[Federal Register Volume 73, Number 147 (Wednesday, July 30, 2008)]
[Proposed Rules]
[Pages 44354-44520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16432]



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Part II





Environmental Protection Agency





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40 CFR Chapter I



Regulating Greenhouse Gas Emissions Under the Clean Air Act; Proposed 
Rule

  Federal Register / Vol. 73, No. 147 / Wednesday, July 30, 2008 / 
Proposed Rules  

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Chapter I

[EPA-HQ-OAR-2008-0318; FRL-8694-2]
RIN 2060-AP12


Regulating Greenhouse Gas Emissions Under the Clean Air Act

AGENCY: Environmental Protection Agency (EPA).

ACTION: Advance Notice of Proposed Rulemaking.

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SUMMARY: This advance notice of proposed rulemaking (ANPR) presents 
information relevant to, and solicits public comment on, how to respond 
to the U.S. Supreme Court's decision in Massachusetts v. EPA. In that 
case, the Supreme Court ruled that the Clean Air Act (CAA or Act) 
authorizes regulation of greenhouse gases (GHGs) because they meet the 
definition of air pollutant under the Act. In view of the potential 
ramifications of a decision to regulate GHGs under the Act, the notice 
reviews the various CAA provisions that may be applicable to regulate 
GHGs, examines the issues that regulating GHGs under those provisions 
may raise, provides information regarding potential regulatory 
approaches and technologies for reducing GHG emissions, and raises 
issues relevant to possible legislation and the potential for overlap 
between legislation and CAA regulation. In addition, the notice 
describes and solicits comment on petitions the Agency has received to 
regulate GHG emissions from ships, aircraft and nonroad vehicles such 
as farm and construction equipment. Finally, the notice discusses 
several other actions concerning stationary sources for which EPA has 
received comment regarding the regulation of GHG emissions.
    The implications of a decision to regulate GHGs under the Act are 
so far-reaching that a number of other federal agencies have offered 
critical comments and raised serious questions during interagency 
review of EPA's ANPR. Rather than attempt to forge a consensus on 
matters of great complexity, controversy, and active legislative 
debate, the Administrator has decided to publish the views of other 
agencies and to seek comment on the full range of issues that they 
raise. These comments appear in the Supplemental Information, below, 
followed by the June 17 draft of the ANPR preamble prepared by EPA, to 
which the comments apply. None of these documents represents a policy 
decision by the EPA, but all are intended to advance the public debate 
and to help inform the federal government's decisions regarding climate 
change.

DATES: Comments must be received on or before November 28, 2008.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2008-0318, by one of the following methods:
     www.regulations.gov: Follow the on-line instructions for 
submitting comments.
     E-mail: [email protected].
     Fax: 202-566-9744.
     Mail: Air and Radiation Docket and Information Center, 
Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania 
Ave., NW., Washington, DC 20460. In addition, please mail a copy of 
your comments on the information collection provisions to the Office of 
Information and Regulatory Affairs, Office of Management and Budget 
(OMB), Attn: Desk Officer for EPA, 725 17th St., NW., Washington, DC 
20503.
     Hand Delivery: EPA Docket Center, EPA West Building, Room 
3334, 1301 Constitution Ave., NW., Washington DC, 20004. Such 
deliveries are only accepted during the Docket's normal hours of 
operation, and special arrangements should be made for deliveries of 
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2008-0318. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
www.regulations.gov, including any personal information provided, 
unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through www.regulations.gov or e-mail. 
The www.regulations.gov Web site is an ``anonymous access'' system, 
which means EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an e-
mail comment directly to EPA without going through www.regulations.gov 
your e-mail address will be automatically captured and included as part 
of the comment that is placed in the public docket and made available 
on the Internet. If you submit an electronic comment, EPA recommends 
that you include your name and other contact information in the body of 
your comment and with any disk or CD-ROM you submit. If EPA cannot read 
your comment due to technical difficulties and cannot contact you for 
clarification, EPA may not be able to consider your comment. Electronic 
files should avoid the use of special characters, any form of 
encryption, and be free of any defects or viruses. For additional 
information about EPA's public docket visit the EPA Docket Center 
homepage at http://www.epa.gov/epahome/dockets.htm. For additional 
instructions on submitting comments, go to Section VII, Public 
Participation, of the SUPPLEMENTARY INFORMATION section of this 
document.
    Docket: All documents in the docket are listed in the 
www.regulations.gov index. Although listed in the index, some 
information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, will be publicly available only in hard copy. 
Publicly available docket materials are available either electronically 
in www.regulations.gov or in hard copy at the Air and Radiation Docket 
and Information Center, EPA/DC, EPA West, Room 3334, 1301 Constitution 
Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744, and the 
telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: Joe Dougherty, Office of Air and 
Radiation, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone 
number: (202) 564-1659; fax number: (202) 564-1543; e-mail address: 
[email protected].

SUPPLEMENTARY INFORMATION: 

Preface From the Administrator of the Environmental Protection Agency

    In this Advanced Notice of Proposed Rulemaking (ANPR), the 
Environmental Protection Agency (EPA) seeks comment on analyses and 
policy alternatives regarding greenhouse gas (GHG) effects and 
regulation under the Clean Air Act. In particular, EPA seeks comment on 
the document entitled ``Advanced Notice of Proposed Rulemaking: 
Regulating Greenhouse Gas Emissions under the Clean Air Act'' and 
observations and issues raised by other federal agencies. This notice 
responds to the U.S. Supreme Court's decision in Massachusetts v. EPA 
and numerous petitions related to the potential regulation of 
greenhouse gas emissions under the Clean Air Act.
    EPA's analyses leading up to this ANPR have increasingly raised

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questions of such importance that the scope of the agency's task has 
continued to expand. For instance, it has become clear that if EPA were 
to regulate greenhouse gas emissions from motor vehicles under the 
Clean Air Act, then regulation of smaller stationary sources that also 
emit GHGs--such as apartment buildings, large homes, schools, and 
hospitals--could also be triggered. One point is clear: The potential 
regulation of greenhouse gases under any portion of the Clean Air Act 
could result in an unprecedented expansion of EPA authority that would 
have a profound effect on virtually every sector of the economy and 
touch every household in the land.
    This ANPR reflects the complexity and magnitude of the question of 
whether and how greenhouse gases could be effectively controlled under 
the Clean Air Act. This document summarizes much of EPA's work and lays 
out concerns raised by other federal agencies during their review of 
this work. EPA is publishing this notice today because it is impossible 
to simultaneously address all the agencies' issues and respond to our 
legal obligations in a timely manner.
    I believe the ANPR demonstrates the Clean Air Act, an outdated law 
originally enacted to control regional pollutants that cause direct 
health effects, is ill-suited for the task of regulating global 
greenhouse gases. Based on the analysis to date, pursuing this course 
of action would inevitably result in a very complicated, time-consuming 
and, likely, convoluted set of regulations. These rules would largely 
pre-empt or overlay existing programs that help control greenhouse gas 
emissions and would be relatively ineffective at reducing greenhouse 
gas concentrations given the potentially damaging effect on jobs and 
the U.S. economy.
    Your input is important. I am committed to making the data and 
models EPA is using to form our policies transparent and available to 
the public. None of the views or alternatives raised in this notice 
represents Agency decisions or policy recommendations. It is premature 
to do so. Rather, I am publishing this ANPR for public comment and 
review. In so doing, I am requesting comment on the views of other 
federal agencies that are presented below including important legal 
questions regarding endangerment. I encourage the public to (1) 
understand the magnitude and complexity of the Supreme Court's 
direction in Massachusetts v. EPA and (2) comment on the many questions 
raised in this notice.
BILLING CODE 6560-50-P

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Department of Transportation

    The Department of Transportation (``the Department'' or ``DOT'') 
hereby submits the following preliminary comments on the Environmental 
Protection Agency (``EPA'') staff's draft Advance Notice of Proposed 
Rulemaking ``Regulating Greenhouse Gas Emissions under the Clean Air 
Act,'' which was submitted to the Office of Management and Budget on 
June 17, 2008 (``June 17 draft'' or ``draft''). In view of the very 
short time the Department has had to review the document, DOT will 
offer a longer, more detailed response by the close of the comment 
period.

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General Considerations

    In response to Massachusetts v. EPA and multiple rulemaking 
petitions, the EPA must consider whether or not greenhouse gases may 
reasonably be anticipated to endanger public health or welfare, within 
the meaning of the Clean Air Act. Such a determination requires the 
resolution of many novel questions, such as whether global or only U.S. 
effects should be considered, how imminent the anticipated endangering 
effects are, and how greenhouse gases are to be quantified, to name 
just a few. Without resolving any of these questions, let alone 
actually making an endangerment finding, the June 17 draft presents a 
detailed discussion of regulatory possibilities. In other words, the 
draft suggests an array of specific regulatory constructs in the 
transportation sector under the Clean Air Act without the requisite 
determinations that greenhouse gas emissions endanger public health or 
welfare and that regulation is feasible and appropriate. In fact, to 
propose specific regulations prejudices those critical determinations 
and reveals a predilection for regulation that may not be justified.
    Policymakers and the public must consider a broader question: even 
if greenhouse gas regulation using a law designed for very different 
environmental challenges is legally permissible, is it desirable? We 
contend that it is not. We are concerned that attempting to regulate 
greenhouse gases under the Clean Air Act will harm the U.S. economy 
while failing to actually reduce global greenhouse gas emissions. Clean 
Air Act regulation would necessarily be applied unevenly across 
sources, sectors, and emissions-causing activities, depending on the 
particular existing statutory language in each section of the Act. 
Imposing Clean Air Act regulations on U.S. businesses, without an 
international approach that involves all of the world's major emitters, 
may well drive U.S. production, jobs, and emissions overseas, with no 
net improvement to greenhouse gas concentrations.
    The Department believes that the Nation needs a well considered and 
sustainable domestic climate change policy that takes into account the 
best climatological, technical and economic information available. That 
policy--as with any significant matter involving Federal law and 
regulation--should also reflect a national consensus that the actions 
in question are justified and effective, and do not bring with them 
substantial unintended consequences or unacceptable economic costs. 
Reducing greenhouse gas emissions across the various sectors of our 
economy is an enormous challenge that can be met effectively only 
through the setting of priorities and the efficient allocation of 
resources in accordance with those priorities.
    It is an illusion to believe that a national consensus on climate 
policy can be forged via a Clean Air Act rulemaking. Guided by the 
provisions of a statute conceived for entirely different purposes--and 
unconstrained by any calculation of the costs of the specific 
regulatory approaches it contemplates--such a rulemaking is unlikely to 
produce that consensus.
    Administrator Johnson of the EPA said in a recent speech, ``now is 
the time to begin the public debate and upgrade [the Clean Air Act's] 
components.'' Administrator Johnson has called for fundamental changes 
to the Clean Air Act ``to consider benefits, costs, risk tradeoffs and 
feasibility in making decisions about how to clean the air.'' This, of 
course, is a criticism of the Clean Air Act's ability to address its 
intended purposes, let alone purposes beyond those Congress 
contemplated. As visualized in the June 17 draft, the U.S. economy 
would be subjected to a complex set of new regulations administered by 
a handful of people with little meaningful public debate and no ability 
to consider benefits, costs, risk tradeoffs and feasibility. This is 
not the way to set public policy in an area critical to our environment 
and to our economy.
    As DOT and its fellow Cabinet departments argue in the cover letter 
to these Comments, using the Clean Air Act as a means for regulating 
greenhouse gas emissions presents insurmountable obstacles. For 
instance, Clean Air Act provisions that refer to specific pollutants, 
such as sulfur dioxide, have been updated many times over the past 
three decades. In contrast, the language referring to unspecified 
pollutants, which would apply to greenhouse gases, retains, in fossil 
form, the 1970s idea that air pollution is a local and regional scale 
problem, with pollution originating in motor vehicles and a few large 
facilities, for which ``end of pipe'' control technologies exist or 
could be invented at acceptable cost. Greenhouse gas emissions have 
global scale consequences, and are emitted from millions of sources 
around the world. If implemented, the actions that the draft 
contemplates would significantly increase energy and transportation 
costs for the American people and U.S. industry with no assurance that 
the regulations would materially affect global greenhouse gas 
atmospheric concentrations or emissions.

