top of page

Federal and State Regulation of GHGs

The federal Clean Air Act does not directly regulate CO2 or methane, two compounds that constitute 90% of GHG emissions to the atmosphere. However, under Massachusetts v. EPA, the Supreme Court held that CO2 is an “air pollutant” and therefore subject to regulation under the Act. Over the past 15 years, EPA’s GHG control efforts have focused on regulating GHG emissions from power generation, industrial sources, and mobile sources, which taken together contribute over 75% of the GHG emissions within the U.S. The results of EPA’s efforts are mixed:

  • To date, EPA has yet to control the GHG emissions from the power sector, despite multiple rulemakings over a 15-year period that have generated millions of comments. While EPA has proposed new NSPS standards for both the power sector and oil and gas production (which comprise ~38% of GHG emissions within the U.S.), these NSPS have yet to be finalized.

  • Except for GHG reporting requirements, GHG emissions from existing industrial stationary sources remain largely unregulated at the federal level. Only sources that manufacture or use Hydrofluorocarbons (HFCs) have been regulated through EPA’s HFC phasedown regulations. By September 30, 2023, annual U.S. manufacture of HFCs will be 10% below a baseline of 303.9 MMTCO2e.

  • Mobile source regulations applicable to new light duty vehicles and heavy-duty trucks are now in place to reduce GHG and ozone precursors that will realize significant reductions. However, the median useful life of both cars and trucks is such that it will take decades for these new cleaner vehicles to meaningfully penetrate mobile fleets.

Absent clear legislation and direction at the federal level, twenty-four states have adopted GHG reduction targets, the most ambitious of which seek to achieve carbon neutrality by 2045. The most aggressive of these state programs rely on a combination of cap-and-trade or cap-and-investment, low carbon fuel standards, renewable portfolio standards, electrification of mobile sources, and carbon capture/storage technologies to achieve ambitious goals. The forerunners to these aggressive state climate action plans include California with a carbon neutrality goal set for 2045, and Washington, Oregon, and New York with blueprints designed to achieve carbon neutrality by 2050.

Within the existing federal and state regulatory schemes, GHG emissions within the U.S. have declined an estimated 15% from 2005 levels, with the largest reduction evidenced in the power sector, where GHG emissions from coal have been reduced by half from 2000 levels, with displaced coal capacity taken up by natural gas and renewable energy. Since 2021 – and for the first time in 60 years— power generated from renewables exceeded that from coal.[1] Notably, these reductions in the power sector were realized absent federal regulation – the economics of coal can no longer compete with that of natural gas. GHG emissions from the industrial sector have remained relatively flat, despite a broad spectrum of clean energy projects, including CCS, LCFS, and energy efficiency projects.

GHG emissions from the transportation sector also have remained relatively flat, illustrating the fact that if fleet turnover is limited to median useful vehicle life, it will take decades to achieve significant reductions from the mobile fleet. This has been recognized by California and other states, which have adopted fleet efficiency standards that require accelerated turnover to meet stringent composite fleet performance standards.

Separate of these federal and state regulatory programs, last year Congress adopted the Inflation Reduction Act (IRA) that provides an estimated $350 billion in federal funding for a broad spectrum of clean energy initiatives which have the potential to reduce GHG emissions ~50% below 2005 levels by 2030.[2] These expected reductions are far greater than would be achieved by any proposed or final GHG regulations issued to date by EPA, and could be significantly higher than the previous U.S. pledge to cut GHG emissions 26-28% by 2025. Rather than prescribe emission control plans or mandatory performance standards, IRA provides financial incentives via tax benefits and funding with the goal of substantially lowering the nation’s GHG carbon emissions by 2030.Additionally, IRA will support more stringent EPA regulation of mobile and stationary sources as costs to comply with EPA NSPS, and mobile source provisions will be offset by favorable tax benefits. Coupled with the SEC’s proposed GHG disclosure regulation expected to be finalized later this year, it is reasonable to anticipate that corporate management will direct projects to secure financial incentives, increase market share, and achieve concurrent GHG reductions. The success of these efforts will turn in large part on development and integration of new, innovative technologies that realize sizable GHG reductions as compared to current operations.

[1] Prior to the 1960’s hydropower exceeded coal-fired power generation. [2] See Energy Innovation Policy and Technology LLC, , this reduction is consistent with the Kyoto agreement.

Recent Posts

See All
bottom of page