels in 2030.\7\
---------------------------------------------------------------------------

    \7\ Energy Market and Economic Impacts of S. 2191, Figure 28 &
29, http://www.eia.doe.gov/oiaf/servicerpt/s2191/economic.html.
---------------------------------------------------------------------------

    The European Union's experience with implementation of its cap-and-

trade system is also instructive from a competitiveness standpoint. Key
energy intensive industries in Europe have raised concerns about the
competitiveness impacts of the emissions trading system (ETS), arguing
that the ETS would force them to relocate outside of Europe. EU leaders
have responded to these concerns by considering the possibility of
awarding free emissions permits to certain industries, provided the
industries also agreed to reduce emissions.\8\ This illustrates one of
the challenges of crafting an effective national or regional solution
to a global problem.
---------------------------------------------------------------------------

    \8\ Financial Times, ``Brussels softens line on carbon
permits,'' Andrew Bounds, Jan. 22, 2008.
---------------------------------------------------------------------------

    International Trade: In order to address the concern that GHG
regulation in the United States will lead to emissions leakage and
movement of certain sectors to countries without strict carbon
regulations, the draft requests comment on ``trade-related policies
such as import tariffs on carbon or energy content, export subsidies,
or requirements for importers to submit allowances to cover the carbon
content of certain products.'' \9\
---------------------------------------------------------------------------

    \9\ EPA draft, pg. 37.
---------------------------------------------------------------------------

    Applying tariffs to imports from countries without carbon
regulations would have a number of significant repercussions. In
addition to exposing the United States to World Trade Organization
challenges by our trading partners, unilateral U.S. carbon tariffs
could spark retaliatory measures against U.S. exporters, the brunt of
which would fall on U.S. workers, consumers, and businesses. For
example, a World Bank study found that carbon tariffs applied to U.S.
exports to Europe ``could result in a loss of about 7 percent in U.S.
exports to the EU. The energy intensive industries, such as steel and
cement * * * could suffer up to a 30 percent loss.'' \10\
---------------------------------------------------------------------------

    \10\ The World Bank, International Trade and Climate Change:
Economic, Legal, and Institutional Perspectives, 2008, pg. 12.
---------------------------------------------------------------------------

    Moreover, carbon tariffs would actively undermine existing U.S.
trade policy. The U.S. Government has consistently advocated for
reducing tariffs, non-tariff barriers, and export subsidies.
Introducing new tariffs or export subsidies for carbon or energy
content would undermine those efforts with respect to clean energy
technologies specifically and U.S. goods and services more broadly, as
well as invite other countries to expand their use of tariffs and
subsidies to offset costs created by domestic regulations.
    Two examples of U.S. efforts to reduce tariffs or enhance exports
in this area: The United States Trade Representative is actively
engaged in trade talks to specifically reduce tariffs on environmental
technologies, which will lower their costs and encourage adoption,
while the Department of Commerce's International Trade Administration
is currently planning its third ``Clean Energy'' trade mission to China
and India focused on opening these rapidly developing economies to U.S
exporters of state-of-the-art clean technologies. Rather than raising
trade barriers, the U.S. Government should continue to advocate for the
deployment of clean energy technologies through trade as a way to
address global GHG emissions
    The issue of emissions leakage and the potential erosion of the
U.S. industrial base are real concerns with any domestic GHG regulation
proposal outside of an international framework. Accordingly, the proper
way to address this concern is through an international agreement that
includes emission reduction commitments from all the major emitting
economies, not by unilaterally erecting higher barriers to trade.
    Realistic Goals for Reducing Carbon Emissions: Establishing a
realistic goal of emissions reduction is an essential aspect of
designing policies to respond to climate change. Although the draft
does not ``make any judgment regarding what an appropriate [greenhouse
gas] stabilization goal may be,'' the document cites, as an example,
the Intergovernmental Panel on Climate Change's projection that global
CO2 emissions reductions of up to 60 percent from 2000 levels by 2050
are necessary to stabilize global temperatures slightly above pre-
industrial levels.\11\
---------------------------------------------------------------------------

    \11\ EPA draft, pg. 14.
---------------------------------------------------------------------------