Transportation-Related Considerations

    As the Nation's chief transportation regulatory agency, the 
Department has serious concerns about the draft's approach to mobile 
sources, including, but not limited to, the autos, trucks, and aircraft 
that Section VI of the draft considers regulating.
    Title II of the Clean Air Act permits the use of technology-forcing 
regulation of mobile sources. Yet Section VI of the draft appears to 
presume an endangerment finding with respect to emissions from a 
variety of mobile sources and then strongly suggests the EPA's intent 
to regulate the transportation sector through an array of source-
specific regulations. Thus, much of Section VI is devoted to describing 
and requesting information appropriate to setting technology-forcing 
performance standards for particular categories of vehicles and engines 
based on an assessment of prospective vehicle and engine technology in 
each source category.
    In its focus on technology and performance standards, the draft 
spends almost no effort on assessing how different regulatory 
approaches might vary in their effectiveness and compliance costs. This 
despite the fact that picking an efficient, effective, and relatively 
unintrusive regulatory scheme is critically important to the success of 
any future program--and far more important at this stage than 
identifying the cost-effectiveness of speculative future technologies.
    The draft fails to identify the market failures or environmental 
externalities in the transportation sector that regulation might 
correct, and, in turn, what sort of regulation would be best tailored 
to correcting a specific situation. Petroleum accounts for 99 percent 
of the energy use and greenhouse gas emissions in the transportation 
sector. Petroleum prices have increased fivefold since 2002. Rising 
petroleum prices are having a powerful impact on airlines, trucking 
companies, marine operators, and railroads, and on the firms that 
supply vehicles and engines to these industries. Petroleum product 
prices have doubled in two years, equivalent to a carbon tax of $200 
per metric ton, far in excess of the cost of any previously 
contemplated climate change measure. Operators are searching for every 
possible operating economy, and capital equipment manufacturers are 
fully aware that fuel efficiency is a critical selling point for new 
aircraft, vehicles, and engines. At this point, regulations could 
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more powerful incentive for commercial operators than that already 
provided by fuel prices. Badly designed performance standards would be 
at best non-binding (if private markets demand more efficiency than the 
regulatory standard) or would actually undermine efficient deployment 
of fuel efficient technologies (if infeasible or non-cost-effective 
standards are required).
Light Duty Vehicles
    On December 19, 2007, the President signed the Energy Independence 
and Security Act (``EISA''), which requires the Department to implement 
a new fuel economy standard for passenger cars and light trucks. The 
Department's National Highway Traffic Safety Administration (``NHTSA'') 
has moved swiftly to comply with this law, issuing a Notice of Proposed 
Rulemaking (``NPRM'') on April 22, 2008. The comment period for this 
NPRM closed on July 1, 2008. If finalized in its present form, the rule 
would reduce U.S. carbon dioxide emissions by an estimated 521 million 
metric tons over the lifetime of the regulated vehicles.
    This NPRM is only the latest in a series of NHTSA Corporate Average 
Fuel Economy (``CAFE'') program rules proposed or implemented during 
this Administration. Indeed, these proposals together represent the 
most aggressive effort to increase the fuel economy (and therefore to 
reduce the emissions) of the U.S. fleet since the inception of the CAFE 
program in 1975.
    In enacting EISA, Congress made careful and precise judgments about 
how standards are to be set for the purpose of requiring the 
installation of technologies that reduce fuel consumption. Although 
almost all technologies that reduce carbon dioxide emissions do so by 
reducing fuel consumption, the EPA staff's June 17 draft not only 
ignores those congressional judgments, but promotes approaches 
inconsistent with those judgments.
    The draft includes a 100-page analysis of a tailpipe carbon dioxide 
emissions rule that has the effect of undermining NHTSA's carefully 
balanced approach under EISA. Because each gallon of gasoline contains 
approximately the same amount of carbon, and essentially all of the 
carbon in fuel is converted to carbon dioxide, a tailpipe carbon 
dioxide regulation and a fuel economy regulation are essentially 
equivalent: they each in effect regulate fuel economy.
    In the draft's analysis of light duty vehicles, the external 
benefits of reducing greenhouse gas emissions account for less than 15 
percent of the total benefits of improving vehicle efficiency, with the 
bulk of the benefits attributable to the market value of the gasoline 
saved. Only rather small marginal reductions in fuel consumption or 
greenhouse gas emissions would be justified by external costs in 
general, and climate change benefits in particular. Thus, the draft 
actually describes fuel economy regulations, which generate primarily 
fuel savings benefits, under the rubric of environmental policy.
    Though it borrows an analytical model provided by NHTSA, the draft 
uses differing assumptions and calculates the effects of the Agency's 
standard differently than does the rule NHTSA proposed pursuant to 
EISA. The draft conveys the incorrect impression that the summary 
numbers such as fuel savings, emission reductions, and economic 
benefits that are presented in the draft are comparable with those 
presented in NHTSA's NPRM, when in fact the draft's numbers are 
calculated differently and, in many cases, using outdated information.
    The draft does not include the provisions of EISA or past, current, 
or future CAFE rulemakings in its baseline analysis of light duty 
vehicle standards. Thus, the draft inflates the apparent benefits of a 
Clean Air Act light duty vehicle rulemaking when much of the benefits 
are already achieved by laws and regulations already on the books. The 
draft fails to ask whether additional regulation of light duty vehicles 
is necessary or desirable, nor gives any serious consideration how 
Clean Air Act and EISA authorities might be reconciled.
    The draft comprehensively mischaracterizes the available evidence 
on the relationship between safety and vehicle weight. In the draft, 
EPA asserts that the safety issue is ``very complex,'' but then adds 
that it disagrees with the views of the National Academy of Sciences 
(NAS) and NHTSA's safety experts, in favor of the views of a two-person 
minority on the NAS panel and a single, extensively criticized article.
    Much of the text of this portion of the draft is devoted to a 
point-by-point recitation and critique of various economic and 
technological assumptions that NHTSA, the Office of Management and 
Budget, and other Federal agencies--among them EPA--painstakingly 
calculated over the past year, but that EPA now unilaterally revises 
for this draft. It is not clear why it is necessary or desirable to use 
one set of analytical assumptions, while the rest of the Federal 
Government uses another.
    The public interest is ill-served by having two competing 
proposals, put forth by two different agencies, both purporting to 
regulate the same industry and the same products in the same ways but 
with differing stringencies and enforcement mechanisms, especially 
during a time of historic volatility in the auto industry and mere 
months after Congress passed legislation tasking another agency with 
regulation in this area. The detailed analysis of a light duty vehicle 
rule in the draft covers the same territory as does NHTSA's current 
rulemaking--and is completely unnecessary for the purposes of an 
endangerment finding or for seeking comment on the best method of 
regulating mobile source emissions.
Setting Air Quality Standards
    The discussion of the process for setting National Ambient Air 
Quality Standards (``NAAQS'') and development of state/Federal 
implementation plans for greenhouse gases is presented as an option for 
regulating stationary sources, and is placed in the discussion of 
stationary sources. The draft describes a scenario in which the entire 
country is determined to be in nonattainment.
    Such a finding would reach beyond power plants and other 
installations to include vital transportation infrastructure such as 
roads, bridges, airports, ports, and transit lines. At a time when our 
country critically needs to modernize our transportation 
infrastructure, the NAAQS that the draft would establish--and the 
development of the implementation plans that would follow--could 
seriously undermine these efforts. Because the Clean Air Act's 
transportation and general conformity requirements focus on local 
impacts, these procedures are not capable of assessing and reducing 
impacts of global pollutants without substantial disruption and waste.
    If the entire Nation were found to be in nonattainment for carbon 
dioxide or multiple greenhouse gases, and transportation and general 
conformity requirements applied to Federal activities, a broad range of 
those activities would be severely disrupted. For example, application 
of transportation conformity requirements to all metropolitan area 
transportation plans would add layers of additional regulations to an 
already arduous Federal approval process and expand transportation-
related litigation without any assurance that global greenhouse gas 
emissions would be reduced. Indeed, needed improvements to airports, 
highways and transit systems that would make the transportation system 
more efficient, and thus help reduce greenhouse gas and other 
emissions, could be precluded due to

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difficulties in demonstrating conformity. Though the potential for such 
widespread impact is clear from even a cursory reading of the draft, it 
ignores the issue entirely.
    For these reasons, we question the practicality and value of 
establishing NAAQS for greenhouse gases and applying such a standard to 
new and existing transportation infrastructure across the Nation.
Heavy Duty Vehicles
    The draft contemplates establishing a greenhouse gas emissions 
standard for heavy duty vehicles such as tractor-trailers. The draft's 
discussion of trucks makes no mention of the National Academy of 
Sciences study required by Section 108 of EISA that would evaluate 
technology to improve medium and heavy-duty truck fuel efficiency and 
costs and impacts of fuel efficiency standards that may be developed 
under 49 U.S.C. Section 32902(k), as amended by section 102(b) of EISA. 
This section directs DOT, in consultation with EPA and DOE, to 
determine test procedures for measuring and appropriate procedures for 
expressing fuel efficiency performance, and to set standards for 
medium- and heavy-duty truck efficiency. DOT believes that it is 
premature to review potential greenhouse gas emission standards for 
medium- and heavy-duty trucks in light of this study and anticipated 
future standard-setting action under EISA, and, in any event, that it 
is problematic to do so with no accounting of the costs that these 
standards might impose on the trucking industry.
    In the case of light duty vehicles, it can be argued that consumers 
do not accurately value fuel economy, and regulation can correct this 
failure. Heavy-duty truck operators, on the other hand, are acutely 
sensitive to fuel costs, and their sensitivity is reflected in the 
product offerings of engine and vehicle manufacturers. The argument for 
fuel economy or tailpipe emissions regulation is much harder to make 
than in the case of light duty vehicles.
    The medium and heavy truck market is more complex and diverse than 
the light duty vehicle market, incorporating urban delivery vans, on-
road construction vehicles, work trucks with power-using auxiliaries, 
as well as the ubiquitous long-haul truck-trailer combinations. 
Further, a poorly designed performance standard that pushes operators 
into smaller vehicles may result in greater and not fewer of the 
emissions the draft intends to reduce. Because freight-hauling 
performance is maximized by matching the vehicle to the load, one 
large, high horsepower truck will deliver a large/heavy load at a lower 
total and fuel cost than the same load split into two smaller, low 
horsepower vehicles.
Railroads
    The Clean Air Act includes a special provision for locomotives, 
Section 213(a)(5), which permits EPA to set emissions standards based 
on the greatest emission reduction achievable through available 
technology. The text of the draft suggests that EPA may consider such 
standards to include hybrid diesel/electric locomotives and the 
application of dynamic braking.
    As in other sectors, it is hard to imagine how a technology-forcing 
regulation can create greater incentives than provided by recent oil 
prices. And sensible public policy dictates caution against imposing 
unrealistic standards or mandating technology that is not cost-
effective, not reliable, or not completely developed.
Marine Vessels
    The International Maritime Organization (``IMO'') sets voluntary 
standards for emissions from engines used in ocean-going marine vessels 
and fuel quality through the MARPOL Annex VI (International Convention 
for the Prevention of Pollution from Ships, 1973, as modified by the 
Protocol of 1978 relating thereto (``MARPOL''), Annex VI, Prevention of 
Air Pollution from Ships). Member parties apply these voluntary 
standards through national regimes. The IMO is also working to consider 
ways to address greenhouse gas emissions from vessels and marine 
transportation, including both vessel-based and operational measures. 
The U.S. is a participant in these discussions. We believe that the 
discussion of ways to reduce greenhouse gas emissions from vessels and 
marine transportation should reference the IMO voluntary measures and 
discussions, and need not address detailed technological or operational 
measures.
Aviation
    The draft includes a lengthy discussion of possible methods by 
which to regulate the greenhouse gas emissions of aircraft. For all its 
detail, however, the draft does not provide adequate information (and 
in some instances is misleading) regarding aviation emissions related 
to several important areas: (1) The overwhelming market pressures on 
commercial airlines to reduce fuel consumption and therefore carbon 
dioxide emissions and the general trends in aviation emissions growth; 
(2) expected technology and operational improvements being developed 
under the interagency Next Generation Air Transportation System 
(``NextGen'') program; (3) the work and role of the International Civil 
Aviation Organization (``ICAO'') in aviation environmental matters; (4) 
limits on EPA's ability to impose operational controls on aviation 
emission; and (5) the scientific uncertainty regarding greenhouse gas 
emissions from aircraft.
    First, the draft does not provide the public an accurate picture of 
aviation emissions growth. Compared to 2000, U.S. commercial aviation 
in 2006 moved 12 percent more passengers and 22 percent more freight 
while burning less fuel, thereby reducing carbon output. Further, the 
draft's projections of growth in emissions are overstated because they 
do not reflect technology improvements in aircraft or air traffic 
operations and apparently do not take into account the industry's 
ongoing contraction or even the sustained increase in aviation jet fuel 
prices in 2007 and 2008. That increase (in 2008, U.S. airlines alone 
will spend $60 billion for fuel, compared to $16 billion in 2000) 
provides an overwhelming economic incentive for a financially troubled 
industry to reduce fuel consumption. Because reduction of a gallon of 
jet fuel displaces about 21 pounds of carbon dioxide, that incentive is 
the single most effective tool for reducing harmful emissions available 
today. Yet the draft makes no note of the trend.
    Second, the draft does not adequately address the multi-agency 
NextGen program, one of whose principal goals is to limit or reduce the 
impact of aviation emissions on the global climate. This includes 
continued reduction of congestion through modernization of the air 
traffic control system, continued research on aircraft technologies and 
alternative fuels, and expanded deployment of operational advances such 
as Required Navigation Performance that allow aircraft to fly more 
direct and efficient routes in crowded airspace. Through NextGen, the 
Department's Federal Aviation Administration (FAA), in cooperation with 
private sector interests, is actively pursuing operational and 
technological advances that could result in a 33 percent reduction in 
aircraft fuel burn and carbon dioxide emissions.
    Third, the draft gives short shrift to the Administration's efforts 
to reduce aviation emissions through a multilateral ICAO process, and 
it contemplates regulatory options either never analyzed by EPA or the 
aviation community for aircraft (``fleet

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averaging''\1\) or previously rejected by ICAO itself (flat carbon 
dioxide standards). The FAA has worked within the ICAO process to 
develop guidance for market-based measures, including adoption at the 
2007 ICAO Assembly of guidance for emissions trading for international 
aviation. ICAO has established a Group on International Aviation and 
Climate Change that is developing further recommendations to address 
the aviation impacts of climate change.\2\ The FAA's emphasis on 
international collaboration is compelled by the international nature of 
commercial aviation and the fact that performance characteristics of 
engines and airframes--environmental and otherwise--work best when they 
maximize consistency among particular national regulations.\3\
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    \1\ The concept of ``fleet averaging,'' though used for 
automobiles, has never been applied to aviation or considered by 
either ICAO or FAA as a basis for standard setting. The draft offers 
little indication of why the concept would be worth serious 
consideration, and it is difficult to understand how that could be, 
given that manufacturers turn out only several hundred commercial 
airplanes for ``averaging'' annually, compared to over a million 
light duty vehicles per year built by large manufacturers. In any 
event, if further analysis supports the viability of fleet 
averaging, the appropriate venue for pursuing this would be through 
ICAO--so that aviation experts from around the world can assess the 
concept.
    \2\ In this context, we note that the draft invites comment on 
proposals in the European Union regarding an emissions trading 
scheme to be imposed by the EU on all Europe-connected commercial 
operations. The U.S. Government, led by the Department of State, has 
repeatedly argued that any of these proposals, if enacted, would 
violate international aviation law and has made clear its opposition 
to the proposals in ICAO and other international fora. It is curious 
that the EPA would solicit comments on the benefits of proposals 
that the United States (along with numerous other nations) opposes 
as unlawful and unworkable.
    \3\ The draft is potentially misleading in suggesting that the 
fuel flow rate data reported for the ICAO landing and takeoff cycle 
engine emissions certification process, and the carbon dioxide 
emissions concentrations data collected for calculation and 
calibration purposes may be used as the basis for a carbon dioxide 
standard.
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    Fourth, the draft invites comments on potential aviation 
operational controls that might have emissions benefits. But proposals 
for changes to airspace or air traffic operational procedures usurp the 
FAA's responsibility as the Nation's aviation safety regulator and air 
traffic manager. It is inappropriate for the EPA to suggest operational 
controls without consideration of the safety implications that the FAA 
is legally required to address.
    Finally, the draft does not accurately present the state of 
scientific understanding of aviation emissions and contains misleading 
statements about aviation emissions impacts. The report of the 
Intergovernmental Panel on Climate Change (cited in the draft but often 
ignored) more clearly conveys cautions about underlying uncertainties 
associated with regulating aviation emissions. For instance, the IPCC 
specifically concludes that water vapor is a small contributor to 
climate change, yet the draft focuses on condensation trails produced 
by water vapor and includes an inaccurate statement that carbon dioxide 
and water vapor are ``the major compounds from aircraft operations that 
are related to climate change.'' Further, the draft does not convey the 
significant scientific uncertainty associated with measuring 
particulate matter (PM) emissions from aircraft engines. That 
understanding needs to be significantly improved before any 
``tailpipe'' PM standard could sensibly be considered.

