Who's In and Who's Out of Cap and Trade

October 8, 2009

Jessica Leber, E&E reporter

A new analysis backs up assertions by the Obama administration and congressional leaders that key climate regulations will encompass only the largest industrial emitters.

The *report* <http://www.eenews.net/features/documents/2009/10/08/document_cw_01.pdf>, by Duke University's Nicholas Institute for Environmental Policy Solutions, examined how many facilities are likely to emit more than 25,000 metric tons of carbon dioxide.

Twenty-five thousand tons is the magic number in a slew of new and pending climate proposals: both the House and Senate cap-and-trade plans, U.S. EPA's new greenhouse gas reporting system, and the agency's recent proposal to require emissions permits from new and upgraded stationary sources.

If individual facilities every year emit less than that number, the equivalent of 130 railcars of coal, they are for the most part excluded from new and proposed climate requirements, such as reporting annual emissions or obtaining allowances to emit CO2.

While practically the entire fossil-fueled power sector lies above the threshold, only 1.3 percent of facilities across all manufacturing industries would be included, the report found. And for the majority of individual industries, less than 10 percent of facilities would be affected, it says.

"We don't think that it is widely appreciated that a large percentage of emissions are coming from such a small percentage of facilities," said David Cooley, a policy and research associate at Duke University who coordinated the report.

A smaller 'doomsday' than industry groups predict

This is a fact that EPA emphasized when it developed recent climate regulations. The agency estimates that its new reporting system, which has many nuances about who reports beyond the simple threshold, would include about 10,000 total facilities. And its recent proposal to regulate stationary sources above 25,000 tons would encompass about 70 percent of industrial emissions, EPA says.

The report, funded by the Environmental Defense Fund, comes at a time of heated political debate over how both cap and trade and pending EPA regulations will affect industries and the economy. Several influential groups, including the National Association of Manufacturers and U.S. Chamber of Commerce, have outlined doomsday scenarios for climate legislation and blasted EPA's proposed rules.

"Quite simply, it's an anti-energy, anti-growth and anti-jobs bill," said NAM Executive Vice President Jay Timmons in August, contending that a carbon cap would shrink industrial output by raising energy and environmental-compliance costs for domestic manufacturers facing unregulated oversees competition (/E&E News PM/ <http://www.eenews.net/eenewspm/2009/08/12/archive/2>, Aug. 12).

These groups have also insisted that EPA, whether it wants to or lawsuits force it to, will wind up regulating emissions sources much smaller than 25,000 tons. EPA Administrator Lisa Jackson has repeatedly insisted that this will not occur, and yesterday, EPA's air chief defended the rule's legal basis (/Greenwire/ <http://www.eenews.net/Greenwire/2009/10/07/3/>, Oct. 7).

Many commercial facilities will escape regulation

Assuming EPA's proposal passes court challenges, the Duke analysis estimates who is in and who is out. In 2002, the year the report's data is from, 4,724 manufacturing facilities would be regulated based on the threshold, encompassing 82.5 percent of total industrial emissions. And with the exception of potentially a few very large universities and hospitals that run large boilers, no commercial-sector buildings or farms would fall inside the scope of programs with a 25,000-ton bar.

The analysis is based on the Manufacturing Energy Consumption Survey, last conducted by the Energy Information Administration in 2002, and economic data from the U.S. Census. The authors calculated emissions from fossil fuel consumption per employee across various industries.

They also came up with a rule of thumb for the manufacturing sector, which, unlike the power sector, has not been previously required to measure CO2 emissions. If a facility has a smokestack, it will probably be required to report, the report says. But if a facility has fewer than 50 employees and no smokestack, "it will be virtually guaranteed safe passage around any regulation, regardless of industry."

Nearly all petroleum refineries, lime manufacturing plants, and chemical manufacturers are affected, while less than a third of pharmaceutical facilities, food manufacturers, textile mills, and iron and steel mills would be regulated. Overall, facilities at most industries wouldn't be included until their employee count is in the hundreds.

The analysis does not include emissions of greenhouse gases other than CO2 because only fuel consumption data were used.

Cooley said that the report underscores the need for a greenhouse gas reporting system, which EPA will begin implementing next year. "This is the best data that we have, but it's not based on actual emission data. That data just doesn't exist right now," he said.

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