Multi-Pollutant Legislation and Its (Surprising) Advocates

David P. Novello

Despite the Bush administration's reversal on its campaign commitment to regulate carbon dioxide emissions from power plants, jockeying continues at both the federal and state levels over mandatory carbon dioxide controls as part of an overall plan to reduce air emissions from electric generators. Environmentalists, members of Congress from both sides of the aisle, and even a number of electric utilities and power producers have called for regulating carbon dioxide emissions as part of a national "multi-pollutant bill" for power plants.

There is no doubt that some of the air has gone out of these efforts at the federal level following President Bush's announcement that the administration would consider only voluntary carbon dioxide reduction measures for electric utilities at this time. Yet the Bush administration reportedly was stunned by political fallout from its turnaround on required controls.

Moreover, several generators have called for mandatory carbon dioxide cutbacks as part of an overall approach to regulating power plants. These companies assume that mandated carbon dioxide limits are on the regulatory horizon, regardless of whether the Bush administration favors such restrictions now. The companies assert that regulating only three pollutants now would fail to provide the economic certainty they need as they engage in long-term electric generation planning and upgrade their facilities. For example, if the utilities must install controls within the next few years to limit other pollutants, they would rather factor into these expensive upgrades the need for carbon dioxide emission reductions.

What truly concerns these utility proponents of carbon dioxide limits is the prospect of having to install controls for carbon dioxide after they have already made massive capital investments to meet other environmental requirements. This could greatly compound the overall cost of the pollution controls because facilities will not have carried out the first wave of environmental upgrades with an eye towards optimizing carbon dioxide removal. Hence, the call for certainty in the form of mandatory carbon dioxide limits now. Carbon dioxide cannot be reduced with the same kinds of technology add-ons that work for other types of pollutants.

How Many Pollutants?
One must view the debate over carbon dioxide limits in the broader context of the push to cut air emissions from "grandfathered" power plants, ongoing electricity restructuring, continuing acid rain problems, and the Clean Air Act's air toxics provisions in Section 112. Many largely coal-fired plants essentially have escaped air pollution regulation since passage of the Clean Air Act in 1970. With the recent EPA findings of interstate transport of nitrogen oxides (NOx) emissions from these plants (many of which are located in the Midwest and Southeast), the facilities will be required to reduce their NOx emissions. These mandates are aimed at reducing high levels of ground-level ozone in the Northeast, which is formed by the reaction of NOx with other chemicals.

Furthermore, recent studies suggest that greater reductions of NOx and sulfur dioxide emissions from these plants will be needed to cure acid rain problems in the Northeast - particularly in the Adirondack region of New York. Political representatives from the Northeast therefore have called for significant reductions of these two pollutants.

At the same time, the ongoing deregulation of electricity markets has led many in the industry to advocate a "level playing field" among electric generators. Cleaner-burning electricity producers point out that they have already complied with more stringent air pollution requirements. Unless the large coal-fired plants in the Midwest and Southeast install such controls, the cleaner power producers argue that they will be undercut in electricity pricing. And, they argue, a regulatory scheme that does not require controls on grandfathered coal-fired plants will lead to increases in pollution because power producers in a competitive environment will find it economically advantageous to burn the higher-emitting, lower-cost plants even more.

Yet another piece of the multi-pollutant strategy concerns mercury emissions. The 1990 Clean Air Act Amendments barred EPA from regulating air toxics from power plants unless - following a report to Congress - EPA concluded that such regulation was necessary. Last year EPA made precisely that finding, focusing particularly on mercury emissions from coal-fired plants. The agency now has begun taking the first steps in the rule development process.

For multi-pollutant power plant legislation, the Bush administration would stop at regulating emissions of the three substances discussed in the preceding paragraphs - NOx, sulfur dioxide, and mercury. In fact, a "three-pollutant bill" is a key item of the administration's recent energy policy. Jeffrey Holmstead, the Bush nominee to head the air program at EPA, testified at his confirmation hearing that a three-pollutant power plant bill would be his top priority. The Administration hopes to have a bill ready to be introduced in Congress this summer 2001.