Conclusion

    The EPA has made an enormous effort in assembling the voluminous 
data that contributed to the draft as published today. However, because 
the draft does not adequately identify or discuss the immense 
difficulties and burdens, and the probable lack of attendant benefits, 
that would result from use of the Clean Air Act to regulate GHG 
emissions, DOT respectfully submits these preliminary comments to point 
out some of the problematic aspects of the draft's analysis regarding 
the transportation sector. We anticipate filing additional comments 
before the close of the comment period.

Department of Energy

I. Introduction

    The U.S. Department of Energy (Department or DOE) strongly supports 
aggressively confronting climate change in a rational manner that will 
achieve real and sustainable reductions in global greenhouse gas (GHG) 
emissions, promote energy security, and ensure economic stability. In 
support of these goals, DOE believes that the path forward must include 
a comprehensive public discussion of potential solutions, and the 
foreseeable impacts of those proposed solutions--including impacts on 
energy security and reliability, on American consumers, and on the 
Nation's economy.
    The Department supports the actions taken by the United States to 
date to address global climate change and greenhouse gas emissions, and 
believes these efforts should be continued and expanded. These actions 
have included a broad combination of market-based regulations, large 
increases in funding for climate science, new government incentives for 
avoiding, reducing or sequestering GHG emissions, and enormous 
increases in funding for technology research. The Department has played 
a significant role in implementing many of these initiatives, including 
those authorized by the Energy Policy Act of 2005 and the Energy 
Independence and Security Act of 2007.
    The Department believes that an effective and workable approach to 
controlling GHG emissions and addressing global climate change should 
not simply consist of a unilateral and extraordinarily burdensome Clean 
Air Act (CAA or the Act) regulatory program being layered on top of the 
U.S. economy, with the Federal Government taking the position that 
energy security and indeed the American economy will just have to live 
with whatever results such a program produces. Rather, the United 
States can only effectively address GHG emissions and global climate 
change in coordination with other countries, and by addressing how to 
regulate GHG emissions while considering the effect of doing so on the 
Nation's energy and economic security. Considering and developing such 
a comprehensive approach obviously is enormously difficult.
    Unfortunately, and no doubt due in part to the limitations of the 
Clean Air Act itself, the draft Advance Notice of Proposed Rulemaking 
prepared by the staff of the Environmental Protection Agency (EPA) does 
not take such an approach. That draft Notice, entitled ``Regulating 
Greenhouse Gas Emissions under the Clean Air Act'' (``draft''), which 
was submitted to the Office of Management and Budget on June 17, 2008, 
instead seeks to address global climate change through an enormously 
elaborate, complex, burdensome and expensive regulatory regime that 
would not be assured of significantly mitigating global atmospheric GHG 
concentrations and global climate change. DOE believes that once the 
implications of the approach offered in the draft are fully explained 
and understood, it will make one thing clear about controlling GHG 
emissions and addressing global climate change--unilaterally proceeding 
with an extraordinarily burdensome and costly regulatory program under 
the Clean Air Act is not the right way to go.
    DOE has had only a limited opportunity to review the June 17 EPA 
staff draft, and therefore anticipates providing additional comments at 
a later date. Based on the limited review DOE has been able to conduct 
so far, it is apparent that the draft reflects extensive work and 
includes valuable information, analyses and data that

[[Page 44366]]

should help inform the public debate concerning global climate change 
and how to address GHG emissions.
    However, DOE has significant concerns with the draft because it 
lacks the comprehensive and balanced discussion of the impacts, costs, 
and possible lack of effectiveness were the United States, through the 
EPA, to use the CAA to comprehensively but unilaterally regulate GHG 
emissions in an effort to address global climate change. The draft 
presents the Act as an effective and appropriate vehicle for regulating 
GHG emissions and addressing climate change, but we believe this 
approach is inconsistent with the Act's overarching regulatory 
framework, which is based on States and local areas controlling 
emissions of air pollutants in order to improve U.S. air quality. 
Indeed, the Act itself states that Congress has determined ``air 
pollution prevention * * * and air pollution control at its source is 
the primary responsibility of States and local governments,'' CAA Sec.  
101(a)(3); that determination is reflected in the Act's regulatory 
structure. The CAA simply was not designed for establishing the kind of 
program that might effectively achieve global GHG emissions controls 
and emissions reductions that may be needed over the next decades to 
achieve whatever level of atmospheric GHG concentration is determined 
to be appropriate or necessary.
    Although the draft recognizes that the CAA does not authorize 
``economy-wide'' cap and trade programs or emission taxes, it in 
essence suggests an elaborate regulatory regime that would include 
economy-wide approaches and sector and multi-sector trading programs 
and potentially other mechanisms yet to be conceived. The draft has the 
overall effect of suggesting that under the CAA, as it exists today, it 
would be possible to develop a regulatory scheme of trading programs 
and other mechanisms to regulate GHG emissions and thus effectively 
address global climate change. It is important to recognize, however, 
that such programs have not yet been fully conceived, in some cases 
rely on untested legal theories or applications of the Act, would 
involve unpredictable but likely enormous costs, would be invasive into 
virtually all aspects of the lives of Americans, and yet would yield 
benefits that are highly uncertain, are dependent on the actions of 
other countries, and would be realized, if at all, only over a long 
time horizon.
    The draft takes an affirmative step towards the regulation of 
stationary sources under the Act--and while it is easy to see that 
doing so would likely dramatically increase the price of energy in this 
country, what is not so clear is how regulating GHG emissions from such 
sources would actually work under the CAA, or whether doing so would 
effectively address global climate change. Other countries also are 
significant emitters of GHGs, and ``leakage'' of U.S. GHG emissions 
could occur--that is, reduced U.S. emissions simply being replaced with 
increased emissions in other countries--if the economic burdens on U.S. 
GHG emissions are too great. In that regard, CAA regulation of GHG 
emissions from stationary sources would significantly increase costs 
associated with the operation of power plants and industrial sources, 
as well as increase costs associated with direct energy use (e.g., 
natural gas for heating) by sources such as schools, hospitals, 
apartment buildings, and residential homes.
    Furthermore, in many cases the regulatory regime envisioned by the 
draft would result in emission controls, technology requirements, and 
compliance costs being imposed on entities that have never before been 
subject to direct regulation under the CAA. Before proceeding down that 
path, EPA should be transparent about, and there should be a full and 
fair discussion about, the true burdens of this path--in terms of its 
monetary cost, in terms of its regulatory and permitting burden, and in 
terms of exactly who will bear those costs and other burdens. These 
impacts are not adequately explored or explained in the draft. What 
should be crystal clear, however, is that the burdens will be enormous, 
they will fall on many entities not previously subject to direct 
regulation under the Act, and all of this will happen even though it is 
not clear what precise level of GHG emissions reduction or atmospheric 
GHG concentration level is being pursued, or even if that were decided, 
whether the CAA is a workable tool for achieving it.
    In the limited time DOE has had to review the draft, DOE primarily 
has focused on the extent to which the draft addresses stationary 
sources and the energy sector. Based on DOE's review, we briefly 
discuss below (1) the inadequacy of CAA provisions for controlling 
greenhouse gas emissions from stationary sources as a method of 
affecting global GHG concentrations and addressing global climate 
change; (2) the potential costs and effects of CAA regulation of GHG 
emissions on the U.S. electric power sector; and (3) considerations for 
U.S. action to address GHG emissions from stationary sources in the 
absence of an effective global approach for addressing climate change 
and worldwide GHG emissions.

II. The Ineffectiveness and Costs Associated with CAA Regulation of 
Greenhouse Gas Emissions from Stationary Sources

    The draft states that it was prepared in response to the decision 
of the United States Supreme Court in Massachusetts v. EPA, 549 U.S. --
----, 127 S. Ct. 1438 (2007). In that case, the Court held that EPA has 
the authority to regulate GHG emissions from new motor vehicles because 
GHGs meet the Clean Air Act's definition of an ``air pollutant.'' Id. 
at 1460. As a result, under section 202(a) of the Act, the EPA 
Administrator must decide whether, ``in his judgment,'' ``the emission 
of any air pollutant from any class or classes of new motor vehicles or 
new motor vehicle engines'' ``cause, or contribute to, air pollution 
which may reasonably be anticipated to endanger public health or 
welfare.'' If the EPA Administrator makes a positive endangerment 
finding, section 202(a) states that EPA ``shall by regulation prescribe 
* * * standards applicable to the emission of'' the air pollutant with 
respect to which the positive finding was made.
    The Supreme Court stated that it did not ``reach the question 
whether on remand EPA must make an endangerment finding, or whether 
policy concerns can inform EPA's actions in the event that it makes 
such a finding.'' Instead, the Court said that when exercising the 
``judgment'' called for by section 202(a) and in deciding how and when 
to take any regulatory action, ``EPA must ground its reasons for action 
or inaction in the statute.''
    As a result, and based on the text of section 202(a) of the Clean 
Air Act, any EPA ``endangerment'' finding must address a number of 
issues that involve interpretation of statutory terms and the 
application of technical or scientific data and judgment. For example, 
an endangerment determination must involve, among other things, a 
decision about the meaning of statutory terms including ``reasonably be 
anticipated to,'' ``cause, or contribute to,'' ``endanger,'' and 
``public health or welfare.'' Moreover, because the Act refers to ``air 
pollutant'' in the singular, presumably EPA should make any 
endangerment finding as to individual greenhouse gases and not as to 
all GHGs taken together, but this also is a matter that EPA must 
address and resolve. There are other issues that must be resolved as 
well, such as: whether the ``public health and welfare'' should be 
evaluated with respect to the United States alone or, if foreign 
impacts can or

[[Page 44367]]

should or must be addressed as well, what the statutory basis is for 
doing so and for basing U.S. emissions controls on foreign impacts; 
what time period in the future is relevant for purposes of determining 
what is ``reasonably anticipate[d]''; whether and if so how EPA must 
evaluate any beneficial impacts of GHG emissions in the United States 
or elsewhere in making an endangerment determination; and whether a 
particular volume of emissions or a particular effect from such 
emissions from new motor vehicles must be found before EPA may make a 
``cause or contribute'' finding, since the Act explicitly calls for the 
EPA Administrator to exercise his ``judgment,'' and presumably that 
judgment involves more than simply a mechanistic calculation that one 
or more molecules will be emitted.
    If EPA were to address these issues and resolve them in favor of a 
positive endangerment finding under section 202(a) of the Act with 
respect to one or more greenhouse gases and in favor of regulating GHG 
emissions from new motor vehicles, then the language similarities of 
various sections of the CAA likely would require EPA also to regulate 
GHG emissions from stationary sources. A positive endangerment finding 
and regulation of GHGs from new motor vehicles likely would immediately 
trigger the prevention of significant deterioration (PSD) permit 
program which regulates stationary sources that either emit or have the 
potential to emit 250 tons per year of a regulated pollutant or, if 
they are included on the list of source categories, at least 100 tons 
per year of a regulated pollutant. Because these thresholds are 
extremely low when considered with respect to GHGs, thousands of new 
sources likely would be swept into the PSD program necessitating time 
consuming permitting processes, costly new investments or retrofits to 
reduce or capture GHG emissions, increasing costs, and creating vast 
areas of uncertainty for businesses and commercial and residential 
development.
    In addition to the PSD program, it is widely acknowledged that a 
positive endangerment finding could lead to three potential avenues of 
stationary source regulation under the CAA: (1) The setting of national 
ambient air quality standards (NAAQS) under sections 108 and 109; (2) 
the issuance of new source performance standards (NSPS) under section 
111; and/or (3) the listing of one or more greenhouse gases as 
hazardous air pollutants (HAP) under section 112. Each of these 
approaches, and their associated deficiencies with respect to GHG 
emissions and as a method of addressing global climate change, are 
briefly discussed below.
a. Sections 108-109: NAAQS
    Section 108 of the CAA requires EPA to identify and list air 
pollutants that ``cause or contribute to air pollution which may 
reasonably be anticipated to endanger public health or welfare.'' For 
such pollutants, EPA promulgates ``primary'' and ``secondary'' NAAQS. 
The primary standard is defined as the level which, in the judgment of 
the EPA Administrator, based on scientific criteria, and allowing for 
an adequate margin of safety, is requisite to protect the public 
health. The secondary standard is defined as the level which is 
requisite to protect the public welfare. Within one year of EPA's 
promulgation of a new or revised NAAQS, each State must designate its 
regions as non-attainment, attainment, or unclassifiable. Within three 
years from the NAAQS promulgation, States are required to adopt and 
submit to EPA a State implementation plan (SIP) providing for the 
implementation, maintenance, and enforcement of the NAAQS.
    At least three major difficulties would be presented with respect 
to the issuance by EPA of a NAAQS for one or more greenhouse gases: (1) 
The determination of what GHG concentration level is requisite to 
protect public health and welfare; (2) the unique nature of GHGs as 
pollutants dispersed from sources throughout the world and that have 
long atmospheric lifetimes; and (3) GHG concentrations in the ambient 
air are virtually the same throughout the world meaning that they are 
not higher near major emissions sources than in isolated areas with no 
industry or major anthropogenic sources of GHG emissions.
    While much has been said and written in recent years about the need 
to reduce greenhouse gas emissions to address climate change, there is 
far less agreement on the acceptable or appropriate atmospheric 
concentration level of CO2 or other GHGs. As the draft 
states, ``[d]etermining what constitutes `dangerous anthropogenic 
interference' is not a purely scientific question; it involves 
important value judgments regarding what level of climate change may or 
may not be acceptable.'' While the Department agrees with this 
statement, the courts have held that when setting a NAAQS, EPA cannot 
consider important policy factors such as cost of compliance. This 
limitation inhibits a rational balancing of factors in determining and 
setting a GHG NAAQS based on the science available, the availability 
and cost of emission controls, the resulting impact on the U.S. 
economy, the emissions of other nations, etc.
    Unlike most pollutants where local and regional air quality, and 
local and regional public health and welfare, can be improved by 
reducing local and regional emissions, GHGs originate around the globe, 
and are mixed and dispersed such that there is a relatively uniform 
atmospheric GHG concentration level around the world. There is little 
or nothing that a single State or region can do that will appreciably 
alter the atmospheric GHG concentration level in that particular State 
or region. Thus, it is hard to see how a GHG NAAQS, which required 
States to take action to reduce their emissions to meet a particular 
air quality standard, would actually work. A GHG NAAQS standard would 
put the entire United States in either attainment or non-attainment, 
and it would be virtually impossible for an individual State to control 
or reduce GHG concentrations in its area and, thus, to make significant 
strides towards remaining in or reaching attainment with the NAAQS.
    Whatever level EPA might eventually establish as an acceptable 
NAAQS for one or more GHGs, EPA's setting of such a level would 
immediately implicate further issues under the NAAQS regime, including 
the ability of States and localities to meet such a standard. If the 
GHG NAAQS standard for one or more gases is set at a level below the 
current atmospheric concentration, the entire country would be in 
nonattainment. All States then would be required to develop and submit 
State Implementation Plans (SIPs) that provide for meeting attainment 
by the specified deadline. And yet, as the draft states, ``it would 
appear to be an inescapable conclusion that the maximum 10-year horizon 
for attaining the primary NAAQS is ill-suited to pollutants such as 
greenhouse gases with long atmospheric residence times * * * [t]he long 
atmospheric lifetime of * * * greenhouse gases * * * means that 
atmospheric concentrations will not quickly respond to emissions 
reduction measures * * * in the absence of substantial cuts in 
worldwide emissions, worldwide concentrations of greenhouse gases would 
continue to increase despite any U.S. emission control efforts. Thus, 
despite active control efforts to meet a NAAQS, the entire United 
States would remain in nonattainment for an unknown number of years.''
    As the draft also recognizes, if the NAAQS standard for GHGs is set 
at a

