701 Pennsylvania Avenue, N.W.

Washington, D.C. 20004-2696

Telephone 202-508-5000

www.eei.org

November 26, 2008

U.S. Environmental Protection Agency

Air and Radiation Docket and Information Center

Mailcode: 2822T

1200 Pennsylvania Ave., NW

Washington, DC 20460

Submitted to: a-and-r-Docket@epa.gov - Docket ID No. EPA-HQ-OAR-2008-0318

Re: Regulating Greenhouse Gas Emissions Under the Clean Air Act, Advance 

Notice of Proposed Rulemaking, 73 Fed. Reg. 44354 (July 30, 2008) 

The Edison Electric Institute (EEI) appreciates the opportunity to comment on the 

Environmental Protection Agency’s (EPA) Advance Notice of Proposed Rulemaking 

(ANPR) on greenhouse gas (GHG) regulation under the Clean Air Act (CAA). 

EEI is the association of U.S. shareholder-owned electric companies throughout the 

United States. EEI represents approximately 70 percent of the U.S. electric power 

industry. Much of the electricity required for homes and businesses is generated through 

means that produce carbon dioxide (CO2) and other GHGs. 

EEI and our member companies look forward to continuing our work with federal 

officials to craft good policy to reduce GHGs. It is also crucial that we ensure the supply 

of cost-effective and reliable electric power is not crippled or unduly disrupted by 

regulation. EEI strongly believes that comprehensive federal legislation is preferable to 

the use of the CAA for accomplishing our nation’s climate goals. Thank you for 

considering our views.

Attached are detailed comments on the ANPR. For further information, please contact 

John Kinsman (jkinsman@eei.org, 202-508-5711), Bill Fang (bfang@eei.org, 202-508-

5617, or Emily Fisher (efisher@eei.org, 202-508-5616).

Sincerely,

Quinlan J. Shea, III

Executive Director, Environment

QJS:kff

COMMENTS OF EDISON ELECTRIC INSTITUTE

ON THE ENVIRONMENTAL PROTECTION AGENCY’S

ADVANCE NOTICE OF PROPOSED RULEMAKING 

ON REGULATING GREENHOUSE GAS EMISSIONS

UNDER THE CLEAN AIR ACT

DOCKET ID NO. EPA-HQ-OAR-2008-0318

November 26, 2008

i

EXECUTIVE SUMMARY

The Edison Electric Institute (EEI) strongly believes that comprehensive federal legislation is 

preferable to the use of the Clean Air Act (CAA or Act) for accomplishing our nation‘s climate 

goals. Well-designed legislation can do what the CAA cannot – create an economy-wide 

emissions reductions program that can:

Encourage and incentivize the use of the full portfolio of technologies and 

measures needed to reduce greenhouse gas (GHG) emissions.

Foster technology development and deployment.

Align targets and timetables with the development and deployment of advanced 

climate technologies.

Provide explicit cost-containment measures, including a price cap or collar; 

allowances; and offsets.

Address international participation and cooperation issues.

Ensure the continued reliability and stability of the electric grid and reasonably

priced electricity.

Provide a consistent national policy for regulating GHGs. 

Comprehensive climate legislation can consider GHG emissions reductions economy-wide 

within the context of the current and projected economic situation, the availability of technology, 

the reliability of the nation‘s power sector and energy supply, and other relevant factors that do 

not readily fit in a CAA context. 

The power sector requires the development and deployment of the full portfolio of climate 

technologies and measures in order to meet long-term emissions reductions targets. These 

include: energy efficiency for both supply and demand; renewables; advanced coal technologies 

integrated with carbon capture and storage; new nuclear power plants; and plug-in hybrid electric 

vehicles. As the so-called ―PRISM‖ study by the Electric Power Research Institute 

demonstrates, the full technology pathway for the power sector is a far wiser path to follow than 

an approach without widespread use of nuclear energy and carbon storage technologies (the 

limited technology approach). Although both the full portfolio and limited portfolio approaches 

could meet the same economy-wide carbon cap, the difference in increase in real electricity 

prices – 45 percent versus 260 percent – is vast. This is why we need to foster technology 

research, development, demonstration and deployment and align carbon reduction targets and 

timetables with technology development and deployment. 

There is widespread agreement that the CAA is the wrong tool for achieving effective and 

efficient GHG regulation. This is not surprising. The Act, originally enacted as a commandand-control statute aimed at improving local air quality, is not designed for the challenges of 

global climate change. GHGs are not like the traditional air pollutants regulated by the CAA in 
ii

order to improve air quality in specific localities, states or regions. There are no GHG ―hot 

spots,‖ and hence we talk about ―global‖ warming and ―global‖ climate change.

EEI comments on the Environmental Protection Agency‘s (EPA) advance notice of proposed 

rulemaking (ANPR) address in detail why the specific regulatory options available under the Act 

are ill-suited to address the climate issue. The problem with using the Act to address global 

climate change begins with trying to fit the ―square‖ peg of GHGs into the ―round hole‖ of CAA 

regulation. The ANPR acknowledges that the complexity and ―interconnections‖ inherent in 

CAA regulation of GHGs had led EPA staff to conclude that not all aspects of the Act are well 

designed for establishing the kind of comprehensive GHG regulatory program that could most 

effectively achieve GHG emissions reductions. The electric industry‘s considerable experience 

with CAA regulation, as well as EPA‘s own assessment of its authority under the Act, indicates 

that this would lead to a complex and excessive permitting system with considerable uncertainty, 

litigation and delay. 

Moreover, if a federal GHG regulatory approach is developed within the CAA context, it would 

virtually impossible to implement a single national program. One of the worst outcomes – in 

terms of effectiveness, efficiency, clarity and expense – would be piecemeal, unwieldy 

regulation of GHGs under the CAA, Clean Water Act, Endangered Species Act, National 

Environmental Policy Act and other federal statutes and state programs. The prospect of 

overlapping federal, regional and state permitting and cap-and-trade programs, with multiple 

costs imposed on consumers through various allowance allocation and auction schemes is 

extremely inefficient, and intolerable from a policy standpoint.
iii

TABLE OF CONTENTS

EXECUTIVE SUMMARY ........................................................................................................... i

TABLE OF CONTENTS ............................................................................................................iii

I. Comprehensive Federal Legislation Can Create An Effective And Efficient Program 

For Reducing GHG Emissions.......................................................................................... 2

A. An Economy-Wide Approach Is the Most Efficient Way to Reduce GHG Emissions....... 5

B. The Power Sector Cannot Meet Long-Term Reductions Targets Without the Full Portfolio 

of Climate Technologies and Measures............................................................................... 6

C. Any Regulation of GHGs Must Ensure Continued Electric Reliability. ........................... 11

D. To Ensure Efficiency and Compliance at the Least Cost, a Single National Policy for 

Regulating GHGs Is Needed.............................................................................................. 14

E. Federal Regulation of GHGs Must Work Toward Global Emissions Reductions. ........... 15

II. The CAA Is Too Complex, Uncertain And Command-And-Control Oriented For 

Effective And Efficient GHG Regulations..................................................................... 17

A. The CAA Is Not Designed for Effective Economy-Wide Regulation............................... 18

B. The CAA Is Too Complex and Cannot Provide Needed Regulatory Certainty. ............... 20

C. The CAA Is Not Designed to Fund or Incentivize Necessary Technology Development 

and Deployment. ................................................................................................................ 22

III. Issues Related To A Possible Endangerment Finding.................................................. 25

IV. Economic Analysis And Considerations........................................................................ 26

A. Appropriate Intergenerational Discount Rate for Climate Policy Analysis....................... 27

B. EPA Must Carefully Select Source Data and Assumptions and Use Sensitivity Analyses in 

its Cost/Benefit Calculations.............................................................................................. 28

C. Climate Change Impacts Should Be Evaluated from U.S. and Global Perspectives......... 29

D. Any Climate Change Analysis Must Account for Any Number of Uncertainties............. 30

E. EPA Should Use the FUND Model Carefully. .................................................................. 34

V. If EPA Regulates Under the CAA, Emissions Reductions Should Be Addressed 

Through Market-Based Approaches.............................................................................. 38
iv

A. CAA Section 111 ............................................................................................................... 39

1. EPA‘s authority to establish a GHG cap-and-trade program under section 111 is 

uncertain............................................................................................................................ 39

2. The D.C. Circuit‘s decision vacating CAMR................................................................... 42

3. If EPA pursues a a cap-and-trade program for GHGs under section 111, it should be 

tailored appropriately........................................................................................................ 43

B. CAA Section 110 ............................................................................................................... 44

1. EPA may have some authority to establish a state-based GHG cap-and-trade program 

under section 110. ............................................................................................................. 44

2. The D.C. Circuit‘s decision vacating CAIR..................................................................... 45

3. EPA should tailor any cap-and-trade program for GHGs under section 110 appropriately.

.......................................................................................................46

C. Design Considerations for a Cap and Trade Program ....................................................... 47

1. General program design..................................................................................................... 47

2. An economy-wide trading program would be more effective than a sector- or multisector-based program. ....................................................................................................... 49

3. Considerations for the design of an offsets program......................................................... 50

D. EPA‘s CAA Authority Related to Auctions, Fees and Revenue Collection...................... 52

VI. Review Of Proposed Regulatory Pathways For Stationary Sources And Associated 

Technical Support Document .................................................................................................... 56

A. Comments on CAA Programs – NAAQS, NSPS, HAPs, PSD/NSR and Title V – and 

Regulation of GHGs.................................................................................................................. 56

1. NAAQS .......................................................................................................................... 58

a. Background................................................................................................................. 58

b. Deficiencies with regulating GHG as a criteria pollutant and establishing NAAQS. 59

c. Other considerations................................................................................................... 62

2. NSPS .............................................................................................................................. 63

a. Background................................................................................................................. 63
v

b. Deficiencies with the NSPS approach ........................................................................ 64

3. HAPs.............................................................................................................................. 67

a. Background................................................................................................................. 67

b. Deficiencies with HAP approach ............................................................................... 68

4. PSD/NSR........................................................................................................................ 69

a. Background................................................................................................................. 69

b. Consequences of GHG regulation under PSD and NSR non-attainment permitting . 70

5. Title V permits ............................................................................................................... 74

a. Background................................................................................................................. 74

b. Deficiencies with title V regulation............................................................................ 75

B. Comments on Stationary Source TSD ............................................................................... 76

1. EPA‘s discussion of efficiency improvements fails to consider costs or NSR 

requirements...................................................................................................................... 77

2. EPA should explore and address options for reducing GHG emissions from all fossil fuelfired generating plants....................................................................................................... 78

3. Fleet-wide efficiency improvement targets cannot and should not be promulgated........ 79

4. Biomass co-firing is possible at many facilities, but should not be required. .................. 81

5. EPA must resolve issues related to its authority under section 111 before imposing 

standards on utility boilers................................................................................................ 81

6. EEI will comment on any proposed metric for measuring boiler efficiency.................... 82

VII. Assessment of PHEV Issues Raised In Connection With The ANPR’s Discussion Of 

Mobile Sources And Title II............................................................................................ 82

A. Electric Drive Significantly Reduces Net GHG Emissions............................................... 83

B. Using Electricity for Transportation Will Result in Greater Net GHG Reductions Over 

Time. .................................................................................................................................. 84

C. EPA‘s Analysis of Upstream Emissions Associated with Transportation Fuel Production 

Must Be Consistent across Fuel Types. ............................................................................. 85
vi

D. Inter-Industry Trading Would Maximize the Emissions Benefits of Electric Drive under a 

Cap-and-Trade Program..................................................................................................... 86

E. Under a Cap-and-Trade Program, Utilities Should Get Credit for Activities that Support 

Electric Drive. .................................................................................................................... 86

VIII. Other Issues – CAA Regulation Of GHG Emissions Should Be Tailored To Avoid 

Effects On Other Media. ................................................................................................. 87

Appendix A..................................................................................................................................... .

Appendix B..................................................................................................................................... .
1

The Edison Electric Institute (EEI)1submits these comments on the Environmental Protection 

Agency‘s (EPA or Agency) advance notice of proposed rulemaking (ANPR) regarding 

regulating greenhouse gas (GHG) emissions under the Clean Air Act (CAA or the Act) (Docket 

ID No. EPA-HQ-OAR-2008-0318), 73 Fed. Reg. 44354 (July 30, 2008). 

Based on our review of the ANPR, recent litigation and our considerable experience with the 

complicated implementation of the Act, as well as that of the more flexible sulfur dioxide (SO2) 

allowance trading program passed by Congress, EEI strongly believes that the best way to 

achieve our nation’s climate goals is through comprehensive federal legislation, not the use 

of the Clean Air Act. 

The ANPR represents EPA‘s extensive efforts to explore how the Act could be used to regulate 

GHG emissions. Despite these ambitious efforts – and after hundreds of pages of documentation 

– the ANPR fails to demonstrate that a clear and effective regulatory path for efficient emissions 

reductions could be implemented under the auspices of the Act. This is not a surprise: The Act, 

originally enacted as a command-and-control statute aimed at improving local air quality, is not 

designed for the challenges of global climate change. In practice, the CAA has proven very 

complex and difficult to implement, with excessive permitting and equipment regulation, 

litigation and delay. Moreover, compliance with the Act relies on technology to achieve 

emissions reductions, but the Act cannot provide financial incentives or funding for needed 

 

1

 EEI is the national association of shareholder-owned electric utilities in the U.S. Our members 

represent about 70 percent of the U.S. electric power industry and serve 95 percent of the 

ultimate customers in the industry‘s investor-owned segment. 
2

research, development and deployment of critical innovations needed to make significant 

reductions in GHG emissions. 

In the ANPR, EPA acknowledges that comprehensive federal legislation is a ―better way‖ when 

it ―requests comment on whether well-designed legislation for establishing a broad GHG 

regulatory framework has the potential for achieving greater environmental results at lower cost, 

with less concern about leakage, and more effective, clearer incentives for the development of 

technology, than a control program based on the CAA alone.‖ Id. at 44397, col. 3. 

Many knowledgeable observers agree that the CAA is the wrong tool for achieving effective and 

efficient GHG regulation and that comprehensive legislation is the better path.2 Indeed, even 

environmental groups have deemed CAA regulation to be the ―second best‖ option.3 

I. Comprehensive Federal Legislation Can Create An Effective And Efficient Program 

For Reducing GHG Emissions.

The utility industry is committed to working with Congress to achieve legislation that will result

in significant emissions reductions across the economy between now and 2050. Well-designed 

legislation can do what the CAA cannot – create an economy-wide emissions reduction program 

 

2

 EPA Administrator Johnson and many other federal government agency and department heads, 

whose comments were included in the ANPR, have come to this conclusion. See, e.g., 73 Fed. 

Reg. 44355, 44359. Rep. Dingell (D-MI), chairman of the U.S. House of Representatives 

Committee on Energy and Commerce, was more direct when he said that regulating GHG 

emissions using the CAA would be ―a glorious mess,‖ involving ―inherently political decisions 

that should be made by an elected and accountable Congress.‖ J. Dingell, ―Strengths and 

Weakness of Regulating Greenhouse Gas Emissions Using Existing Clean Air Act Authorities,‖ 

Statement before Subcommittee on Energy and Air Quality, U.S. House of Representatives (Apr. 

10, 2008).

3

 D. Bookbinder, Sierra Club, Testimony before the Senate Environment and Public Works 

Committee (Sept. 23, 2008). 
3

imbued with the certainty that industry needs to make compliance a reality. Comprehensive 

legislation also can:

● Encourage and incentivize the use of the full portfolio of options

needed to reduce GHG emissions, including energy efficiency for both 

supply and demand, renewable energy, advanced coal technologies (ACT) 

with carbon capture and storage (CCS), new nuclear power plants and 

plug-in hybrid electric vehicles (PHEVs).4 All options will be necessary 

to achieve significant GHG emissions reductions.

● Foster technology development and deployment with needed 

investment and incentives. Long-term reductions targets cannot be met 

without the development and deployment of an array of advanced climate 

technologies. These new technologies, in turn, depend on increased public 

and private funding, including tax credits and other financial incentives.

● Align targets and timetables with the development and commercial 

deployment of advanced climate technologies. 

● Within the context of an economy wide cap-and-trade program, 

allocate emissions allowances to energy-intensive industries, such as 

the power sector, and their customers in order to mitigate the 

enormous costs of a GHG cap.5 

● Provide other explicit cost-containment measures, such as a safety 

valve or price collar, within the context of an economy wide cap-and-trade 

program.

● Allow for the full and robust use of domestic and international offsets 

to contain costs further and promote clean development goals, within the 

context of an economy-wide cap-and-trade program.

● Address international participation and cooperation issues, including 

measures needed to mitigate the potential for leakage and harm to U.S. 

industrial competitiveness.

● Ensure the continued reliability and stability of the electric grid and 

reasonably priced electricity, which are critical to the growth and 

continued international competitiveness of the U.S. economy.

Provide a consistent national policy for regulating GHGs.

 

4

 See discussion of PHEVs, section VII, infra. 

5

 In section V, we discuss in more detail the critical elements of a well-designed cap-and-trade 

program. Our comments do not address other market-based approaches, like a carbon tax, 

because tax measures are outside of EPA‘s authority as an Executive Branch regulatory agency.
4

EEI offers the following comments on the critical elements of a comprehensive approach to 

regulating GHG emissions. Our comments reflect the Global Climate Change Principles 

(Climate Change Principles) agreed upon by EEI’s CEOs in February 2007, which provide 

our industry a benchmark for evaluating any federal legislation or action. These Climate 

Principles are attached in Appendix A.

First, comprehensive legislation is crucial because it can consider GHG emissions reductions 

holistically within the context of the current and projected economic situations. GHG emissions 

reductions in the power sector must be made against the backdrop of population and economic 

growth in the U. S.: The Energy Information Agency (EIA) projects net electric demand to 

increase 30 percent by 2030, even after taking into account energy efficiency improvements due 

to market-driven efficiency and stricter building codes and appliance and other efficiency 

standards mandated by the Energy Independence and Security Act of 2007. The technological 

transformation needed to achieve emissions reductions in the power sector will occur in the face 

of tremendous capital and investment needs to meet the electricity demands of a growing 

population and economy. Even with substantial energy efficiency measures, new and 

replacement power plant capacity is projected to total 133,000 megaWatts (MW) and cost $505

billion by 2030.6 Transmission and distribution investment needs are projected to total almost 

another $900 billion by 2030.7

 

6

The Brattle Group, ―Transforming America‘s Power Industry: The Investment Challenge

2010-2030,‖ at 19-20 (Nov. 2008), available at 

http://www.edisonfoundation.net/reports.htm#transforming.

7

Id. at 37-40, 43-46.
5

A. An Economy-Wide Approach Is the Most Efficient Way to Reduce GHG Emissions.

The most efficient way to reduce GHG emissions is through an economy-wide approach, 

with no exceptions. If there were exceptions and the power sectors were the only covered 

sector or one of the few covered sectors, the odds of achieving environmental success would 

decline and the costs of regulation would be even higher. 

Electric generation is responsible for 34 percent of GHG emissions8in the U.S.; transportation is 

responsible for 28 percent, industry for 19 percent and agriculture for almost 8 percent, 

commercial for 6 percent and residential for 5 percent.9 The least economically intrusive and 

most environmentally effective and equitable regulatory system must involve the participation of 

all sources and sinks, all regulated GHGs and all sectors of the economy.10 ―[A] domestic 

regulatory system, like an international system, should move as rapidly as feasible towards 

including all sources and sinks under a cap.‖ M. Wara & D. Victor, ―A Realistic Policy on 

International Carbon Offsets‖ 15, Stanford University Program on Sustainable Development, 

Working Paper #74 (Apr. 2008). 

 

8

Electric generation is responsible for 40 percent of the carbon dioxide (CO2) emissions in the 

U.S.

9

 EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2006 at 2-17 (Apr. 15, 

2008). U.S. territories account for the remaining 1 percent of emissions.

10

 In the House, such proposals include: H.R. 1590 by Rep. Waxman (D-CA), H.R 6186 by Rep. 

Markey (D-MA), and the Dingell-Boucher discussion draft of Oct. 7, 2008. In the Senate, such 

proposals include: S. 2191 (the Lieberman-Warner bill), reported by the Senate Committee on 

Environment and Public Works on May 20, 2008, and placed on Senate Calendar No. 740; S. 

3036, as modified version of Lieberman-Warner, placed on Senate Calendar No. 742 and the 

vehicle for Senate floor debate starting June 2, 2008; and the Boxer-Lieberman-Warner 

substitute for S. 3036 introduced as S.A. 4825 (154 Cong. Rec. S5049 (daily ed. June 2, 2008)). 
6

Furthermore, several studies show that GHG emissions reductions are available from other 

sectors of the economy – buildings, transportation, forestry and agriculture/waste – at lower costs 

than from the power sector.

Moreover, the most efficient economy-wide approach to regulating GHG emissions will employ 

a market-based mechanism, such as a cap-and-trade program or a carbon tax, to contain costs. 

Market-based approaches to regulating GHGs are discussed in more detail in section V, infra.

B. The Power Sector Cannot Meet Long-Term Reductions Targets Without the Full 

Portfolio of Climate Technologies and Measures.

