By Jessica Wentz
The Kerry-Lieberman (KL) bill discusses additional mitigation strategies in Title VII, Subtitle C: “Achieving Fast Mitigation”, including pages 533-618. This subtitle contains provisions for addressing non-CO2 climate forcers, including hydrofluorocarbons (§§ 2201, 619), black carbon (§§ 2211-2214, 805, 795), and methane (§ 2221). It also requires the EPA Administrator to conduct a study on fast mitigation strategies (§ 2231).
Part I: Hydrofluorocarbons
The KL bill discusses hydrofluorocarbons in Subtitle C, Part I, which amends Title VI of the Clean Air Act, creating special provisions for production and importation of hydrofluorocarbons in the United States. §2201. The amendment, section 619, specifies that hydrofluorocarbons be treated as class II substances for the purposes of the title. Class II substances are compounds that have an ozone depletion potential (ODP) less than 0.2, including 34 controlled hydrochlorofluorocarbons (HCFCs) that are already specified in section 602(b) of the Clean Air Act. §619(a). The Administrator is required to establish 2 groups of class II substances: group I, which consists of all hydrochlorofluorocarbons (HCFCs) listed in the Clean Air Act, and group II, which consists of twenty additional hydrofluorocarbon (HFC) compounds identified in the KL bill. §619(a)(2).
Phasing Down the Consumption, Production and Importation of Class II, Group II Substances
Within 18 months of the bill’s enactment, the Administrator is required to make regulations phasing down the consumption of class II, group II substances in the United States, and the importation of products containing these substances. §619(b)(1)(A)(i).
Effective beginning January 1, 2013, the bill makes it unlawful for any person to produce or import any class II, group II substance, or import a product containing such a substance, without holding 1 consumption allowance or 1 destruction offset credit for each carbon dioxide equivalent ton of the class II, group II substance. §619(b)(1)(A)(ii). Any person that exports a class II, group II substance for which a consumption allowance was retired may receive a refund of that allowance from the Administrator following the export. §619(b)(1)(A)(iii).
Also effective as of January 1, 2013, the bill makes it unlawful for any person to produce any class II, group II substance without holding 1 consumption allowance and 1 production allowance, or 1 destruction offset credit, for each carbon dioxide equivalent ton of the class II, group II substance. §619(b)(1)(B)(iii).
Distribution of Consumption Allowances for Class II, Group II Substances
Section 619 contains detailed provisions for distributing consumption allowances for class II, group II substances. The section provides a schedule for determining the number of such allowances that are available for each calendar year. Starting in 2013, emissions allowances may be held in exchange for up to 87.5% of the baseline consumption and importation of class II substances. Each year, this percentage declines (85% in 2014, 80% in 2016, 75% in 2018) until 2032. After 2032, emissions allowances may be held in exchange for up to 15% of the baseline. §619(b)(2).
The baseline is calculated by adding the annual average consumption of all class II substances during 2004, 2005 and 2006, and the annual average quantity of all class II substances contained in imported products during 2004, 2005 and 2006. §619(b)(3)(B).
In order to distribute allowances, the Administrator is required to establish a producer-importer allowance pool and a secondary allowance pool. §619(b)(4). Of the consumption allowances available for a calendar year, the bill specifies that 80% be placed in the producer-importer pool and 20% be placed in the secondary pool. §619(b)(4)(B). The Administrator is then required to auction off a percentage of the producer-importer allowance pool, and sell the remaining allowances in the producer-importer pool and the secondary pool, in accordance with the procedures articulated below. §619(b)(4).
The Administrator is required to deposit all proceeds from the auction and non-auction sale of allowances in the Stratospheric Ozone and Climate Protection Fund. §619(n). The Administrator may use amounts in the Fund to establish a program to incentivize the recovery, recycling and reclamation of any class II substance in order to reduce emissions of the substances, or to meet any international obligations as embodied in an international agreement that restricts class II, group II substances. §619(n)(3). The Secretary of Energy, in consultation with the Administrator, may also use the Fund to establish and carry out a “Best-in-Class Appliances Deployment Program”, which would provide bonus payments to retailers or distributors for sales of best-in-class high-efficiency household appliance models, building equipment and consumer electronics. §619(n)(3).