[[Page 44368]]

level above the current atmospheric concentration, the entire country 
would be in attainment. In a nationwide attainment scenario, the PSD 
and new source review (NSR) permitting regimes would apply and States 
would have to submit SIPs for the maintenance of the primary NAAQS and 
to prevent interference with the maintenance by other States of the 
NAAQS; tasks, that as applied to GHGs, are entirely superfluous given 
the inability of any single State to change through its own unilateral 
action the global or even local concentration level of GHGs.
    As the difficult choices and problematic results outlined above 
demonstrate, the inability of a single State to appreciably change 
atmospheric GHG concentrations in its own area through its own emission 
reduction efforts is inconsistent with a fundamental premise of the 
Clean Air Act and of the NAAQS program--that States and localities are 
primarily responsible for air pollution control and maintaining air 
quality, and that State and local governments can impose controls and 
permitting requirements that will allow the State to maintain or attain 
air quality standards through its own efforts.
b. Section 111: NSPS
    Section 111 of the CAA requires the EPA Administrator to list 
categories of stationary sources if such sources cause or contributes 
significantly to air pollution which may reasonably be anticipated to 
endanger public health or welfare. The EPA must then issue new source 
performance standards (NSPS) for such sources categories. An NSPS 
reflects the degree of emission limitation achievable through the 
application of the ``best system of emission reduction'' which the EPA 
determines has been adequately demonstrated. EPA may consider certain 
costs and non-air quality health and environmental impact and energy 
requirements when establishing NSPS. Where EPA also has issued a NAAQS 
or a section 112 maximum achievable control technology (MACT) standard 
for a regulated pollutant, NSPS are only issued for new or modified 
stationary sources. Where no NAAQS has been set and no section 112 MACT 
standard issued, NSPS are issued for new, modified, and existing 
stationary sources.
    Regulation of GHGs under section 111 presents at least two key 
difficulties. First, EPA's ability to utilize a market system such as 
cap and trade has not been confirmed by the courts. EPA's only attempt 
to establish a cap and trade program under section 111, the ``Clean Air 
Mercury Rule,'' was vacated by the U.S. Court of Appeals for the 
District of Columbia Circuit, though on grounds unrelated to EPA's 
authority to implement such a program under section 111. DOE believes 
EPA does have that authority, as EPA previously has explained, but 
there is legal uncertainty about that authority, which makes a GHG 
market-oriented program under section 111 uncertain.
    Second, EPA's regulation of small stationary sources (which account 
for a third of all stationary source emissions) would require a 
burdensome and intrusive regulatory mechanism unlike any seen before 
under the CAA. If EPA were to determine that it cannot feasibly issue 
permits to and monitor compliance for all of these sources, a section 
111 system presumably would cover only large stationary sources, which 
would place the compliance burden completely on electric generators and 
large industrial sources, and reduce any overall effect from the GHG 
control regime.
    However, there are questions about whether it would be permissible 
for EPA to elect not to regulate GHG emissions from small stationary 
sources. Section 111(b)(1) indicates that the Administrator must list a 
category of sources if, in his judgment, it causes, or contributes 
significantly to, air pollution which may reasonably be anticipated to 
endanger public health and welfare. Given the volume of greenhouse 
gases that are emitted from small stationary sources in the aggregate, 
it is uncertain whether, if EPA makes a positive endangerment finding 
for emissions of one or more GHGs from new motor vehicles, EPA could 
conclude that small stationary sources do not cause ``or contribute 
significantly'' to air pollution that endangers the public health or 
welfare. This might well turn on the interpretation and application of 
the terms in CAA section 202(a), noted above. Regardless, it is 
uncertain whether, and if so where, EPA could establish a certain GHG 
emission threshold for determining what sources or source categories 
are subject to GHG regulations under section 111. What does seem clear 
is that regulating GHG emissions under section 111 would entail 
implementation of an enormously complicated, costly, and invasive 
program.
c. Section 112: HAP
    Section 112 contains a list of hazardous air pollutants subject to 
regulation. A pollutant may be added to the list because of adverse 
health effects or adverse environmental effects. DOE believes it would 
be inappropriate for greenhouse gases to be listed as HAPs given, among 
other things, EPA's acknowledgment that ambient GHG concentrations 
present no health risks. Nevertheless, if one or more GHGs were listed 
under section 112, EPA would have to list all categories of ``major 
sources'' (defined as sources that emit or potentially emit 10 tons per 
year of any one HAP or 25 tons per year of any combination of HAPs). 
For each major source category, EPA must then set a maximum available 
control technology (MACT) standard.
    It is entirely unclear at this point what sort of MACT standard 
would be placed on which sources for purposes of controlling GHG 
emissions, what such controls would cost, and whether such controls 
would be effective. However, complying with MACT standards with respect 
to GHG emission controls likely would place a significant burden on 
States and localities, manufacturing and industrial facilities, 
businesses, power plants, and potentially thousands of other sources 
throughout the United States. As the draft explains, section 112 
``appears to allow EPA little flexibility regarding either the source 
categories to be regulated or the size of sources to regulate * * * EPA 
would be required to regulate a very large number of new and existing 
stationary sources, including smaller sources * * * we believe that 
small commercial or institutional establishments and facilities with 
natural gas fired furnaces would exceed this major source threshold; 
indeed, a large single family residence could exceed this threshold if 
all appliances consumed natural gas.''
    Compliance with the standards under section 112 is required to be 
immediate for most new sources and within 3-4 years for existing 
sources. Such a strict timeline would leave little to no time for 
emission capture and reduction technologies to emerge, develop, and 
become cost-effective.
d. Effects of CAA Regulation of GHGs on the U.S. Energy Sector
    While the Department has general concerns about the portrayal of 
likely effects of proposals to regulate GHGs under the CAA on all 
sectors of the U.S. economy, DOE is particularly concerned about the 
effects of such regulation on the energy sector. The effects of broad 
based, economy-wide regulation of GHGs under the CAA would have 
significant adverse effects on U.S. energy supplies, energy 
reliability, and energy security.
    Coal is used to generate about half of the U.S. electricity supply 
today, and the Energy Information Administration (EIA) projects this 
trend to continue

[[Page 44369]]

through 2030. (EIA AEO 2008, at 68) At the electricity generating plant 
itself, conventional coal-fired power stations produce roughly twice as 
much carbon dioxide as a natural gas fired power station per unit of 
electricity delivered. Given this reality, the effect of regulating 
emissions of GHGs from stationary sources under the CAA could force a 
drastic shift in the U.S. power sector. As Congressman John D. Dingell, 
Chairman of the U.S. House of Representatives Committee on Energy and 
Commerce, explained in a statement issued on April 8, 2008:

    ``As we move closer to developing policies to limit and reduce 
emissions, we must be mindful of the impact these policies have on 
the price of all energy commodities, particularly natural gas. What 
happens if efforts to expand nuclear power production and cost-
effectively deploy carbon capture and storage for coal-fired 
generation are not successful? You know the answer. We will drive 
generation to natural gas, which will dramatically increase its 
price tag. We don't have to look too far in the past to see the 
detrimental effect that high natural gas prices can have on the 
chemical industry, the fertilizer industry, and others to know that 
we must be conscious of this potential consequence.''

Chairman Dingell's view is supported by studies of the climate bill 
recently considered by the United States Senate. EIA's analysis of the 
Lieberman-Warner bill stated that, under that bill, and without 
widespread availability of carbon capture and storage (CCS) technology, 
natural gas generation would almost double by 2030. See Energy 
Information Administration, Energy Market and Economic Impacts of S. 
2191, the Lieberman-Warner Climate Security Act of 2007 at 25.\4\
---------------------------------------------------------------------------

    \4\ DOE's Energy Information Administration (EIA) prepared an 
analysis of the proposed Lieberman-Warner Climate Security Act of 
2007 and projected that if new nuclear, renewable and fossil plans 
with carbon capture and sequestration are not developed and deployed 
in a time frame consistent with emissions reduction requirements, 
there would be increased natural gas use to offset reductions in 
coal generation, resulting in markedly higher delivered prices of 
natural gas. See Energy Market and Economic Impacts of S. 2191, the 
Lieberman-Warner Climate Security Act of 2007 (EIA, April 2008) EIA 
estimated price increases from 9.8 cents per kilowatthour in 2020 to 
14.5 cents per kilowatthour in 2030, ranging from 11 to 64 percent 
higher by 2030. Id., p. 27, Figure 16. EPA's analysis of the 
proposed legislation similarly projected electricity prices to 
increase 44% in 2030 and 26% in 2050 assuming the growth of nuclear, 
biomass or carbon capture and storage technologies. See EPA Analysis 
of the Lieberman-Warner Climate Security Act of 2008 (March 14, 
2008), pp. 3, 57. If the growth of nuclear, biomass, or carbon 
capture and storage technologies was constrained, EPA projected that 
electricity prices in 2030 would be 79% higher and 2050 prices would 
be 98% higher than the reference scenario prices. Other analyses of 
the legislation also projected substantial increases in energy costs 
for consumers. See, e.g. Analysis of the Lieberman-Warner Climate 
Security Act (S. 2191) Using the National Energy Modeling System (A 
Report by the American Council for Capital Formation and the 
National Associate of Manufacturers, conducted by Science 
Applications International Corporation (SAIC))(study finding 
increases in energy prices for residential consumers by 26% to 36% 
in 2020, and 108% to 146% in 2030 for natural gas, and 28% to 33% in 
2020, and 101% to 129% in 2030 for electricity). Further, in its 
analysis o the bill the Congressional Budge Office estimated that 
costs of private sector mandates associated with the legislation 
would amount to more than $90 billion each year during the 2012-2016 
period, most of which cost would ultimately be passed on to 
consumers in the form of higher prices for energy and energy-
intensive goods and services. See Congressional Budget Office Cost 
Estimate, S. 2191 (April 10, 2008), pp. 2, 19.
---------------------------------------------------------------------------

    If CAA regulation of GHG emissions from stationary sources forces 
or encourages a continued move toward natural gas fired electric 
generating units, there will be significantly increased demand for 
natural gas. Given the limitations on domestic supplies, including the 
restrictions currently placed on the production of natural gas from 
public lands or from areas on the Outer Continental Shelf, much of the 
additional natural gas needed likely would have to come from abroad in 
the form of liquefied natural gas (LNG). This LNG would have to be 
purchased at world prices, currently substantially higher than domestic 
natural gas prices and generally tied to oil prices (crude or product). 
To put this into perspective, natural gas closed on June 27, 2008, at 
about $13.20/mcf for August delivery, about twice as high as last year 
at this time, despite increasing domestic natural gas production. The 
reason is that unlike last year, the U.S. has been able to import very 
little LNG this year, even at these relatively high domestic prices. 
United States inventories of natural gas in storage currently are about 
3% below the five year average, and are 16% below last year at this 
time. Among other effects, a large policy-forced shift towards 
increased reliance on imported LNG would raise energy security and 
economic concerns by raising domestic prices for consumers (including 
electricity prices) and increasing U.S. reliance on foreign sources of 
energy.
    In order for coal to remain a viable technology option to help meet 
the world's growing energy demand while at the same time not addressing 
GHG emissions, CCS technologies must be developed and widely deployed. 
While off-the-shelf capture technologies are available for coal power 
plant applications, current technologies are too costly for wide scale 
deployment for both new plant construction and retrofit of the existing 
fleet of coal-fired power plants. DOE studies (e.g., DOE/NETL Report: 
``Cost and Performance Baseline for Fossil Energy Plants,'' May 2007) 
show that capturing and sequestering CO2 with today's 
technology is expensive, resulting in electricity cost increases on the 
order of 30%-90% above the cost of electricity produced from new coal 
plants built without CCS.
    The impact of a policy that requires more production of electricity 
from natural gas will be felt not just in the United States but in 
worldwide efforts to reduce GHG emissions. Unless U.S. policy supports 
rapid development of CCS technologies to the point that they are 
economically deployable (i.e., companies are not forced to switch to 
natural gas fired electric generating facilities), CCS will not be 
installed as early as possible in the China or other developing 
nations. In a global climate sense, most of the benefit from new 
technology installation will come from the developing countries, and 
much of the international benefit would come from providing countries 
like China and India with reasonable-cost CCS options for development 
of their massive coal resources, on which we believe they will continue 
to rely.