For the electric utility industry, the optimal path to achieve long-term emissions reductions 

targets will require the development and deployment of the full portfolio of climate technologies 

and measures. These include: energy efficiency for both supply and demand; renewable energy; 

ACT integrated with CCS; new nuclear power plants; and PHEVs.

In the near term, the power sector will engage in stepped-up energy efficiency practices and 

enhanced renewable energy activities to help meet emissions reductions targets.11 In the longer 

term, even with very aggressive assumptions about the potential for renewable energy and 

energy efficiency deployment, the electric utility industry will need to depend on fossil fuel and 

nuclear generation to serve baseload demand. Short-term carbon reduction targets beyond what 

can be accomplished with efficiency and renewables that kick in before advanced technologies, 

such as ACT with CCS and new nuclear plants, are commercially available and deployed on a 

widespread basis would result in fuel switching from coal to natural gas, with negative impacts 

 

11

 The extent to which individual utilities will be able to reduce GHGs as a result of these 

practices and activities will be affected by load growth, regional variability and regulatory 

structure.
7

on gas supply and prices. In addition, the investment of resources necessary to comply with such 

short-term targets would divert resources away from developing and deploying the technologies 

needed to meet long-term targets.

Thus, a two-pronged approach is needed for the electric utility industry. Our initial focus should 

be to rely on enhanced energy efficiency and increased use of renewables to the maximum extent 

feasible in the near term, while developing and commercially deploying baseload climatefriendly technologies and practices. In the near term, the goal would be to slow and eventually 

stabilize the growth of GHG emissions. With new nuclear power plants being completed and 

ACT with CCS starting to become commercially available after 2020, more ambitious reductions

targets could be achievable starting in the 2025 time frame. Even more aggressive reductions 

could be undertaken beginning in 2030 and beyond, on to 2050, assuming that the U.S. is 

engaging in aggressive and widespread commercial development of the full suite of climate 

technologies and measures. This would result in a nearly de-carbonized electricity supply.

This scenario assumes greatly increased funding for technologies, like CCS, by both 

government and the private sector, including financial and tax incentives to expedite 

deployment when they become commercially available and cost-effective. Without 

appropriate funding and incentives, compliance with long-term emissions reductions goals – if at 

all possible – would come at astronomical costs, and consumers would be compelled to curtail

electricity use dramatically, with resulting consequences for the economy and standards of 

living. 
8

The so-called ―PRISM‖ work by the Electric Power Research Institute (EPRI) demonstrates that

a full technology pathway for the power sector is a far wiser and less costly path to follow than a

limited technology approach.12 See Figure 1 below.

Figure 1: 2008 Prism...Technical Potential for CO2 Reductions

Relating to Figure 1, note that the U.S.’s current capacity of renewable energy is 39 gigawatts (GW) and 

of nuclear energy is 118 GW.

Each of the slices in the PRISM represents aggressive implementation of technical potential for a 

particular technology or measure – end-use efficiency, renewables, nuclear, ACT, CCS, PHEVs 

and distributed energy resources – and assumes efficient resolution of economic, financial, 

 

12

 EPRI, The Power to Reduce CO2 Emissions – The Full Portfolio, Report 1015461 (Aug. 

2007), available at: http://mydocs.epri.com/docs/public/DiscussionPaper2007.pdf.

The PRISM in Figure 1 has been updated to reflect EIA‘s Annual Energy Outlook 2008, Report 

DOE/EIA-0383 (revised early release) (March 2008).
9

regulatory and siting constraints. In this sense, the PRISM should be viewed as a roadmap or 

goal for the development of the optimal mix of supply- and demand-side resources to reduce 

carbon emissions in the electric sector. The full portfolio approach depicted in Figure 2 below, 

which meets the comparable level of emissions reductions as in the PRISM using an economic 

model, shows that the least costly way of reducing carbon emissions is to rely heavily on the 

renaissance of nuclear energy after 2020 and wide deployment of ACT with CCS after 2020-

2025.13 

Figure 2: U.S. Electric Generation – Full Portfolio

 

13

 However, changes in public attitudes and policies could modify this economic allocation.
10

On the other hand, the limited portfolio approach depicted in Figure 3 shows how the electric 

industry is likely to achieve emissions reductions goals if new nuclear plants and coal with CCS 

are not available by 2050. Without these technologies, electricity demand must decline

significantly, and natural gas – which has a little more than half the CO2 content of coal – carries 

a significant portion of our generation needs in order to reduce CO2 emissions.

Figure 3: U.S. Electric Generation – Limited Portfolio

Coal

w/CCS

Gas

w/CCS Nuclear

Hydro

Wind

Oil Solar

Demand Reduction

Demand with No Policy

Biomass

8

7

6

5

4

3

2

1

0

2000 2010 2020 2030 2040 2050 Trillion kWh per Year

Limited Portfolio 

(economic allocation)

Coal

Gas

Nuclear

Gas (with half the CO2 of coal) 

pays a significant CO2 cost

With a less de-carbonized supply,

electricity load must decline

to meet the CO2 emissions target

Wind

Biomass

In addition, as illustrated in Figure 4 below, although both the full portfolio and limited portfolio 

approaches meet the same economy-wide carbon cap, the difference in increase in real electricity 

prices – 45 percent to 260 percent – is vast, with the limited portfolio approach making 

electricity far more costly to our customers and our economy.
11

Figure 4: Increase in Real Electricity Prices...2000 to 2050

Full Portfolio

8

7

6

5

4

3

2

1

0

2000 2010 2020 2030 2040 2050 Trillion kWh per Year

8

7

6

5

4

3

2

1

0

2000 2010 2020 2030 2040 2050 Trillion kWh per Year

Limited Portfolio

+260% +45%

Coal

w/CCS

Gas

w/CCS Nuclear

Hydro

Wind

Oil Solar

Demand Reduction

Demand with No Policy

Biomass

Both Scenarios meet the same economy-wide CO2 Cap*

*Economy-wide CO2 emissions capped at 2010 levels 

until 2020 and then reduced at 3%/yr

The lessons of the EPRI analysis are three-fold:

1) Under any scenario, the costs of compliance with GHG mandates will be high.

2) The wiser path to compliance for the power sector relies on development and 

deployment of the full portfolio of climate technologies and measures over the longer 

term.

3) Short-term targets should not lead the power sector off the long-term technology path.

C. Any Regulation of GHGs Must Ensure Continued Electric Reliability.

In ANPR section III, EPA identifies ―several other important considerations‖ that it believes 

―should inform‖ the ―examination and potential use of CAA authorities‖ to control GHG 

emissions in the U.S. 73 Fed. Reg. 44409. Surprisingly, these ―considerations‖ do not include 
12

the impact of GHG regulation on reliability of the electricity grid. The continued reliability and 

stability of reasonably priced electricity are critical for the growth and continued competitiveness 

of the U.S. economy.

Federal Energy Regulatory Commission (FERC) Chairman Kelliher recently indicated that 

climate change has significant implications for the energy supply mix, the transmission grid and 

prices, and ―argues that an over-reliance on energy efficiency and renewables could undermine 

reliability.‖14 He warned ―that poorly designed‖ GHG rules that ―exclude the role of coal and 

nuclear power. . .would undermine‖ FERC‘s ability to ―ensure adequate electricity supplies and a 

reasonable price, even while current uncertainty about a national climate change policy is already 

making it difficult to ensure the reliability of the electricity grid.‖15

Similarly, a recent North American Electric Reliability Corporation (NERC) report titled ―2008 

Long-Term Reliability Assessment, 2008-2017,‖ said:16

A number of ongoing environmentally-driven regulatory issues could, in sum, 

have a significant effect on resource adequacy in the U.S., namely Greenhouse 

Gas Reductions and climate change initiatives, the U.S. Clean Water Act: 

Cooling Water Intake Structures and the U.S. Clean Air Act: Interstate and 

Mercury Rules. Understanding the reliability implications of potential legislation 

and regulations is vital to ensure that the bulk power system remains reliable 

during and after implementation.

* * * *

 

14

 Carbon Control News (Oct. 27, 2008).

15

 FERC apparently was not given the opportunity to comment on the ANPR before it was made 

public in July. FERC is an independent regulatory agency with national energy responsibilities. 

EPA is also a regulatory agency—although not an independent regulatory agency like FERC—

with national air, water and land environmental responsibilities. There is a need for both to 

coordinate.

16

 NERC‘s mission is to ensure the reliability of the North American electrical system. Pursuant 

to the Energy Policy Act of 2005, it was appointed by FERC as the national Electric Reliability 

Organization with authority to enforce compliance with reliability standards industry-wide.
13

In 2006, coal provided almost 50% of the electric energy production in the US 

and approximately 20% in Canada in 2003. Natural gas is the cleanest fossil fuel 

in terms of air quality and carbon emissions, emitting up to 60 percent less carbon 

dioxide than coal. However, the magnitude of these benefits depends on the 

source of the natural gas and other factors, such as plant efficiency. Burning 

natural gas instead of coal at electricity-generating units to reduce greenhouse gas 

emissions involves important tradeoffs related to economic, environmental, 

infrastructure, and fuel supply considerations. Converting existing capacity to 

natural gas poses substantial challenges due to fuel supply constraints, changes to 

infrastructure, and economic considerations.

(p. 28) (footnotes omitted).

Even more recently, NERC issued a November 2008 ―Special Report‖ titled ―Electric Industry 

Concerns on the Reliability Impacts of Climate Change Initiatives,‖ including concerns of the 

states, the Canadian provinces, regional initiatives, and the Executive Branch and Congress. 

In this report, NERC stated that ―successful climate change initiatives capable of maintaining 

reliability must‖:

● Recognize and address the potential reliability impacts associated with 

broad-scale fuel-switching from coal to natural gas and the resulting 

increase in dependence on natural gas as a fuel for electric generation.

● Support innovative resource planning and implementation mechanisms to 

ensure the adequate development, siting and construction of transmission 

infrastructure.

● Support the development and reliable integration of demand-side 

resources.

● Provide regulatory certainty to the electric industry, clearly articulating 

requirements and interaction with state, provincial and regional initiatives.

Id. at 5.

The NERC Report was very concerned about heavy reliance on natural gas for electric 

generation (which EPRI projected would occur if new nuclear and CCS are not 
14

available). It observed that this ―raises a number of reliability issues, from reductions in 

available generation capacity to natural gas supply security,‖ and ―[a]s more gas plants 

and existing plants are operated for longer periods, stress on the gas supply and 

transportation infrastructure is increasingly a source of concern for reliability.‖ Id. at 6, 

9.

As noted in a 2007 study by the University of Maryland for the Maryland Department of the 

Environment on the impacts of the Regional Greenhouse Gas Initiative (RGGI) of 10 Northeast 

and Mid-Atlantic states:

Reliability can be measured in terms of the number and duration of outages customers 

experience in a year. However, the planning, investment, and operations that ensure 

electricity is available are complicated processes and substandard performance in any of 

these areas can threaten reliability. Even under optimal conditions, the balance of 

electricity supply, delivery and demand is delicate. When a new regulation, such as 

RGGI, is added to the mix it may make reliability even more complex

(p. 50).

The same can be said in the case of any GHG regulation. We therefore urge that the impact on 

the reliability of the nation‘s electric infrastructure, particularly the impact of de-carbonization 

upon generation, be addressed as part of the development of any proposed GHG regulatory 

program. 

D. To Ensure Efficiency and Compliance at the Least Cost, a Single National Policy for 

Regulating GHGs Is Needed.

Numerous authorities from Congress – we note the House Committee on Energy and Commerce 

white paper on ―Appropriate Roles for Different Levels of Government‖ – to labor and industry 

have called for the harmonization of federal and state climate laws and policies. States may well 

have appropriate roles in land-use programs and urban transit, renewable electricity standards 
15

and energy efficiency standards and building codes. However, if a cap-and-trade approach is 

embarked upon, there should be only one national program. Separate federal, regional and state 

cap-and-trade programs, with multiple costs imposed on consumers through various allowance 

allocation and auction schemes, would be inefficient, and thus intolerable from a policy 

standpoint. This ―glorious mess‖ could be avoided by comprehensive federal legislation.

Numerous authorities also have called for a single comprehensive federal law, rather than a 

regulatory regime consisting of multiple, overlapping or conflicting statutes.17 One of the worst 

outcomes – in terms of efficiency, clarity and expense – would be piecemeal regulation under the 

CAA, Clean Water Act, Endangered Species Act, National Environmental Policy Act and other 

federal statutes and state programs. 

E. Federal Regulation of GHGs Must Work Toward Global Emissions Reductions.

The U.S. is one of the largest sources of GHG emissions worldwide, but its share is declining.18 

Unless all major GHGs emitters, including key developing countries, commit to reductions, 

efforts by the U.S. to reduce its GHG emissions will be offset by rising overall global emissions. 

The International Energy Agency (IEA) forecasts that global energy-related CO2 emissions will 

increase 45 percent between 2006 and 2030, with non-Organization for Economic Cooperation 

and Development countries accounting for more than 97 percent of this projected increase.19 

President-elect Obama has acknowledged that U.S. action is needed to reduce global GHG 

 

17

 See, e.g., R. Nordhaus, ―New Wine Into Old Bottles: The Feasibility of Greenhouse Gas 

Regulation Under the Clean Air Act,‖ 15 N.Y.U. Environmental Law Journal 53 (2007). 

18

 ―China Increases Lead as Biggest Carbon Dioxide Emitter,‖ New York Times (June 13, 

2008).

19

 International Energy Agency, World Energy Outlook 2008 (Nov. 12, 2008). 
16

emissions, but that we ―cannot meet this challenge alone. Solving this problem will require‖ all 

nations ―working together.‖20

In other fora, EPA has been clear that unilateral U.S. action would have minimal impact on 

global CO2 concentrations. Specifically, in its analysis of three comprehensive climate bills, 

EPA determined that global CO2 concentrations would rise to 718 parts per million (ppm) in 

2095, but the three bills studied would reduce global concentration levels only by 23-25 ppm by 

2095 – or less than 3.5 percent.21

While it may be argued that U.S. action under comprehensive legislation also cannot ensure 

international participation in the global effort to reduce GHG emissions, this does not argue in 

favor of proceeding with CAA regulation. The CAA is too complex yet limited in scope to allow 

EPA to make an effective link between GHG regulations and potential international activities. 

Moreover, only comprehensive legislation, free from the strictures of the Act, can be designed to 

link to a possible future international treaty or protocol on global emissions cuts.

In addition, unilateral GHG regulation under the Act could not address the serious competitive 

harm that such reductions would entail for U.S. industry. EPA regulations could not address the 

potential for the flight of industry and concomitant GHG emissions from the U.S. to those 

countries without carbon controls. These issues can be addressed better through legislation that 

 

20

 President-elect Obama, speech to Bi-Partisan Governors Climate Summit (Nov. 18, 2008).

21

 EPA, ―EPA Analysis of Bingaman-Specter Request on Global CO2 Concentrations‖ (Oct. 1, 

2007). The three bills analyzed were S. 1766, Bingaman-Specter‘s Low Carbon Economy Act; 

S. 280, Lieberman-McCain‘s Climate Stewardship and Innovate Act; S. 485, Kerry-Snowe‘s 

Global Warming Reduction Act. The Lieberman-Warner bill, S. 3036, and Boxer substitute 

amendment could have only slightly more impact. 
17

1) is ultimately tied to U.S. participation in international agreements, such as treaties or 

protocols, or 2) contains incentives, sanctions or other measures that ensure comparable action 

by international trading partners.

II. The CAA Is Too Complex, Uncertain And Command-And-Control Oriented For 

Effective And Efficient GHG Regulations.

GHGs are not like the traditional air pollutants that the CAA regulates in order to improve air

quality in specific localities, states or regions. Indeed, many GHGs, like CO2, are essential to 

life on Earth as we know it and are not considered pollutants in normal use. Unlike traditional 

pollutants, GHGs are carried long distance, can be extremely long-lived and are well-mixed in 

the atmosphere. There are no GHG ―hot spots,‖ such as occurs with air pollutants over many 

urban areas. Hence, we talk about ―global‖ warming and ―global‖ climate change. In 

comparison, the CAA was designed to lead to command-and-control regulations for specific 

stationary and mobile sources that quickly and measurably improve local and regional air 

quality. Applying CAA regulations to GHGs could only lead to a decrease in CO2 atmospheric 

concentrations – the closest analog to an improvement in air quality in this context – over the 

course of decades, if not longer. Thus, we agree with that ―the ANPR...is ill-suited for the task 

of regulating global greenhouse gases.‖ 73 Fed. Reg. 44355.

Moreover, a new GHG regulatory program under the Act is likely to affect almost all sectors of

the U.S. economy and impose enormous costs. The various regulatory regimes that may be built 

around the CAA described in the ANPR would, in EPA‘s own words, ―impose enormous costs 

on U.S. consumers, workers and businesses.‖ Id. at 44360. The ANPR fails to address these 

increased costs and the potential harm to the international competitiveness of U.S. business and 
18

industry. These considerations are serious impediments to moving forward with CAA

regulation, especially given the current economic situation.

This is another reason why EEI believes that comprehensive federal legislation can achieve GHG 

emissions reductions in an efficient way that does not unduly harm the economy – by creating a

clear regulatory scheme that encompasses the whole economy (with a view toward the ultimate 

participation of the whole world); incentivizes the development and deployment of the full 

portfolio of climate technologies and measures; provides a level of certainty to encourage the 

investment necessary for compliance; and uses flexible, market-based approaches to contain 

costs. By its very nature, the CAA is unlikely to enable EPA to address all of these critical 

elements of an effective GHG regulatory scheme.

A. The CAA Is Not Designed for Effective Economy-Wide Regulation.

Despite acknowledging in the ANPR that economy-wide regulation would promote optimal 

economic efficiency and would provide the necessary incentives for the development and 

deployment of new technologies to reduce emissions (73 Fed. Reg. 44411), EPA nevertheless

makes it clear that it would prefer to implement a sector or multi-sector approach because it 

would be easier under the CAA. Id. at 44412. Among the impediments, EPA cites its inability 

under the Act to address key issues in the design of an economy-wide program, including 

concerns about allocating or auctioning allowances and the creation of an offsets system. See id. 

While the CAA does not provide EPA with the tools for readily addressing these concerns, 

comprehensive legislation could design an economy-wide approach that could respond to these 

concerns. Moreover, these design concerns are not limited to an economy-wide approach under 

the CAA, but would persist if EPA were to develop a sector or multi-sector program. 
19

The ANPR details how operation of the CAA would turn EPA into the de facto head of a vast 

economy-wide GHG permitting program. EPA devotes a great amount of verbiage in the ANPR 

discussing how it could avoid the economy-wide consequences of regulation under the Act. For 

example, EPA notes that regulation of GHG emissions from either mobile or stationary sources 

could trigger automatically permitting requirements for all stationary sources under the 

Prevention of Significant Deterioration program. The result would be command-and-control 

regulations so onerous – the need for thousands, if not hundreds of thousands, of previously 

unregulated stationary sources to obtain a construction permit that would contain stringent 

emissions limitations based on Best Available Control Technology – that EPA proposes several 

end runs around this regulation to ensure that many of the entities that would be swept into the 

Agency‘s regulatory ambit could be spared. See 73 Fed. Reg. 44505. 

Setting aside the feasibility of any of these proposed end runs, these efforts demonstrate just how 

unworkable CAA regulation would be from an economy-wide perspective. The problem is not 

only including all sectors of the economy, but also the way that they would be included by 

operation of the relevant provisions of the CAA. In proposing these end runs, EPA indicates that 

it is willing to sacrifice economy-wide regulation, possible environmental benefits and increased 

economic efficiency for no purpose other than to avoid implementing the Act as written. This 

makes no sense. EPA should concede that the CAA is not fit for the purpose of creating sensible 

and effective economy-wide regulation.
20

B. The CAA Is Too Complex and Cannot Provide Needed Regulatory Certainty.

The problem with using the existing Act to address global climate change is not just one of 

trying to fit the ―square peg‖ of GHGs into the ―round hole‖22 of CAA regulation. The 

interconnected nature of the various provisions of the Act also is problematic. The ANPR 

acknowledges that ―the complexity and interconnections inherent in [CAA] regulation of GHGs‖ 

has led EPA staff to conclude that ―not...all aspects of the Act are well designed for establishing 

the kind of comprehensive GHG regulatory program that could most effectively achieve the 

GHG emissions reductions that may be needed.‖ 73 Fed. Reg. 44397, cols. 2-3.23 

Given the interconnected nature of the Act and its various provisions, regulations under any 

portion of the Act likely would result in an expansion of EPA‘s authority to regulate economic 

activity in virtually every sector of the U.S. in an unprecedented way, constituting the largest 

permitting program in EPA‘s history – if not the history of all federal agencies. Our 

considerable experience with CAA regulation, as well as EPA‘s own assessment of its authority 

under the Act, indicates that this would lead to a complex and excessive permitting system with 

considerable uncertainty, litigation and delay. 

The massive cost and impact of responding to climate change not only requires the creation of a 

regulatory scheme that is clear and free from unnecessary complexity, but one that also provides 

the certainty needed to make the enormous investment in efficiency and new technology needed 

 

22

 EPA Administrator Johnson, Speech as Prepared, Press Conference Call Regarding Advance 

Notice of Proposed Rulemaking (July 11, 2008). 

