Some background, and how this latest move “fits” within the quickly evolving U.S. policy:
On April 2, 2007, in Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court found that greenhouse gases are air pollutants covered by the Clean Air Act. The Court ruled that the U.S. EPA Administrator must determine “whether or not emissions of greenhouse gases from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision.”

With this decision, “the U.S. EPA Administrator is required to follow the language of section 202(a) of the Clean Air Act. The Supreme Court decision resulted from a petition for rule making under section 202(a) filed by more than a dozen environmental, renewable energy, and other organizations.”

As a follow-up to this earlier decision, the U.S. EPA Administrator signed a proposal with the two findings:
“The Administrator is proposing to find that the current and projected concentrations of the mix of six key greenhouse gases—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6)—in the atmosphere threaten the public health and welfare of current and future generations. This is referred to as the endangerment finding.”

“The Administrator is further proposing to find that the combined emissions of CO2, CH4, N2O, and HFCs from new motor vehicles and motor vehicle engines contribute to the atmospheric concentrations of these key greenhouse gases and hence to the threat of climate change. This is referred to as the cause or contribute finding.”

While this is a significant development (and was expected) it does not necessarily mean that greenhouse gases will be regulated under the Clean Air Act.

Before the EPA can officially adopt the ruling or take any regulatory actions, the proposed ruling – based on a peer-reviewed scientific analysis of: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride – must undergo a 60-day public comment period.

This move by the U.S. EPA is playing out while Congress also moves forward to develop a plan to regulate carbon. Congressional hearings are scheduled to begin this week.

The draft House bill, “American Clean Energy and Security Act of 2009” authored by Rep. Henry Waxman (Chairman of the Energy and Commerce Committee) and Rep. Edward Markey (Chairman of the Energy and Environment subcommittee) is significantly shaping the debate as to what a federal climate program looks like. This is essentially the current competition with the U.S. EPA.

Key elements of the draft bill are:
- “A national renewable electricity mandate where utilities need to get 6 percent of power from solar, wind, biomass, or geothermal sources in 2012 and 25 percent in 2025. One-fifth of the requirement can be met with energy-efficiency measures.

- A demonstration facility for carbon capture and sequestration where carbon dioxide from coal-burning power plants is stored underground.

- Giving authority to the Federal Electricity Regulatory Commission for planning power grid modernization with smart-grid technology and upgrades to the transmission lines.

- A single federal fuel-efficiency standard and low-carbon fuel standard for biofuels.

- An “energy efficiency resource standard” to create incentives for electricity and natural gas companies to invest in customer efficiency programs.

- A global warming reduction program modeled on recommendations from U.S. Climate Action Partnership (www.us-cap.org) which is a coalition of large corporations and NGOs advocating regulation. The target is a 20 percent reduction of greenhouse gas emissions below 2005 levels in 2020, 42 percent reduction in 2030, and 83 percent cut in 2050.

- Programs to promote “green jobs,” such as training, and rebates for heavily polluting industries that could be put at a competitive disadvantage from costs related to carbon regulations.”

It appears that the preference is for congressional action to regulate carbon and not U.S. EPA under the Clean Air Act. Congress is now in a race with the. EPA.

Bear in mind that we are also looking at the U.S. becoming engaged in upcoming negotiations in Copenhagen during early December 2009. It is unlikely that the US will go into these negotiations with a final congressional bill or U.S. EPA regulations in place. There needs to be “room to negotiate” during Copenhagen. As we move forward on a federal program to regulate greenhouse gases a clearer message as to what the program will look like will wait just a bit longer until later this year.

In the midst of all of this, U.S. companies need to determine their carbon footprint (including their supply chain and products) and explore the various regulatory scenarios and how they will impact their business (including potentially new products and services).

This is now a classic risk management exercise.

For further reading on the endangerment assessment, visit http://epa.gov/climatechange/endangerment.html.

The plan outlines a cap and trade program to regulate greenhouse gases. The draft proposal will use 2005 as a base year and require that U.S. greenhouse gas emissions be reduced by 20 percent by 2020, 42 percent by 2030 and 83 percent by 2050. This draft legislation is a bit more aggressive than the timetable proposed by the administration.