    To provide context, it is useful to note that a 60 percent
reduction in U.S. emissions from 2000 levels would result in emissions
levels that were last produced in the United States during the 1950s
(see chart on next page). In 1950, the population in the United States
was 151 million people--about half the current size--and the Gross
Domestic Product was $293 billion.\12\ Without the emergence of
technologies that dramatically alter the amount of energy necessary for
U.S. economic output, the reduction of energy usage necessary to
achieve this goal would have significant consequences for the U.S.
economy.
---------------------------------------------------------------------------

    \12\ U.S. Census Bureau, 1950 Decennial Census; Bureau of
Economic Analysis, National Income and Product Accounts Table.
---------------------------------------------------------------------------

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    Moreover, as the draft acknowledges, initial emissions reductions
under the CAA or other mechanism ``may range from only [a] few percent
to 17% or more in some cases. Clearly, more fundamental technological
changes will be needed to achieve deeper reductions in stationary
source GHG emissions over time.'' \13\ But the inability, at this time,
to identify either a realistic emissions target or the technical
feasibility of achieving various levels of reduction is one of the
major flaws of using the draft to assess policy changes of this
magnitude.
---------------------------------------------------------------------------

    \13\ EPA draft, pg. 209.
---------------------------------------------------------------------------

    The draft also notes that ``[a]n economy-wide, market-oriented
environmental regulation has never been implemented before in the
U.S.'' \14\ This point is worth underscoring: The CAA has never been
applied to every sector in the U.S. economy. Instead, the CAA is
generally applied to specific sectors (such as the power sector) or
sources of emissions, and it has included initiatives to address
regional and multi-state air quality issues. While these examples
clearly provide valuable experience in addressing air pollution issues
across state boundaries, using the CAA to regulate GHGs is
significantly more ambitious in scope than anything previously
attempted under the CAA.
---------------------------------------------------------------------------

    \14\ EPA draft, pg. 32.
---------------------------------------------------------------------------

    Accountability and Public Input: The draft contemplates a dramatic
regulatory expansion under the CAA. However, climate policies of this
magnitude are best addressed through legislative debate and scrutiny.
Examining these issues in the legislative context would ensure that
citizens, through their elected representatives, have ample opportunity
to make their views known and to ensure accountability for the
decisions that are made.
    Economic Implications of Applying CAA Authorities: The draft noted
numerous issues of economic significance in analyzing the potential
application of the CAA to stationary sources of GHGs. The Department of
Commerce highlights below some of the most important issues raised in
the draft that could impact U.S. competitiveness, innovation, and job
creation.
    Compliance Costs of Multiple State Regulations Under the CAA: The
draft describes the various authorities under the CAA that could be
applied to GHGs. One such mechanism involves the development of
individual state implementations plans (SIPs) in order to meet a
national GHG emissions reduction standard. As the draft notes, ``[t]he
SIP development process, because it relies in large part on individual
states, is not designed to result in a uniform national program of
emission controls.'' \15\ The draft also raises the potential
implications of this approach: ``[u]nder the traditional SIP approach,
emissions controls on specific source categories would flow from
independent state-level decisions, and could result in a patchwork of
regulations requiring different types and levels of controls in
different states.'' \16\ If this were the result, it could undermine
the benefit of having a national standard and significantly raise
compliance costs. The implications of this approach should be examined
further.
---------------------------------------------------------------------------

    \15\ EPA draft, pg. 181.
    \16\ EPA draft, pg. 187.
---------------------------------------------------------------------------

    Viability of Technological Alternatives: The draft notes that some
of the authorities in the CAA could impose requirements to use
technology that is not commercially viable. For example, when
discussing Standards of Performance for New and Existing Sources, the
draft notes that ``the systems on which the standard is based need only
be `adequately demonstrated' in EPA's view * * * The systems, and
corresponding emission rates, need not be actually in use or achieved
in

practice at potentially regulated sources or even at a commercial
scale.'' \17\ Similarly, in examining the potential application of the
New Source Review program to nonattainment areas, the draft outlines
the program's required use of the Lowest Available Emissions Rate
(LAER) technology which ``does not allow consideration of the costs,
competitiveness effects, or other related factors associated with the
technology * * * New and modified sources would be required to apply
the new technology even if it is a very expensive technology that may
not necessarily have been developed for widespread application at
numerous smaller sources, and even if a relatively small emissions
improvement came with significant additional cost.'' \18\
---------------------------------------------------------------------------