Requirements for Auction and Non-Auction Sale of Class II, Group II Consumption Allowances
Producer-Importer Pool: For each year, the Administrator is required to offer for sale at auction a specified percentage of the consumption allowances in the producer-importer pool, pursuant to a schedule in §619(b)(4)(C)(i). This schedule specifies that 20% of the producer-importer pool should be available in 2013, 30% in 2014, 40% in 2015, and so forth until 2020. In 2020 and thereafter, the available percentage is 90%.
The bill contains specific instructions on how to conduct the auction, so as to ensure that the auction follows a single-round, sealed-bid, uniform price format. §619(b)(6). The Administrator is required to set a minimum bid per consumption allowance: $1.20 in 2013, $1.40 in 2014, $1.60 in 2015 and so forth. In 2018 and each year thereafter, the minimum bid is set at $2.00. §619(b)(4)(C)(i)(IV).
For each calendar year, as soon as practicable after the auction, the Administrator is instructed to offer for sale the remaining consumption allowances in the producer-importer pool at specified prices. §619(b)(4)(C)(ii)(I). For the first two years, the prices are set at $1.20 for 2013 and $1.40 in 2014. From 2015-2017, the prices are determined by averaging a specified price and the previous year’s auction clearing price. For 2018 and subsequent years, the price is equal to the previous year’s auction clearing price.
Secondary Pool: For each year, the Administrator is required to offer for sale the consumption allowances in the secondary pool at the same prices as were set for the remaining consumption allowances in the producer-importer pool, pursuant to section §619(b)(4)(C)(ii). §619(b)(4)(D).
Any consumption allowances in the secondary pool that are not purchased for a calendar year may be rolled over and added to the quantity available in the secondary pool for the following calendar year. §619(b)(4)(D)(iii). If the demand for consumption allowances in the secondary pool exceeds their supply, the Administrator is required to first sell the consumption allowances to any importers of products containing class II, group II substances. §619(b)(4)(D)(iv)(aa). Apart from that requirement, the Administrator is instructed to develop and use criteria for determining the distribution of consumption allowances, which may include pro rata shares, historic importation, economic or technical hardship, or other factors determined to be relevant by the Administrator. §619(b)(4)(D)(iv)(bb).
The bill permits the issuance of offsets for the destruction of chlorofluorocarbons in the United States, in accordance with the general rules for domestic offsets. The Administrator is required to establish and distribute to an entity that destroys chlorofluorocarbons a quantity of destruction offset credits in an amount equal to 0.8 multiplied by the number of metric tons of carbon dioxide equivalents of reduction achieved through the destruction. §619(b)(9). However, the Administrator may not issue offset credits for the destruction of a class II, group II substance. §619(b)(9)(B)(iii).
The bill permits the Administrator to exercise his or her discretion to withhold and retire consumption allowances that would otherwise be available for auction or non-auction sale, or to allocate those allowances for essential uses pursuant to criteria listed in subsection (d) of the section. §619(b)(4)(E). These essential uses may include use in medical devices, aviation and space vehicle safety, fire suppression, and national security. §619(d).
The Administrator is also permitted, after notice and opportunity for public comment, to authorize the production of limited quantities of class II, group II substances in excess of the quantities otherwise allowable, for export to and use in developing countries, for the purpose of satisfying basic domestic needs in those countries. §619(e).
The Administrator may issue regulations to establish a more stringent schedule for phasing down consumption of class II, group II substances if the Administrator determines that the more stringent schedule is practicable, taking into account technological achievability safety, and other factors the Administrator deems to be relevant, or if the Montreal Protocol or any applicable international agreement to which the United States is a party is modified or established to include more stringent requirements for phasing down class II, group II substances. §619(f).