Four-Pollutant Bills
The administration's decision not to include carbon dioxide in its bill has not stopped others from calling for mandatory reductions now. Two similar bills in the 107th Congress would require such emission cuts. In the Senate, Sen. Jeffords (then R-VT) introduced S. 556, known as the "Clean Power Act of 2001." This relatively short bill, which is supported by environmental groups, would amend Title I of the Clean Air Act to require significant power plant emission reductions by 2007. By that date aggregate carbon dioxide emissions would have to return to 1990 levels.

EPA would flesh out the general reduction objectives with regulations, and (except for mercury) could include market-based mechanisms such as emissions trading in these rules. Thus, a particular power plant would not need to decrease emissions to 1990 levels; the focus of the legislation is on industry-wide emissions. If EPA failed to promulgate the rules within two years of enactment, however, individual plants would need to obtain the specified reductions for carbon dioxide and the other three substances.

Senator Leahy (D-VT) reportedly will introduce his own four-pollutant bill shortly. In the House, Reps. Waxman (D-CA) and Boehlert (R-NY) are the two primary co-sponsors of H.R. 1256, the "Clean Smokestacks Act of 2001." While this bill differs in minor respects from the Jeffords Senate bill, the emission reduction objectives are precisely the same.

Again, except for mercury, EPA could adopt market-based approaches to meet the emission targets. Yet another bill - H.R. 1335 - would also limit carbon dioxide emissions. And there are reports that more conservative Democrats may be drafting a four-pollutant bill.

Industry Four-Pollutant Proposals
As noted above, some in industry would prefer that emission limits for carbon dioxide be included in power plant legislation, to provide needed certainty for long-range planning. Two coalitions of power companies have stepped forward with detailed proposals for four-pollutant legislation.

The Clean Energy Group, composed of nine electric producers and distribution companies, has promoted what it calls an integrated air quality planning approach. The group's members are developing or operate plants throughout the U.S that burn a variety of fuels. Their proposal would establish aggregate tonnage caps by dates certain for nitrogen oxides, sulfur dioxide, mercury, and carbon dioxide, and couple these targets with an emissions trading system. It also would reform the Clean Air Act "new source review" program and include a flexible approach for meeting carbon dioxide limits.

Under the market-based approach, facilities would receive credit for early carbon dioxide reductions, domestic and international projects that effectively sequester carbon, and greenhouse gas reductions outside of the electric industry. The proposal also includes an investment credit program for renewable energy and energy efficiency projects. The aim of the compliance flexibility measures is to make the measures more cost-effective and to provide a workable transition to a nationwide network of power plants that emit less carbon dioxide.

Another industry coalition, known as the Clean Power Group, has its own multi-pollutant electric utility strategy. This proposal includes emissions caps that decline continuously over time, except that the mandated declines would temporarily halt when the cost of further reductions exceeds a specified level. This proposal would also allow emission trading. It would do away with the new source review program for modified facilities. And other, primarily coal-fired, utilities have also noted the value of knowing their carbon dioxide obligations now.

State Initiatives
While the debate continues over whether to include mandatory carbon dioxide requirements - and the form of a power plant emissions reduction strategy - states have begun to move ahead with their own multi-pollutant legislation and regulations. Massachusetts adopted such rules in April 2001, when it became the first state to regulate carbon dioxide emissions from existing power plants. Instead of a mass (tonnage) cap for carbon dioxide emissions, the Massachusetts rules adopt an emissions rate approach. Although under some circumstances off-site reductions could be used to meet a facility's carbon dioxide limit, industry has criticized the rules' lack of flexibility for demonstrating compliance.

Other states, including Illinois, North Carolina, and New Hampshire, are also considering multi-pollutant power plant legislation or rules. If legislation stalls in Congress, or if carbon dioxide emissions are not regulated under federal law, the states can be expected to develop their own patchwork of power plant emissions laws and rules.

David P. Novello practices law with his own firm, where he specializes in air quality matters and works with the Clean Energy Group discussed in this article. David also is a vice-chair of the Section's Committee on Climate Change and Sustainable Development.