Center for Climate, Energy, Environment and Economics Newsletter

Center for Climate, Energy, Environment and Economics Newsletter: Thursday, October 23, 2014

Message From The Directors

Victor Flatt It has been an exciting few months at CLEAR. As federal adaptation policies continue to be re-examined we are actively participating in the conversation. One of the most important areas of climate change adaptation that CLEAR is pursuing is the environmental justice impacts. The poor and otherwise marginalized will bear the brunt of continuing climate change demanding a focus on environmental justice in adaptation policies. CLEAR is working with Sea-grant in Virginia and North Carolina to examine the vulnerability of coastal communities to try and assist them with more targeted adaptation assistance.

The announcement of federal grant money for disaster areas undertaking long term climate change planning also underscores the need for the examination of laws and policies to increase resilience. As the state looks to protecting its coast and to the simultaneous deployment of renewable energy at the coastline, CLEAR is working with 5 other UNC units as well as the North Carolina Sea Grant to examine how coastal laws and policies can be altered to both increase resilience and provide methods for continued deployment of low carbon energy.

We also continue our role in other environmental areas. We hosted a very well attended forum examining the impact of the EPA’s CAA GHG rules on North Carolina. We have also taken an active role in critiquing and discussing the ongoing environmental political actions in the state of North Carolina, including the state’s approach to Coal Ash clean up and to fracking.

Last, we continue to increase opportunities for our students with new courses and new environmental externships in environmental law, energy, and climate, including new externships at the EPA office of Air Policy here in RTP, North Carolina.

Featured Article

On September 19, 2014, CLEAR, along with UNC’s Institute for the Environment, hosted Clean Power Plan: What EPA’s Carbon Rules Mean for North Carolina. After a welcome from Dean Boger, the forum commenced with an overview of EPA's proposed carbon regulations from Marguerite McLamb, Policy Advisor, Sector Policies and Programs Division, Office of Air Quality Planning and Standards, US EPA. Ms. McLamb discussed the origins of the EPA proposal, including health effects, climate change, and the call to action in President Obama's Climate Action Plan. In reducing carbon pollution from existing plants, the EPA has stressed flexibility and focused on stakeholder engagement, costs, importance of a range of energy sources, and other regulations that affect the power sector.

After meeting with over 300 utility, labor and environmental groups, posting a webinar and hosting 11 public listening sessions, Ms. McLamb stressed that the EPA understands that reliability, affordability, and flexibility are vital, and that regional solutions must be allowed and potentially encouraged. After touching on the fact that there are also two related Clean Air Act rulemakings for new and modified and reconstructed sources, the remaining time was spent focused squarely on section 111(d) of the Clean Air Act, which the EPA is citing for its authority to regulate greenhouse gases from existing power plants. Defining BSER – best system of emissions reduction – and then translating that into a goal for each state, the EPA expects the rule to reduce carbon dioxide 30% nationwide. from 2005 levels by 2030. The EPA estimates that the climate and health benefits will be between $54 and $89 billion, with the rule costing $7.3 to $8.8 billion.

Marguerite McLambThe goal for each state was determined by using state-specific data, and applying that data to four "building blocks." The building blocks are: 1) lowering the carbon intensity of generation at individual plants through heat rate improvements of 6%; 2) reducing emissions by shifting base generation to less carbon-intensive plants (utilizing natural gas plants at 70% capacity); 3) reducing emissions by expanding the amount of new lower or zero-carbon generation; and 4) reducing emissions by increasing demand-side energy efficiency by 1.5% annually.

Ms. McLamb stressed that the various states will be able to determine how to meet the goal; an individual state does not need to use the formula utilized by the EPA in determining its goal. Each state's goal is different because each state has a unique mix of fossil-fuel and other power sources, emissions, and energy efficiency opportunities. Also, states can choose to meet a mass-based goal instead of a rate-based goal, which could make emissions trading and multi-state or regional plans easier to implement. As proposed, state plans are due June 30, 2016.

The overview was followed by a legal and policy analysis of the proposed regulation by a panel moderated by Maria Savasta-Kennedy and comprised of Jonas Monast, Jeremy Tarr, Victor Flatt, and David Ardia. The panel focused on potential legal issues with the proposed rule, including whether power plants can be regulated at all under Section 111(d) of the Clean Air Act due to conflicting language in the text passed in the 1990 Clean Air Act Amendments. The EPA has asserted that it can, even with the conflicting language, but there will be litigation on that uncertainty. The building blocks may also be ripe for litigation, as some critics have suggested that the EPA can only require measures that can be taken at the power plant itself ("within the fence line"). The thinking is that if the agency can look outside the fence line at demand-side reductions, the targets can be more stringent, requiring a greater emissions reduction. However, the panel agreed that the EPA has straddled this line well, as even demand-side reductions would have reductions of emissions at the affected units, even if the units are not under legal control of the demand-side programs.