Part II: Black Carbon
The bill discusses black carbon mitigation strategies in Subtitle C, Part II: “Black Carbon”. This subtitle requires the EPA Administrator to report to Congress on potential mechanisms for reducing black carbon emissions, promulgate regulations to reduce these emissions, and establish a “Black Carbon Retrofit Grant Program”. It also requires the Secretary of Agriculture to provide grants for research and development of biochar production technology for the purpose of sequestering carbon from the atmosphere.
Report on Black Carbon Sources, Impacts and Reduction Opportunities
Section 2211 requires the Administrator to prepare and submit to Congress a 3-phase report in accordance with this section on the sources and effects of, and strategies for reducing, black carbon emissions. §2211(b).
The Administrator is required to complete the first phase no later than April 30th, 2011, by providing a report that identifies techniques for monitoring and quantifying black carbon emissions, assesses the net impacts of these emissions on global and regional climate, and identifies cost-effective approaches for decreasing these emissions in the United States and internationally. §2211(c).
The Administrator is required to complete the second phase no later than November 2011, or the date that is 1 year after the enactment of the Bill, whichever is later, by providing a report that summarizes the amount of assistance provided by the United States to foreign countries to reduce or mitigate black carbon emissions, identifies opportunities for achieving additional, significant reductions in these emissions, and analyzes the co-benefits of reducing black carbon for public health, agriculture, air quality and climate in developing countries. §2211(d).
The Administrator is required to complete the third phase no later than May 2012, or the date that is 18 months after the enactment of the bill, whichever is later, by providing a report that identifies priority areas for future research to mitigate black carbon emissions, demonstrates the development of a coordinated interagency plan for monitoring and addressing these emissions, and discusses methods of promoting sustainable solutions to mitigating black carbon both domestically and internationally. §2211(e).
Amending Title VIII of the Clean Air Act
Section 2212 amends Title VIII of the Clean Air Act by inserting section 805, “Black Carbon”. Section 805 specifies that, within two years of the bill’s enactment, the Administrator is required to either propose regulations applicable to the emissions of black carbon or issue a finding that existing regulations promulgated under the Act adequately regulate black carbon emissions. §805(a). In making this finding, the Administrator is instructed to consider whether existing regulations address those sources that both contribute significantly to the total emissions of black carbon and provide the greatest potential for significant and cost-effective reductions in emissions of black carbon, and whether they reflect the greatest degree of emission reduction achievable through application of available technology. §805(a)(1)(B).
Black Carbon Reduction Retrofit Grant Program
Section 2213 amends Subtitle G of title VII of the Energy Policy Act of 2005 by adding section 795. Section 795 requires the Administrator to establish a voluntary grant program, to be known as the “Black Carbon Reduction Retrofit Program”, for the purpose of cost effectively mitigating the adverse consequences of global warming by means of early action to reduce black carbon emission from diesel-powered heavy-duty vehicles in service prior to 2007. §795(b). Under this program, the Administrator is instructed to authorize the provision of grants to cover 100% of the cost of purchasing and installing diesel particulate filters on heavy-duty vehicles. §795(b)(2).
To implement the program, the Administrator is required to make regulations, which establish streamlined procedures for the provision of grants to eligible entities, including a list of diesel particulate filters that are eligible under the program, and a list of vehicles that are eligible to be retrofitted under the program. §795(g)(2).
Within two years of the section’s enactment, and biennially thereafter, the Administrator is required to submit to Congress a report evaluating the implementation of this program. §795(d).
Enhanced Soil Sequestration
Section 2214 requires the Secretary of Agriculture to provide grants to up to 60 facilities to conduct research, develop, demonstrate, and deploy biochar production technology for the purpose of sequestering carbon from the atmosphere. §2214(b). Biochar is defined as “charcoal or black carbon derived from organic matter through pyrolysis”. §2214(a)(1).
The Secretary of Agriculture is further required to ensure that facilities receiving grants under this section represent a variety of technologies and feedstocks and are geographically dispersed, and that any facility receiving a grant under this section uses waste biomass feedstocks in connection with the technology. §2214(c).