23 In a joint letter, the Secretaries of Agriculture, Commerce, Energy and Transportation find that 

the CAA ―is fundamentally ill-suited to the effective regulation of GHG emissions.‖ 73 Fed. 

Reg. 44359. 
21

to bring about emissions reductions. EPA asserts that it can institute market-based mechanisms 

to regulate GHG emissions and relies on novel interpretations of the Act to bring about this 

outcome. However, it is not at all certain that the CAA is as flexible as EPA hopes.

Recent experience has made EEI‘s members necessarily concerned about committing resources 

to implement EPA trading programs. In July of this year, shortly before the EPA issued the 

ANPR, the D.C. Circuit vacated the Clean Air Interstate Rule (CAIR),24 a trading program 

designed to reduce the interstate transport of ozone and particulate matter, because it did not 

comport with CAA section 110, despite the fact that it would dramatically reduce overall 

emissions. In one fell swoop, this decision stranded billions of dollars in utility investments 

needed to comply with the CAIR trading program and put utilities that had made good-faith 

efforts to reduce emissions through the CAIR program at risk of additional massive outlays to

comply with whatever is devised to take CAIR‘s place. The parties are seeking rehearing, and 

the fate of CAIR and attendant investments hang in the balance.

The investment in new technology and energy efficiency programs that would be needed to 

comply with any GHG regulatory program will be at least an order of magnitude greater than 

that associated with CAIR, in large measure because the necessary suite of technologies, 

including CCS, do not yet exist or are not yet commercially available. Therefore, in order for 

any regulatory scheme to be workable, it is imperative that the scheme provide regulated entities 

with certainty that their good-faith efforts to reduce emissions will be rewarded. 

 

24

 North Carolina v. EPA, No. 05-1244 (D.C. Cir. July 11, 2008).
22

C. The CAA Is Not Designed to Fund or Incentivize Necessary Technology 

Development and Deployment.

As discussed above, substantial advancements in technology will be needed to reduce GHG 

emissions in the long term, regardless of the regulatory scheme ultimately chosen. CAA 

regulation is not capable of appropriately incentivizing and financially supporting the extensive 

research and development (R&D) efforts to bring promising technologies, like ACT and CCS, to 

commercial fruition as soon as practicable. Despite the importance of technology to limiting, 

avoiding or sequestering GHG emissions, the ANPR spends comparatively little time addressing 

this issue, relevant particularly with respect to the power sector.

Section III.C of the ANPR, titled ―Advancing Technology,‖ makes an attempt to address 

technology issues. The preamble to this section asserts that ―[i]nternational, U.S., and private 

studies have identified a broad range of potential strategies that can reduce emissions from 

diverse economic sectors. . ., such as increasing energy efficiency and conservation and 

employing hybrid and diesel vehicle technologies‖ that are ―available today.‖ 73 Fed. Reg. 

44404. EPA also states that there ―is a broad consensus that for many sectors of the economy 

new technologies will be needed to achieve deep reductions in GHG emissions,‖ but seems to 

suggest that this need relates only to the issue of achieving such reductions ―at less cost than 

today‘s technologies alone can achieve.‖ Id. at 44405. The section is very limited in its 

application to technologies regarding stationary sources, particularly in the case of electric 

generation. Moreover, the focus on technologies that are ―available today‖ and the implication 

that technology is only necessary to reduce costs are troubling, not just because they underplay 

the importance of substantial technological development, but also because they highlight the 

Act‘s inability to fund or incentivize necessary new technology.
23

The ANPR does raise the question of how to spur technology development and deployment, and 

suggests there are ―several different pathways for technological change.‖ These include: 

―investment‖ in R&D by both the public and private sectors; market-based incentives; and 

―learning by doing (i.e., efficiency gains through repetition).‖ Id. at 44405. The only option that 

the CAA gives to EPA is the latter.

As to this pathway, EPA asserts that ―the history of the CAA provides many examples in which 

technological innovation and  ̳learning by doing‘ have made it possible to achieve greater 

emissions reductions than had been feasible earlier‖ or ―have reduced the costs of emissions 

control in relation to original estimates.‖ Id. at 44407. In support of this pathway, the ANPR 

refers to EPA‘s ―Final Ozone NAAQS Regulatory Impact Analysis‖ of March 2008 by EPA‘s 

Health and Environmental Impacts Division. Id. at n. 47. Section 5.4 of that analysis explains:

Studies have suggested that costs of some EPA programs have been less 

than originally estimated due in part to inadequate inability to predict and account 

for future technological innovation in regulatory impact analyses.

* * * *

Constantly increasing marginal costs are likely to induce the type of innovation 

that would result in lower costs than estimated early in this chapter. Breakthrough 

technologies in control equipment could by 2020 result in a rightward shift in the 

marginal cost curve for such [ozone] equipment . . . as well as perhaps a decrease 

in its slope, reducing marginal costs per unit of abatement, and thus deviate from 

the assumption of one constantly increasing marginal cost curve. In addition, 

elevated abatement costs may result in significant increases in the cost of 

production and would likely induce production efficiencies, in particular those 

related to energy inputs, which would lower emissions from the production side.

(pp. 5-26 – 5-28) (footnotes omitted).
24

The ANPR states that an issue raised by ―potential CAA regulation is whether the CAA can help 

spur needed technological development for reducing GHG emissions and the costs of these

reductions.‖ 73 Fed. Reg. 44407. It then points out that some CAA provisions ―offer little 

flexibility in standard-setting criteria, emission control methods, compliance deadlines, and 

potential for market-oriented regulation,‖ while others ―offer more potential to encourage new 

technology through market incentives or to establish standards based on anticipated advances in 

technology‖ and requests ―comment on the extent to which various CAA provisions could be 

used to help spur technological development, and on the need for federally conducted or funded‖ 

R&D to ―promote‖ such ―development.‖ Id.

The history of the CAA in what some call ―forcing technology‖ through command-and-control 

regulation has been mixed. Some of the earliest efforts occurred regarding motor vehicle 

controls. For example, in 1977 when the Congress revisited the 1970 version of the Clean Air 

Act, the Senate Committee on Environment and Public Works pointed out25 that the 1965 

automobile control program ―required‖ the then administering agency to set standards based on 

―technical and economic feasibility,‖ but that progress under that ―yardstick‖ proved 

―inadequate.‖ So in 1970 Congress abandoned it and ―adopted statutory standards and rigid 

timetables‖ for their achievement. The new standards ―reflected that level of control needed to 

insure attainment of health-related air quality levels,‖ and the deadline for meeting them was the 

―1975 model year.‖ But between 1970 and 1977 the deadlines had to be modified twice (in 1973 

and 1975) by EPA for reasons of cost and lack of technology and once by Congress in 1974, 

resulting in calling for ―achievement of the statutory reductions on 1978 model cars.‖ In 1977 

 

25

 Clean Air Amendments of 1977, S. Rep. No. 95-127 at 67-75 (1977) (regarding S. 252).
25

the standards and deadlines were adjusted again by Congress for various reasons, including the 

status of technology, costs and other factors.

In short, it is hard to imagine how EPA, through CAA regulation, could incorporate and base its 

regulations to achieve the full portfolio approach. EPA‘s authority under the Act is limited: It 

can provide no funding nor offer any incentives to ensure development and commercial 

deployment of critical technologies. Instead, EPA is forced to rely on technology-forcing 

regulations and hope for the best. Ambitious reductions in emissions will not be achieved in this 

manner.

III. Issues Related To A Possible Endangerment Finding

EPA‘s authority to regulate GHG emissions using the Act is contingent upon making an 

endangerment finding.26 EEI does not take a position on whether the various endangerment 

standards throughout the Act have been satisfied with respect to GHGs, but notes that EPA‘s 

process for assessing this issue has been incomplete. Before making a final endangerment 

determination, which would be subject to notice and comment requirements, EPA must address 

several issues.

Specifically, EPA must assess the potential effects of climate change on the U.S. directly and 

must fully document and support its conclusions. EPA‘s assessment, as embodied in the 

ANPR‘s Endangerment and Benefits TSDs, is problematic because it focuses on regional and 

global effects. In addition to analyzing effects on the U.S., any endangerment analysis must also 

 

26

 Massachusetts v. EPA, 127 S. Ct. 1438, 1462 (2007).
26

address both the potential adverse and beneficial effects of climate change, noting that CO2 is 

necessary to sustain life on Earth as we know it, especially through the carbon cycle and plant 

growth. Moreover, any assessment of the overall effects of climate change also must 

acknowledge and address the natural variation of GHG concentrations in the atmosphere. A full 

discussion of these issues in included in Appendix B. 

Assuming arguendo that EPA corrects the above-discussed deficiencies and moves toward an 

endangerment finding, we agree with the Agency in the ANPR that ―current and future projected 

levels of ambient concentrations of the six GHGs are not expected to cause any direct adverse 

health effects, such as respiratory or toxic effects, which would occur as a result of elevated 

GHG concentrations themselves rather than through the effects of climate change.‖ 73 Fed. Reg. 

44427, col. 3; see also id. at 44425, col. 2. At a minimum, because the effects of GHGs are 

conceded by EPA to be indirect with respect to public health, the most that an 

endangerment finding can reach is welfare.

IV. Economic Analysis And Considerations

EPA seeks comment on a variety of issues related to its required economic analysis of the costs 

and benefits associated with GHG regulation, including: the selection of an appropriate discount 

rate for evaluating the costs and benefits of climate policy and GHG impacts over a long-term, 

inter-generational context; uncertainty in costs and benefits calculations and application, given 

the quantified and unquantified uncertainties associated with measuring the impacts of climate 

change and the results of mitigation policies; and the appropriateness of using U.S. and global 

values in quantifying the benefits of GHG reductions and the appropriate application of benefits 

estimates given the state of the art and overall uncertainties. 73 Fed. Reg. 44414-16.
27

A. Appropriate Intergenerational Discount Rate for Climate Policy Analysis

The selection of an appropriate intergenerational discount rate is one of the most contentious 

issues associated with the modeling of climate policy, and became particularly prominent when 

noted economist William Nordhaus of Yale University criticized the economic analysis that was 

part of the Stern Review on the economics of climate change on the grounds that the assumed 

discount rate, which was close to zero in Stern‘s analysis, was unreasonably low. Nordhaus 

advocates adopting a higher discount rate (3 percent or more) commensurate with a risk-free 

market return, and in fact uses a 4-percent discount rate in his own most recent analysis of 

climate change, on the grounds that this is the estimated return on market capital.

27

 The impact 

of discount rate choices on the results of climate change analyses was exemplified by Richard 

Tol, who compared 211 such analyses that have been performed over the past 25 years.28 His 

summary indicates that studies using a discount rate of 1 percent produced estimates of the social 

cost of carbon (i.e., the marginal cost of climate change damage) that were more than three times 

as high, on average, as studies that used an assumed discount rate of 3 percent, while studies 

which use a discount rate at or close to zero produced estimates that were, on average, four times 

as high as those which used a 1-percent discount rate, and more than 13 times as high as those 

which used a 3-percent discount rate. The extreme variability in results that arises from a change 

of less than 3 percentage points in the selected discount rate demonstrates the risk inherent in 

selecting a rate that is too low. 

 

27

 W. Nordhaus, A Question of Balance: Weighing the Options on Global Warming Policies

(Yale University Press, 2008).

28

 R. Tol, ―The Social Cost of Carbon: Trends, Outliers and Catastrophes,‖ Economics ejournal, Vol. II (Aug. 2008).
28

In a study published in the OECD Journal of Budgeting in 2001,29 Michael Spackman argued 

that the time preference rate should, at a minimum, be set based upon the following formula:

(1.0g+1.0+0.1)%

where g is the expected rate of growth of per capita income. For an assumed per capita growth 

rate of 2 percent, this minimum time preference rate would then be 3.1 percent. But Spackman 

also includes a survey of social discount rates actually specified by countries for the appraisal 

and evaluation of policies in the public sector, and demonstrates that these rates range from 4-10 

percent (with 7 percent reported for the U.S.).

Accordingly, the discount rate should be set above 3 percent, and, in fact, should be established 

in the middle or upper range of prescribed rates as reported by Spackman, to reflect the 

particularly high magnitude of uncertainties associated with climate change (see discussion in 

subsection D below). Any policy analysis undertaken by the EPA should explicitly report, with 

the use of alternative cases or sensitivity analyses, the impact of alternative discount rates on the 

results.

B. EPA Must Carefully Select Source Data and Assumptions and Use Sensitivity 

Analyses in its Cost/Benefit Calculations.

EEI supports a policy of cost/benefit estimates using a base case derived from statistics and 

projections from sources generally acknowledged and respected by the energy industry, such as 

EIA. EIA‘s Annual Energy Outlook provides reference forecasts on energy prices, supply and 

demand, including projections on expansion of domestic energy supply and production. 

However, while statistics and forecasts from sources such as these provide an acceptable 

 

29

 M. Spackman, ―Public Investment and Discounting in European Union Member States,‖ 

OECD Journal on Budgeting (2001). 
29

baseline, EPA must recognize that there are significant disagreements regarding projections of 

important energy statistics. These include but are not limited to 1) the extent to which the U.S. 

will need to rely upon imports of liquefied natural gas (LNG) to meet domestic demand, and the 

consequent effect of a rising reliance upon LNG on prices, 2) the impact of rising construction 

materials costs on the future cost of investment in new electric infrastructure, 3) the timing of 

commercially available ACT integrated with CCS and of other abatement technologies, and 4) 

the extent to which energy efficiency programs, nuclear power, and renewables will be able to 

mitigate the requirement for future baseload fossil-fuel generation. 

The lack of consensus on variables such as these, and the critical impact of each of them on 

the results of any climate policy analysis, highlight the necessity for sensitivity cases 

representing a realistic appraisal of uncertainties in estimates of critical variables.

C. Climate Change Impacts Should Be Evaluated from U.S. and Global Perspectives.

Costs and benefits should be evaluated from both domestic (national) and global perspectives. 

As noted in a study by the Congressional Budget Office:

30

Countries that would bear a relatively large share of the costs of climate policies are not 

necessarily those that would receive a large share of the benefits. For example, under a 

policy determined by global cost-benefit analysis, the U.S. would incur a substantial 

share of the costs but would receive a disproportionately small share of the benefits. 

Developing countries, in contrast, would incur a relatively small share of the costs but 

would receive a disproportionately large share of the benefits.

While GHG emissions arguably represent a global externality, the case for a national policy of 

GHG reductions will be contingent upon evaluating the U.S. share of costs and benefits in light 

of the degree of participation or lack thereof by other nations in a global climate policy. 

 

30

 Congressional Budget Office, ―Uncertainty in Analyzing Climate Change: Policy 

Implications‖ x (Jan. 2005).
30

D. Any Climate Change Analysis Must Account for Any Number of Uncertainties.

The evaluation of both the economic damages of unabated GHG emissions accumulations and 

the costs of reducing these emissions is made tentative by the high level of uncertainty that is 

inherent in the process. This uncertainty occurs in a number of distinct but significant areas, 

including the following:

1. The actual extent to which observed global temperature changes have been affected by 

rising concentrations of GHGs, as opposed to the extent to which temperatures have been 

affected by other causes, including but not limited to:

Normal long- and short-term climate change patterns.

 The Milankovitch Cycle (a 41,000-year cycle in which changes in the 

Earth‘s tilt affect the severity of the seasons).

 El Nino – Southern Oscillation (surface temperature anomalies that occur 

in the tropical Pacific ocean at intervals of from 2 to 7 years).

 North Atlantic/Arctic Oscillation and Atlantic Multidecadal Oscillation

(surface temperature anomalies in the North Atlantic of varying 

periodicities).

 Pacific Decadal Oscillation (a pattern of varying temperatures and 

pressures in the Pacific Ocean with a periodicity of from 10 to 30 years).

Solar activity and cycles.

Volcanic eruptions.

Changes to the Earth‘s reflectivity (albedo) due to industrialization and other 

human-induced modifications of the terrestrial environment.

Direct heating of the atmosphere by fossil-fuel combustion.

Ozone depletion in the upper atmosphere.

Changes in the location and design of temperature-measuring equipment.
31

2. The rate of world population and economic growth – particularly the rate of transition in 

developing countries from economies predominately based in agriculture to ones with a 

greater mix of manufacturing and service industries. While higher transition rates may 

increase the level of energy intensity in these economies, on the other hand they will also 

contribute to a greater potential for adaptation in the face of climate change, and less 

vulnerability to adverse climate impacts associated with droughts, flooding and reduced 

yields in particular crops.

3. The specific environmental impacts of rising GHG concentrations on future temperature 

changes, including the rate of temperature change, and an assessment of the relative 

damage caused by temperature change by region. The Stern Review31 provided a telling 

example of the magnitude of uncertainty involved in long-term temperature projections. 

In a table summarizing the projected impacts on temperature of different equilibrium 

GHG concentrations based upon 11 recent studies, estimates of the probability of a 2-

degree Centigrade increase in global temperature at a stabilization level of 400 ppm CO2

equivalent (CO2e) ranged from 8 to 57 percent, and at 450 ppm CO2e ranged from 26 to 

78 percent. A recent analysis32 of the effectiveness of global climate models in making 

long-term temperature and precipitation predictions at eight selected weather stations in 

six countries produced average correlation coefficients between predicted and actual 

observations of 0.237 for temperature and -0.046 for precipitation, leading the authors to 

conclude that ―model predictions are much poorer than an elementary prediction based on 

 

31

 N. Stern, The Stern Review: The Economics of Climate Change 195, Box 8.1 (Oct. 30, 

2006).

32

 D. Koutsoyiannis et al., ―On the credibility of climate predictions,‖ Hydrological Sciences 

Journal 671-84 (2008).
32

the time average,‖ hence making ―future climate projections at the examined locations 

not credible.‖

A recent example of a regional assessment of potential climate change damage that had to 

be significantly revised involved estimates of the impact of increasing GHG

concentrations and rising temperatures upon North Atlantic Ocean currents. The 

relatively moderate climate in Northern Europe has been attributed to a phenomenon 

known as thermohaline circulation, in which ocean currents deliver warm air northward 

from more tropical climates near the equator. Measurements of ocean currents in 2005 

indicated that these were weakening in the North Atlantic, leading to suggestions that 

rising ocean temperatures would cause the imminent shutdown or slowdown of 

thermohaline circulation in that region, in turn producing cooler temperatures in 

neighboring European nations. However, subsequent measurements have indicated that 

variations in ocean current are well within the ranges of seasonal variability.33

In addition to uncertainty with regard to the timing and extent of temperature change and 

its consequent impacts, there will also be uncertainty associated with the degree of 

adverse environmental impacts by region. Such differential regional impacts (and prior 

expectations associated with their probabilities of occurrence) will have an effect upon 

the timing and extent of participation in climate change policy by both developed and 

developing countries. For example, as noted in the aforementioned study by the 

Congressional Budget Office, ―[s]ome researchers predict that India would experience a 

 

33

 Q. Schiermeier, ―Ocean Circulation Noisy, not Stalling,‖ 448 Nature 844-45 (Aug. 23, 2007).
33

loss equal to about 5 percent of its total output if the global temperature rose by 2.5° 

Celsius, whereas Russia would benefit by an amount equal to about 0.65 percent of its 

total output.‖34 It can readily be inferred that such significant differences in national 

impacts could easily affect the willingness of some countries to enter into international 

climate change agreements. Hence, uncertainties about the future regional distribution of 

impacts will contribute to uncertainties about the timing and degree of participation by 

particular nations.

4. The extent to which adaptation could mitigate or eliminate damages arising from climate 

change. For example, one study estimated that a doubling of global CO2 concentrations 

would result in total agricultural losses ranging from $0.2 billion to $84 billion, but that 

adaptation could reduce this projection to a maximum impact of $52 billion, ranging to a 

potential net benefit of $10 billion.35

5. The timing and level of participation in GHG limitation or reduction activities by major 

emitting nations in both the developed and developing world. Any economic evaluation 

must address uncertainties regarding the level of this international participation in order 

to produce realistic estimates of domestic benefits. In his 2007 analysis of the economic 

impacts of climate policy, Nordhaus estimated the cost of attaining a global emissions 

reduction target as a function of the participation rate, and based on this estimate 

concluded that a policy that included the U.S. and developed (Annex I) countries only 

would incur abatement costs more than twice as high as one that included all nations.36

 

34

 Congressional Budget Office, supra n. 30.

35

 J. Reilly et al., ―Climate Change and Agricultural Trade: Who Benefits, Who Loses,‖ 4 

Global Environmental Change, No. 1 at 24-36 (March 1994).

36

 W. Nordhaus, ―The Challenge of Global Warming: Economic Models and Environmental 

Policy,‖ Yale University (June 7, 2007).
34

6. The rate of technological development that will result in the introduction of commercially 

available ACT integrated with CCS and other innovations contributing to no- or lowemissions energy production, as well as the capability to adapt to future climactic 

changes and mitigate any negative economic impacts through technology. Other key 

elements of uncertainty related to technological development are the following:

The rate at which existing alternative energy resources become more economical 

due to design innovations and reductions in operating costs arising from ―learning 

by doing.‖

The rate of technology diffusion between countries.