III. Energy Policy Considerations for Addressing Climate Change

    The Department is concerned that the draft does not properly 
acknowledge collateral effects of using CAA regulation to address 
global climate change, particularly in the absence of a regime that 
actually will effectively address global climate change by addressing 
global GHG emissions. DOE strongly supports efforts to reduce GHG 
emissions by advancing technology and implementing policies that lower 
emissions, but doing so in a manner that is conscious of and that 
increases, rather than decreases, U.S. energy security and economic 
security. With these goals in mind, DOE believes policymakers and the 
public should be mindful of the considerations briefly described below 
as the United States seeks to effectively address the challenge of 
global climate change.
    Secretary Bodman has stated that ``improving our energy security 
and addressing global climate change are among the most pressing 
challenges of our time.'' This is particularly true in light of the 
estimate by the International Energy Agency that the world's primary 
energy needs will grow by over 50% by 2030.
    In order to address these challenges simultaneously and 
effectively, the United States and other countries must make pervasive 
and long-term changes. Just as the current energy and environmental 
situation did not develop

[[Page 44370]]

overnight, neither can these challenges be addressed and resolved 
immediately.
    To ensure that we both improve energy security and reduce GHG 
emissions, rather than address one at significant cost to the other, 
DOE believes that a number of actions must be taken. None of these 
actions is sufficient in itself, and none of these actions can be 
pursued to the exclusion of the others.
    Specifically, the United States and other nations must: Bring more 
renewable energy online; aggressively deploy alternative fuels; develop 
and use traditional hydrocarbon resources, and do so in ways that are 
clean and efficient; expand access to safe and emissions-free nuclear 
power, while responsibly managing spent nuclear fuel and reducing 
proliferation risks; and significantly improve the efficiency of how we 
use energy. In all of these things, the Department believes that 
technological innovation and advancement is the key to unlocking the 
future of abundant clean energy and lower GHG emissions. Therefore, 
this innovation and advancement--through government funding, private 
investment, and public policies that promote both of these--should be 
the cornerstone of any plan to combat global climate change.
    In recent years, DOE has invested billions of dollars to advance 
the development of technologies that advance these objectives. For 
example, in 2007 DOE funded the creation of three cutting-edge 
bioenergy research facilities. These facilities, which are already 
showing progress, will seek to advance the production of biofuels that 
have significant potential for both increasing the Nation's energy 
security and reducing GHG emissions. Since the start of 2007, DOE has 
invested well over $1 billion to spur the growth of a robust, 
sustainable biofuels industry in the United States.
    DOE also has promoted technological advancement and deployment in 
other renewable energy areas such as wind, solar and geothermal power, 
and these advancements and policies are producing results. For example, 
in 2007, U.S. cumulative wind energy capacity reached 16,818 
megawatts--more than 5,000 megawatts of wind generation were installed 
in 2007 alone. The United States has had the fastest growing wind power 
capacity in the world for the last three years in a row. In addition, 
DOE recently issued a solicitation offering up to $10 billion in 
federal loan guarantees, under the program authorized by Title XVII of 
the Energy Policy Act of 2005, to incentivize the commercial deployment 
of new or significantly improved technologies in projects that will 
avoid, reduce or sequester emissions of GHGs or other air pollutants.
    DOE strongly believes that nuclear power must play an important 
role in any effective program to address global climate change. Indeed, 
we believe that no serious effort to effectively control GHG emissions 
and address climate change can exclude the advancement and development 
of nuclear power. DOE continues to seek advancements in nuclear power 
technology, in the licensing of new nuclear power facilities, and in 
responsibly disposing of spent nuclear fuel. With respect to new 
nuclear power plants, DOE has put in place a program to provide risk 
insurance for the developers of the first new facilities, and recently 
issued a solicitation offering up to $18.5 billion in federal loan 
guarantees for new nuclear power plants.
    Significant advancements have been made in recent years toward the 
development of new nuclear facilities. There now are pending at the 
Nuclear Regulatory Commission several applications, all of which have 
been filed in 2007 or 2008, to license new nuclear generating 
facilities. DOE views the filing of these applications and the interest 
in licensing and building new nuclear power facilities as very positive 
developments from the perspectives of the Nation's electric reliability 
and energy security, as well as the effort to control greenhouse gas 
emissions. But there still is much to be done, and it will take a 
sustained effort both by the private sector and by federal, State and 
local governments, to ensure that these facilities are licensed, built 
and placed into service.
    As noted above, DOE believes that coal can and must play an 
important role in this Nation's energy future. Moreover, regardless 
what decisions about coal U.S. policy officials may wish to make, it 
seems clear that coal will continue to be used by other countries to 
generate electricity for decades to come. It has been noted that China 
is building new coal power plant capacity at the incredible rate of one 
per week. As a result, it is critically important that we develop and 
deploy cost-effective carbon capture and sequestration technology, both 
to ensure that we can take advantage of significant energy resources 
available in the United States, but also to help enable the control of 
emissions in other countries as well.
    DOE believes that cost effective CCS technology must be developed 
over the next 10-15 years that could be deployed on new plants built to 
meet increasing demand and to replace retiring capital stock, and 
retrofitted on existing plants with substantial remaining plant life. 
DOE is helping to develop technologies to capture, purify, and store 
CO2 in order to reduce GHG emissions without significant 
adverse effects on energy use or on economic growth. DOE's primary CCS 
research and development objectives are: (1) Lowering the cost and 
energy penalty associated with CO2 capture from large point 
sources; and (2) improving the understanding of factors affecting 
CO2 storage permanence, capacity, and safety in geologic 
formations and terrestrial ecosystems.
    Once these objectives are met, new and existing power plants and 
fuel processing facilities in the U.S. and around the world will have 
the potential to deploy CO2 capture technologies. Roughly 
one third of the United States' carbon emissions come from power plants 
and other large point sources. To stabilize and ultimately reduce 
atmospheric concentrations of CO2, it will be necessary to 
employ carbon sequestration--carbon capture, separation and storage or 
reuse. The availability of advanced coal-fired power plants with CCS to 
provide clean, affordable energy is essential for the prosperity and 
security of the United States.
    The DOE carbon sequestration program goal is to develop at R&D 
scale by 2012, fossil fuel conversion systems that offer 90 percent 
CO2 capture with 99 percent storage permanence at less than 
a 10 percent increase in the cost of energy services from new plants. 
For retrofits of existing facilities, the task will be much harder, and 
the penalties in terms of increased cost of power production from those 
plants likely will be much higher. We expect that these integrated 
systems for new plants will be available for full commercial 
deployment--that is, will have completed the demonstration and early 
deployment phase--in the 2025 timeframe. Of course, there are inherent 
uncertainties in these projections and long-term research, development, 
demonstration and deployment goals.
    In line with the Department's CCS R&D goals, DOE is working with 
regional carbon sequestration partnerships to facilitate the 
development of the infrastructure and knowledge base needed to place 
carbon sequestration technologies on the path to commercialization. In 
addition, DOE recently restructured its FutureGen program to accelerate 
the near-term deployment of advanced clean coal technology by equipping 
new integrated gasification combined cycle (IGCC) or other clean coal 
commercial power

[[Page 44371]]

plants with CCS technology. By funding multiple projects, the 
restructured FutureGen is expected to at least double the amount of 
CO2 sequestered compared to the concept that previously had 
been announced in 2003. The restructured FutureGen approach also will 
focus on the challenges associated with avoidance and reduction of 
carbon emissions and criteria pollutants through sequestration.
    In order to reduce the demand on our power sector and the 
associated emissions of GHGs and other pollutants, we must continue to 
support expanded efforts to make our society more efficient, from major 
power plants to residential homes. DOE has helped lead this effort 
with, among other things, its Energy Star program, a government-backed 
joint effort with EPA to establish voluntary efficiency standards that 
help businesses and individuals protect the environment and save money 
through greater energy efficiency. By issuing higher efficiency 
standards for an increasing number of products, the Energy Star program 
helps consumers make fully-informed and energy-conscious decisions that 
result in reduced emissions of GHGs and other pollutants. Last year 
alone, with the help of the Energy Star program, American consumers 
saved enough energy to power 10 million homes and avoid GHG emissions 
equivalent to the emissions from 12 million cars--all while saving $6 
billion in energy costs.

IV. Conclusion

    The Department believes the draft does not address and explain in 
clear, understandable terms the extraordinary costs, burdens and other 
adverse consequences, and the potentially limited benefits, of the 
United States unilaterally using the Clean Air Act to regulate GHG 
emissions. The draft, while presenting useful analysis, seems to make a 
case for the CAA being the proper vehicle to meaningfully combat global 
climate change, but we believe it understates the potential costs and 
collateral adverse effects of attempting to regulate GHG emissions and 
address climate change through a regulatory scheme that is forced into 
the Clean Air Act's legal and regulatory mold.
    Any effective and workable approach to controlling GHG emissions 
and addressing global climate change should not simply consist of a 
unilateral and extraordinarily burdensome CAA regulatory program that 
is placed on top of the U.S. economy with all other existing mandates, 
restrictions, etc. simply remaining in place and the Government taking 
the position that U.S. energy security and indeed the American economy 
will just have to live with whatever results the GHG control program 
produces. Rather, the Nation can only effectively address GHG emissions 
and global climate change in coordination with other countries, and by 
addressing how to regulate GHG emissions while considering the effect 
of doing so on the Nation's energy and economic security. Considering 
and developing such a comprehensive approach obviously will be very 
difficult. But what seems clear is that it would be better than the 
alternative, if the alternative is unilaterally proceeding with the 
enormously burdensome, complex and costly regulatory program under the 
Clean Air Act discussed in the draft, which in the end might not even 
produce the desired climate change benefits.

U.S. Department of Commerce

Analysis of Draft Advanced Notice of Proposed Rulemaking

''Regulating Greenhouse Gas Emissions Under the Clean Air Act''
    Overview: This analysis reviews some of the implications of 
regulating greenhouse gas (GHG) emissions under the Clean Air Act (CAA) 
as outlined in the draft Advance Notice of Proposed Rulemaking 
submitted to the Office of Management and Budget on June 17, 2008 (the 
draft). The Department of Commerce's fundamental concern with the 
draft's approach to using the CAA to regulate GHGs is that it would 
impose significant costs on U.S. workers, consumers, and producers and 
harm U.S. competitiveness without necessarily producing meaningful 
reductions in global GHG emissions.
    Impact on U.S. Competitiveness and Manufacturing: The draft states 
that competitiveness is an important policy consideration in assessing 
the application of CAA authorities to GHG emissions. It also 
acknowledges the potential unintended consequences of domestic GHG 
regulation, noting ``[t]he concern that if domestic firms faced 
significantly higher costs due to regulation, and foreign firms 
remained unregulated, this could result in price changes that shift 
emissions, and possibly some production capacity, from the U.S. to 
other countries.'' \5\ This is a real issue for any domestic regulation 
implemented without an international agreement involving the world's 
major emitters.
---------------------------------------------------------------------------

    \5\ EPA draft, pg. 36.
    \6\ EIA International Energy Outlook 2008, http://www.eia.doe.gov/oiaf/ieo/highlights.html.
---------------------------------------------------------------------------

    However, the draft does not detail the shift in global emissions 
that is currently taking place. As the chart below shows, the emissions 
of countries outside of the Organization of Economic Cooperation and 
Development (OECD) already exceed those of OECD countries. By 2030, 
non-OECD emissions are projected to be 72 percent higher than those of 
their OECD counterparts.\6\
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[GRAPHIC] [TIFF OMITTED] TP30JY08.006

    Any climate change regulation must take this trend into account. 
Greenhouse gas emissions are a global phenomenon, and, as documented in 
the draft, require reductions around the world in order to achieve 
lower concentrations in the atmosphere. However, the costs of emissions 
reductions are generally localized and often borne by the specific 
geographic area making the reductions. As a result, it is likely that 
the U.S. could experience significant harm to its international 
competitiveness if GHGs were regulated under the CAA, while at the same 
time major sources of emissions would continue unabated absent an 
international agreement.
    Because the draft does not specify an emissions target level, the 
implications of national regulation for the U.S. economy as a whole and 
for energy price-sensitive sectors in particular are difficult to 
forecast. However, recent analysis of emissions targets similar to 
those cited in the draft provides a guide to the estimated level of 
impacts.
    In April 2008, the Energy Information Administration (EIA) released 
an analysis of legislation that set emission reduction targets of 30 
percent below 2005 levels by 2030 and 70 percent below 2005 levels by 
2050. The EIA estimated that in the absence of international offsets 
and with limited development of alternatives, achieving those emission 
targets would reduce manufacturing employment by 10 percent below 
currently projected levels in 2030. Under the same scenario, the EIA 
estimate indicated the emission targets would reduce the output of key 
energy-intensive manufacturing industries, such as food, paper, glass, 
cement, steel, and aluminum, by 10 percent and the output of non-energy 
intensive manufacturing industries by nine percent below currently 
projected levels in 2030.\7\
---------------------------------------------------------------------------

    \7\ Energy Market and Economic Impacts of S. 2191, Figure 28 & 
29, http://www.eia.doe.gov/oiaf/servicerpt/s2191/economic.html.
---------------------------------------------------------------------------