    \17\ EPA draft, pg. 196.
    \18\ EPA draft, pg. 232.
---------------------------------------------------------------------------

    If CAA requirements such as these were used to regulate GHGs, it
would impose significant costs on those required to adopt the
technology.
    Expanding CAA Regulation to Cover Small Businesses and Non-Profits:
The draft notes that the use of some CAA authorities could extend
regulation to small and previously unregulated emissions sources. For
example, the draft states that the use of one authority under the CAA
could result in the regulation of ``small commercial or institutional
establishments and facilities with natural gas-fired furnaces.'' \19\
This could include large single family homes, small businesses,
schools, or hospitals heated by natural gas. If the CAA was applied in
ways that extended it beyond those traditionally regulated under the
Act, it could have significant economic impacts, and the costs of such
an application should be further analyzed. To put this potential
expansion in context, in 2003 there were 2.4 million commercial non-
mall buildings in the United States that used natural gas, and an
estimated 54 percent of these buildings were larger than 5,000 square
feet.\20\ According to the EIA's 2003 Commercial Building Energy
Consumption Survey, a building between 5,001 to 10,000 square feet
consumes 408,000 cubic feet of natural gas per year.\21\ Based on
preliminary calculations using the EPA's Greenhouse Gas Equivalencies
Calculator, this translates into annual CO2 emissions of 21
metric tons, which would exceed the allowable threshold under one
provision of the CAA.\22\
---------------------------------------------------------------------------

    \19\ EPA draft, pg. 215.
    \20\ Energy Information Agency, 2003 Commercial Buildings Energy
Consumption Survey-Overview of Commercial Buildings Characteristics,
Table C23.
    \21\ 2003 Commercial Buildings Energy Consumption Survey.
    \22\ Calculation done by converting cubic feet of gas consumed
to therms, and the number of therms then inserted into the EPA
calculator. According to the EPA draft (pg. 214): If GHGs were
listed as a Hazardous Air Pollutant (HAP) under the CAA, the HAP
standard's ``major source thresholds of 10 tons for a single HAP and
25 for any combination of HAP would mean that very small GHG
emitters would be considered major sources.''
---------------------------------------------------------------------------

    The table below taken from the EIA's 2003 Commercial Building
Energy Consumption Survey shows the number and size of U.S. buildings,
providing more detail on the type of structures that could be regulated
if the CAA was applied to GHGs. Based on the estimate of 21 metric tons
of annual emissions from a building 5,000-10,000 square feet in size,
it is likely that schools, churches, hospitals, hotels, and police
stations heated by natural gas could be subject to the CAA. Clearly,
the costs and benefits of such an approach should be examined in
greater detail.

                                      Non-Mall Buildings Using Natural Gas
                          [Number and Floorspace by Principal Building Activity, 2003]
----------------------------------------------------------------------------------------------------------------
                                                                Number of     Total floorspace  Mean square feet
                                                                buildings       (million sq.      per building
                                                               (thousand)           ft.)           (thousand)
----------------------------------------------------------------------------------------------------------------
All Buildings.............................................             2,391            43,468              18.2
Education.................................................               213             7,045              33.1
Food Sales................................................                98               747               7.6
Food Service..............................................               226             1,396               6.2
Health Care...............................................                72             2,544              35.5
    Inpatient.............................................                 7             1,805             257.0
    Outpatient............................................                65               739              11.4
Lodging...................................................                86             4,256              49.7
Mercantile................................................               245             2,866              11.7
Office....................................................               488             8,208              16.8
Public Assembly...........................................               146             2,723              18.6
Public Order and Safety...................................                36               637              17.7
Religious Worship.........................................               220             2,629              11.9
Service...................................................               281             2,496               8.9
Warehouse and Storage.....................................               187             5,494              29.4
Other.....................................................                45             1,252              27.9
Vacant....................................................                49             1,176              24.2
----------------------------------------------------------------------------------------------------------------
Source: from Energy Information Administration, 2003 Commercial Buildings Energy Consumption Survey, Table C23.
  (http://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_tables_2003/2003set11/2003excel/c23.xls)