The rate of endogenous technological change, which will be affected by the costs 

of conventional fossil fuels and generation.

The availability of financial capital to invest in the development and introduction 

of new generation and emissions reductions technologies and the transmission 

infrastructure necessary to support an increase in renewables.

The extent and availability of future ―knowledge capital‖ capable of contributing 

to ongoing innovation, as well as a skilled labor force available to participate in 

the development and operation of new technologies.

E. EPA Should Use the FUND Model Carefully.

The EPA is using the Climate FUND (Framework for Uncertainty, Negotiation, and 

Distribution) integrated assessment model to measure the benefits of reducing GHG emissions, 

as described in its TSD on ―Benefits of Reducing GHG Emissions.‖

This TSD provides an assessment of the issues associated with modeling and measuring the 

benefits of reducing GHG emissions. The TSD correctly points out that the theoretical optimum 

level of emissions reductions would occur at the point where the marginal benefit of avoided 

climate damage equals the marginal cost of reducing CO2 emissions. The TSD appreciates the 

high level of uncertainty inherent in trying to estimate the marginal benefit of avoided climate 

damage. And the TSD addresses the issue of the discount rate as related to future costs and 

benefits, and the significant impact that the rate selected will have on the final estimates.
35

The EPA is using the FUND model to develop its own estimates.37 While conceding that its 

current FUND estimates are ―very preliminary,‖ EPA has also stated its intent to submit more 

refined results (after further model development and information collection) for peer review.

The TSD also cites two academic studies performed by Tol38 as a check on its own 

measurements of the benefits of avoided climate change damage. In these studies, Tol 

performed ―meta-analyses‖ of more than 200 estimates of the social cost of carbon (i.e., the 

metric associated with the benefit of avoided climate change) that had been performed by a 

number of analysts over the past 25 years. These studies illustrate the incredible range of 

estimates, from less than $0 to more than $400/ton CO2. Tol computed the average estimated 

social cost of carbon of all studies as $35/ton CO2, and also exhibited the effect of the selected 

intergenerational discount rate on study results by computing averages by discount rate. These 

ranged from $86/ton CO2 when no discount rate was used, to $6.50/ton CO2 when a discount rate 

of 3 percent was selected.

Tol also found that peer-reviewed studies tend to produce lower estimates of this cost than 

studies that have not been peer reviewed. (On average, peer-reviewed estimates are less than 

half of those which come from studies not submitted to peer review.) Curiously, the TSD 

 

37

 FUND models 16 global regions and estimates the impacts on agricultural production, water 

resources, sea-level rise, health, etc. due to changes in climate. Other users of the model have 

submitted results to peer-reviewed academic journals.

38

 R. Tol, ―The marginal damage costs of carbon dioxide emissions: an assessment of the 

uncertainties,‖ 33 Energy Policy 2064-74 (2005); and R. Tol, supra n. 28.
36

claims that it has updated Tol‘s meta-analysis by looking at only peer-reviewed studies 

performed after 1995, yet its computed average of the social cost of carbon based on studies 

using a 3 percent discount rate is $40/ton CO2. This number seems high, given the averages that 

are actually reported in Tol‘s study, and the lower numbers that tend to occur in peer-reviewed 

and more recent studies, as indicated above.39 In any case, EPA‘s own initial results based on its 

FUND model research produced an estimate for the social cost of carbon of $17/ton CO2 at a 3 

percent discount rate, but the estimate was more than five times higher ($88/ton CO2) if the 

discount rate was lowered to 2 percent. Hence, even within the same model run by the same 

researchers, the range of estimates of the social cost of carbon can be extremely wide, based on 

simple changes in assumptions or operating parameters.

On a related point, the TSD suggests that as EPA continues to enhance its model, the estimated 

social cost of carbon will rise as other environmental impacts are included, leaving the 

impression that any reported number will be a floor price or minimum, always subject to upward 

revision in future analyses. But the Tol study referred to above specifically observes that the 

reverse has been the case. As models have become more sophisticated over time, and as new 

data have been incorporated, estimates of the social cost of carbon have actually declined. A 

striking example is the series of climate analyses performed by Nordhaus, who estimated the 

social cost of carbon at $40/ton CO2 back in 1982, and now, with a much more sophisticated 

model and greater access to climate data, estimates it at $7.40/ton CO2.

40 Contrary to 

contentions by the IPCC, the Tol study concludes that ―there is a downward trend in the 

 

39

 The high average can only be explained in part by the fact that the TSD has attempted to 

convert all of the estimates to 2006 dollars. 

40

 R. Tol, ―The Social Cost of Carbon: Trends, Outliers, and Catastrophes,‖ Economics ejournal, Vol. II (Aug. 2008); and W. Nordhaus, supra n. 36.
37

estimates of the social cost of carbon. . . .‖ Therefore, any suggestions that costs will rise as 

models and data improve run contrary to actual historical evidence.

A general criticism that has been leveled against all models that estimate the avoided costs of 

climate change impacts is that they are not taking proper account of adaptation.41 For example, 

these models would estimate the probability of flooding of major coastal cities if the West 

Antarctic Ice Sheet collapses, and the corresponding economic damage attributable to the 

flooding. But a more appropriate estimate would factor in the cost of adaptation to this event, 

which might prevent some of the more catastrophic damage from occurring. The cost of 

adaptation could be significantly less than the cost of the damages in the absence of adaptation.

The TSD suggests that EPA does not intend to do a marginal cost/marginal benefit calculation to 

determine an optimal carbon price. Rather, the goal will be to continue development of the 

FUND model and share the results, with the caveat to its recipients that other, non-quantifiable 

impacts are not included. As indicated above, this might leave the impression that the results 

produced are a ―floor price,‖ which is wrong for two reasons. The first is that model 

enhancements have tended to bring down the estimates rather than raise them. The second is that 

the marginal benefit of avoided emissions could be higher than the optimal CO2 price, which is 

also determined by the marginal cost of abatement. For these reasons, the marginal benefit of 

avoided climate damage could actually represent a price ceiling, rather than a floor.

 

41

 See, e.g., I. Goklany, ―Managing Climate Change Risks in the Context of Other, More Urgent 

Risks to Humanity,‖ Office of Policy Analysis, U.S. Department of the Interior (Apr. 2007).
38

While most of the actual modeling activities described in the TSD may be proceeding in a 

competent and reasonable fashion, the results of these activities lend themselves readily to 

misapplication. One such misapplication would be to take the total estimated benefits and 

simply compare them to the total estimated costs of mitigation. Such an approach would not 

determine the socially optimal level of climate change mitigation, and in fact could result in a 

significant over-expenditure of society‘s resources. This is the risk presented by an injudicious 

use of the FUND model.

V. If EPA Regulates Under the CAA, Emissions Reductions Should Be Addressed 

Through Market-Based Approaches. 

For the reasons discussed below and elsewhere in these comments, EEI does not believe 

that the CAA is the correct vehicle to address climate change. A better approach would be

comprehensive climate legislation—consistent with EEI’s stated principles—that gives EPA 

uniquely designed tools and the flexibility to address this complex and global problem. 

However, were EPA to decide nevertheless to move forward with its existing CAA title I 

authorities, we encourage it to utilize market-based programs (i.e., cap-and-trade) instead of 

traditional command-and-control approaches. 

EPA‘s acid rain program is an excellent example of an efficient and highly effective marketbased emissions trading program. The CAA Amendments of 1990 created title IV, which gave 

EPA the authority to create the acid rain program, a stand-alone cap-and-trade approach to 

reducing SO2 emissions. The program has been heralded worldwide for its simplicity, practical 

design and outstanding success in reducing the costs of compliance in cutting acid rain-causing 

SO2 emissions. Key to the program‘s success is the fact that it exclusively relies on authorities 
39

granted under title IV and not other CAA provisions, making it is free from the complexities and 

constraints inherent in other part of the Act. Consequently, the program has achieved emissions 

reductions with few legal challenges in the course of its 20-year history.

As discussed further below, under CAA sections 110 and 111, EPA‘s authority to establish GHG 

cap-and-trade programs is not as clear or certain as that provided by title IV. If EPA were to 

choose to move forward relying on novel interpretations of its statutory authority in an attempt to 

use the CAA to implement a cap-and-trade program, the outcome would be far from certain. 

This lack of legal certainty highlights the risks of using title I to establish a cap-and-trade 

program. As discussed in section II.B of these comments, challenges to EPA‘s approach could 

result in extended regulatory delays and great uncertainty for the regulated community, who 

would not know what investments to make, or on what timeline, to achieve the desired emissions 

reductions for reducing GHGs. No one would be well served by such an outcome. 

We examine the legal arguments both for and against the use of title I to illustrate just how 

uncertain a strategy of relying on title I of the CAA would be.

A. CAA Section 111

1. EPA’s authority to establish a GHG cap-and-trade program under section 111 is 

uncertain.

Section 111(b) authorizes EPA to create standards of performance for categories of new and 

modified stationary sources. In addition, once EPA sets performance standards for new and 

modified sources in a given source category, section 111(d) authorizes EPA, in certain 

circumstances, to promulgate standards of performance for existing sources, which states must 
40

adopt through plans requiring approval by EPA.42 EPA has defined ―standards of performance‖ 

to include a cap-and-trade program.

43

 EPA has used its section 111 authorities to create a capand-trade program for stationary sources, including in the Clean Air Mercury Rule (CAMR)

44

and in the 1994 rule governing emissions guidelines and compliance times for large municipal 

waste combustors, 40 C.F.R. Part 60, subpart Cb.45

In the GHG context, EPA could use section 111 to design and implement a cap-and-trade 

program to cover new and existing stationary sources.46 To do so, EPA would develop a 

nationwide cap on emissions; state emissions budgets for covered source categories; and 

guidelines for a trading program relating to applicability, GHG ―allowance‖ allocations, banking, 

 

42

 If a state fails to submit a satisfactory plan, EPA may prescribe a plan for the state. 42 U.S.C. 

7411(d)(2)(A).

43

 See 70 Fed. Reg. 28606, 28616. Under section 111(a), ―standard of performance‖ is defined 

as ―a standard for emissions of air pollutant which reflects the degree of emission limitation 

achievable through the application of the best system of emission reductions which (taking into 

account the cost of achieving such reductions and any non-air quality health and environmental 

impact and energy requirements) the Administrator determines has been adequately 

demonstrated.‖ According to EPA, a requirement for a cap-and-trade program can meet this 

definition because it ―(i) constitutes a  ̳standard for emissions of air pollutants‘ (i.e., a rule for air 

emissions), (ii)  ̳which reflects the degree of emission limitation achievable‘ (i.e., which requires 

an amount of emissions reductions that can be achieved), (iii)  ̳through application of (a) ... 

system of emission reduction‘ (i.e., in this case, a cap-and-trade program that caps allowances at 

a level lower than current emissions).‖

44

 CAMR, which has since been vacated (see discussion, infra), was designed to apply to all new 

and existing coal-fired utility units located in all 50 states, as well as on Indian lands. 70 Fed. 

Reg. 28606, 28621.

45

 70 Fed. Reg. 28606, 28617.

46

 Because regulation under section 111(d) is prohibited for pollutants for which air quality 

criteria have been issued or which is listed under section 108 of the CAA, if a cap-and-trade 

program were to cover existing sources, EPA would have to show that it does not have a nondiscretionary obligation to list GHGs as National Ambient Air Quality Standards (NAAQS)

pollutant if it makes a positive endangerment finding under another provision of the Act. 42 

U.S.C. § 7411(d)(1). Moreover, the CAA prohibits regulation under section 111(d) of pollutants 

which are emitted from a source category that is regulated under section 112 of the CAA. Id.
41

monitoring, reporting, compliance and enforcement.47 If states promulgated rules consistent with 

EPA‘s requirements and demonstrated that they will limit state-wide emissions from affected 

new and existing sources to the amount of their state budget, sources in those states could then 

participate in a nationwide cap-and-trade program designed by EPA.48 

In practice, the various rules (e.g., CAIR and the NOx State Implementation Plan (SIP) call) 

provide that the cap-and-trade program is to be administered by EPA and that states must adopt 

the model cap-and-trade rules designed by EPA, but have flexibility on the allowance allocation 

methodology, which may include auctions and set asides for various purposes.

EPA‘s NOx rule mandated that 22 states and D.C. revise their SIPs to mitigate interstate transport 

of ozone by reducing NOx, an ozone precursor, based on the 1990 CAA Amendments, which 

require that SIPs contain ―adequate provisions prohibiting emissions sources in a state from 

emitting air pollutants that will contribute significantly to nonattainment in, interfere with 

maintenance by, any other state‖ regarding any NAAQS standard. In Michigan v. EPA, 123 F.3d 

663 (2000), the U.S. Court of Appeals for the D.C. Circuit made multiple rulings on various 

components of the NOx SIP rule but left ―intact most‖ of its requirements. 70 Fed. Reg. 25162, 

25174. Regarding the NOx rule‘s requirement concerning the trading program, the court said, 

―Of course we are able to assume the existence of EPA‘s allowance trading program only 

because no one has challenged its adoption.‖ 123 F.3d at 667.

 

47

 EPA may also develop a model rule for a GHG trading program, as it did for the mercury 

trading program proposed in the CAMR, which can be adopted directly by states choosing to 

participate in the program. See 69 Fed. Reg. 12398, 12403.

48

 See, e.g., 69 Fed. Reg. 12398, 12401.
42

However, in the preamble to the NOx rule (section VII, NOx Budget Trading Program), EPA said 

it was setting forth a ―model‖ trading program that ―employs a cap of total emissions in order to 

ensure that emissions reductions under the transport rulemaking are achieved and maintained, 

while providing the cost effectiveness of a market-based system.‖ EPA proposed that states elect 

to ―participate‖ in the program by ―either‖ adopting the model rule by reference or developing

state regulations in accordance with the model rule. Some commentators urged that rather than 

adopt the program ―it should be sufficient for each state‖ to declare in the SIP that it ―will 

participate in the Federal program,‖ which ―would leave the details in the Federal rule.‖ EPA 

responded that it ―does not have the statutory authority under title I to promulgate a Federal capand-trade program to achieve a state‘s SIP call budget unless the state fails to respond adequately 

to the SIP call.‖ 63 Fed. Reg. 57356, 57458.

This combination – of the still untested legal basis for implementing a trading program under 

section 111 and EPA‘s admitted ability to implement cap-and-trade for existing sources only 

when a state fails to respond to a SIP call – places any potential strategy to use section 111 in 

jeopardy of being found to be beyond EPA‘s authority under the Act.

2. The D.C. Circuit’s decision vacating CAMR

In New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008), the D.C. Circuit vacated CAMR, which 

created a cap-and-trade program to regulate mercury emissions from new and existing electric 

utility steam generating units. The court never reached the question of EPA‘s authority to 

establish a cap-and-trade program under section 111. Rather, it found unlawful EPA‘s decision 

to delist sources for regulation under section 112, and thus vacated the entire rule because, as 
43

EPA conceded, it hinged on EPA‘s delisting decision.49 Therefore, contrary to some assertions, 

the D.C. Circuit‘s decision does not stand for the proposition that EPA lacks authority to regulate 

GHGs using a cap-and-trade program under section 111; it simply means that the issue remains 

untested in the courts, creating uncertainty whether section 111 would withstand the inevitable 

legal challenge that will follow should EPA use this mechanism to regulate GHGs.

3. If EPA pursues a a cap-and-trade program for GHGs under section 111, it 

should be tailored appropriately.

If EPA ultimately issues a proposal for the creation of a cap-and-trade program for stationary 

sources under section 111, there are several program elements that the agency should strongly 

consider.

Section 111 requires EPA to list and set emissions standards for sources that the Administrator, 

in his judgment, finds ―causes or contributes significantly to air pollution which may reasonably 

be anticipated to endanger public health or welfare.‖ There is no prohibition on creating a source 

category for a new pollutant that overlaps somewhat or entirely with source categories that were 

previously listed based on their contribution to a different type of pollution. Thus, in defining a 

GHG source category, EPA could consider combining sources that are not already regulated with 

some sources that are already regulated under section 111.50 The main benefit of creating one or 

more new source categories for GHG purposes is that the greater the number and variety of 

sources that may trade with one another, the more cost-effective overall emissions reductions 

will be.

 

49

 New Jersey v. EPA, 517 F.3d at 583. EPA filed a petition for a writ of certiorari to the 

Supreme Court on October 17, 2008, arguing that the D.C. Circuit misinterpreted the CAA and 

that its decision should be vacated.

50

 If EPA develops a standard of performance for GHG sources that are already listed under 

section 111(b), it could do so without making an endangerment finding under that section. 
44

See subsection C, infra, for a discussion of design elements for an effective and efficient capand-trade program.

B. CAA Section 110

1. EPA may have some authority to establish a state-based GHG cap-and-trade 

program under section 110.

States have primary responsibility for implementing NAAQS through their SIPs. Under CAA 

section 110(a)(2)(D), states must include in their SIPs provisions ―prohibiting...any source or 

other type of emissions activity within the state from emitting any air pollutant in amounts which 

will ... contribute significantly to nonattainment in, or interfere with maintenance by, any other 

State with respect to any [NAAQS].‖51

If EPA concludes that an ―implementation plan for any area is substantially inadequate to attain 

or maintain the relevant [NAAQS], to mitigate adequately the interstate pollutant transport 

described in section [176A] or [184], or to otherwise comply with any requirement of this 

chapter,‖ section 110(k)(5) of the CAA requires EPA to order a state to revise and correct its SIP 

―as necessary.‖52 This process is sometimes referred to as a ―SIP call.‖

Under sections 110(a)(2)(D) and 110(k)(5), EPA could establish a nationwide cap-and-trade 

program for GHG regulation of stationary sources.53 In fact, EPA has used these provisions in 

the past to establish cap-and-trade programs for several pollutants, most recently in the NOx SIP 

 

51

 42 U.S.C. § 4710(a)(2)(D)(i)(I).

52

 42 U.S.C. § 7410(k)(5).

53

 This approach assumes that EPA would first list GHGs as criteria pollutants under section 108 

and that it would subsequently promulgate either primary or secondary NAAQS for the 

pollutants under section 109.
45

call rule (creating a cap-and-trade program for NOx emissions affecting 21 states and D.C.) and 

CAIR (creating a cap-and-trade program for NOx and SO2 emissions affecting 28 states and 

D.C.). To establish a similar program for GHG regulation, EPA would have to determine that all 

states are contributing to the non-attainment or are interfering with maintenance of GHG 

NAAQS in all other states, and thus require the states to revise their SIPs to include control 

measures to reduce GHG emissions. EPA could create an emissions cap for each state, and also 

create an optional interstate trading program for sources within each state. States could choose 

to participate in the cap-and-trade program, as they did in the NOx SIP call rule, or a federal capand-trade program would apply automatically in the absence of approved SIPs.

2. The D.C. Circuit’s decision vacating CAIR

In North Carolina v. EPA, the D.C. Circuit vacated CAIR, rejecting EPA‘s use of section 110 to 

create a cap-and-trade program to regulate SO2 and NOx. It did so on the grounds that EPA 

crafted the rule as a ―complete remedy‖ to interstate air problems under section 110(a)(2)(D), 

without independently considering the ―significant contribution‖ from sources within each 

regulated, upwind state to downwind non-attainment areas, as required by the statute.54 The 

court faulted EPA for taking a region-wide approach that assured only that the entire region‘s 

significant contribution would be eliminated, instead of achieving ―something measurable 

toward the goal of prohibiting sources  ̳within the state‘ from contributing to nonattainment or 

interfering with maintenance  ̳in any other State.‘‖55

 

54

 531 F.3d at 907.

55

 Id. EPA filed a petition for rehearing or rehearing en banc with the D.C. Circuit on September 

24, 2008. In that petition, EPA correctly points out how the court misinterpreted CAA section 

110(a)(2)(D), why the Agency has authority under that provision to develop a cap-and-trade 

program, and how its decision to vacate CAIR is inconsistent with the NOx SIP call decision. 

EEI agrees with the arguments that EPA advances in that petition
46

This decision, in and of itself, does not foreclose EPA‘s ability to develop a cap-and-trade 

program for GHGs. The D.C. Circuit‘s CAIR decision found significant flaws with that 

program‘s structure, not with EPA‘s underlying authority to use a cap-and-trade under section 

110. The decision leaves intact EPA‘s authority to create a cap-and-trade program in at least two 

instances. First, it may use a cap-and-trade program as a partial solution to the problem of 

interference with non-attainment, so long as the program achieves ―something measurable‖ 

toward the goal of prohibiting sources ―within the State‖ from contributing to non-attainment or 

interfering with maintenance in ―any other State.‖56 Second, it may use a cap-and-trade program 

as a final solution to the problem of interference with non-attainment, so long as it can show –

through actual measurement of each state‘s ―significant contribution‖ to downwind nonattainment – that the program eliminates emissions from sources that contribute significantly and 

interfere with maintenance in downwind non-attainment areas.57 However, these arguments are 

all based on ones surrounding contribution, and will be difficult to apply to a regulatory scheme 

where it is GHG loadings at a global scale that matter, not individual state contributions.

3. EPA should tailor any cap-and-trade program for GHGs under section 110 

appropriately.