In addition the legislation would require utilities to generate 25 percent of their electricity from renewable energy by 2025.
Key provisions, yet to be detailed, include the allocation of emission permits to regulated industries – either through sale or a percentage given to the firms.

So, the race between U.S. Environmental Protection Agency and Congress is on. We can expect increased progress in moving forward with U.S. regulations as we move closer to upcoming COP15 negotiations in Copenhagen in December 2009.

It is very important to note that the U.S. Climate Action Partnership (USCAP – www.us-cap.org) “hails” the draft as a “strong start.” USCAP, a coalition of U.S. companies (such as Alcoa, GE, BP America, PepsiCo) and NGOs (such as The Nature Conservancy and Environmental Defense Fund), has long recognized the need for clear and consistent public policy on climate change as a way to promote private investment in low carbon technologies to drive innovation, create jobs and provide a foundation for economic recovery.

This is encouraging as it focuses on the business opportunities (read top line growth) in moving to a global low carbon economy. The participants in USCAP get it.

Lost in the headlines of the financial meltdowns, bailouts and recovery plans are a couple of stories that reflect the increasing adoption of wind technology in the U.S. While wind power represents just a fraction of current U.S. energy production, last year the U.S. was the largest producer of wind power ahead of Germany.

During the summer of 2008, the U.S. wind industry exceeded 20,000-megawatt (MW) installed capacity and achieved in two years what had previously taken two decades (the 10,000-MW mark was reached in 2006).  This put the U.S. in the number one spot ahead of Germany to be the global leader in wind energy production. According to the Executive Director of the American Wind Energy Association (AWEA), Randall Swisher, “wind energy installations are well ahead of the curve for contributing 20% of the U.S. electric power supply by 2030 as envisioned by the U.S. Department of Energy.”

Another important milestone is that wind power accounted for approximately 42% of all new electricity generation installed last year in the U.S. This reflects a shift in power generation from the east to the west with the wind “belts” of the Midwest, west Texas and the West Coast seeing increased construction and wind generation. Texas leads the states in wind generation followed by Iowa and California. New “wind states” include Oregon, Minnesota, Colorado and Washington.

Finally, a critical metric, especially in the midst of the recession is the number of jobs and job growth. In January of this year, the number of jobs in the wind energy sector exceeded those in the U.S. coal industry. A 70% increase in jobs in the wind sector resulted in a total of approximately 85,000 jobs compared to the coal sector with approximately 81,000 jobs. Of these approximately 85,000 jobs, there are about 13,000 manufacturing jobs. The wind manufacturing sector is currently dominated by European companies, the U.S. has two domestic wind turbine manufacturers with General Electric (GE) and Clipper.

So while the wind sector currently represents a small portion of our energy generation, it is a growing sector creating jobs (including domestic manufacturing) and fostering innovation.

The annual list, includes “green” and “going green” as well as “carbon footprint” and “carbon offsetting,” the university reports. The list, issued each year since 1975, comes from thousands of nominations each year. Other favorite words to make the latest list include: “maverick,” “staycation” and “bailout.”

This comes on the heels of an article in the  2008 titled, “Green Goal of ‘Carbon Neutrality’ Hits Limit” taking a shot at carbon neutral claims. One of the points made is that “carbon neutral” has no standard meaning and is confusing for customers and the public in general.

And finally, Parade Magazine declared that in 2008, “green went mainstream.” It is official. I wasn’t sure when it occurred (perhaps after Wal-Mart and GE dove into it?), but I am now relieved that green is mainstream and we can now move on.

2008 was the year that “consumers turned to reusable shopping bags, and automakers sold about 360,000 hybrid cars (led by Toyota’s Prius).” Renewable energy (with the help of the unlikely pair of T. Boone Pickens and Al Gore) gained momentum with solar power growing by at least 30% and wind energy projects creating approximately 9,000 new jobs in Texas, Utah, and other states.

“Green industries” now generate up to 8.5 million jobs in the U.S., and President-elect Obama has promised an ambitious program to develop an additional 5 million jobs in renewable energy. On top of this, the Green Jobs Act of 2007, expected to be funded next year, will authorize $125 million to train new workers in needed skills for the new green economy.

So, let’s jettison the jargon and move on to reinvent our industries and grow our economy.