    Cost of CAA Permitting: As the draft states, ``the mass emissions
[of CO2] from many source types are orders of magnitude
greater than for currently regulated pollutants,'' which could result
in the application of the CAA's preconstruction permitting requirements
for modification or new construction to large office buildings, hotels,
apartment building and large retail facilities.\23\ The draft also
notes the potential time impacts (i.e., the number of months necessary
to receive a CAA permit) of applying new permit requirements to
projects and buildings like those noted above that were not previously
subject to the CAA.\24\ The potential economic costs of applying the
CAA permitting regimes to these areas of the economy, such as small
businesses and commercial development, merit a complete assessment of
the costs and benefits of such an approach.
---------------------------------------------------------------------------

    \23\ EPA draft, pg. 224, 225.
    \24\ EPA draft, pg. 227.
---------------------------------------------------------------------------

    Conclusion: Climate change presents real challenges that must be
addressed through focused public policy

responses. However, the draft raises serious concerns about the use of
the CAA to address GHG emissions. The CAA is designed to reduce the
concentration of pollutants, most of which have a limited lifetime in
the air, while climate change is caused by GHG emissions that linger in
the atmosphere for years. The CAA uses regulations that are often
implemented at the state and regional level, while climate change is a
global phenomenon. The CAA is designed to regulate major sources of
traditional pollutants, but applying those the standards to GHGs could
result in Clean Air Act regulation of small businesses, schools,
hospitals, and churches.
    Using the CAA to address climate change would likely have
significant economic consequences for the United States. Regulation of
GHG emissions through the CAA would mean that the United States would
embrace emissions reductions outside of an international agreement with
the world's major emitters. This would put U.S. firms at a competitive
disadvantage by raising their input costs compared to foreign
competitors, likely resulting in emissions leakage outside of the
United States and energy-intensive firms relocating to less regulated
countries. Such an outcome would not be beneficial to the environment
or the U.S. economy.

Department of Agriculture

    Americans enjoy the safest, most abundant, and most affordable food
supply in the world. Our farmers are extraordinarily productive, using
technology and good management practices to sustain increased yields
that keep up with growing populations, and they are good stewards of
the land they depend upon for their livelihoods. Because of their care
and ingenuity, the United States is projecting an agricultural trade
surplus of $30 billion in 2008.
    Unfortunately, the approach suggested by the Environmental
Protection Agency (``EPA'') staff's draft Advance Notice of Proposed
Rulemaking ``Regulating Greenhouse Gas Emissions under the Clean Air
Act,'' which was submitted to the Office of Management and Budget on
June 17, 2008 (``June 17 draft'' or ``draft ANPR''), threatens to
undermine this landscape. If EPA were to exercise a full suite of the
Clean Air Act (``CAA'') regulatory programs outlined in the draft ANPR,
we believe that input costs and regulatory burden would increase
significantly, driving up the price of food and driving down the
domestic supply. Additionally, the draft ANPR does not sufficiently
address the promise of carbon capture and sequestration, and how a
Clean Air Act regulatory framework could address these issues.