If EPA ultimately chooses to list GHGs as criteria pollutants under section 110, a decision that 

would yield serious, unwelcome implications (discussed in section VI.A.1, infra), it should 

nonetheless consider utilizing its cap-and-trade authority under that section to institute costeffective emissions controls for stationary sources.

 

56

 Id.

57

 Id. (citation omitted).
47

To satisfy the statute, as interpreted by the D.C. Circuit in North Carolina v. EPA, a section 110 

cap-and-trade program must consider and address how each state is contributing to nonattainment, or interfering with maintenance, of a GHG NAAQS, and it must ensure that the 

program is limiting emissions that contribute significantly within each state. Thus, EPA may 

have to consider implementing an emissions ceiling for each state that would operate in addition 

to a cap-and-trade program. This emissions ceiling would have to be set at an EPA-determined 

―significance‖ level, in order to ensure that states do not contribute to non-attainment or interfere 

with maintenance of a NAAQS. Depending on how EPA defines ―significance,‖ the level could 

be set equally for all states or could be more appropriately tailored to each state‘s GHG 

emissions and other factors, such as costs of reducing emissions. However, any factor other than 

the cost of reducing emissions is inconsistent with the rationale for a cap-and-trade program.

A section 110 cap-and-trade program for GHGs also should consider the elements described in 

the next subsection. For example, banking may be extremely beneficial to any proposed GHG 

cap-and-trade program.

C. Design Considerations for a Cap and Trade Program

1. General program design

In the ANPR, EPA requests comment on

the use of cap-and-trade programs for GHGs under section 111 and other CAA 

authorities, including design elements such as opportunities for sources to opt into 

such programs, inter-sector trading and offsets, allowance auctions, cost 

containment mechanisms, and conditions or safeguards to ensure that emissions 

reductions goals are met and that local air quality is protected. Particular issues to 

consider include whether it be allowable under section 111 to develop a cap-andtrade program that covered multiple source categories or would each source 

category have to be covered under a source-category specific cap-and-trade 

program. Another issue is whether it would be legally permissible to allow offsets 
48

(i.e., obtaining emissions reductions from sources outside of the capped sector) to 

meet the requirements of section 111.

73 Fed. Reg. 44515, col. 2.

Since EPA‘s ANPR has not identified the specifics of a market-based program, including an 

emissions trading program, it would be premature at this time for EEI to present or discuss 

elements of a specific, hypothetical emissions trading program. However, in an effort to be 

responsive to EPA‘s request, EEI notes that it has developed a set of Climate Change Principles 

(Appendix A) that will guide EEI‘s evaluation of any proposed regulatory program that EPA 

may develop as part of a future rulemaking. Below EEI highlights those Climate Change 

Principles that are relevant to the design of any market-based program.

Based on EEI‘s Climate Change Principles, a market-based program must:

Involve all sectors of the economy, and all sources of GHGs, with no exemptions for any 

industry or specific fuel.

Align compliance timelines with the expected development and deployment of needed 

technologies.

Employ market mechanisms to secure cost-effective GHG reductions, and provide a 

reasonable transition and an effective economic safeguard.

Include a system of mitigating impacts on customers by flowing through the benefits of 

allowances to customers via an allocation to local distribution companies and direct 

allocation of the majority of allowances in the early years of a program with a transition 

to auctioning.

Establish a long-term price signal for carbon that is moderate, does not harm the 

economic competitiveness of U.S. industry and stimulates future investments in zero- or 

low-carbon technologies and processes.

Minimize economic disruptions or disproportionate impacts.

Recognize early actions and investments made to mitigate GHG emissions.

Provides for the robust use of a broad range of domestic and international GHG offsets.

Provides certainty and a consistent national policy.
49

Any cap-and-trade program must include a safety valve and banking, since such costcontainment mechanisms would reduce possible price volatility and increase compliance 

flexibility for affected sources. A safety valve would set a maximum cost that purchasers 

would pay for GHG emissions allowances by allowing sources to purchase allowances at the 

ceiling price. Banking refers to the retention of unused allowances from one control period 

for use in later control periods, and it allows sources to make early reductions beyond those 

necessary to comply with state budgets and bank allowances for use at a future date.58 

Banking of mercury allowances was finalized as part of CAMR,

59 and banking makes 

particular sense in the GHG context given that GHGs are well-mixed and have long 

atmospheric life spans. As a result, it makes little difference whether reductions occur in 

year ―x‖ or in year ―x + 1,‖ so long as they are made.

2. An economy-wide trading program would be more effective than a sector- or 

multi-sector-based program.

Further, EPA discusses the potential value and use of economy-wide, multi-sector or single 

sector trading programs. 73 Fed. Reg. 44411-12. EPA also suggests that it may be faster to 

move forward initially only with sectors with experience in emissions trading (e.g., start with an 

electric sector-only program). As previously stated, cost-effective reductions can only be 

achieved through an economy-wide, multi-sector, market-based program. Consistent with our

Climate Change Principles, EEI opposes starting with just the utility sector alone. To 

achieve the needed emissions reductions requires an economy-wide, market-based approach that 

is consistent with the expected development and deployment timelines of needed technologies.

 

58

 See 69 Fed. Reg. 12398, 12411.

59

 See 70 Fed. Reg. 28606, 28630.
50

3. Considerations for the design of an offsets program 

The ANPR notes that to broaden the scope to other sectors, covered sources could be allowed to 

purchase offsets from non-covered sources. EPA then opines that accountability, emissions 

reductions certainty and permanence (e.g., maintenance of the project over time) are all potential 

obstacles to the use of offsets. 73 Fed. Reg. 44412, col.1.

First, the inclusion of offsets from non-covered sources must be a critical design element of any 

EPA emissions trading program. Full and robust use of national and international offsets from a 

variety of sources is a key cost-reduction methodology.

Second, EPA‘s apparent apprehension about the use of offsets and offsets trading is not 

supported in the ANPR. Unless EPA can provide evidence to substantiate its misgivings, its

concerns over the certainty of emissions reductions from offsets are erroneous and may be 

overstated. Offsets programs in the U.S. and internationally have greatly matured and offer the 

potential for certain and cost-effective GHG reductions, avoidances and sequestrations. It is 

wrong for EPA to conclude arbitrarily and capriciously that potential deficiencies that may exist 

in offsets programs in today‘s voluntary carbon markets will carry over into a regulatory 

framework. EPA itself has guidance on offsets as contained in 40 C.F.R. 51, Appendix S and 

therefore oversees a mandatory offsets program for criteria pollutants under PSD/New Source 

Review (NSR) that provides for offsets that are real, measurable and enforceable. This existing 

PSD/NSR offsets program provides for a potential model for GHG offsets. However, EPA 

guidance in 40 C.F.R. 51, Appendix S contains quite explicit restrictions on the creation and use 

of NSR emissions offsets as originally designed for criteria pollutants. Since the PSD/NSR 
51

program was not designed for GHG offsets, many of the unique design features needed in a 

NSR/PSD offsets program are unnecessary and would prove to be significant obstacles when 

implementing a GHG offsets program.

For example, like NSR offsets, GHG offsets must be real, but they do not need traditional 

permits to be enforceable and do not need to be measured on an annual basis. 

Current offsets programs are state managed, and different rules apply in different jurisdictions,

making NSR emissions offsets a non-fungible commodity. Lack of fungibility reduces 

efficiency and increases costs. This is an undesirable outcome. 

Current NSR rules require that offsets come from within the same non-attainment zone. Under 

current practice, states then sign individual memoranda of understanding (MOUs) that address 

the legal recognition by one state of offsets created in another state in order to use offsets within 

contiguous non-attainment zones that cross state borders. How this would work with GHG 

offsets is uncertain. Even if the contiguous U.S. were to be considered a single non-attainment 

zone, we question whether current regulation would require each state to have an MOU with 

every other state and whether states would be able to trade GHG emissions offsets across state 

borders.

Further, the requirement that offsets come from ―within a nonattainment zone‖ would produce 

the undesirable outcome of precluding the use of international offsets (notwithstanding the issues 

surrounding the lack of federal enforceability of offsets created outside the U.S.).
52

Current NSR emissions offsets regulations allow only for intra-pollutant offsets. Based on 

existing offsets guidance, it is unclear if methane emissions reductions offsets, for example, 

could be used to meet an NSR offsets requirement for CO2. This potential lack of flexibility 

could decrease the available pool of projects eligible to be used to create offsets, greatly 

increasing the difficulty and cost of complying with NSR offsets provisions.

Overall, EPA must look closely at the restrictions on emissions offsets currently imposed by 40 

C.F.R. 51, Appendix S. While the restrictions may be suitable and necessary for traditional 

criteria pollutants where acute exposure issues are an important factor, for GHG emissions, 

where it is of no value to set local health-based emissions levels, these restrictions would be a 

detriment to the creation and use of GHG offsets.

D. EPA’s CAA Authority Related to Auctions, Fees and Revenue Collection

The ANPR states that the ―CAA does not include a broad grant of authority for EPA to impose 

taxes, fees, or other monetary charges specifically for GHGs and, therefore, additional legislative 

authority may be required if EPA were to administer such charges,‖ which EPA then refers to in 

the ANPR ―collectively as fees.‖

60

 73 Fed. Reg. 44411, col. 1. The ANPR adds that ―EPA may 

promulgate regulations that impose fees only if the specific statutory provisions at issue 

authorize such fees, whether directly or through a grant of regulatory authority that is written 

broadly enough to encompass them.‖ Id. As an example, the ANPR refers to section 

110(a)(2)(A) of the CAA, which provides that each SIP must ―include...control measures, 

 

60

 The words ―broad grant of authority‖ are somewhat misleading as they suggest that there may 

be some more limited grant of authority for EPA under the CAA. That certainly is not the case 

regarding taxes, which may only be imposed by a statute enacted by Congress. EPA does not 

have any statutory authority to impose taxes for GHGs or other purposes.
53

means, or techniques (including economic incentives such as fees, marketable permits, and 

auctions of emissions rights)..., as may be necessary or appropriate to meet the applicable 

requirements‖ of the CAA,61 and states that ―[u]nder this provision, some states intend to auction 

allowances,‖ citing CAIR, while others might use the NOx SIP call rule. See id. However, those 

are requirements for the states and are not an authority for EPA to apply independently. 62

As to fees, the ANPR said that ―[a] fee program differs from a cap-and-trade program because it 

does not establish an overall emissions limit‖ and thus EPA has ―not taken a position on whether, 

given this limitation, a fee program fits the definition of a  ̳standard of performance.‘‖ 73 Fed. 

Reg. 44411. However, the ANPR states that under section 111 ―costs may be considered when 

establishing NSPS regulations, and a fee may balance the consideration of assuring emissions are 

reduced but not at an unacceptably high cost. In addition, there may be advantages of including 

an emissions fee feature into a cap-and-trade program‖ as a price ceiling. Id. It adds that the 

―use‖ of such a ceiling ―that is not to be triggered except in the case of unexpectedly high (or 

low) control costs may be viewed differently under the auspices of the CAA than a stand-alone 

emissions fee.‖ Id. The ANPR then requests ―comments on what CAA provisions, if any, would 

authorize emissions fees to control GHG emissions, and whether there are other approaches that 

could be taken under the CAA that would approximate a fee.‖ It also requests comments on ―the 

use of emission fee programs under other sections of the Act.‖ Id.

 

61

 Section 110(a)(2)(E) of the CAA requires that the SIP provide ―necessary assurances‖ that a 

state ―will have adequate . . . authority under‖ state law to ―carry out‖ the SIP ―or portion 

thereof.‖ The ANPR notes that ―states have authority to impose emission fees as incentives as 

part of their SIPs and collect the revenues.‖ 73 Fed. Reg. at 44411.

62

 Citing section 110(a)(2)(A) of the CAA, the ANPR also asserts that if and when EPA 

promulgates a Federal Implementation Plan (FIP), EPA has the authority, like a state, to ―impose

emission fees as economic incentives,‖ but the ANPR adds that EPA ―has never‖ imposed such 

FIP-related fees. Id..
54

Provisions of section 110(a)(2)(A) also allow the use of other ―economic incentives‖ that include 

―fees‖ and ―marketable permits.‖ Thus, it would appear that if such auctioning were allowed in 

the context of section 111, which was applied in the CAIR and NOx SIP call rules, emissions 

fees should also be interpreted to be allowed as well. In addition, in the case of auctions, if a 

state has the authority to auction allowances in accordance with an EPA rule providing for an 

EPA-administered cap-and-trade program, presumably the state could also provide a safety valve 

or price ceiling in connection with the auction, unless EPA, as part of a rule, precluded it. 

In the case of both auctions and fees, a significant issue is what authority EPA or the state has to 

collect the revenues and use them for various purposes such as energy conservation, 

development of technologies, mitigation of costs to low- or medium-income ratepayers, or other 

purposes. In the case of the states, the various EPA rules (e.g., CAIR, NOx SIP call) indicate that 

EPA defers to the states as to authority to collect and use revenues. As to EPA, footnote 62 of 

the ANPR explains that, even in the case of Federal FIPs, any revenues derived from the 

imposition of fees must be ―deposited in the Federal Treasury under the Miscellaneous Receipts 

Act, and not [be] retained and disbursed by EPA,‖ which may explain why EPA has ―never‖ 

imposed FIP fees.63

 

63

 31 U.S.C. § 3302, which is known as the ―Miscellaneous Receipts Act,‖ provides:

(a) Except as provided by another law, an official or agency of the United States 

Government having custody or possession of public money shall keep the money safe 

without –

(1) lending the money;

(2) using the money;

(3) depositing the money in a bank; and

(4) exchanging the money for other amounts.
55

Only Congress can amend this requirement, as articulated in the 1990 CAA amendments, in 

which Congress included section 416 in title IV, directing EPA to promulgate regulations 

establishing a ―Special Allowance Reserve containing allowances to be sold under this section‖ 

and directed EPA to ―withhold‖ 2.8 percent of the allocation of allowances annually beginning in 

1995. Under section 416(c), EPA was directed to establish a ―Direct Sale Subaccount‖ in the 

reserve in order to offer allowances therein to ―any person‖ at a statutory set price of $1,500 per 

allowance, adjusted by the Consumer Price Index,‖ with a priority for purchase to any 

independent power producer. Section 416(d) directed EPA to establish an ―Auction Subaccount‖ 

in the reserve for allowances to be sold at annual auctions. The auctions are to be ―open to any 

person,‖ and EPA was directed to ensure that the regulations ―specify‖ that the ―allowances shall 

be allocated and sold on the basis of the bid price, starting with the highest-bid priced bid and 

continuing until all allowances for sale at such auction have been allocated‖ and that no 

―minimum price‖ may be ―set‖ for their purchase.

For both sales, Congress carved out limited exceptions to the Miscellaneous Receipts Act 

regarding the ―proceeds‖ from the sales. In the case of direct sales, EPA is required to transfer 

the proceeds of ―any sale‖ within 90 days thereof‖ without charge, on a pro rata basis to the 

owners or operators of the affected units from whom the allowances were withheld‖ and that any 

unsold allowances be ―transferred‖ to the Subaccount for Auction sales. In the case of auction 

 

(b) Except as provided in section 3718(b) of this title, an official or agent of the 

Government receiving money for the Government from any source shall deposit the money 

in the Treasury as soon as practicable without deduction for any charge or claim.
56

sales, EPA also must transfer the proceeds within 90 days ―on a pro rata basis‖ to such owners or 

operators. In the case of unsold allowances offered for sale but not sold, they are to be ―returned 

without charge, on a pro rata basis‖ to such owners or operators. For both, sections 416(c)(6) 

and (d)(3) of the CAA state:

No proceeds of any sale under this subsection shall be held by any officer or employee of the 

United States or treated for any purpose as revenue to the United States or to the 

Administration.

The Miscellaneous Receipts Act is a formidable obstacle that only legislation can change.

In addition, while EPA cap-and-trade, or emissions fee, ―model rule‖ programs established by 

rule, as in the NOx SIP call, may be workable from a NOx budget standpoint, they are not 

satisfactory from a national climate change standpoint. Since auctions, the setting of fees and the 

use of proceeds are all dependent on state-by-state authorities and priorities that will differ 

significantly, there will be no national uniformity, an undesirable outcome that could lead to 

increased costs, disparities between regions that result in emissions leakage, and other bad 

consequences.

VI. Review Of Proposed Regulatory Pathways For Stationary Sources And Associated 

Technical Support Document

A. Comments on CAA Programs – NAAQS, NSPS, HAPs, PSD/NSR and Title V – and 

Regulation of GHGs.

As the ANPR correctly acknowledges, the Supreme Court‘s Massachusetts v. EPA decision has 

potentially broad implications well beyond mobile sources. The Court‘s holding that GHGs are 

―air pollutants‖ means that EPA potentially has authority to regulate one or more GHGs under all 

significant CAA title I programs, including the national ambient air quality standards (NAAQS), 
57

the new source performance standards (NSPS) program, hazardous air pollutants (HAPs), 

prevention of significant deterioration (PSD) and new source review (NSR), as well as under title 

VI (stratospheric ozone) and title II (mobile sources and fuels). This section discusses the above 

CAA title I programs except for EPA‘s authority to utilize cap-and-trade programs, which is

addressed in section V.

The April 10, 2008, hearing of the House Energy and Air Quality Subcommittee (Energy and 

Commerce Committee) on regulating GHGs under the CAA, described many complications and 

problems:

Chairman Dingell said that if Congress fails to move, lawsuits will force EPA to regulate 

GHGs under the CAA; regulating GHGs under the CAA could cause a ―glorious mess‖ and 

shutdown or slowdown of industry and the economy; and it would be ―insane‖ to leave this 

judgment to the long and complex regulatory and litigation process, which could amount to 

100 rulemakings and thus no certainty. 

Former EPA General Counsel Ludwiszewski stated that if EPA stretches the existing CAA 

regime to meet the needs of GHG regulation, it will enter uncharted legal territory, inviting 

legal challenge, delaying protection of the environment and creating uncertainty in business 

planning. 

Attorney Glaser cautioned that with regulation of GHGs under the CAA ―the country will 

experience years, if not decades, of regulatory agony, as EPA will be required to undertake 

numerous, controversial, time-consuming, expensive, and difficult regulatory proceedings, 

all of which will be litigated.‖

EEI agrees with these assessments because the Act does not provide the tools needed to 

efficiently and effectively address this global issue, and therefore cautions EPA against 

regulating GHGs under its existing CAA authorities. 

In the remainder of this subsection, EEI discusses more specifically the difficulties and 

implications associated with each of the title I authorities that EPA could potentially utilize to 

regulate GHGs. Where applicable, EEI comments on topics related directly to regulation of 
58

GHGs from electric utilities. Also discussed below are comments related to EPA‘s Stationary 

Source TSD.

1. NAAQS

a. Background

The program with the broadest potential implications for GHG sources is the NAAQS program 

under sections 108 and 109, which has been called the ―centerpiece‖ of the CAA. Sierra Club v. 

Costle, 657 F.2d 298, 315 n. 23 (D.C. Cir. 1981). The CAA requires the Administrator to 

publish, and ―from time to time thereafter revise,‖ a list of air pollutants: 1) emissions of which, 

in his judgment, cause or contribute to air pollution which may reasonably be anticipated to 

endanger public health or welfare; 2) that are emitted from numerous or diverse mobile or 

stationary sources; and 3) for which air quality ―criteria‖ have not been issued.64 CAA § 

108(a). Once a pollutant is listed under section 108, EPA is obligated to develop a criteria 

document (an assessment of the latest scientific knowledge) and primary and secondary air 

quality standards. Id.; CAA §§ 109(a), (b). ―Primary standards‖ must be set at a level 

―requisite‖ to protect public health with an ―adequate‖ margin of safety. CAA § 109(b)(1). 

―Secondary standards‖ must be set at a level requisite to protect ―public welfare,‖ defined to 

include such things crops, weather, climate and property. CAA §§ 109(b)(2), 302(h).

Once NAAQS are established, EPA must designate counties as being in attainment or nonattainment with the standards. CAA § 107. Counties deemed to be in attainment must develop 

SIPs demonstrating how they will maintain compliance, whereas non-attainment areas must 

develop SIPs demonstrating how they will come into attainment with the standards ―as soon as 

 

64

 There are six listed criteria pollutants: ozone, nitrogen dioxide, particulate matter, SO2, 

carbon monoxide and lead. 
59

practicable‖ but no later than five years after designation.65 CAA § 110. States and counties 

that fail to submit SIPs or to attain NAAQS in a timely fashion face potential sanctions and a 

federal takeover of their CAA programs.

Non-attainment areas must also comply with several other requirements that are statutorily 

triggered whenever an area is so designated. In particular, such areas must implement nonattainment NSR, reasonably available control measures and technologies to reduce emissions, 

and meet periodic reduction milestones. NSR would apply to ―major‖ sources (i.e., those that 

have the potential to emit more than 100 tons per year of GHGs) and would require new and 

modified sources to: 1) obtain a preconstruction permit; 2) meet the ―lowest achievable emission 

rate‖ (LAER); and 3) obtain offsets at least equal to the amount of GHGs emitted from the new 

or modified source. 