    The European Union's experience with implementation of its cap-and-

[[Page 44373]]

trade system is also instructive from a competitiveness standpoint. Key 
energy intensive industries in Europe have raised concerns about the 
competitiveness impacts of the emissions trading system (ETS), arguing 
that the ETS would force them to relocate outside of Europe. EU leaders 
have responded to these concerns by considering the possibility of 
awarding free emissions permits to certain industries, provided the 
industries also agreed to reduce emissions.\8\ This illustrates one of 
the challenges of crafting an effective national or regional solution 
to a global problem.
---------------------------------------------------------------------------

    \8\ Financial Times, ``Brussels softens line on carbon 
permits,'' Andrew Bounds, Jan. 22, 2008.
---------------------------------------------------------------------------

    International Trade: In order to address the concern that GHG 
regulation in the United States will lead to emissions leakage and 
movement of certain sectors to countries without strict carbon 
regulations, the draft requests comment on ``trade-related policies 
such as import tariffs on carbon or energy content, export subsidies, 
or requirements for importers to submit allowances to cover the carbon 
content of certain products.'' \9\
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    \9\ EPA draft, pg. 37.
---------------------------------------------------------------------------

    Applying tariffs to imports from countries without carbon 
regulations would have a number of significant repercussions. In 
addition to exposing the United States to World Trade Organization 
challenges by our trading partners, unilateral U.S. carbon tariffs 
could spark retaliatory measures against U.S. exporters, the brunt of 
which would fall on U.S. workers, consumers, and businesses. For 
example, a World Bank study found that carbon tariffs applied to U.S. 
exports to Europe ``could result in a loss of about 7 percent in U.S. 
exports to the EU. The energy intensive industries, such as steel and 
cement * * * could suffer up to a 30 percent loss.'' \10\
---------------------------------------------------------------------------

    \10\ The World Bank, International Trade and Climate Change: 
Economic, Legal, and Institutional Perspectives, 2008, pg. 12.
---------------------------------------------------------------------------

    Moreover, carbon tariffs would actively undermine existing U.S. 
trade policy. The U.S. Government has consistently advocated for 
reducing tariffs, non-tariff barriers, and export subsidies. 
Introducing new tariffs or export subsidies for carbon or energy 
content would undermine those efforts with respect to clean energy 
technologies specifically and U.S. goods and services more broadly, as 
well as invite other countries to expand their use of tariffs and 
subsidies to offset costs created by domestic regulations.
    Two examples of U.S. efforts to reduce tariffs or enhance exports 
in this area: The United States Trade Representative is actively 
engaged in trade talks to specifically reduce tariffs on environmental 
technologies, which will lower their costs and encourage adoption, 
while the Department of Commerce's International Trade Administration 
is currently planning its third ``Clean Energy'' trade mission to China 
and India focused on opening these rapidly developing economies to U.S 
exporters of state-of-the-art clean technologies. Rather than raising 
trade barriers, the U.S. Government should continue to advocate for the 
deployment of clean energy technologies through trade as a way to 
address global GHG emissions
    The issue of emissions leakage and the potential erosion of the 
U.S. industrial base are real concerns with any domestic GHG regulation 
proposal outside of an international framework. Accordingly, the proper 
way to address this concern is through an international agreement that 
includes emission reduction commitments from all the major emitting 
economies, not by unilaterally erecting higher barriers to trade.
    Realistic Goals for Reducing Carbon Emissions: Establishing a 
realistic goal of emissions reduction is an essential aspect of 
designing policies to respond to climate change. Although the draft 
does not ``make any judgment regarding what an appropriate [greenhouse 
gas] stabilization goal may be,'' the document cites, as an example, 
the Intergovernmental Panel on Climate Change's projection that global 
CO2 emissions reductions of up to 60 percent from 2000 levels by 2050 
are necessary to stabilize global temperatures slightly above pre-
industrial levels.\11\
---------------------------------------------------------------------------

    \11\ EPA draft, pg. 14.
---------------------------------------------------------------------------

    To provide context, it is useful to note that a 60 percent 
reduction in U.S. emissions from 2000 levels would result in emissions 
levels that were last produced in the United States during the 1950s 
(see chart on next page). In 1950, the population in the United States 
was 151 million people--about half the current size--and the Gross 
Domestic Product was $293 billion.\12\ Without the emergence of 
technologies that dramatically alter the amount of energy necessary for 
U.S. economic output, the reduction of energy usage necessary to 
achieve this goal would have significant consequences for the U.S. 
economy.
---------------------------------------------------------------------------

    \12\ U.S. Census Bureau, 1950 Decennial Census; Bureau of 
Economic Analysis, National Income and Product Accounts Table.
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    Moreover, as the draft acknowledges, initial emissions reductions 
under the CAA or other mechanism ``may range from only [a] few percent 
to 17% or more in some cases. Clearly, more fundamental technological 
changes will be needed to achieve deeper reductions in stationary 
source GHG emissions over time.'' \13\ But the inability, at this time, 
to identify either a realistic emissions target or the technical 
feasibility of achieving various levels of reduction is one of the 
major flaws of using the draft to assess policy changes of this 
magnitude.
---------------------------------------------------------------------------

    \13\ EPA draft, pg. 209.
---------------------------------------------------------------------------

    The draft also notes that ``[a]n economy-wide, market-oriented 
environmental regulation has never been implemented before in the 
U.S.'' \14\ This point is worth underscoring: The CAA has never been 
applied to every sector in the U.S. economy. Instead, the CAA is 
generally applied to specific sectors (such as the power sector) or 
sources of emissions, and it has included initiatives to address 
regional and multi-state air quality issues. While these examples 
clearly provide valuable experience in addressing air pollution issues 
across state boundaries, using the CAA to regulate GHGs is 
significantly more ambitious in scope than anything previously 
attempted under the CAA.
---------------------------------------------------------------------------

    \14\ EPA draft, pg. 32.
---------------------------------------------------------------------------

    Accountability and Public Input: The draft contemplates a dramatic 
regulatory expansion under the CAA. However, climate policies of this 
magnitude are best addressed through legislative debate and scrutiny. 
Examining these issues in the legislative context would ensure that 
citizens, through their elected representatives, have ample opportunity 
to make their views known and to ensure accountability for the 
decisions that are made.
    Economic Implications of Applying CAA Authorities: The draft noted 
numerous issues of economic significance in analyzing the potential 
application of the CAA to stationary sources of GHGs. The Department of 
Commerce highlights below some of the most important issues raised in 
the draft that could impact U.S. competitiveness, innovation, and job 
creation.
    Compliance Costs of Multiple State Regulations Under the CAA: The 
draft describes the various authorities under the CAA that could be 
applied to GHGs. One such mechanism involves the development of 
individual state implementations plans (SIPs) in order to meet a 
national GHG emissions reduction standard. As the draft notes, ``[t]he 
SIP development process, because it relies in large part on individual 
states, is not designed to result in a uniform national program of 
emission controls.'' \15\ The draft also raises the potential 
implications of this approach: ``[u]nder the traditional SIP approach, 
emissions controls on specific source categories would flow from 
independent state-level decisions, and could result in a patchwork of 
regulations requiring different types and levels of controls in 
different states.'' \16\ If this were the result, it could undermine 
the benefit of having a national standard and significantly raise 
compliance costs. The implications of this approach should be examined 
further.
---------------------------------------------------------------------------

    \15\ EPA draft, pg. 181.
    \16\ EPA draft, pg. 187.
---------------------------------------------------------------------------

    Viability of Technological Alternatives: The draft notes that some 
of the authorities in the CAA could impose requirements to use 
technology that is not commercially viable. For example, when 
discussing Standards of Performance for New and Existing Sources, the 
draft notes that ``the systems on which the standard is based need only 
be `adequately demonstrated' in EPA's view * * * The systems, and 
corresponding emission rates, need not be actually in use or achieved 
in

[[Page 44375]]

practice at potentially regulated sources or even at a commercial 
scale.'' \17\ Similarly, in examining the potential application of the 
New Source Review program to nonattainment areas, the draft outlines 
the program's required use of the Lowest Available Emissions Rate 
(LAER) technology which ``does not allow consideration of the costs, 
competitiveness effects, or other related factors associated with the 
technology * * * New and modified sources would be required to apply 
the new technology even if it is a very expensive technology that may 
not necessarily have been developed for widespread application at 
numerous smaller sources, and even if a relatively small emissions 
improvement came with significant additional cost.'' \18\
---------------------------------------------------------------------------

    \17\ EPA draft, pg. 196.
    \18\ EPA draft, pg. 232.
---------------------------------------------------------------------------

    If CAA requirements such as these were used to regulate GHGs, it 
would impose significant costs on those required to adopt the 
technology.
    Expanding CAA Regulation to Cover Small Businesses and Non-Profits: 
The draft notes that the use of some CAA authorities could extend 
regulation to small and previously unregulated emissions sources. For 
example, the draft states that the use of one authority under the CAA 
could result in the regulation of ``small commercial or institutional 
establishments and facilities with natural gas-fired furnaces.'' \19\ 
This could include large single family homes, small businesses, 
schools, or hospitals heated by natural gas. If the CAA was applied in 
ways that extended it beyond those traditionally regulated under the 
Act, it could have significant economic impacts, and the costs of such 
an application should be further analyzed. To put this potential 
expansion in context, in 2003 there were 2.4 million commercial non-
mall buildings in the United States that used natural gas, and an 
estimated 54 percent of these buildings were larger than 5,000 square 
feet.\20\ According to the EIA's 2003 Commercial Building Energy 
Consumption Survey, a building between 5,001 to 10,000 square feet 
consumes 408,000 cubic feet of natural gas per year.\21\ Based on 
preliminary calculations using the EPA's Greenhouse Gas Equivalencies 
Calculator, this translates into annual CO2 emissions of 21 
metric tons, which would exceed the allowable threshold under one 
provision of the CAA.\22\
---------------------------------------------------------------------------

    \19\ EPA draft, pg. 215.
    \20\ Energy Information Agency, 2003 Commercial Buildings Energy 
Consumption Survey-Overview of Commercial Buildings Characteristics, 
Table C23.
    \21\ 2003 Commercial Buildings Energy Consumption Survey.
    \22\ Calculation done by converting cubic feet of gas consumed 
to therms, and the number of therms then inserted into the EPA 
calculator. According to the EPA draft (pg. 214): If GHGs were 
listed as a Hazardous Air Pollutant (HAP) under the CAA, the HAP 
standard's ``major source thresholds of 10 tons for a single HAP and 
25 for any combination of HAP would mean that very small GHG 
emitters would be considered major sources.''
---------------------------------------------------------------------------

    The table below taken from the EIA's 2003 Commercial Building 
Energy Consumption Survey shows the number and size of U.S. buildings, 
providing more detail on the type of structures that could be regulated 
if the CAA was applied to GHGs. Based on the estimate of 21 metric tons 
of annual emissions from a building 5,000-10,000 square feet in size, 
it is likely that schools, churches, hospitals, hotels, and police 
stations heated by natural gas could be subject to the CAA. Clearly, 
the costs and benefits of such an approach should be examined in 
greater detail.

                                      Non-Mall Buildings Using Natural Gas
                          [Number and Floorspace by Principal Building Activity, 2003]
----------------------------------------------------------------------------------------------------------------
                                                                Number of     Total floorspace  Mean square feet
                                                                buildings       (million sq.      per building
                                                               (thousand)           ft.)           (thousand)
----------------------------------------------------------------------------------------------------------------
All Buildings.............................................             2,391            43,468              18.2
Education.................................................               213             7,045              33.1
Food Sales................................................                98               747               7.6
Food Service..............................................               226             1,396               6.2
Health Care...............................................                72             2,544              35.5
    Inpatient.............................................                 7             1,805             257.0
    Outpatient............................................                65               739              11.4
Lodging...................................................                86             4,256              49.7
Mercantile................................................               245             2,866              11.7
Office....................................................               488             8,208              16.8
Public Assembly...........................................               146             2,723              18.6
Public Order and Safety...................................                36               637              17.7
Religious Worship.........................................               220             2,629              11.9
Service...................................................               281             2,496               8.9
Warehouse and Storage.....................................               187             5,494              29.4
Other.....................................................                45             1,252              27.9
Vacant....................................................                49             1,176              24.2
----------------------------------------------------------------------------------------------------------------
Source: from Energy Information Administration, 2003 Commercial Buildings Energy Consumption Survey, Table C23.
  (http://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_tables_2003/2003set11/2003excel/c23.xls)

    Cost of CAA Permitting: As the draft states, ``the mass emissions 
[of CO2] from many source types are orders of magnitude 
greater than for currently regulated pollutants,'' which could result 
in the application of the CAA's preconstruction permitting requirements 
for modification or new construction to large office buildings, hotels, 
apartment building and large retail facilities.\23\ The draft also 
notes the potential time impacts (i.e., the number of months necessary 
to receive a CAA permit) of applying new permit requirements to 
projects and buildings like those noted above that were not previously 
subject to the CAA.\24\ The potential economic costs of applying the 
CAA permitting regimes to these areas of the economy, such as small 
businesses and commercial development, merit a complete assessment of 
the costs and benefits of such an approach.
---------------------------------------------------------------------------

    \23\ EPA draft, pg. 224, 225.
    \24\ EPA draft, pg. 227.
---------------------------------------------------------------------------

    Conclusion: Climate change presents real challenges that must be 
addressed through focused public policy

[[Page 44376]]

responses. However, the draft raises serious concerns about the use of 
the CAA to address GHG emissions. The CAA is designed to reduce the 
concentration of pollutants, most of which have a limited lifetime in 
the air, while climate change is caused by GHG emissions that linger in 
the atmosphere for years. The CAA uses regulations that are often 
implemented at the state and regional level, while climate change is a 
global phenomenon. The CAA is designed to regulate major sources of 
traditional pollutants, but applying those the standards to GHGs could 
result in Clean Air Act regulation of small businesses, schools, 
hospitals, and churches.
    Using the CAA to address climate change would likely have 
significant economic consequences for the United States. Regulation of 
GHG emissions through the CAA would mean that the United States would 
embrace emissions reductions outside of an international agreement with 
the world's major emitters. This would put U.S. firms at a competitive 
disadvantage by raising their input costs compared to foreign 
competitors, likely resulting in emissions leakage outside of the 
United States and energy-intensive firms relocating to less regulated 
countries. Such an outcome would not be beneficial to the environment 
or the U.S. economy.

