EPA to Establish Nationwide, Mandatory Greenhouse Gas Reporting Scheme by 2009

Tucked into the massive $500 billion omnibus budget package signed into law by President Bush last month is a provision that requires the Environmental Protection Agency (“EPA”) to establish a mandatory program that will require U.S. companies by mid-2009 to report their greenhouse gas (“GHG”) emissions. The GHG reporting provision, which was inserted into the budget package in the final days of Congressional negotiations, directs the EPA Administrator to publish a draft GHG reporting rule nine months following enactment of the law, and a final rule within 18 months, which would be June 2009.[1] The law does not specify which industries must report or how often reporting must occur, but leaves those details to EPA. It also does not specifically preempt state reporting laws.[2]

Over the past few years, there have been numerous proposals in Congress to create a national GHG reporting program as a first step to support comprehensive climate change legislation. This past year, more emphasis has focused on enacting a national emissions trading scheme, such as the one contemplated by the Lieberman-Warner Climate Security Act of 2007 (“Lieberman-Warner Act”). See previous Environmental News article entitled, Congress Takes First Step Toward Enacting Federal Climate Change Legislation. Most observers assumed that a national GHG reporting program would be passed as part of more comprehensive federal emissions trading legislation (e.g., that the Lieberman-Warner Act would require EPA to create a reporting program). Instead, the reporting mandate has been inserted into law ahead of comprehensive climate legislation, leaving EPA in the position of having to develop a reporting program without knowing the details of the regulatory program it will ultimately be supporting. The enactment of the law also comes at a time when many states are adopting their own GHG emission reporting laws, which the new federal law does not expressly preempt. This potentially dual system of emissions reporting creates further challenges for EPA, and for companies trying to prepare for new reporting obligations.

Purpose of GHG Reporting

Reporting of GHG emissions is viewed by many as a first step to support comprehensive emission reduction programs such as those being contemplated both in Congress and by many states. In order to craft policies to achieve the emission reductions required by the law, policymakers need up-to-date and accurate information relative to the source, size and growth of GHG emissions. This is particularly true for market-oriented approaches to reduce GHGs such as a cap-and-trade program, where reliable and transparent emissions data would be the foundation for developing allocation systems, reduction targets, and enforcement provisions. Currently, only coal-fired power plants are required to report their GHG emissions to the federal government. EPA regulations have required monitoring and reporting of CO2 emissions since 1993 under Section 821 of the 1990 Clean Air Act amendments. 40 C.F.R. § 75.l0(3)(i). Some companies voluntarily report their GHG emissions through a number of different voluntary registries.

Summary of the Federal Reporting Mandate

The provision directing EPA to establish a federal GHG reporting program was inserted into the appropriations bill by Senator Amy Klobuchar (D-MN) and Senator Dianne Feinstein, the California Democrat who chairs the Senate Appropriations Subcommittee on Interior, Environment and Related Agencies, which sets EPA's annual budget. The new law directs EPA to use its existing authority under the Clean Air Act to create a mandatory GHG reporting program that would cover businesses across all sectors of the U.S. economy. The one-paragraph directive does not provide details as to how the agency must structure the reporting program. Rather, the EPA Administrator is granted the discretion to determine such significant design details as the types of sources that will be covered by the program, thresholds of emissions above which reporting will be required, the frequency of reporting, and other important features of the program.[3] The law appropriates to EPA $3.5 million for conducting the rulemaking.

Coordination with Other GHG Reporting Schemes

A significant issue for EPA in designing the new reporting program will be the extent to which it tries to harmonize its program with reporting regimes being developed by states or by voluntary registration programs such as the Climate Registry.

A number of states have already or are currently in the process of developing mandatory reporting schemes to support their GHG reduction efforts. The State of California’s reporting rules will require reporting of GHG emissions beginning in 2009. California will require more than 800 industrial and commercial sources in that state to annually measure and report their GHG emissions to the California Air Resources Board. The regulations also require third-party verification of emission reports submitted by regulated sources. New Mexico’s reporting program, which also went into effect on January 1, 2008, shares some design elements with California’s, but differs with respect to the GHGs initially covered, the scope of industrial sectors covered, and the verification process.[4] A number of other western states, including Washington and Oregon, have committed to adopt reporting programs so that they may take part in the Western Climate Initiative (“WCI”). The WCI is a regional collaboration among western states and several Canadian Provinces for reducing GHG emissions.[5] As more states develop reporting programs, the differences in program design have the potential to become a serious challenge for businesses operating in multiple states.

To try to avoid regulatory inconsistency, an independent organization called the Climate Registry was formed last year and is supported by 39 states, as well as by several Canadian provinces and Mexican states.[6] The Climate Registry aims to standardize GHG accounting and reporting rules across multiple jurisdictions and to provide businesses with a means of publicly recording their emissions in a single consistent and comparable report. The Climate Registry is currently in the process of developing general reporting protocols which are expected to be adopted in January 2008. The reporting protocol will be based on the internationally recognized Greenhouse Gas Protocol Corporate Accounting and Reporting Standard authored by the World Resources Institute and World Business Council for Sustainable Development (WRI/WBCSD). Members of the Climate Registry hope that mandatory GHG reporting, whether at the state or the federal level, will in the future be closely linked or even coordinated through the Climate Registry’s program to ensure consistent and harmonized reporting standards.

Whether EPA will utilize the reporting protocols being developed by the Climate Registry is unclear at this time. Also unclear at this time is the fate of the federal government’s existing voluntary GHG registry, known as the 1605(b) program within the Department of Energy. This program was designed to track progress towards achieving the President’s goal of reducing the U.S. GHG emission intensity by 18 percent. The 1605(b) program has been criticized for being inconsistent with international GHG accounting standards and unnecessarily complicated. The program has also been criticized for its failure to require third-party verification of emissions data and its inability to support multiple policy objectives.

Conclusion

The requirement that EPA create a national mandatory GHG reporting program is viewed by many as a necessary first step before federal regulation of GHG emissions. In creating the reporting program, the challenge for EPA will be to avoid a program design that is inconsistent with similar programs that have already been adopted or are in the process of being adopted by states and/or the Climate Registry.

For more information on national and state GHG emissions reporting requirements, and how they will affect your business or agency, please contact any member of Marten Law Group’s Climate Change/Sustainability Practice Group.