EEI is concerned that EPA may be forced by the CAA to set primary or secondary NAAQS for 

GHGs were it to respond to Massachusetts v. EPA by determining that automobile GHGs are 

endangering public health or welfare. However, as discussed further below, the NAAQS 

program is ill equipped to deal with a global phenomenon like climate change. Establishing 

GHG NAAQS would trigger impossible obligations for states and enormous burdens on society. 

b. Deficiencies with regulating GHG as a criteria pollutant and establishing 

NAAQS 

There are a number of reasons why the NAAQS program is ill-suited to regulate domestic GHG 

emissions for climate change purposes. 

 

65

 The statute provides that states must come into attainment within five years, but it authorizes 

EPA to grant one five-year extension. In addition, states can seek two additional one-year 

extensions. Thus, under the CAA, states can obtain up to 12 years to attain the (non-ozone) 

NAAQS.
60

First, when considering setting a primary (health-based) NAAQS for CO2 or other GHGs, EEI 

agrees with EPA‘s observation that ―current and projected levels of ambient concentrations of 

the six GHGs are not expected to cause any direct adverse health effects, such as respiratory or 

toxic effects...‖ 73 Fed. Reg. 44427. EPA also states, ―Current ambient concentrations of CO2

and other GHG remain well below published thresholds for any direct adverse health effects, 

such as respiratory or toxic effects.‖ Id. at 44425.

EPA has no guidance on how to define a GHG primary or secondary standard with an 

―adequate‖ margin of safety that is ―requisite‖ to protect public health or welfare. No federal 

agency, state, foreign jurisdiction or international body has proposed such a standard. No 

literature specifies a precise concentration that is necessary to protect the public health or welfare 

of the U.S., and EPA lacks specific information to establish a level at which health or welfare 

effects from GHGs may occur now or in the future. 

Second, the NAAQS regulatory option faces two challenging but necessary considerations: 

Number 1, EPA should consider the beneficial effects of CO2 and GHGs, such as reductions in 

cold weather-related mortality, increased agricultural (food) productivity and forest growth. In 

fact, GHGs and CO2 in particular are necessary to sustain life on this planet as we know it. 

Number 2, EPA should consider that NAAQS are only relevant to substances in the ―ambient 

air‖ to which the general public has access (as opposed to the upper atmosphere where most of 

the chemical reactions that lead to climate change occur). EPA needs to consider how to 

differentiate the effects of GHGs in the ambient air from those in the upper atmosphere. 
61

Third, the NAAQS approach makes little sense for GHGs because, under the program, states are 

generally charged with maintaining and attaining NAAQS. However, individual states and 

counties have little or no control over the level of GHGs in the atmosphere, and thus no control 

over their ability to comply with a NAAQS, due to the nature of GHG diffusion and residence 

time in the atmosphere.66 Nevertheless, assuming that a NAAQS would be set at a level that 

renders the entire country in non-attainment, each state would have to develop, within three years 

of being designated, a SIP that demonstrated compliance and addresses all of the NAAQS nonattainment requirements. The global nature of the problem renders it impossible for states to 

make such a showing. Domestic reductions in GHGs can easily be overtaken by emission 

increases elsewhere in the world. Requiring states to go through this exercise would waste 

resources that could be better spent elsewhere. Further, even if states do complete the SIP 

process, it would likely lead to a national patchwork of regulations that would be ineffective, 

inefficient, and difficult for companies, as well as regional metropolitan areas, cities and other 

jurisdictions to navigate efficiently.

Fourth, the NAAQS attainment deadlines would be unworkable for GHGs. While the CAA 

allows potentially up to 12 years for areas to come into attainment or face statutory sanctions, 

such a deadline is unrealistic to reduce GHGs significantly, particularly because several of the 

major GHGs have atmospheric lifetimes that span many decades. In other words, actions taken 

 

66

 If the NAAQS for a GHG like CO2 were set sufficiently high, such as at a concentration of 

400 ppm, perhaps the entire country would be classified in attainment. However, this would not 

create mechanisms to reduce GHG emissions. Nor would it be long before international 

emissions would make it impossible for states to achieve this standard. Moreover, this would put 

states in the difficult, if not impossible position, of having to show in their SIPs how they could 

maintain compliance with such a standard.
62

to comply with a NAAQS would not lead to reductions in the amount of GHG in the atmosphere 

for many years. 

Fifth, the NAAQS process does not allow for costs and feasibility to be considered when setting 

the standards. This, no doubt, could lead to absurd results. 

Sixth, there remains some uncertainty regarding whether EPA has authority under section 110 to 

establish a cap-and-trade program, which is the kind of program that is being discussed in 

Congress and in the states as the best regulatory tool for GHG control. Issues related to cap-andtrade are discussed in section V of these comments.

The ultimate consequences of EPA setting GHG NAAQS would be sanctions for inevitable 

noncompliance and, more importantly, a significant loss of industry and jobs to other nations. 

This leakage of industry and jobs likely would lead to even higher net global GHG emissions.

c. Other considerations

EPA solicits comments on the possibility of setting only a secondary GHG NAAQS. Although 

EEI does not support the establishment of a GHG NAAQS, were EPA to pursue that course, we 

agree that the Agency should only establish a secondary (i.e., welfare) standard. First, as EPA 

itself acknowledges, ―the direct effects of GHG emissions appear to be principally or exclusively 

welfare-related.‖ Id. at 44478. Historically, EPA has established NAAQS for pollutants that 

lead to direct health impacts. Second, a secondary NAAQS would at least provide for relief to 

states on the issue of attainment deadlines. Instead of a fixed deadline, states would have to 

attain the secondary standard as expeditiously as possible. It is notable that there is no precedent 

for EPA to set only a secondary standard. 
63

EPA also asks whether it should list all six GHGs as a group rather than individually if the 

Agency decides to pursue the NAAQS program. There are numerous technical challenges with 

the grouping approach, but EEI believes it would be far preferable to regulating only CO2

because to do so would ignore other potent GHGs. Further, regulating only CO2 would eliminate 

promising compliance strategies. Regulating each GHG individually would also ignore the fact 

that it is the collective concentrations of all GHGs in the atmosphere that is the ―problem,‖ not 

the concentration of any one compound, and might well complicate the ability to use a cap and 

trade program to achieve the most cost-effective emissions reductions. 

2. NSPS

a. Background

Under CAA section 111, the Administrator is required to adopt NSPS for categories of emission 

sources that ―cause, or contribute significantly to, air pollution which may reasonably be 

anticipated to endanger public health or welfare.‖ CAA § 111(b)(1)(A). EPA is also required to 

review, and if appropriate, revise, the NSPS every eight years to ensure that the standards 

continue to protect public health and the environment. CAA § 111(b). NSPS apply equally in 

attainment and non-attainment areas. Currently, there are 84 NSPS, including several that apply 

to fossil fuel-powered steam generating units and electric utility steam generating units. See, 

e.g., NSPS subparts D and Da. 

Emission standards under the NSPS program must reflect ―the degree of emission limitation 

achievable through the application of the best system of emission reduction‖ that has been 

―adequately demonstrated,‖ while considering the ―costs of achieving such reductions and any 
64

non-air quality health and environmental impact and energy requirements.‖ CAA § 111(a)(2). 

This standard is sometimes referred to as the best demonstrated technology, or BDT. 

Generally, NSPS adopted under section 111(a) apply only prospectively to ―new‖ or ―modified‖ 

units.67 Existing sources are grandfathered from the standards unless and until they are modified 

or ―reconstructed.‖ CAA section 111(d) provides an exception to the general rule, however. 

Under this provision, EPA may issue a SIP call to states to establish standards of performance 

for any existing source that emits an air pollutant that 1) is not a criteria pollutant and 2) is not a 

HAP emitted by a source category regulated under CAA section 112. If states fail to submit a 

SIP, EPA may establish a FIP for existing units.

b. Deficiencies with the NSPS approach

The NSPS program carries a number of deficiencies that call into question the appropriateness of 

using it to address GHGs. 

First, existing NSPS do not apply economy-wide, meaning that EPA‘s response would be only 

partial and would not likely achieve the least-cost GHG reductions.68 This is in stark contrast to 

the major GHG legislative proposals that are pending before Congress.

Second, section 111 regulations for GHGs may lead to very costly controls that are simply 

unrealistic for certain sources, even though they would provide little or no benefit in terms of 

overall GHG reductions. Although the statute expressly authorizes EPA to consider costs in 

 

67

 A ―new‖ source is any source that commences construction after the date EPA proposes an 

NSPS or revised NSPS. A ―modified‖ source is one whose hourly emission rate increases as a 

result of a physical or operation change.

68

 NSPS apply only to 84 regulated source categories.
65

choosing the standard, EPA has stated that the systems on which a standard is based need not be 

actually in use or achieved in practice at potentially regulated sources or even at a commercial 

scale. 73 Fed. Reg. 44354, 44487.

Third, there remains much uncertainty regarding whether EPA has authority under section 111 

to establish a cap-and-trade program. Issues related to cap-and-trade are discussed in section V

of these comments. 

Fourth, another potential problem with regulation of GHGs from stationary sources under section 

111 is that, to regulate existing sources, EPA must issue a state SIP call and cannot dictate to the 

states the specific control mechanism to be adopted. Thus, even if EPA proposes a cap-and-trade 

approach for existing sources, as EPA experienced with CAMR, the states are not obligated to 

follow suit. And in light of the significant state activity on climate change, some states might be 

unwilling to adopt an EPA proposed cap-and-trade system, instead insisting that each unit within 

the state reduce GHG emissions to a specified level. This could create an environment of 

conflicting and duplicative regulations for industries, including electric utilities, operating in 

multiple states.

Fifth, EPA claims that it has flexibility to postpone or decline to set GHG limits for source 

categories with small GHG contributions or for which no effective means of reducing emissions 

currently exists. Id. at 44490. EEI understands that sources with small GHG emissions logically 

might be treated with delay or even not be regulated. However, if those small sources are 

numerous, their total GHG emissions could be very significant. EEI does not support ignoring 
66

significant emission sources or those which, for example, currently or will not in the near future 

have definitive emissions monitoring capabilities, especially if the lack of emissions monitoring 

capabilities is due more to monitoring capabilities not existing than to not investing in monitors. 

Instead, emissions estimates (calculations) may be acceptable in some cases. 

Sixth, EPA addresses aspects of identifying BDT with regard to ―adequately demonstrated,‖ 

current and future, and to whether the Agency can establish two-phased or multi-phased 

standards with increasing stringency for future years. Id. at 44487. The CAA clearly requires a 

review of NSPS every eight years. This time period is more than adequate to incorporate new 

control technologies as those become proven and commercially available. EEI believes it is 

important that standards track research, development and demonstration of needed technology to 

assure they are feasible and cost-effective. With regard to the possibility of phasing in 

performance standards, EPA suggests consideration of an NSPS for utilities based on energy 

efficiency by users and customers in Phase 1 and fuel switching, ACT and CCS in Phase 2. Id. 

at 44491. Such a program may not be consistent with the NSPS program, which requires that a 

standard be based on BDT and technologies that are demonstrated, commercially available and 

cost-effective. 

Seventh, EPA characterizes CCS technologies as promising for the power sector and other 

sectors and solicits comments on criteria that it should use to evaluate whether CCS technologies 

are adequately demonstrated to be available in these sectors. Id. at 44492. EEI is not aware of 

any compilation of criteria to evaluate whether CCS technologies are demonstrated to be 

available for the power sector. Furthermore, it is very early to develop such criteria, given that 
67

CCS technologies are only now in the earliest stages of development and demonstration. DOE, 

EPRI and the Coal Utilization Research Council have developed detailed roadmaps describing 

the future development and demonstration needs for CCS.

3. HAPs

a. Background

Section 112 of the CAA regulates HAPs. In 1990, Congress codified a list of 189 HAPs. None 

of the six primary GHGs is included on the list today. The Administrator may add pollutants to 

the list of HAPs if they 

present, or may present, through inhalation or other routes of exposure, a threat of 

adverse human health effects (including, but not limited to, substances which are known 

to be, or may reasonably be anticipated to be, carcinogenic, mutagenic, terotagenic, 

neurotoxic, which cause reproductive dysfunction, or which are acutely or chronically 

toxic) or adverse environmental effects whether through ambient concentrations, 

bioaccumulation, deposition, or otherwise . . . . 

CAA § 112(b)(2) (emphasis added). 

Once the Administrator lists a HAP, he or she must establish a standard for major sources that 

reflect ―the maximum degree of reduction‖ in HAP emissions that is achievable, taking into 

consideration the cost of achieving the emission reduction, any non-air quality health and 

environmental impacts, and energy requirements. CAA § 112(d)(2). This standard is also 

referred to as the maximum achievable control technology (MACT). MACT determinations are 

made on a case-by-case basis. ―Major sources‖ include new and existing sources that have the 

potential to emit at least 10 tons per year of any of the listed substances, or at least 25 tons per 

year of any combination of substances.

Due to the interconnected nature of the CAA, there are some advantages of regulating under 

section 112 (e.g., exemption from the PSD program, NSPS and NAAQS). Id. at 44495. 
68

However, these potential benefits are outweighed by deficiencies described below, including the 

lack of flexibility and the tight timetables.

b. Deficiencies with HAP approach

Regulation of GHGs under section 112 would make little sense and could lead to draconian 

regulation of innumerable GHG sources under the CAA. Regarding CO2 or GHGs as HAPs, 

EPA states, ―Current and projected levels of ambient concentrations of the six GHGs are not 

expected to cause any direct adverse health effects, such as respiratory or toxic effects. . . .‖ 73 

Fed. Reg. 44427. EPA also states, ―Current ambient concentrations of CO2 and other GHGs

remain well below published thresholds for any direct adverse health effects, such as respiratory 

or toxic effects.‖ Id. at 44425.

First, a decision by EPA to list GHGs as a HAP under 112 would be vulnerable to a legal 

challenge because, unlike the other listed HAPs, GHGs do not pose a direct threat to human 

health through exposure. 

Second, of all of the primary stationary source control programs in title I, section 112 carries the 

most inflexible and stringent requirements for regulated sources. Meeting the two-year deadline 

for developing a standard after a new source category is listed would be difficult, if not 

impossible. Id. at 44494. Major sources under the provision must employ MACT, which is 

determined on a case-by-case basis, and they must do so within three years after a standard is 

promulgated. Thus, as soon as a control limit is available for relevant sources, it may become 

required, even if it is cost prohibitive. The short timetables for implementation also do not allow 

time for emerging GHG technologies to be further developed. Id. at 44495.
69

Third, this is all the more problematic given the sheer number of GHG sources that would 

qualify for regulation based on section 112‘s exceedingly low ―major‖ source threshold. Despite 

EEI‘s preference for economy-wide solutions, a program under section 112 would be simply 

unworkable.

4. PSD/NSR

a. Background

CAA section 165 prohibits the construction or modification of a major source of air pollution 

unless, among other things: 1) a permit has been issued for such proposed facility; and 2) the 

proposed facility is subject to BACT for each pollutant subject to regulation under the CAA. 

See CAA §§ 165(a)(1) and (4). To be deemed a major modification subject to PSD permitting, a 

physical or operation change must result in significant net emissions increase of a regulated air 

pollutant. See 40 C.F.R. § 52.21. EPA‘s regulations further define ―significant‖ to mean with 

respect to pollutants for which EPA has not promulgated specific thresholds, ―any emissions 

rate.‖ Id. at § 52.21(b)(23)(ii). BACT reviews and applications are done case-by-case. 

In the ANPR, EPA states its belief that PSD program requirements become applicable 

immediately upon the effective date of the first regulation requiring GHG control under the Act. 

73 Fed. Reg. 44497-98. If EPA decides to regulate GHGs under any section of the CAA, any 

physical or operation change that results in any increase — even as little as a pound — would 

trigger PSD permitting and BACT requirements for many sources. 

If EPA establishes a NAAQS for GHGs and designates the nation as being in non-attainment, 

particularly severe requirements would apply to new sources, including a requirement that new 

sources achieve LAER, which is defined as ―the most stringent emission limitation‖ contained in 
70

any SIP or that is ―achieved in practice‖ by the same or a similar source category, whichever is 

more stringent. Non-attainment NSR permitting carries substantial burdens.

b. Consequences of GHG regulation under PSD and NSR non-attainment 

permitting

Were EPA to regulate GHGs under any major provision of the CAA, the implications under the 

PSD and NSR non-attainment programs would be severe. 

First, there would be a large increase in the number of construction and modification activities 

that would trigger PSD review. EPA estimates that permitting authorities now issue about 200-

300 new PSD permits nationally per year. If GHGs become regulated pollutants, EPA asserts 

that this figure is projected to balloon by a factor of 10. Id. at 44354, 44499. EPA‘s estimate 

does not even taken into account the number of sources that would come under regulation based 

on their ―potential to emit,‖ putting aside their actual emissions. Nor does this estimate account 

for the increase in permits that would be required for modifications to existing major GHG 

sources. Id. A recent report by the Chamber of Commerce estimates that in one year more than 

1 million mid-size to large commercial-sector sources, almost 200,000 industrial-manufacturing 

sector sources and more than 17,000 large agricultural-sector sources would emit enough CO2

per year to be exposed to PSD permitting requirements. U.S. Chamber of Commerce, ―A 

Regulatory Burden: The Compliance Dimension of Regulating CO2 as a Pollutant‖ (Sept. 2008). 

EPA addresses several alternatives for reducing the burden of the PSD program in the GHG 

context (streamlined approaches, general permits, and higher thresholds), but the agency‘s legal 

theories to support reducing these burdens are uncertain and would be challenged in court. 
71

EPA discusses several regulatory options for mitigating some of the effects of NSR on major 

new sources or modifications that increase GHGs. These options include raising de minimis 

limits, redefining ―major sources‖ of GHG as sources with the potential to emit 10,000 or 25,000 

tons per year of GHG emissions, and creating guidance for presumptive GHG BACT for 

categories of sources so that BACT analyses by applicants and reviewers are streamlined. The 

legal basis for such changes may be suspect. Further, even if national environmental groups 

claim they will not oppose such approaches, it would only take one successful challenge from 

one local or regional group to undermine EPA‘s potential PSD ―fixes.‖

EPA acknowledges that there have been concerns about the PSD program due to its complexity, 

cost, uncertainty and resulting construction delays. From the permittee‘s perspective, a single 

permit can take months or even years to finalize, costing hundreds of thousands or even millions 

of dollars. At a March 13, 2008, hearing of the House Select Committee on Energy 

Independence and Global Warming, witness Glaser said that a PSD permit takes 12-18 months 

from the date it is filed to become final. And these permits are done on a case-by-case basis. 

In fact, EPA has quantified the typical burden of the NSR and PSD permitting processes in 

response to the Federal Paperwork Reduction Act. 73 Fed. Reg. 45436-37. This notice cites 

that a docket has been established for this Information Collection Request, and in that docket is 

an EPA report69 detailing the burden and cost to a permit applicant. Table 6-1 states that based 

on actual experience with 282 PSD permits, the average annual number of hours expended by the 

 

69

 C. Wheeler, Information Collection Request for Prevention of Significant Deterioration and 

Non-attainment New Source Review (40 C.F.R. Parts 51 and 52), U.S. Environmental Protection 

Agency.
72

applicant was 866, with an average cost of $124,940. For a non-attainment NSR permit, the 

annual number of hours expended by the applicant was 642, and the average cost $62,665. 

The EPA report also estimates the burden and cost to state and local permitting agencies. Table 

6-2 states that based on actual experience with 282 PSD permits, the annual number of hours 

expended by the applicant was 301, with an average cost of $23,245. For a non-attainment NSR 

permit, the annual number of hours expended by the applicant was 127, and the average cost 

$9,807. The additional EPA burden, from Table 6-3, was not insignificant. 

Given a massive increase in permit applications if GHGs were regulated under the CAA, human 

resources and financial burdens on permit applicants and on state and local permitting authorities 

would be tremendous. State agencies would be crippled by the weight of the many new permit 

applications, and substantial delay would be the norm. The overall regulatory burden would be 

so enormous that construction in cities and other localities throughout the nation could be 

seriously depressed and the economy and employment greatly affected.

Second, EPA is severely limited by statute to try to alleviate the problems raised here because 

the CAA specifies precisely what a ―major‖ source is. The statute lists 28 specific categories of 

stationary sources that are considered ―major‖ under the PSD program if they emit at least 100 

tons per year of any pollutant. CAA § 169(1). Other categories of stationary sources qualify as 

―major‖ sources if they emit at least 250 tons per year of any pollutant. Id. EPA suggests that it 

could ignore the ―plain meaning‖ of the statute by relying on certain judge-made doctrines, such 

as the doctrine of ―administrative necessity‖ and ―absurd results.‖ But courts seldom invoke 
73

these doctrines and, when they do, it is only in exceptional situations, which EPA has not shown 

or even intimated in the case of GHGs. Therefore, EPA‘s assertion that these doctrines could 

apply to the PSD program is speculative.

Third, EPA were to promulgate a rule establishing emissions limits on GHG emissions from 

mobile sources or stationary sources, PSD permits would need to contain an emissions limit for 

GHGs that reflect BACT and address other substantive PSD program elements (e.g., the 

requirements to consult with the Federal Land Manager regarding the potential impact on 

visibility of proposed construction in Class I areas). It is not clear what would be considered 

BACT for GHG purposes, but many would argue that ACT and CCS or both would be required, 

despite their costs, energy penalties (in the case of CCS) and lack of readiness for commercial 

deployment at this time.