Department of Agriculture

    Americans enjoy the safest, most abundant, and most affordable food 
supply in the world. Our farmers are extraordinarily productive, using 
technology and good management practices to sustain increased yields 
that keep up with growing populations, and they are good stewards of 
the land they depend upon for their livelihoods. Because of their care 
and ingenuity, the United States is projecting an agricultural trade 
surplus of $30 billion in 2008.
    Unfortunately, the approach suggested by the Environmental 
Protection Agency (``EPA'') staff's draft Advance Notice of Proposed 
Rulemaking ``Regulating Greenhouse Gas Emissions under the Clean Air 
Act,'' which was submitted to the Office of Management and Budget on 
June 17, 2008 (``June 17 draft'' or ``draft ANPR''), threatens to 
undermine this landscape. If EPA were to exercise a full suite of the 
Clean Air Act (``CAA'') regulatory programs outlined in the draft ANPR, 
we believe that input costs and regulatory burden would increase 
significantly, driving up the price of food and driving down the 
domestic supply. Additionally, the draft ANPR does not sufficiently 
address the promise of carbon capture and sequestration, and how a 
Clean Air Act regulatory framework could address these issues.

Input Costs

    Two of the more significant components of consumer food prices are 
energy and transportation costs, and as these costs rise, they will 
ultimately be passed on to consumers in the form of higher food prices. 
As the past several months have demonstrated to all Americans, food 
prices are highly sensitive to increased energy and transportation 
costs. From May 2007 to May 2008, the price of crude oil has almost 
doubled, and the price consumers in the United States paid for food has 
increased by 5.1%.
    We do not attempt here to address the effects on energy and 
transportation costs that would likely flow from a Clean Air Act 
approach to regulating greenhouse gases. The expert agencies--the 
Department of Energy and the Department of Transportation--have each 
included their own brief assessments of such effects. Our analysis 
begins with the assumption that these input costs would be borne by 
agricultural producers.
    United States commercial agriculture is a highly mechanized 
industry. At every stage--field preparation, planting, fertilization, 
irrigation, harvesting, processing, and transportation to market--
modern agriculture is dependent on technically complex machinery, all 
of which consume energy. Direct energy consumption in the agricultural 
sector includes use of gas, diesel, liquid petroleum, natural gas, and 
electricity. In addition, agricultural production relies on energy 
indirectly through the use of inputs such as nitrogen fertilizer, which 
have a significant energy component associated with their production.
    Crop and livestock producers have been seeing much higher input 
prices this year. From June 2007 to June 2008, the prices paid by 
farmers for fertilizer are up 77%, and the prices paid for fuels have 
risen 61%. The prices paid by farmers for diesel fuel alone have 
increased by 72% over the past year. In practical terms, these figures 
mean that it is becoming far more costly for the producer to farm. 
Currently, USDA forecasts that expenditures for fertilizers and lime, 
petroleum fuel and oils, and electricity will exceed $37 billion in 
2008, up 15% from 2007.
    Depending on the extent to which the Clean Air Act puts further 
pressure on energy prices, input costs for indispensible items such as 
fuel, feed, fertilizer, manufactured products, and electricity will 
continue to rise. A study conducted by USDA's Economic Research Service 
(Amber Waves, April 2006) found the impact of energy cost changes on 
producers depends on both overall energy expenditures and, more 
importantly, energy's share of production costs, with the potential 
impacts on farm profits from changes in energy prices greatest for feed 
grain and wheat producers. The study also found that variation in the 
regional distribution of energy input costs suggests that changes in 
energy prices would most affect producers in regions where irrigation 
is indispensable for crop production. Less use of irrigation could mean 
fewer planted acres or lower crop yields, resulting in a loss of 
production. In addition to potential financial difficulties, farmers 
fear that future tillage practices could be mandated and livestock 
methane management regulated.
    However, the impact of higher energy prices on farmers is only part 
of the story. Only 19% of what consumers paid for food in 2006 went to 
the farmer for raw food inputs. The remaining 81% covered the cost of 
transforming these inputs into food products and transporting them to 
the grocery store shelf. Of every $1 spent on U.S.-grown foods, 3.5 
cents went toward the costs of electricity, natural gas, and other 
fuels used in food processing, wholesaling, retailing, and food service 
establishments. An additional 4 cents went toward transportation costs. 
This suggests that for every 10 percent increase in energy costs, 
retail food prices could increase by as much as 0.75 percent if fully 
passed onto consumers. The resulting impact to the consumer of higher 
energy prices will be much higher grocery bills. More important, 
however, will be the negative effect on our abundant and affordable 
food supply.
Regulatory Burden on Agriculture
    In its draft ANPR, EPA contemplates regulating agricultural 
greenhouse gas (GHG) emissions under the three primary CAA programs--
National Ambient Air Quality Standards (``NAAQS''), New Source 
Performance Standards (``NSPS''), or Hazardous Air Pollutant (``HAP'') 
standards. Like the Act itself, these programs were neither designed 
for, nor are they suitable to, regulation of greenhouse gases from 
agricultural sources. If agricultural producers were covered under such 
complex regulatory schemes, most (except perhaps the largest 
operations) would be ill-equipped to bear the costly

[[Page 44377]]

burdens of compliance, and many would likely cease farming altogether.
    The two common features of each CAA program are permitting and 
control requirements:
    Permitting: Operators who are subject to Title V permitting 
requirements--regardless of which CAA program is applicable--are 
required to obtain a permit in order to operate. These Title V permits 
are subject to a public notice and comment period and contain detailed 
requirements for emission estimation, monitoring, reporting, and 
recordkeeping. Title V permits may also contain control requirements 
that limit the operation of a facility. If a producer desired, or were 
compelled by changed circumstances (e.g., changing market demand, 
weather events, or pest infestation) to modify his operational plans, 
he would be required to first seek a permit modification from EPA or 
the State.
    If GHG emissions from agricultural sources are regulated under the 
CAA, numerous farming operations that currently are not subject to the 
costly and time-consuming Title V permitting process would, for the 
first time, become covered entities. Even very small agricultural 
operations would meet a 100-tons-per-year emissions threshold. For 
example, dairy facilities with over 25 cows, beef cattle operations of 
over 50 cattle, swine operations with over 200 hogs, and farms with 
over 500 acres of corn may need to get a Title V permit. It is neither 
efficient nor practical to require permitting and reporting of GHG 
emissions from farms of this size. Excluding only the 200,000 largest 
commercial farms, our agricultural landscape is comprised of 1.9 
million farms with an average value of production of $25,589 on 271 
acres. These operations simply could not bear the regulatory compliance 
costs that would be involved.
    Control: Unlike traditional point sources of concentrated emissions 
from chemical or manufacturing industries, agricultural emissions of 
greenhouse gases are diffuse and most often distributed across large 
open areas. These emissions are not easily calculated or controlled. 
Moreover, many of the emissions are the result of natural biological 
processes that are as old as agriculture itself. For instance, 
technology does not currently exist to prevent the methane produced by 
enteric fermentation associated with the digestive processes in cows 
and the cultivation of rice crops; the nitrous oxide produced from the 
tillage of soils used to grow crops; and the carbon dioxide produced by 
soil and animal agricultural respiratory processes. The only means of 
controlling such emissions would be through limiting production, which 
would result in decreased food supply and radical changes in human 
diets.
    The NAAQS program establishes national ambient concentration levels 
without consideration of specific emission sources. The determination 
of which source is required to achieve emission reductions and how to 
achieve those reductions is specified in the State Implementation Plans 
(``SIPs'') developed by each State. Under a NAAQS regulatory program, 
agricultural sources may need to employ Reasonably Available Control 
Measures (``RACM'') or, at a minimum, include the use of Reasonably 
Available Control Technologies (``RACT''). In the past, such control 
measures were established with a national focus for typical industrial 
sources. In previously regulated sectors, these control measures and 
technologies have typically been associated with improved engineering 
or chemical processes; however, agriculture is primarily dependent upon 
biological processes which are not readily re-engineered. Given the 
nature of many agricultural source emissions, RACM and RACT may not 
exist or may be cost prohibitive.
    The NSPS program regulates specific pollutants emitted from 
industrial categories for new, modified, or reconstructed facilities. 
EPA, rather than individual States, determines who is regulated, the 
emission reductions that must be achieved, and the associated control 
technologies and compliance requirements. Should EPA choose to regulate 
agriculture under NSPS, control requirements would be established at 
the national level using a ``one-size-fits-all'' approach. Differences 
in farming practices make it difficult to comply with this approach, as 
variability exists between types of operations and between similar 
operations located in different regions of the United States.
    In addition, regulation of the agricultural sector under a NSPS 
program would likely trigger the added challenge of compliance with the 
pre-construction permitting process under the Prevention of Significant 
Deterioration (``PSD'') program. Triggering pre-construction permits 
could result in a requirement to utilize Best Available Control 
Technologies (``BACT'') or technologies that achieve the Lowest 
Available Emission Reductions (``LAER''). Given the state of available 
control methods for agricultural area sources, compliance with these 
requirements may not currently be achievable in many instances. Should 
BACT or LAER technologies exist, the ability to utilize them across the 
variety of farming operations is questionable, and the costs to employ 
these technologies would be high since they would be relatively new 
technologies.
    Similar to the NSPS program, the HAP program focuses on industrial 
categories. EPA must list for regulation all categories of major 
sources that emit one or more HAP at levels that are very low (i.e., 10 
tons per year of a single HAP or 25 tons per year of a combination of 
HAP). Under a HAP program, EPA can regulate both major sources and 
smaller (i.e., area) sources. In addition to the Title V permit 
requirement, this program would result in emission control requirements 
for all agricultural sources regardless of the size of the operation. 
These requirements are driven by the best-performing similar sources, 
with EPA determining the similarity between sources. This approach does 
not lend itself to compliance by agricultural sources whose practices 
vary farm-by-farm and locality-by-locality. In addition, the cost of 
controls used by the best-performing sources would increase the 
operating expenses for all farms regardless of size.
    While this discussion only begins to address the practical 
difficulties that agricultural producers will face if EPA were to 
regulate GHGs under the CAA, these questions have not been raised in 
the draft ANPR in the context of agriculture. USDA believes that these 
issues must be thoroughly considered before a rule is finalized.
Capture and Sequestration
    The draft ANPR does not sufficiently address the promise of carbon 
capture and sequestration, or how a Clean Air Act regulatory framework 
could address these issues. In describing emissions by sector, the 
draft ANPR does contain the following brief introductory statement:

    Land Use, Land-Use Change, and Forestry: Land use is not an 
economic sector per se but affects the natural carbon cycle in ways 
that lead to GHG emissions and sinks. Included in this category are 
emissions and sequestration of CO2 from activities such 
as deforestation, afforestation, forest management and management of 
agricultural soils. Emissions and sequestration depend on local 
conditions, but overall land use in the United States was a net sink 
in 2006 equivalent to 12.5 percent of total GHG emissions.

    Thus, the United States Government, as well as private landowners 
throughout the country, possess land resources that hold potentially

[[Page 44378]]

tremendous economic and environmental value in a carbon-limited 
environment.
    Unfortunately, in the draft ANPR's extensive discussion of 
regulatory alternatives, the EPA staff does not even attempt to make 
the case that the Clean Air Act could or should be used to ensure that 
a regulatory scheme maximizes opportunities and incentives for carbon 
capture and sequestration. Had the draft ANPR raised these issues, it 
would become evident that there are substantial questions as to whether 
the CAA could provide an effective vehicle to account for such 
beneficial actions.
    Additionally, any regulatory program should avoid needless 
duplication and conflict with already existing efforts. The recently 
enacted Food, Conservation and Energy Act of 2008 (``Farm Bill'') 
requires the Secretary of Agriculture to establish technical guidelines 
to create a registry of environmental services benefits from 
conservation and land management activities, including carbon capture 
and sequestration. USDA is including EPA and other Federal agencies as 
participants in this process, which we believe holds substantial 
promise.

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BILLING CODE 6560-50-C

General Information

What Should I Consider as I Prepare My Comments for EPA?

A. Submitting CBI
    Do not submit this information to EPA through www.regulations.gov 
or e-mail. Clearly mark the part or all of the information that you 
claim to be confidential business information (CBI). For CBI 
information in a disk or CD ROM that you mail to EPA, mark the outside 
of the disk or CD ROM as CBI and then identify electronically within 
the disk or CD ROM the specific information that is claimed as CBI. In 
addition to one complete version of the comment that includes 
information claimed as CBI, a copy of the comment that does not contain 
the information claimed as CBI must be submitted for inclusion in the 
public docket. Information so marked will not be disclosed except in 
accordance with procedures set forth in 40 CFR part 2.
B. Tips for Preparing Your Comments
    When submitting comments, remember to:
     Explain your views as clearly as possible.
     Describe any assumptions that you used.
     Provide any technical information and/or data you used 
that support your views.
     If you estimate potential burden or costs, explain how you 
arrived at your estimate.
     Provide specific examples to illustrate your concerns.
     Offer alternatives.
     Make sure to submit your comments by the comment period 
deadline identified.
     To ensure proper receipt by EPA, identify the appropriate 
docket identification number in the subject line on the first page of 
your response. It would also be helpful if you provided the name, date, 
and Federal Register citation related to your comments.