Input Costs

    Two of the more significant components of consumer food prices are
energy and transportation costs, and as these costs rise, they will
ultimately be passed on to consumers in the form of higher food prices.
As the past several months have demonstrated to all Americans, food
prices are highly sensitive to increased energy and transportation
costs. From May 2007 to May 2008, the price of crude oil has almost
doubled, and the price consumers in the United States paid for food has
increased by 5.1%.
    We do not attempt here to address the effects on energy and
transportation costs that would likely flow from a Clean Air Act
approach to regulating greenhouse gases. The expert agencies--the
Department of Energy and the Department of Transportation--have each
included their own brief assessments of such effects. Our analysis
begins with the assumption that these input costs would be borne by
agricultural producers.
    United States commercial agriculture is a highly mechanized
industry. At every stage--field preparation, planting, fertilization,
irrigation, harvesting, processing, and transportation to market--
modern agriculture is dependent on technically complex machinery, all
of which consume energy. Direct energy consumption in the agricultural
sector includes use of gas, diesel, liquid petroleum, natural gas, and
electricity. In addition, agricultural production relies on energy
indirectly through the use of inputs such as nitrogen fertilizer, which
have a significant energy component associated with their production.
    Crop and livestock producers have been seeing much higher input
prices this year. From June 2007 to June 2008, the prices paid by
farmers for fertilizer are up 77%, and the prices paid for fuels have
risen 61%. The prices paid by farmers for diesel fuel alone have
increased by 72% over the past year. In practical terms, these figures
mean that it is becoming far more costly for the producer to farm.
Currently, USDA forecasts that expenditures for fertilizers and lime,
petroleum fuel and oils, and electricity will exceed $37 billion in
2008, up 15% from 2007.
    Depending on the extent to which the Clean Air Act puts further
pressure on energy prices, input costs for indispensible items such as
fuel, feed, fertilizer, manufactured products, and electricity will
continue to rise. A study conducted by USDA's Economic Research Service
(Amber Waves, April 2006) found the impact of energy cost changes on
producers depends on both overall energy expenditures and, more
importantly, energy's share of production costs, with the potential
impacts on farm profits from changes in energy prices greatest for feed
grain and wheat producers. The study also found that variation in the
regional distribution of energy input costs suggests that changes in
energy prices would most affect producers in regions where irrigation
is indispensable for crop production. Less use of irrigation could mean
fewer planted acres or lower crop yields, resulting in a loss of
production. In addition to potential financial difficulties, farmers
fear that future tillage practices could be mandated and livestock
methane management regulated.
    However, the impact of higher energy prices on farmers is only part
of the story. Only 19% of what consumers paid for food in 2006 went to
the farmer for raw food inputs. The remaining 81% covered the cost of
transforming these inputs into food products and transporting them to
the grocery store shelf. Of every $1 spent on U.S.-grown foods, 3.5
cents went toward the costs of electricity, natural gas, and other
fuels used in food processing, wholesaling, retailing, and food service
establishments. An additional 4 cents went toward transportation costs.
This suggests that for every 10 percent increase in energy costs,
retail food prices could increase by as much as 0.75 percent if fully
passed onto consumers. The resulting impact to the consumer of higher
energy prices will be much higher grocery bills. More important,
however, will be the negative effect on our abundant and affordable
food supply.
Regulatory Burden on Agriculture
    In its draft ANPR, EPA contemplates regulating agricultural
greenhouse gas (GHG) emissions under the three primary CAA programs--
National Ambient Air Quality Standards (``NAAQS''), New Source
Performance Standards (``NSPS''), or Hazardous Air Pollutant (``HAP'')
standards. Like the Act itself, these programs were neither designed
for, nor are they suitable to, regulation of greenhouse gases from
agricultural sources. If agricultural producers were covered under such
complex regulatory schemes, most (except perhaps the largest
operations) would be ill-equipped to bear the costly