Another issue is whether the CAA requires or allows the EPA to set the Best System of Emissions Reduction or if that should be left to the states. The EPA has interpreted the Act as allowing it to determine BSER, and has passed implementing regulations accordingly. Whomever sets BSER, it is constrained by cost, non-air quality health and environmental impact, energy requirements, and adequate demonstration.

Clean Power Plan Panelists According to the panelists, other key issues include how states can move forward with a constructive evaluation process of the rule, while at the same time, political voices are against the proposal or are litigating the proposal; how much is required vs. where states would be anyway, given market forces such as cheap natural gas and existing renewable and energy efficiency programs; and that renewable energy and energy efficiency are going to play a role, because improving existing power plants isn't going to get a state to its target. State utility commissions may need to be involved to help states understand demand-side response programs and develop accurate forecasts.

All of this is occurring during a time when the electricity industry is already changing, and changing rapidly in unforeseen ways. Duke Power is dispatching natural gas before coal because it is more economical; in some parts of the country, low natural gas prices or natural gas and wind are putting pressure on nuclear plants, causing some to close; nuclear plants are coming to the end of their current operating permits; solar panels are cheap, increasing market penetration and could put economic pressure on utilities in the future; energy demand is relatively flat; and older coal plants are shutting down due to low natural gas prices and mercury emission regulations. The panel speculated that in some cases, states may be able to meet the target in the proposed rule based on where the state would have been with these changes anyway, or with a small additional effort.

Of course, some states have already taken action; the Regional Greenhouse Gas Initiative is one, California's AB 32 is another, which goes even further than the EPA's rule as it is an economy-wide initiative. Professor Flatt suggested that there is an open question about whether California's current program with its offsets, will be allowed under the rule, or whether the reductions must come only from the electricity sector, as many have read the rule to imply. This is important if there is to be trading among a multi-sector initiative in the future. The EPA does mention trading; and, if that's the case, it suggests that some affected units may have no emissions decreases, that EPA sets BSER, and that states do have flexibility as a state SIP must just be satisfactory and no less stringent than the EPA BSER guidelines. So as long as a state meets its target, they have extreme flexibility.

Professor Ardia made three predictions concerning the public's acceptance of the rule and media coverage, that: 1) the media will do an abysmal job reporting on the Clean Power Plan rule; 2) most people, at least initially, will not be influenced by the media's coverage; and 3) media coverage of environmental issues generally, and this one specifically, is critically important. Coverage of the environment lags other issues; these are complex issues, and journalists are even less likely to have a science or math degree than the average American. People won't be influenced because there won't be enough coverage; because we don't have a long enough attention span; and because of "information cocooning" where we read sources and watch news that fits with our existing worldview. Professor Ardia proposed that the cure is a robust public sphere where people are exposed to differing viewpoints. How the media covers climate change is important because media sets the public agenda; frames the issues; and establishes narratives. However, we have more voices today on environmental issues, the public wants more information about the environment, and media coverage of adaptation is increasing, so there are causes for optimism.

The next panel moderated by Steve Levitas, Partner at Kilpatrick Townsend & Stockton, discussed the impact of the proposed carbon regulations on North Carolina. Panelists included Greg Andeck, Senior Manager, Clean Energy, Environmental Defense Fund; Chris Ayers, Executive Director, North Carolina Utilities Commission Public Staff; Cari Boyce, Vice President, Environmental and Energy Policy, Duke Energy; Sheila Holman, Director, Division of Air Quality, N.C. Department of Energy and Natural Resources; and Bob Keefe, Executive Director, Environmental Entrepreneurs.