Fourth, if EPA establishes a NAAQS for GHGs and designates the nation as being in nonattainment, particularly severe requirements would apply to new sources, including a 

requirement that new sources achieve LAER. LAER does not allow for consideration of costs, 

energy or environmental impacts of the emissions reductions technology. 

Fifth, as for power plants, the desire to avoid PSD would kill many projects that could improve 

efficiency. Such projects would be avoided because if a project would increase the efficiency of 

a generating unit, it would likely run more hours and increase its CO2 emissions, thus triggering 

PSD. 
74

5. Title V permits 

a. Background

Title V of the 1990 CAA Amendments requires each state to develop and implement a 

comprehensive operating permit program for most sources of air pollution. This program 

facilitates enforcement by requiring that all federal regulations applicable to a source be 

contained in one single document. Typically, each state administers its own title V permit 

program, but EPA retains authority to review and approve the state‘s program, as well as 

individual permits. 

Title V requires a state program to provide for permitting of any major stationary source that has 

the potential to emit 100 tons or more of any air pollutant, as well as any ―major source‖ as 

defined by section 112 of the CAA (which, as discussed above, includes sources that emit 10 

tons per year of one HAP or 25 tons per year of more than one HAP). Thus, because title V‘s 

―major source‖ definition uses lower emissions thresholds than that of the PSD program, title V 

applies to more sources than the PSD program. 

Title V permit applications must contain detailed information, including all emissions of 

pollutants for which the source is major and all emissions of regulated air pollutants, a 

description of air pollution control equipment, and identification of all federal air pollution 

control requirements. Moreover, a responsible corporate official must certify the truth, accuracy 

and completeness of the application. 40 C.F.R. § 70.5(d). Before a permit issues, the permitting 

authority must provide procedures for public notice and comment, as well as the opportunity to 

hold a public hearing on the draft permit. 40 C.F.R. § 70.7(h).
75

b. Deficiencies with title V regulation

Application of title V to sources based on their GHG emissions would create similar 

administrative problems as those raised above in the PSD context, as well as several additional 

difficulties. 

First, if GHGs became ―regulated pollutants‖ under the CAA, even more sources would be 

subject to regulation under title V than under the PSD program because, as explained above, title 

V emissions cutoff is 100 tons per year for all source categories (rather than 250 tons per year for 

certain categories under the PSD program). According to EPA‘s own estimates, more than 

550,000 additional sources would require title V permits than the approximately 15,000-16,000 

sources currently regulated under title V. EPA states that the burden of title V permits in a GHG 

regulatory context would be overwhelming unless the number of covered sources could be 

reduced. 73 Fed. Reg. 44512. The Chamber of Commerce estimates that more than 1 million 

sources could be subject to PSD, and each of those and more would be subject to title V 

requirements. Similar to the PSD program, EPA addresses several alternatives for eliminating 

the burden of the title V program in the GHG context. EPA‘s legal theories supporting the 

reducing of these burdens are uncertain.

Second, regulatory deadlines make title V particularly problematic as applied to a newly 

regulated pollutant traceable to so many sources, like GHGs. Title V requires sources to submit 

permit applications within one year of a source becoming subject to the program, which means 

that if GHGs were to become subject to control requirements, many sources would be applying 

for title V permits at the same time. As a result, permitting authorities would face unrealistic 

title V permit processing demands. Such demands would likely make it impossible for 
76

authorities to act on title V applications within 18 months, as generally required, which could 

ignite a wave of litigation over missed deadlines. CAA § 503(c).

Third, EPA notes that title V requires permitting authorities to collect permit fees adequate to 

support the costs of running the title V program. Because most states charge title V fees on a 

dollar per ton basis, EPA ―expect[s] that the fee revenues [for GHG sources] would be grossly 

excessive‖ for what is needed to process permits for GHG sources. Thus, EPA notes that 

permitting authorities would need to consider other options for fees, such as a lower cost per ton 

for GHGs, fixed fees for applicants below a certain size or no fees for smaller GHG sources. Id.

at 44513. Title V permitting fees should apply to all sources regardless of size. As EPA notes, 

title V requires that the permitting process be self-funding. In the options that EPA discusses, it 

focuses only on relief for small sources (including the possibility of waiving fees for small 

sources). Any relief given for fees should apply to all sources regardless of size. Large sources 

should not have to subsidize the permitting costs for smaller sources.

B. Comments on Stationary Source TSD

To supplement the ANPR‘s discussion of stationary sources, EPA included in the docket a TSD

that ―provides technical and other background information on the approaches, advantages and 

disadvantages, legal and policy questions‖ (p. 2).70 A significant portion of the TSD is devoted 

to discussion of possible approaches to reducing GHG emissions from the largest stationary 

sources of emissions, with particular emphasis on industrial boilers, including those used to 

produce electricity. See TSD at 11-18. EPA explores the application of section 111, New 

 

70 The TSD is titled ―Technical Support Document for the Advanced Notice of Proposed 

Rulemaking for Greenhouse Gases; Stationary Sources, Section VII,‖ and is designated as a 

―Final Draft.‖
77

Source Performance Standards, to electric utilities with the goal of setting work performance 

standards for improving boiler efficiency (as measured by reductions in net heat rate) as a means 

for reducing GHG emissions without affecting net electrical output.

EPA notes that the approaches in the TSD are meant to be illustrative and are designed to 

facilitate discussion between the Agency and stakeholders. See id. at 11. Consistent with EPA‘s 

stated purpose for the TSD, EEI provides its assessment of the possible GHG reduction 

approaches discussed and provides additional issues for EPA to consider if it should move 

forward with regulations built on any of these options.

1. EPA’s discussion of efficiency improvements fails to consider costs or NSR

requirements.

A significant element in EPA‘s proposed approach for reducing emissions from utility boilers is 

net heat rate reductions at existing units through a range of options that are ―well known in the 

industry, but for many reasons are not equally feasible from plant to plant or from unit to unit in 

a plant.‖ Id. at 16. While EEI does not disagree that there are many known ways to improve 

boiler efficiency at existing generating plants or for specific units, EPA‘s assessment of why 

such measures currently are not in place fails to address several elephants in the room. 

First, EPA‘s discussion of feasibility with respect to efficiency improvements is limited to 

technical considerations. Such improvements and the related reductions in GHG emissions will 

come at a cost that is likely to affect retail electric rates. In a rulemaking context, EPA would be 

required to consider these costs in any analysis of the economic impact of the proposed 

efficiency requirements.
78

Second, such efficiency improvements likely would trigger the CAA‘s NSR requirements if 

implemented at existing plants. As discussed previously in section V.A, being subject to the 

NSR program and more specifically, the PSD portion of the program, would result in enormous 

delays in construction of any efficiency improvement modifications as utilities would be required 

to obtain pre-construction permits. In addition, the generator would be subject to BACT 

requirements, an expensive and time-consuming process that requires an assessment of all 

possible control options even before the technological option is implemented. Subjecting a 

generator to this level of delay, uncertainty and cost does not encourage or incent efficiency 

improvements.

2. EPA should explore and address options for reducing GHG emissions from all 

fossil fuel-fired generating plants.

The Agency focuses its discussion on efficiency improvements at coal plants. In 2007, nearly 50 

percent of electricity in the U.S. was generated using coal. Among other fossil fuels, natural gas 

accounted for more than 21 percent of production.71 To the extent that the examples that EPA 

provides in the TSD are meant to be illustrative and not exhaustive, our industry will not be able 

to avoid all types of fossil fuel generating plants ultimately being targeted to control GHG 

emissions. It is certainly true that natural gas boilers are more efficient than those using coal and 

therefore do not emit GHGs as intensively per unit of heat input. However, EPA may overstate 

the limits on improving efficiency – e.g., optimizing control systems and installation of higher 

efficiency components, among others – of natural gas-fired boilers by stating that there are few 

 

71 See EEI, ―Electric Companies Use a Diverse Mix of Fuels to Generate Electricity, 2007 

National Fuel Mix‖ at 

http://eei.org/industry_issues/energy_infrastructure/fuel_diversity/pie_fueldiversity.pdf, which is 

based on the Power Plant Report (EIA-906) and Combined Heat and Power Plant Report (EIA920).
79

physical options for improving efficiency at natural gas-fired simple cycle and combined cycle 

turbine plants.72 See TSD at 16. 

3. Fleet-wide efficiency improvement targets cannot and should not be 

promulgated.

In the TSD, ―preliminary analysis indicates‖ that individual coal plants could reasonably be 

expected to reduce net heat rates between 2 and 5 percent, considering site-specific 

characteristics.73 Setting fleet-wide reduction targets for net heat rate reductions would not be 

workable, for the reasons the Agency notes: Plant-specific characteristics, including coal type 

and production process, among others, will significantly affect the plant‘s ability to reach the 

target. At a minimum, should EPA establish such targets, they should take into account plantspecific characteristics. In addition, any remedy for failure to achieve heat rate reductions should 

be similarly flexible.

The TSD states that the installation of new, high-efficiency power plants and the retirement of

older plants will reduce the average heat rate for the fossil fleet. See id. at 17. While it is 

possible for new supercritical or ultra-supercritical plants to achieve net efficiencies of more than 

40 percent, it would be problematic to use this as a basis for future efficiency standards. First, 

there are insufficient data at present on the GHG emissions of such plants, and it may be some 

time before sufficient information exists that could be used to create proposed future standards. 

Second, developing incentives for new high-efficiency power plants may not be sufficient to 

cause as quick a turnover in the existing coal fleet as EPA implies is possible. It will take 

 

72

 Moreover, if ambitious GHG reductions in the 60-80 percent range are the goal, even natural 

gas-fired plants will need CCS to achieve necessary emissions cuts.

73

 Heat rate improvements, like many of the other measures EPA discusses in the TSD, are 

incremental measures available now, but they would not be sufficient to achieve ambitions 

emissions reductions goals.
80

decades – and considerable expense – to replace all or most existing coal plants or units thereof, 

particularly when it takes between 5-10 years to permit and build a new generating unit.

74 In the 

context of GHG emissions, EPA should avoid statements that would support a determination that 

these designs are BACT outside of any official proceeding.

Along these same lines, EPA notes that some comments on the recently amended NSPS for 

electric utility boilers urged the Agency to regulate GHG emissions, including by mandating the 

use of integrated gasification combined cycle (IGCC) technologies, among other things. See id. 

at 17. IGCC technologies are relatively untested. There are only five plants in the world 

currently using IGCC to produce electricity, only two of which are in the U.S. Data from these 

plants do not provide a sufficient basis for evaluating the technology‘s capability. Moreover, 

IGCC is not a pollution control technology, but an electric generation technology that emits as 

much CO2 as other technologies.75 At present, the only way to reduce emissions from an IGCC 

facility would be through CCS, which is not commercially available at this time.76 As EPA 

 

74 Indeed, permitting delays could be even longer. For example, it is likely that the recent 

Environmental Appeals Board decision, In re Deseret Power Electric Cooperative, PSD Appeal 

No. 07-03 (Nov. 13, 2008), which remanded a PSD permit back to EPA Region 8 to consider 

whether to require a CO2 BACT limit, will further delay new plant construction. The case 

focused on a permit for a new coal-fired plant, but the potential ramifications extend to all 

generation that emits CO2.

75 Massachusetts Institute of Technology (MIT), The Future of Coal: Options for a CarbonConstrained World, Table, 30 (2007). Table 3.5 shows that emissions of CO2 per kilowatt-hour 

(KWH) of 500-MW IGCC and supercritical pulverized coal plants are nearly identical and, in 

fact, that IGCC plants actually emit slightly more CO2. 

76 EPRI, the Coal Utilization Research Council and MIT have all recognized that CCS will not 

likely be commercially available on a widely deployable basis until around 2025. The TSD, 

constrained by its focus on efficiency improvements consistent with regulation under section 

111, does not address other technology-based approaches to reducing GHG emissions, like CCS. 

EEI will be submitting comments in EPA‘s rulemaking on proposed Safe Drinking Water Act 

underground injection control regulations for the geologic storage of CO2, Docket EPA-HQOW-2008-0390, on December 24, 2008.
81

notes in the TSD, efficiency improvements lead to GHG emissions reductions. Consequently, 

requiring IGCC technology at all future generation plants at this time would not reduce 

emissions without other action.

4. Biomass co-firing is possible at many facilities, but should not be required.

EPA states that ―bio-mass co-firing might eventually substitute for 2-5 percent of coal used in 

the current coal fleet‖ to reduce GHG emissions. See TSD at 17. EEI agrees that co-firing is 

possible at the rates that EPA suggests, but is concerned about biomass supply – a significant 

constraint on a specific plant‘s ability to substitute biomass for coal or other fossil fuels is access 

to biomass. Consequently, EPA should not promulgate any standards that would require a 

certain percentage of co-firing. In a worst case scenario, such a requirement could force an 

electric utility to greatly increase transportation sector GHG emissions when transporting 

biomass from great distances to the generation site. At a minimum, any such requirement should 

ensure that generators are not penalized if biomass is not reasonably available for use in cofiring.

5. EPA must resolve issues related to its authority under section 111 before 

imposing standards on utility boilers.

The TSD‘s entire discussion of the efficiency improvements that could be mandated under 

section 111‘s NSPS program depends upon EPA‘s authority under that section to promulgate 

work practices, which is limited by section 111(h). This section states that ―work practice 

standards,‖ which include ―design, equipment, work practice or operational standard[s],‖ are 

only available as a regulatory tool if the Administrator determines that the pollutant at issue

cannot be emitted through a conveyance designed to capture the pollutant or if the application of 

measurement methodology is not economically or technologically practicable. EEI takes no 

position on how section 111 may circumscribe EPA‘s authority in the context of improving 
82

boiler efficiency to reduce GHG emissions, but urges the Agency not to embroil the power sector

in another situation in which utilities are required to make expenditures to comply with 

regulations that are subsequently invalidated by the courts as beyond the Agency‘s statutory 

mandate.77 Stranding costs not only increases rates but also reduces the amount of investment 

that electric generators have available for other GHG emissions reductions efforts.

6. EEI will comment on any proposed metric for measuring boiler efficiency.

The Agency notes that it ―would need to develop a metric for measuring and benchmarking 

boiler GHG emissions in terms of the unit‘s output‖ to inform its efforts to improve efficiency 

under NSPS. TSD at 18. It would be premature to comment on such a metric at this time, but 

we look forward to assessing the merits of such a tool if and when EPA proposes one.

VII. Assessment of PHEV Issues Raised In Connection With The ANPR’s Discussion Of 

Mobile Sources And Title II.

EEI is pleased that in the ANPR EPA considers PHEVs and their use in reducing tailpipe 

emissions potentially to zero when operated in the ―all-electric mode‖ and the related concern for 

increased emissions from electricity generation. See 73 Fed. Reg. 44439-40. Electric transport 

has the potential to reduce GHG emissions dramatically in the U.S. and globally. EEI urges 

increased funding for the development and commercial deployment of PHEVs as part of 

the portfolio of technologies needed to reduce GHG emissions and would like to highlight 

certain information for consideration in this proceeding and by others addressing this issue.

 

77 See section V for a discussion of the recent vacatur of EPA‘s CAIR and CAMR trading 

programs.
83

A. Electric Drive Significantly Reduces Net GHG Emissions.

Many studies78 have shown that the use of electric drive will significantly reduce GHG emissions 

and indicate that current PHEVs, on average, produce just one-third of the GHGs emitted by 

traditional, gasoline-fueled vehicles.79 According to a joint study by EPRI and the Natural 

Resources Defense Council (NRDC), PHEVs have the potential to reduce cumulative U.S. GHG 

emissions by as much as 10.3 billion tons from 2010 to 2050.80 Widespread adoption of PHEVs 

could reduce GHG emissions from vehicles by more than 450 million metric tons annually in 

2050, which is equivalent to taking 82.5 million passenger cars off the road.81 Moreover, a

PHEV‘s ability to operate in an electric-only mode will help to reduce other emissions, including 

NOx and SO2. 

When assessing the potential for electric vehicles to reduce emissions from mobile sources, EEI 

encourages EPA to consider all types of electric drive vehicle, including PHEVs, battery electric 

vehicles – which also are known as all-electric vehicles – and neighborhood electric vehicles. In 

addition, EEI expects that there will be more use of electric drive in medium and heavy duty 

applications, such as utility bucket trucks. 

 

78 EEI recommends that EPA also review publications from the National Renewable Energy 

Laboratory, http://www.nrel.gov/docs/fy07osti/41410.pdf, and from the Argonne National 

Laboratory, http://www.transportation.anl.gov/modeling_simulation/GREET/publications.html.

79 L. Sanna, ―Driving the Solution: The PHEV Hybrid Vehicle,‖ EPRI Journal 14 (fall 2005). 

80 EPRI & NRDC, ―EPRI Executive Summary: Environmental Assessment of Plug-in Hybrid 

Electric Vehicles‖ (2007).

81 EPRI & NRDC, ―EPRI-NRDC Report Finds Environmental Benefits of Deploying PHEVs,‖ 

press release (July 19, 2007).
84

B. Using Electricity for Transportation Will Result in Greater Net GHG Reductions 

Over Time.

Increased demand for electricity ultimately will not reduce the overall GHG benefits of electric 

transportation. Although emissions that directly result from electricity production will vary 

according to the local electricity fuel mix, increasingly stringent power plant regulations and 

GHG emissions reductions requirements (whatever the regulatory regime that is eventually 

adopted) will continue to cut net emissions as PHEVs are introduced into the marketplace. 

This is consistent with past performance in the power sector. Over the past 38 years utilities and 

generation companies complying with federal legislation have reduced NOx and SO2 emissions. 

According to EIA‘s Electric Power Annual 2004, total electric utility industry SO2 emissions in 

1993 were 14.472 million metric tons (MMT) and total NOx emissions were 7.801 MMT. By 

2006, according to the Electric Power Annual 2006, those numbers had dropped significantly to 

9.524 MMT of SO2 (a 34.2 percent reduction) and 3.799 MMT of NOx (a 51.3 percent

reduction). This occurred while total U.S. electric generation rose from 3.197 trillion KWH to 

4.065 Trillion KWH (a 27.1 percent increase).82 Furthermore, on a per unit basis, the amount 

of NOx generated per KWH went down by 61.4 percent in that time period, and the amount of 

SO2 generated per KWH went down by 48.2 percent.

Data supports the conclusion that similar reductions in GHG emissions can be expected. The 

July 2007 EPRI/NRDC report, supra nn. 88 & 81, which modeled GHG emissions from the 

power sector, found that for nearly every type of fossil fuel power plant, lower or significantly 

lower GHG emission intensity (amount of GHG emitted per KWH generated) going forward. 

 

82 EEI, Statistical Yearbook of the Electric Power Industry, Washington, D.C. (May 2008). 
85

Consequently, using electricity for transportation should reduce net GHG emissions in the long 

term. However, to avoid penalizing the power section for increased emissions by electric 

utilities, legislators must provide allowances, credits or other compensation to utilities in order to 

reflect accurately the relative contributions to the net decrease in overall emissions.

C. EPA’s Analysis of Upstream Emissions Associated with Transportation Fuel 

Production Must Be Consistent across Fuel Types.

In the context of upstream emissions, the ANPR discusses the possibility of considering vehicles 

and fuels as a system, rather than isolated components, as well as the use of the life-cycle 

approach to GHGs, when assessing mobile source emissions. EEI offers the following 

comments: 

If EPA were to consider the ―well to wheels‖ type of analysis for mobile sources, all fuel types 

should be included. Moreover, all upstream emissions should be included in the analysis. See

73 Fed. Reg. at 44434, 44438. For example, if power plant emissions are to be included as part 

of the life-cycle GHG analysis for electric vehicles, emissions like the following must be 

included as well:

Oil refinery emissions.

Fuel delivery emissions (for gasoline, diesel, biofuel and other fossil fuel vehicles).

Biofuel refinery emissions.

Natural gas production and delivery emissions for compressed natural gas vehicles.

EPA would not want to create a regulatory regime that considered only tailpipe emissions for 

one fuel type and consider ―well to wheels‖ emissions for another fuel type. EPA should be fuel 

neutral and market neutral in any GHG regulations.
86

In addition, EPA also must consider offshore fuel production issues. Entities should not get 

GHG credits for moving fuel production offshore in order to ―reduce‖ domestic emissions while 

increasing overall GHG emissions associated with the fuel production process.

D. Inter-Industry Trading Would Maximize the Emissions Benefits of Electric Drive 

under a Cap-and-Trade Program.

In the ANPR, EPA suggests a variety of approaches for regulating mobile source GHG 

emissions, including allowing credit or allowance trading under a cap-and-trade program to 

maximize flexibility in meeting emissions reductions targets. See id. at 44438. EEI agrees that 

the most economically efficient market-based approach for reducing GHG emissions would be 

economy-wide, to the extent possible, and that emissions allowances or credits should be 

allowed to be traded across sectors, and especially between mobile sources and non-mobile 

sources. See id. at 44440.