burdens of compliance, and many would likely cease farming altogether.
    The two common features of each CAA program are permitting and
control requirements:
    Permitting: Operators who are subject to Title V permitting
requirements--regardless of which CAA program is applicable--are
required to obtain a permit in order to operate. These Title V permits
are subject to a public notice and comment period and contain detailed
requirements for emission estimation, monitoring, reporting, and
recordkeeping. Title V permits may also contain control requirements
that limit the operation of a facility. If a producer desired, or were
compelled by changed circumstances (e.g., changing market demand,
weather events, or pest infestation) to modify his operational plans,
he would be required to first seek a permit modification from EPA or
the State.
    If GHG emissions from agricultural sources are regulated under the
CAA, numerous farming operations that currently are not subject to the
costly and time-consuming Title V permitting process would, for the
first time, become covered entities. Even very small agricultural
operations would meet a 100-tons-per-year emissions threshold. For
example, dairy facilities with over 25 cows, beef cattle operations of
over 50 cattle, swine operations with over 200 hogs, and farms with
over 500 acres of corn may need to get a Title V permit. It is neither
efficient nor practical to require permitting and reporting of GHG
emissions from farms of this size. Excluding only the 200,000 largest
commercial farms, our agricultural landscape is comprised of 1.9
million farms with an average value of production of $25,589 on 271
acres. These operations simply could not bear the regulatory compliance
costs that would be involved.
    Control: Unlike traditional point sources of concentrated emissions
from chemical or manufacturing industries, agricultural emissions of
greenhouse gases are diffuse and most often distributed across large
open areas. These emissions are not easily calculated or controlled.
Moreover, many of the emissions are the result of natural biological
processes that are as old as agriculture itself. For instance,
technology does not currently exist to prevent the methane produced by
enteric fermentation associated with the digestive processes in cows
and the cultivation of rice crops; the nitrous oxide produced from the
tillage of soils used to grow crops; and the carbon dioxide produced by
soil and animal agricultural respiratory processes. The only means of
controlling such emissions would be through limiting production, which
would result in decreased food supply and radical changes in human
diets.
    The NAAQS program establishes national ambient concentration levels
without consideration of specific emission sources. The determination
of which source is required to achieve emission reductions and how to
achieve those reductions is specified in the State Implementation Plans
(``SIPs'') developed by each State. Under a NAAQS regulatory program,
agricultural sources may need to employ Reasonably Available Control
Measures (``RACM'') or, at a minimum, include the use of Reasonably
Available Control Technologies (``RACT''). In the past, such control
measures were established with a national focus for typical industrial
sources. In previously regulated sectors, these control measures and
technologies have typically been associated with improved engineering
or chemical processes; however, agriculture is primarily dependent upon
biological processes which are not readily re-engineered. Given the
nature of many agricultural source emissions, RACM and RACT may not
exist or may be cost prohibitive.
    The NSPS program regulates specific pollutants emitted from
industrial categories for new, modified, or reconstructed facilities.
EPA, rather than individual States, determines who is regulated, the
emission reductions that must be achieved, and the associated control
technologies and compliance requirements. Should EPA choose to regulate
agriculture under NSPS, control requirements would be established at
the national level using a ``one-size-fits-all'' approach. Differences
in farming practices make it difficult to comply with this approach, as
variability exists between types of operations and between similar
operations located in different regions of the United States.
    In addition, regulation of the agricultural sector under a NSPS
program would likely trigger the added challenge of compliance with the
pre-construction permitting process under the Prevention of Significant
Deterioration (``PSD'') program. Triggering pre-construction permits
could result in a requirement to utilize Best Available Control
Technologies (``BACT'') or technologies that achieve the Lowest
Available Emission Reductions (``LAER''). Given the state of available
control methods for agricultural area sources, compliance with these
requirements may not currently be achievable in many instances. Should
BACT or LAER technologies exist, the ability to utilize them across the
variety of farming operations is questionable, and the costs to employ
these technologies would be high since they would be relatively new
technologies.
    Similar to the NSPS program, the HAP program focuses on industrial
categories. EPA must list for regulation all categories of major
sources that emit one or more HAP at levels that are very low (i.e., 10
tons per year of a single HAP or 25 tons per year of a combination of
HAP). Under a HAP program, EPA can regulate both major sources and
smaller (i.e., area) sources. In addition to the Title V permit
requirement, this program would result in emission control requirements
for all agricultural sources regardless of the size of the operation.
These requirements are driven by the best-performing similar sources,
with EPA determining the similarity between sources. This approach does
not lend itself to compliance by agricultural sources whose practices
vary farm-by-farm and locality-by-locality. In addition, the cost of
controls used by the best-performing sources would increase the
operating expenses for all farms regardless of size.
    While this discussion only begins to address the practical
difficulties that agricultural producers will face if EPA were to
regulate GHGs under the CAA, these questions have not been raised in
the draft ANPR in the context of agriculture. USDA believes that these
issues must be thoroughly considered before a rule is finalized.
Capture and Sequestration
    The draft ANPR does not sufficiently address the promise of carbon
capture and sequestration, or how a Clean Air Act regulatory framework
could address these issues. In describing emissions by sector, the
draft ANPR does contain the following brief introductory statement:

    Land Use, Land-Use Change, and Forestry: Land use is not an
economic sector per se but affects the natural carbon cycle in ways
that lead to GHG emissions and sinks. Included in this category are
emissions and sequestration of CO2 from activities such
as deforestation, afforestation, forest management and management of
agricultural soils. Emissions and sequestration depend on local
conditions, but overall land use in the United States was a net sink
in 2006 equivalent to 12.5 percent of total GHG emissions.