Part III: International Methane
Section 2221 articulates a finding by the Senate that methane is internationally recognized as the second leading contributor to climate change among greenhouse gases, methane is 20 times more effective at trapping heat in the atmosphere than carbon dioxide, and the United States can take steps to reduce methane emissions. The Senate found that, because methane remains in the atmosphere for the relatively short period of 10-12 years, it is a promising target for climate mitigation measures seeking near-term benefits. §2221(a).
Section 2221 also expresses the “sense of the Senate” that the United States should redouble efforts to maximize the cost-effective energy, economic, environmental, and public health benefits of preventing and recovering anthropogenic methane emissions, by expanding its involvement in the Methane to Markets Partnership, working to raise international awareness, and increasing its cooperation with the international private sector and institutions like the World Bank, regional development banks, and other multilateral development aid institutions. §2221(b).
Part IV: Study on Fast Mitigation Strategies
Section 2231 requires the Administrator, in consultation with the Secretary of State and the Secretary of Energy, to establish an interagency process for conducting review of existing and potential policies and measures to promote fast mitigation of greenhouse gas emissions focusing on non-carbon dioxide climate-forcing gases. §2231(a). As part of this review, the interagency process is required to consider:
(1) policies and measures that could be implemented, and the estimated cost of the policies and measures, to achieve greater reductions in potent non-carbon dioxide climate-forcing gases;
(2) the public health and environmental co-benefits achieved from reductions in climate-forcing gases, taking into consideration the report on black carbon issued by the Administrator under section 2311l
(3) carbon negative strategies or actions that remove carbon pollution from the atmosphere at a level greater than carbon pollution is emitted into the atmosphere on a lifecycle basis;
(4) advancements in research and development within the field of fast-action mitigation technologies, including advancements that could increase Arctic and urban albedo. §2231(b).
The report is also required to include recommendations on what further steps, if any, should be taken to implement fast mitigation measures, including whether additional institutional capacity is required. §2231(c).
Comparison to Waxman-Markey
Hydrofluorocarbons: The Waxman-Markey (WM) bill contains roughly the same provisions on hydrofluorocarbons as the Kerry-Lieberman (KL) bill. The only major difference is how the money in the Stratospheric Ozone and Climate Protection Fund is spent. The WM bill specifies that these funds may be spent on a “Low Global Warming Product Transition Assistance Program”, to provide financial assistance to manufactures for the design and configuration of new products that use alternative substances with no or low carbon dioxide equivalent value and no ozone depletion potential, and for the redesign and retooling of facilities for the manufacture of products in the United States that use alternative substances with no or low carbon dioxide equivalent value and no ozone depletion potential. §619(o)(3)(D).
The KL bill permits funds to be spent on a different program, the “Best-in-Class Appliances Deployment Program”, which would provide bonus payments to retailers or distributors for sales of best-in-class high-efficiency household appliance models, building equipment and consumer electronics. §619(n)(3). Although the KL and the WM programs have similar purposes (to facilitate the development of products with lower or negligible emissions impact), the WM program achieves this by assisting manufacturers with the transition to new standards, and the KL program achieves this by rewarding manufacturers who have already used these standards in their products.
Black Carbon: The WM bill contains the same basic requirements for phasing down consumption, production and importation of black carbon as the KL bill. However, the WM bill’s requirements are less detailed, and there are fewer overall provisions on black carbon. For example, the WM bill only requires the Administrator to submit one report to Congress, as opposed to three phases of reports. §333(b). Furthermore, the WM bill does not contain any provisions on a Black Carbon Retrofit Program or biochar technology and soil sequestration. By adding programs and provisions, the KL bill creates a more expansive framework for regulating and restricting black carbon emissions, although, like the WM bill, it does not grant EPA additional authority under the Clean Air Act to regulate black carbon.
International Methane: Unlike the KL bill, the WM bill does not contain provisions on international methane.
Study on Fast Mitigation Strategies: Unlike the KL bill, the WM bill does not require the Administrator to conduct an interagency study on fast mitigation strategies.