Inter-industry, multi-sector trading would maximize both the economic and environmental 

opportunities of electric drive vehicles, creating a ―win-win‖ situation that reduces costs to 

consumers, automakers and utilities, while increasing GHG emissions reductions. 

E. Under a Cap-and-Trade Program, Utilities Should Get Credit for Activities that 

Support Electric Drive.

While not directly related to the supply of power for the use of electric drive vehicles, utilities 

engage in a variety of other activities that should be viewed as key components of the 

infrastructure needed to support electric drive transportation. For example, utilities may offer the 

following programs in support of electric drive: 
87

Financial incentives to consumers, businesses and automakers.

Incentives to state and local governments and businesses for installing public or private 

charging stations.

Installation of public charging stations.

Installation of advanced meters associated with a smart grid to help ensure that vehicles 

are only or primarily charged during off-peak times (or when low- or zero-carbon fuels 

are providing electricity to the local or regional grid). 

To the extent that utilities provide these types of incentives to support electric drive, utilities 

should receive credit for these activities.

VIII. Other Issues – CAA Regulation Of GHG Emissions Should Be Tailored To Avoid 

Effects On Other Media.

In the ANPR, EPA notes that ―an effective GHG control program may require application of 

many technologies and approaches that may in turn result in increased discharges to water, 

generation of solid materials that require appropriate disposal, or have other impacts to the 

environment that may not be addressed under the CAA.‖ 73 Fed. Reg. 44408.

The Agency is correct that the application of many technologies and control options to 

effectively reduce GHG emissions could result in increased discharges to other media whether 

directly through discharges resulting from a technological process, or through secondary impacts 

such as reduced capacity or efficiency as a result of the parasitic load of the removal technology 

or design and process changes necessary to accommodate the technology. Further, undesirable 

effects on other media could result from unintended consequences from such varied things as 

mining for different fuels, fuel processing and transport changes.
88

While it would be too speculative to predict specific impacts in other media, it is appropriate for 

the Agency to recognize that such impacts will occur and determine an effective strategy to 

address those impacts. EPA also should recognize that reducing GHG emissions cannot be 

viewed in a vacuum or assumed to be the only appropriate environmental outcome.

Ultimately, some means to optimize the balance between GHG reductions and impacts in other 

media from GHG control technologies and management strategies should be developed. This 

methodology must be sensitive to the national, regional and local priorities regarding other 

environmental media. An effective framework for GHG also would account for all potential 

impacts – on energy, material, terrestrial and aquatic media – in a careful and appropriately 

quantified manner. In addition, balancing the direct and secondary environmental impacts that 

may occur is necessary to avoid unintended consequences and optimize the environmental result 

in a sustainable manner – accounting for any expected increased costs of energy production, 

efficiency impacts and the debits that may be incurred by other environmental media.

EEI Global Climate Change Principles – February 8, 2007 

 Solutions compatible with a market economy that deliver timely and reasonably priced greenhouse 

gas reductions. 

EEI supports federal action or legislation to reduce greenhouse gas emissions that: 

 Involves all sectors of the economy, and all sources of GHG; 

 Assures stable, long-term public/private funding to support the development and deployment of 

needed technology solutions; 

 Assures compliance timelines consistent with the expected development and deployment timelines of 

needed technologies; 

 Employs market mechanisms to secure cost-effective GHG reductions, and provides a reasonable 

transition and an effective economic safety valve; 

 Establishes a long-term price signal for carbon that is moderate, does not harm the economic 

competitiveness of U.S. industry and stimulates future investments in zero- or low-carbon 

technologies and processes; 

 Addresses regulatory or economic barriers to the use of carbon capture and storage and increased 

nuclear, wind or other zero- or low-GHG technologies; 

 Minimizes economic disruptions or disproportionate impacts; 

 Recognizes early actions/investments made to mitigate greenhouse gas emissions; 

 Provides for the robust use of a broad range of domestic and international GHG offsets; 

 Provides certainty and a consistent national policy; and, 

 Recognizes the international dimensions of the challenge and facilitates technology transfer. 
1

APPENDIX B

Endangerment Analysis

In this Appendix, we review in detail issues that Environmental Protection Agency (EPA or 

Agency) should address before making any endangerment finding under the Clean Air Act (CAA 

or Act) with respect to greenhouse has (GHG) emissions from any source, mobile or stationary. 

This review focuses on materials EPA provided in the Advance Notice of Proposed Rulemaking 

(ANPR),

1

particularly the Endangerment Technical Support Document (Sixth Order Draft) (June 

21, 2008) (TSD)

A. The ANPR Relies on Limited Core References When Addressing Effects of Climate 

Change in the United States.

The ANPR‘s preface to section V, titled ―Endangerment Analysis and Issues,‖ states that this 

section presents EPA‘s ―work to date on an endangerment analysis in response to the Supreme 

Court‘s decision in Massachusetts v. EPA,‖ which ―ruled that EPA must either decide whether 

GHG emissions from new motor vehicles cause or contribute to air pollution which may 

reasonably be anticipated to endanger public health or welfare, or explain why scientific 

uncertainty is so profound that it prevents making a reasoned judgment on such a determination.‖ 

73 Fed. Reg. 44421. Further, ―[i]n response to the remand, EPA analyzed synthesis reports and 

studies on how elevated concentrations of GHGs in the atmosphere, and other factors, contribute 

to climate change, and how climate change is affecting, and may affect in the future, human 

health and welfare, primarily within the United States.‖ Id. The ANPR adds that ―[w]e also 

analyzed direct GHG effects on human health and welfare, i.e., those effects from elevated 

 

1

73 Fed. Reg. 44354 (July 30, 2008). 
2

concentrations of GHGs that do not occur via climate change,‖ and that ―this information is 

contained in the Endangerment Technical Support Document.‖

The TSD states that its ―purpose‖ is to ―provide scientific and technical support for an 

endangerment analysis regarding‖ GHG emissions under the CAA and that it ―is a final internal 

EPA draft‖ that has ―undergone initial EPA review as well as federal expert review‖ (p. 1). The 

Introduction goes on to explain that the document ―relies most heavily on existing, and in most 

cases very recent, synthesis reports of climate change science and potential impacts, which have 

gone through their own peer–review processes including review by the U.S. Government‖ (p. 4). 

Indeed, table 1.1, titled ―Core references relied on most heavily in this document,‖ lists 15 

reference documents, including: the three 2007 Working Group volumes of the 

Intergovernmental Panel on Climate Change‘s (IPCC) Fourth Assessment Report (AR4); five of 

the Synthesis and Assessment Products (SAPs) of the U.S. Climate Change Science Program 

(CCSP), all completed in 2006, 2007 or 2008; four reports of the National Academy of Science 

issued in 2001, 2005, 2006 and 2008; an EPA Inventory of U.S. Greenhouse Gas Emissions and 

Sinks (2007);

2

and a ―Scientific Assessment of the Effects of Global Change on the United 

States,‖ which is a report prepared pursuant to the Global Change Research Act of 1990 (15 

U.S.C. § 2921 et seq.) and which draws from the IPCC AR4, as well as the CCSP Report (p. 4). 

This latter Assessment explains that it ―focuses primarily‖ on the U.S., but ―given the global 

nature of the issues it also discusses international impacts‖ (p. 18).

 

2

 Section 1 of the TSD states that ―[t]he most recent inventory was published in 2007 and 

includes annual data for the years 1990-2005‖ (p. 9). However, there is a later inventory, which 

was published April 15, 2008 — or before the Sixth Order draft was released — and which 

―presents estimates by the United States government of U.S. anthropogenic greenhouse gas 

emissions and sinks for the years 1990 through 2006‖ (Introduction, p. 1-1).
3

In section 1, ―Introduction and Background,‖ the TSD further explains why EPA relies ―most 

heavily on these synthesis reports,‖ stating that 

they 1) are very recent and represent the current state of knowledge on 

climate change science, vulnerabilities and potential impacts; 2) have 

assessed numerous individual studies in order to draw general conclusions 

about the state of science; 3) have been reviewed and formally accepted 

by, commissioned by, or in some cases authored by, U.S. government 

agencies and individual government scientists and provide EPA with 

assurances that this material has been well vetted by both the climate 

change research community and by the U.S. government; and 4) in many 

cases, they reflect and convey the consensus conclusions of expert authors.

(p. 4).

B. IPCC Regional Coverage Is Mostly Continental, Not U.S.-Specific.

In the case of the IPCC reports, the TSD observes that these assessments ―are generally global in 

scope but provide information at the country and regional level as well‖ and that ―[t]his 

document relies heavily on the North American chapter‖ of the Working Group II report (p. 5). 

The TSD then adds that this IPCC ―chapter may not provide as much regional detail within the 

U.S. as did the 2000 report, Climate Change Impacts on the United States; The Potential 

Consequences of Climate Variability and Change (NAST, 2000).‖ 

However, the ―NAST, 2000‖ report is not listed in table 1.1 as one of the ―Core references relied 

upon most heavily in this document.‖ Indeed, it is odd that the TSD indicates heavy reliance on 

all three IPCC Working Group reports, but at the same time, emphasizes reliance only on one 

chapter of the IPCC‘s Working Group I report, even though it ―may not‖ provide as much about 

U.S. climate change and emissions as the NAST, 2000 report, which, among other things, is not

―recent‖ or representative of the ―current state of knowledge‖ and was controversial when issued.
4

Regarding the heavy reliance on the ―North American‖ chapter of the IPCC report, both the 

Summary for Policymakers (SPM) for the Working Group II report and the Technical Summary 

for that report concern the ―regional impacts, adaptation and vulnerability‖ of the several regions 

listed, including the North American region. However, neither IPCC report specifically 

mentions the countries in the North American region: the U.S., Canada and Mexico. Rather, the 

IPCC discussion focuses on North America as a region. 

This lack of such specific reference to countries, such as the U.S. and Canada, apparently has 

been a concern to the EPA in preparing the TSD for use in ANPR section V, because in the 

beginning of part IV of the TSD, titled ―U.S. Observed and Projected Human Health and Welfare 

Effects from Climate Change,‖ EPA notes that sections 7-14 of part IV ―describe observed 

effects, risks and projected impacts of climate change within the U.S.‖ and thus ―rely heavily on 

the North American chapter of the IPCC Working Group II volume‖ of AR4 (p. 62). But that 

IPCC chapter speaks only of North America ―as a whole rather than specifically for the U.S. or 

Canada.‖ 

Nevertheless, EPA ―asked the leading authors‖ of this IPCC chapter ―to make a statement about 

the applicability of that chapter‘s major conclusions to the U.S.,‖ and Box IV.1 of the document 

contains a ―[s]hort statement on the relevance of the findings in IPCC AR4 Chapter 14 (North 

America) to the United States,‖ which was prepared by the two people referred to in the Box as 

―Coordinating Lead Authors of chapter 14.‖ The ―statement‖ is dated September 21, 2007, 
5

which is after the Second Order draft underwent federal expert review. Box IV.1 adds that their 

statement ―has not been separately evaluated or approved by the IPCC.‖ 

In light of the ―Principles and Procedure‖ (see Box 1.1) governing IPCC reports, the 

appropriateness of EPA asking two authors from a list of more than 60 ―Drafting Authors‖ of the 

Working Group II SPM report to make this statement with no apparent consultation with, or 

authorization from, the IPCC, or for that matter the State Department, which heads the U.S. 

delegation to the IPCC, should be called into question. Such a ―statement‖ by just two authors is 

hardly a consensus under IPCC Principles and Procedures. Most importantly, the SPM is the 

product of government delegations, including the U.S. delegation, in ―formal, plenary session‖ 

and is ―approved‖ by them, not the drafting authors, ―line-by-line,‖ while the underlying 

assessment is ―accepted‖ by the Working Group members by consensus. In the case of Working 

Group II‘s ―approved‖ SPM, the IPCC comments are followed by ―information‖ on a region-byregion basis with reference in the SPM back to the relevant chapters of the underlying 

assessment (e.g., Africa (chapter 9), Asia (chapter 10), Australia and New Zealand (chapter 11), 

Europe (chapter 12), Latin America (chapter 13), North America (chapter 14), Polar Regions 

(chapter 15), and Small Islands (chapter 16)). Except in the case of the Australia and New 

Zealand region, the IPCC decided not to refer to countries within each region. 

The remarks in the Box by the two ―Drafting Authors‖ of the SPM are inconsistent with this 

IPCC decision. Most importantly, they obviously are not authorized by the IPCC (under its 

Principles and Procedures for preparing, reviewing, accepting and approving IPCC reports) to 

make such a ―statement,‖ as ―Coordinating Lead Authors of chapter 14‖ or as ―Drafting 
6

Authors‖ of an IPCC report, in an attempt to explain what the IPCC is approving in the SPM or 

accepting in the case of the underlying assessment. Further, EPA did not consult with the State 

Department, which headed the U.S. delegation to the IPCC on AR4, before asking the authors to 

make such a ―statement.‖ Accordingly, Box IV.1 should not be a part of the TSD.

This attempt to emphasize climate change ―impacts‖ in the U.S. is highlighted again in the 

Executive Summary of the TSD by Table ES-3, titled ―Balance of Projected Climate Change 

Impacts in the United States.‖ It again helps to explain the significance that EPA assigns to 

having the ―statement‖ by the two IPCC ―Drafting Authors‖ as a part of the TSD. The table 

briefly lists a series of ―Positive‖ and ―Negative,‖ and sometimes ―Uncertain,‖ statements on 

―U.S. Impacts‖ in ―Sectors‖ on ―Health,‖ ―Air Quality,‖ ―Food Production and Agriculture,‖ 

―Forestry,‖ ―Water Resources,‖ ―Sea Level Rise and Coastal Resources,‖ ―Energy, Infrastructure 

and Settlements,‖ and ―Ecosystems and Wildlife.‖ However, the only source or reference cited 

in the table is the IPCC AR4 report.

But as discussed above, AR4 addresses such ―impacts‖ in the context of North America 

generally, and does not address such impacts concerning the U.S. and Canada specifically. Thus, 

the table‘s reference to AR4 as a source for U.S. impacts is inappropriate, unless, of course, the 

―statement‖ by the two authors is retained in the document, which cannot be justified in the 

absence of IPCC approval or authorization.

Apparently the Box IV.1 ―statement‖ and Table ES-3 are also important to EPA because the 

Agency connects the TSD directly to the ANPR, responding to the Supreme Court‘s remand by 
7

stating that it ―analyzed synthesis reports and studies on how elevated concentrations of GHGs in 

the atmosphere, and other factors, contribute to climate change, and how climate change is 

affecting, and may affect in the future, human health and welfare, primarily within the United 

States,‖ and that ―[t]his information. . .is contained in the Endangerment Technical Support 

Document found in the docket for today‘s notice.‖ 73 Fed. Reg. 44421. Unquestionably, that 

connection depends entirely on the ―statement‖ by the two IPCC authors, which was neither 

authorized nor approved by the IPCC.

C. The ANPR Bases its “Science Summary” on the TSD.

The second part of the ANPR‘s endangerment analysis is a science summary of ―Observed 

Global Effects,‖ ―Observed U.S. Effects‖ and ―Projected Effects‖ globally and for the U.S. Id. at 

44425. As to the ANPR‘s comments on ―observed‖ U.S. effects, as well as U.S. projections, 

much of the material is primarily about global effects, but with the added words ―including the 

U.S.‖ For example, the ANPR states that ―[w]idespread changes in extreme temperatures have 

been observed in the last 50 years across all world regions, including the U.S.,‖ ―[n]early all of 

the Atlantic Ocean shows sea level rise. . .with the highest rate in areas that include the U.S. east 

coast,‖ and the ―IPCC projects with virtual certainty. . .declining air quality in cities due to 

warmer days and nights, and fewer cold days and nights, and/or more frequent hot days and 

nights over most land areas, including the U.S.,‖ id. at 44426 (emphasis added). These add-on 

references to the U.S. have no basis in the ―core references‖ discussed above, because the corereference materials utilized in the TSD are solely the IPCC reports, which, as we have explained 

above, are not specific to individual countries, but include material on various regions, such as 

North America, Africa, etc.
8

The ANPR also provides a ―summary‖ of the underlying science ―reviewed and utilized‖ for the 

―Endangerment discussion‖ and reiterates that it too ―relied heavily‖ on the IPCC‘s AR4, which 

is not U.S.-specific. Id. at 44425. 

D. EPA Issued the TSD Before Completion of All 21 SAPs.

The ANPR seeks ―comment‖ not only on the ―best available science for purposes of the 

endangerment discussion‖ but also ―in particular on the use of the more recent findings‖ of the 

CCSP, presumably through its SAPs. 

In transmittal comments to Congress on each SAP report, EPA states that the series of 21 SAPs 

are ―aimed‖ at providing current assessments or evaluations of ―climate change science to inform 

public debate, policy, and operational decisions.‖ Yet, there is no explanation in the TSD of why 

some of the SAPs are relied upon and considered ―core references,‖ but others are not, or why it 

was deemed appropriate to develop and review the Second Order draft in August 2007 before all 

21 SAPs were complete and available, particularly since the Massachusetts v. EPA decision was 

only issued four months earlier and, most importantly, did not provide a timetable or deadline for 

EPA to act on the Supreme Court‘s remand. In addition, we understand that some of the SAPs 

were completed just prior to, and after, August 2007 but before the TSD Sixth Order draft was 

issued last June, but are not included.3 Further, we understand that all of the SAPs will be 

completed this year. 

 

3

 See, e.g., SAP-2.1a, ―Scenarios of Greenhouse Gas Emissions and Atmospheric 

Concentrations‖; SAP-2.1b, ―Global-Change Scenarios, Their Development and Use‖; and SAP2.2, ―The First State of the Carbon Cycle Report (SOCCR), the North American Carbon Budget 

and Implications for the Global Carbon Cycle.‖
9

In light of the time and resources used to develop and publish the SAPs, the TSD should consider 

all of them for use in the document, to the extent they are relevant to the endangerment issues in 

the U.S.

E. The TSD’s Definition of “Climate Change” Differs from the IPCC’s.

In section 1(a), titled ―Scope and Approach of this Document,‖ the TSD includes a proposed 

definition of the term ―climate change‖ as follows:

Reviews a wide range of specific and quantifiable vulnerabilities, risks and 

impacts due to both effects induced by climate change and effects caused directly 

by the GHGs. Any known or expected benefits of elevated atmospheric 

concentrations of GHGs or a climate change are documented as well (i.e., impacts 

can mean either positive or negative consequences). The extent to which 

observed climate change can be attributed to anthropogenic GHG emissions is 

assessed. The term ―climate change‖ in this document generally refers to climate 

change induced by human activities, including activities that emit GHGs. Future 

projections of climate change, based primarily on future scenarios of 

anthropogenic GHG emissions, are shown for the global and national scale. 

(p. 1). However, this definition of this term differs from the definition contained in at least two 

of the core references for this TSD. One is the above-referenced Assessment, which definition 

includes natural variability.4 The other is the IPCC reports, wherein this term ―in IPCC usage 

 

4

 The Scientific Assessment, supra p. 31 , includes as a sidebar the following definitions, the 

second of which is similar to the IPCC‘s definition of the term ―climate change:‖

Sidebar

Global Change: Changes in the global environment (including alterations in climate, land 

productivity, oceans or other water resources, atmospheric chemistry, and ecological systems) 

that may alter the capacity of the Earth to sustain life (from the Global Change Research Act of

1990).

Climate Change: A statistically significant variation in the mean state of the climate and/or in its 

variability, persisting for an extended period (typically decades or longer), due to either natural 

or human causes (adapted from the CCSP Strategic Plan). 

Note that the 1990 Act does not define ―Climate Change.‖

It would appear from the reference to the CCSP Strategic Plan that this definition would also 

apply to the SAPs. However, many SAPs do not have a glossary of terms. Some that do either 

do not define ―climate change‖ or define it in different ways (see, e.g., SAP 4.5, which is 

referred to in the core references, defines the term as ―changes in climate that depart from normal 
10

refers to any change in climate over time, whether due to natural variability or as the result of 

human activity.‖5 Yet there is no explanation in the TSD for this apparent difference in the 

definition of the term ―climate change‖ as compared to the IPCC definition and the 1990 

statutory definition, particularly since, as noted above, the document relies ―most heavily‖ on 

those ―references.‖ The TSD‘s definition of this term should conform to that used by the core 

references.

Given these deficiencies in the scientific documentation, the endangerment TSD needs 

considerable revision and should not be relied upon in its present form by EPA as support for 

any regulation of GHGs under the CAA.

 

variability, representing significant change in averages and/or extremes‖; SAP 4.3, where the 

definition is significantly longer and contains a ―note‖ that states that the definition in Article 1 

of the FCCC ―makes a distinction between  ̳climate change‘ attributable to human activities 

altering the atmospheric composition, and  ̳climate variability‘ attributable to natural causes‖). 

SAP 4.3 also defines ―natural variability.‖

5

 See Working Group I SPM n. 1, AR4. The footnote adds that this ―usage differs from that in 

the United Nations Framework Convention on Climate Change, where climate change refers to a 

change of climate that is attributed directly or indirectly to human activity that alters the 

composition of the global atmosphere and that is in addition natural climate variability observed 

over comparable time periods.‖