    Thus, the United States Government, as well as private landowners
throughout the country, possess land resources that hold potentially

tremendous economic and environmental value in a carbon-limited
environment.
    Unfortunately, in the draft ANPR's extensive discussion of
regulatory alternatives, the EPA staff does not even attempt to make
the case that the Clean Air Act could or should be used to ensure that
a regulatory scheme maximizes opportunities and incentives for carbon
capture and sequestration. Had the draft ANPR raised these issues, it
would become evident that there are substantial questions as to whether
the CAA could provide an effective vehicle to account for such
beneficial actions.
    Additionally, any regulatory program should avoid needless
duplication and conflict with already existing efforts. The recently
enacted Food, Conservation and Energy Act of 2008 (``Farm Bill'')
requires the Secretary of Agriculture to establish technical guidelines
to create a registry of environmental services benefits from
conservation and land management activities, including carbon capture
and sequestration. USDA is including EPA and other Federal agencies as
participants in this process, which we believe holds substantial
promise.

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General Information

What Should I Consider as I Prepare My Comments for EPA?

A. Submitting CBI
    Do not submit this information to EPA through www.regulations.gov
or e-mail. Clearly mark the part or all of the information that you
claim to be confidential business information (CBI). For CBI
information in a disk or CD ROM that you mail to EPA, mark the outside
of the disk or CD ROM as CBI and then identify electronically within
the disk or CD ROM the specific information that is claimed as CBI. In
addition to one complete version of the comment that includes
information claimed as CBI, a copy of the comment that does not contain
the information claimed as CBI must be submitted for inclusion in the
public docket. Information so marked will not be disclosed except in
accordance with procedures set forth in 40 CFR part 2.
B. Tips for Preparing Your Comments
    When submitting comments, remember to:
     Explain your views as clearly as possible.
     Describe any assumptions that you used.
     Provide any technical information and/or data you used
that support your views.
     If you estimate potential burden or costs, explain how you
arrived at your estimate.
     Provide specific examples to illustrate your concerns.
     Offer alternatives.
     Make sure to submit your comments by the comment period
deadline identified.
     To ensure proper receipt by EPA, identify the appropriate
docket identification number in the subject line on the first page of
your response. It would also be helpful if you provided the name, date,
and Federal Register citation related to your comments.

Outline of This Preamble

I. Introduction
II. Background Information
III. Nature of Climate Change and Greenhouse Gases and Related
Issues for Regulation
IV. Clean Air Act Authorities and Programs
V. Endangerment Analysis and Issues
VI. Mobile Source Authorities, Petitions and Potential Regulation
VII. Stationary Source Authorities and Potential Regulation
VIII. Stratospheric Ozone Protection Authorities, Background, and
Potential Regulation

I. Introduction

    Climate change is a serious global challenge. As detailed in
section V of this notice, it is widely recognized that greenhouse gases
(GHGs) have a climatic warming effect by trapping heat in the
atmosphere that would otherwise escape to space. Current atmospheric
concentrations of GHGs are significantly higher than pre-industrial
levels as a result of human activities. Warming of the climate system
is unequivocal, as is now evident from observations of increases in
global average air and ocean temperatures, widespread melting of snow
and ice, and rising global average sea level. Observational evidence
from all continents and most oceans shows that many natural systems are
being affected by regional climate changes, particularly temperature
increases. Future projections show that, for most scenarios assuming no
additional GHG emission reduction policies, atmospheric concentrations
of GHGs are expected to continue climbing for most if not all of the
remainder of this century, with associated increases in average
temperature. Overall risk to human health, society and the environment
increases with increases in both the rate and magnitude of climate
change.
    Today's notice considers the potential use of the CAA to address
climate change. In April 2007, the Supreme Court concluded in
Massachusetts v. EPA, 127 S. Ct. 1438 (2007), that GHGs meet the CAA
definition of ``air pollutant,'' and that section 202(a)(1) of the CAA
therefore authorizes regulation of GHGs subject to an Agency
determination that GHG emissions from new motor vehicles cause or
contribute to air pollution that may reasonably be anticipated to
endanger public health or welfare. The Court also ruled that in
deciding whether to grant or deny a pending rulemaking petition
regarding section 202(a)(1), EPA must decide whether new motor vehicle
GHG emissions meet that endangerment test, or explain why scientific
uncertainty is so profound that it prevents making a reasoned judgment
on such a determination. If EPA finds that new motor vehicle GHG
emissions meet the endangerment test, section 202(a)(1) of the CAA