Ms. Holman stated that North Carolina has legal concerns with the rule, as well as technical concerns, especially around some of the calculations. Multiple panelists requested that implementation of the rule be delayed until after all litigation and challenges are complete. Ms. Boyce noted that Duke is still evaluating the rule, but that they support regulations which would decrease emissions over time provided that they can protect the investment they have already made and mitigate costs to their customers. Mr. Andeck noted that the EDF is encouraged by the rule, stressed the flexibility it gives to states, was glad that it encourages utilities to continue to modernize, and that North Carolina's solar industry is growing and could continue to grow further. Multiple panelists noted this rule is a great jobs opportunity. Mr. Ayers stressed that the public staff is concerned about the cost to ratepayers, as environmental compliance costs are generally recoverable, so he would want compliance to be done in the cheapest manner possible. As increasing natural gas unit dispatch is one option for compliance, the question on cost becomes future natural gas prices, and how to protect customers from price fluctuations. How South Carolina could impact North Carolina's compliance is a concern, given the connected nature of the grids, and agreements between the states. If Duke builds a plant in South Carolina, North Carolina ends up paying 65% of the cost. Multiple panelists noted that, based on that, it could be possible for North Carolina and South Carolina to develop a multi-state plan, likely on a mass basis rather than a rate basis.

Clean Power Plan Audience

Going through each building block, it was noted that North Carolina's coal fleet is the most efficient in the country, so there is some debate that an additional 6% efficiency can be achieved, and some question of the EPA using a national number rather than a more tailored, unit-specific approach. With building block 2, there is a concern with natural gas supply. Additionally, heat rate efficiency can go down when coal plants are utilized less, so building block 2 might contradict building block 1. On renewable energy, based on the state renewable energy portfolio, it looks like more renewable energy was assumed for 2020 than currently required by the REP. Whether the current rate of energy efficiency can be sustained is another question.

Multiple panelists also stressed how the private sector has solved air problems like acid rain for a fraction of what the rule was originally expected to cost, and with added benefits. With climate change, the costs aren't just what consumers see in their electric bill, but also coastal insurance premiums, health impacts, and others.

With an audience of around 100 consisting of undergraduate and law students, privately practicing attorneys, those in government and academia, the discussion added to the information available and the "robust public sphere." Video of the forum can be found at CLEAR's website.

Recent News

Professor Flatt Speaks to WFAE on North Carolina and Climate Change

Professor Flatt was interviewed by Charlotte's NPR affiliate, WFAE, regarding the stop in preparations and lack of use of already-developed data and tools around climate change. Also discussed were major climate change threats.

Professor Flatt Publishes New Paper on Water Pollution Regulation and Nutrient Trading

In an new article published by the Houston Law Review, Professor Flatt proposes modifications to the current regulatory trading system for water pollution. The article identifies why the current trading system is not being utilized, compares the current market to the market for biological offsets in a carbon trading system, analyzes the need for both markets to function with environmental integrity and efficiency, and proposes regulatory changes to make nutrient trading a more liquid market.

CLEAR Continues Scholar of the Month Articles

New Scholar pieces have been added on Robin Kundis Craig, Alejandro E. Camacho, David Hunter, Robert L. Glicksman, and J.B. Ruhl.

Professor Flatt Named Co-Director

Professor Flatt has been named Co-Director of the North Carolina Coastal Resources Law, Planning, and Policy Center.

Upcoming Events

Lecture: Mississippi River Tragedies: A Century of Unnatural Disaster

Mississippi River Tragedies: A Century of Unnatural DisasterHosted by CLEAR, Professor Christine Klein, Chesterfield Smith Professor of Law at the University of Florida Levin College of Law, will be discussing her new book Mississippi River Tragedies: A Century of Unnatural Disaster.

American engineers have done astounding things to bend the Mississippi River to their will: forcing one of its tributaries to flow uphill, transforming over a thousand miles of roiling currents into a placid staircase of water, and wresting the lower half of the river apart from its floodplain. American law has aided and abetted these feats. But despite our best efforts, so-called “natural disasters” continue to strike the Mississippi basin, as raging floodwaters decimate waterfront communities and abandoned towns literally crumble into the Gulf of Mexico. In some places, only the tombstones remain, leaning at odd angles as the underlying soil erodes away. A Century of Unnatural Disaster reveals that it is seductively deceptive—but horribly misleading—to call such catastrophes “natural.”

Authors Christine A. Klein and Sandra B. Zellmer present a sympathetic account of the human dreams, pride, and foibles that got us to this point, weaving together engaging historical narratives and accessible law stories drawn from actual courtroom dramas. The authors deftly uncover the larger story of how the law reflects and even amplifies our ambivalent attitude toward nature—simultaneously revering wild rivers and places for what they are, while working feverishly to change them into something else. Despite their sobering revelations, the authors' final message is one of hope. Although the acknowledgement of human responsibility for unnatural disasters can lead to blame, guilt, and liability, it can also prod us to confront the consequences of our actions, leading to a liberating sense of possibility and to the knowledge necessary to avoid future disasters.

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