Outline of This Preamble

I. Introduction
II. Background Information
III. Nature of Climate Change and Greenhouse Gases and Related 
Issues for Regulation
IV. Clean Air Act Authorities and Programs
V. Endangerment Analysis and Issues
VI. Mobile Source Authorities, Petitions and Potential Regulation
VII. Stationary Source Authorities and Potential Regulation
VIII. Stratospheric Ozone Protection Authorities, Background, and 
Potential Regulation

I. Introduction

    Climate change is a serious global challenge. As detailed in 
section V of this notice, it is widely recognized that greenhouse gases 
(GHGs) have a climatic warming effect by trapping heat in the 
atmosphere that would otherwise escape to space. Current atmospheric 
concentrations of GHGs are significantly higher than pre-industrial 
levels as a result of human activities. Warming of the climate system 
is unequivocal, as is now evident from observations of increases in 
global average air and ocean temperatures, widespread melting of snow 
and ice, and rising global average sea level. Observational evidence 
from all continents and most oceans shows that many natural systems are 
being affected by regional climate changes, particularly temperature 
increases. Future projections show that, for most scenarios assuming no 
additional GHG emission reduction policies, atmospheric concentrations 
of GHGs are expected to continue climbing for most if not all of the 
remainder of this century, with associated increases in average 
temperature. Overall risk to human health, society and the environment 
increases with increases in both the rate and magnitude of climate 
change.
    Today's notice considers the potential use of the CAA to address 
climate change. In April 2007, the Supreme Court concluded in 
Massachusetts v. EPA, 127 S. Ct. 1438 (2007), that GHGs meet the CAA 
definition of ``air pollutant,'' and that section 202(a)(1) of the CAA 
therefore authorizes regulation of GHGs subject to an Agency 
determination that GHG emissions from new motor vehicles cause or 
contribute to air pollution that may reasonably be anticipated to 
endanger public health or welfare. The Court also ruled that in 
deciding whether to grant or deny a pending rulemaking petition 
regarding section 202(a)(1), EPA must decide whether new motor vehicle 
GHG emissions meet that endangerment test, or explain why scientific 
uncertainty is so profound that it prevents making a reasoned judgment 
on such a determination. If EPA finds that new motor vehicle GHG 
emissions meet the endangerment test, section 202(a)(1) of the CAA 
requires the Agency to set motor vehicle standards applicable to 
emissions of GHGs.
    EPA is also faced with the broader ramifications of any regulation 
of motor vehicle GHG emissions under the CAA in response to the Supreme 
Court's decision. Over the past several months, EPA has received seven 
petitions from states, localities, and environmental groups to set 
emission standards under Title II of Act for other types of mobile 
sources, including nonroad vehicles such as construction and farm 
equipment, ships and aircraft. The Agency has also received public 
comments seeking the addition of GHGs to the pollutants covered by the 
new source performance standard (NSPS) for several industrial sectors 
under section 111 of the CAA. In addition, legal challenges have been 
brought seeking controls for GHG emissions in

[[Page 44397]]

preconstruction permits for several coal-fired power plants.
    The interrelationship of CAA authorities and the broad array of 
pending and potential CAA actions concerning GHGs make it prudent to 
thoroughly consider how the various CAA authorities would or could work 
together if GHG controls were established under any provision of the 
Act. Since regulation of one source of GHG emissions would or could 
lead to regulation of other sources of GHG emissions, the Agency should 
be prepared to manage the consequences of CAA regulation of GHGs in the 
most effective and efficient manner possible under the Act.
    Today's notice discusses our work to date in response to the 
Supreme Court's decision regarding an endangerment finding and vehicle 
standards under section 202 of the Act. It also includes a 
comprehensive examination of the potential effects of using various 
authorities under the Act to regulate other sources of GHG emissions. 
In addition, this notice examines and seeks public comment on the 
petitions the Agency has received for GHG regulation of additional 
mobile source categories. In light of the interrelationship of CAA 
authorities and the pending CAA actions concerning GHGs, the notice 
identifies and discusses possible approaches for controlling GHG 
emissions under the Act and the issues they raise.
    Today's notice is also part of broader efforts to address the 
climate change challenge. Since 2001, President Bush has pursued a 
broad climate change agenda that has improved our understanding of 
climate change and its effects, spurred development of needed GHG 
control technologies, increased our economy's energy efficiency, and 
engaged other nations in efforts to foster sensible solutions to the 
global challenge of climate change. Building on that success, the 
President recently announced a new national goal: to stop the growth of 
U.S. GHG emissions by 2025. New actions will be necessary to meet this 
goal.
    The President has identified several core principles for crafting 
any new GHG-specific legislation. EPA believes these principles are 
also important in considering GHG regulation under the CAA, to the 
extent allowed by law. These principles include addressing GHG 
emissions in a manner that does not harm the U.S. economy; encouraging 
the technological development that is essential to significantly 
reducing GHG emissions; and recognizing that U.S. efforts to reduce GHG 
emissions could be undermined if other countries with significant GHG 
emissions fail to control their emissions and U.S. businesses are put 
at a competitive disadvantage relative to their foreign competitors. 
Throughout this notice we discuss and seek comment on whether and how 
these principles can inform decisions regarding GHG regulation under 
the CAA.
    In Congress, both the House and Senate are considering climate 
change legislation. A number of bills call for reducing GHG emissions 
from a wide variety of sources using a ``cap-and-trade'' approach. Many 
of the sources that would be subject to requirements under the bills 
are already subject to numerous CAA controls. Thus, there is potential 
for overlap between regulation under the CAA and new climate change 
legislation.
    This ANPR performs five important functions that can help inform 
the legislative debate:
     First, in recognition of the Supreme Court's decision that 
GHGs are air pollutants under the CAA, the ANPR outlines options that 
may need to be exercised under the Act.
     Second, this notice provides information on how the GHG 
requirements under the CAA might overlap with control measures being 
considered for climate change legislation.
     Third, the notice discusses issues and approaches for 
designing GHG control measures that are useful in developing either 
regulations or legislation to reduce GHG emissions.
     Fourth, the ANPR illustrates the complexity and 
interconnections inherent in CAA regulation of GHGs. These complexities 
reflect that the CAA was not specifically designed to address GHGs and 
illustrate the opportunity for new legislation to reduce regulatory 
complexity. However, unless and until Congress acts, the existing CAA 
will be applied in its current form.
     Fifth, some sections of the CAA are inherently flexible 
and thus more capable of accommodating consideration of the President's 
principles. Other sections may not provide needed flexibility, raising 
serious concerns about the results of applying them. EPA believes that 
the presentation in this notice of the various potential programs of 
the CAA will help inform the legislative debate.
    EPA is following the Supreme Court's decision in Massachusetts v. 
EPA by seriously considering how to apply the CAA to the regulation of 
GHGs. In light of the CAA's interconnections and other issues explored 
in this notice, EPA does not believe that all aspects of the Act are 
well designed for establishing the kind of comprehensive GHG regulatory 
program that could most efficiently achieve the GHG emission reductions 
that may be needed over the next several decades. EPA 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 for many sectors of the economy, 
with less concern about emissions leakage and more effective, clearer 
incentives for development of technology, than a control program based 
on the CAA alone.

II. Background Information

A. Background on the Supreme Court Opinion

    On October 20, 1999, the International Center for Technology 
Assessment (ICTA) and 18 other environmental and renewable energy 
industry organizations filed a petition with EPA seeking regulation of 
GHGs from new motor vehicles under section 202 (a)(1) of the CAA. The 
thrust of the petition was that four GHGs--carbon dioxide 
(CO2), methane (CH4), nitrous oxide 
(N2O), and hydrofluorocarbons (HFCs)--are air pollutants as 
defined in CAA section 302(g), that emissions of these GHGs contribute 
to air pollution which is reasonably anticipated to endanger public 
health or welfare, that these GHGs are emitted by new motor vehicles, 
and therefore that EPA has a mandatory duty to issue regulations under 
CAA section 202(a) addressing GHGs from these sources.
    EPA denied the petition in a notice issued on August 8, 2003. The 
Agency concluded that it lacked authority under the CAA to regulate 
GHGs for purposes of global climate change. EPA further decided that 
even if it did have authority to set GHG emission standards for new 
motor vehicles, it would be unwise to do so at this time. More 
specifically, EPA stated that CAA regulation of CO2 emitted 
by light-duty vehicles would interfere with fuel economy standards 
issued by the Department of Transportation (DOT) under the Energy 
Policy and Conservation Act (EPCA), because the principal way of 
reducing vehicle CO2 emissions is to increase vehicle fuel 
economy. The Agency also noted in the 2003 notice that there was 
significant scientific uncertainty regarding the cause, extent and 
effects of climate change that ongoing studies would reduce. EPA 
further stated that regulation of climate change using the CAA would be 
inappropriate given the President's comprehensive climate

[[Page 44398]]

change policies, concerns about piecemeal regulation, and implications 
for foreign policy.
    EPA's denial of the ICTA petition was challenged in a petition for 
review filed in the U.S. Court of Appeals for the D.C. Circuit. 
Petitioners included 12 states, local governments, and a variety of 
environmental organizations. Intervenors in support of respondent EPA 
included 10 states and several industry trade associations.
    The D.C. Circuit upheld EPA's denial of the petition in a 2-1 
opinion (Massachusetts v. EPA, 415 F.3d 50 (D.C. Cir. 2005)). The 
majority opinion did not decide but assumed, for purposes of argument, 
that EPA had statutory authority to regulate GHGs from new motor 
vehicles and held that EPA had reasonably exercised its discretion in 
denying the petition.
    In a 5-4 decision, the Supreme Court reversed the D.C. Circuit's 
decision and held that EPA had improperly denied ICTA's petition 
(Massachusetts v. EPA, 127 S. Ct. 1438 (2007)). The Court held that 
GHGs are air pollutants under the CAA, and that the alternative denial 
grounds provided by EPA were ``divorced from the statutory text'' and 
hence improper.
    Specifically, the Court held that CO2, CH4, N2O, and HFCs fit the 
CAA's definition of ``air pollutant'' because they are `` `physical 
[and] chemical * * * substances which [are] emitted into * * * the 
ambient air.' '' Id. at 1460. The Court rejected the argument that EPA 
could not regulate new motor vehicle emissions of the chief GHG, 
CO2, under CAA section 202 because doing so would 
essentially regulate vehicle fuel economy, which is the province of DOT 
under EPCA. The Court held that EPA's mandate to protect public health 
and welfare is ``wholly independent of DOT's mandate to promote energy 
efficiency,'' even if the authorities may overlap. Id. at 1462. The 
Court stated that ``there is no reason to think the two agencies cannot 
both administer their obligations and yet avoid inconsistency.'' Id.
    Turning to EPA's alternative grounds for denial, the Court held 
that EPA's decision on whether to grant the petition must relate to 
``whether an air pollutant `causes, or contributes to, air pollution 
which may reasonably be anticipated to endanger public health or 
welfare.' '' Id. Specifically, the Court held that generalized concerns 
about scientific uncertainty were insufficient unless ``the scientific 
uncertainty is so profound that it precludes EPA from making a reasoned 
judgment as to whether greenhouse gases contribute to global warming.'' 
Id. at 1463. The Court further ruled that concerns related to piecemeal 
regulation and foreign policy objectives were unrelated to whether new 
motor vehicle GHG emissions contribute to climate change and hence 
could not justify the denial.
    The Court remanded the decision to EPA but was careful to note that 
it was not dictating EPA's action on remand, and was not deciding 
whether EPA must find there is endangerment. Nor did the Court rule on 
``whether policy concerns can inform EPA's actions in the event that it 
makes such a finding.'' Id. The Court also observed that under CAA 
section 202(a), ``EPA no doubt has significant latitude as to the 
manner, timing, content, and coordination of its regulations with those 
of other agencies.'' The Supreme Court sent the case back to the D.C. 
Circuit, which on September 14, 2007, vacated and remanded EPA's 
decision denying the ICTA petition for further consideration by the 
Agency consistent with the Supreme Court's opinion.

B. Response to the Supreme Court's Decision to Date

1. The President's May 2007 Announcement and Executive Order
    In May 2007, President Bush announced that he was ``directing the 
EPA and the Departments of Transportation and Energy (DOT and DOE) to 
take the first steps toward regulations that would cut gasoline 
consumption and GHG emissions from motor vehicles, using my 20-in-10 
plan as a starting point.'' The 20-in-10 plan refers to the President's 
legislative proposal, first advanced in his 2007 State of the Union 
address, to reduce domestic gasoline consumption by 20% by 2017 through 
the use of renewable and alternative fuels and improved motor vehicle 
fuel economy.
    On the same day, President Bush issued Executive Order (EO) 13432 
``to ensure the coordinated and effective exercise of the authorities 
of the President and the heads of the [DOT], the Department of Energy, 
and [EPA] to protect the environment with respect to greenhouse gas 
emissions from motor vehicles, nonroad vehicles, and nonroad engines, 
in a manner consistent with sound science, analysis of benefits and 
costs, public safety, and economic growth.''
    In response to the Supreme Court's Massachusetts decision and the 
President's direction, EPA immediately began work with DOT and the 
Departments of Energy and Agriculture to develop draft proposed 
regulations that would reduce GHG emissions from motor vehicles and 
their fuels. In particular, EPA and DOT's National Highway Traffic 
Safety Agency (NHTSA) worked together on a range of issues related to 
setting motor vehicle GHG emission standards under the CAA and 
corporate average fuel economy (CAFE) standards under EPCA. As a 
prerequisite to taking action under the CAA, the Agency also compiled 
and reviewed the available scientific information relevant to deciding 
whether GHG emissions from motor vehicles, and whether GHG emissions 
from the use of gasoline and diesel fuel by motor vehicles and nonroad 
engines and equipment, cause or contribute to air pollution that may 
reasonably be anticipated to endanger public health or welfare.
    Sections V and VI of this notice provide further discussion and 
detail about EPA's work to date on an endangerment finding and new 
motor vehicle regulation under section 202 of the CAA.
 2. Passage of a New Energy Law
    At the same time as EPA was working with its federal partners to 
develop draft proposed regulations for reducing motor vehicle and fuel 
GHG emissions, Congress was considering broad new energy legislation 
that included provisions addressing the motor vehicle fuel economy and 
fuel components of the President's 20-in-10 legislative plan. By the 
end of 2007, Congress passed and the President signed the Energy 
Independence and Security Act (EISA). Title II of EISA amended the CAA 
provisions requiring a Renewable Fuels Standard (RFS) that were first 
established in the Energy Policy Act of 2005. EISA also separately 
amended EPCA with regard to the DOT's authority to set CAFE standards 
for vehicles.
    With regard to the RFS, Congress amended section 211(o) of the CAA 
to increase the RFS from 7.5 billion gallons in 2012 to 36 billion 
gallons in 2022. There are a number of significant differences between 
the RFS provisions of EISA and the fuels program EPA was developing 
under the President's Executive Order. As a result, EPA is undertaking 
substantial new analytical work as part of its efforts to develop the 
regulations needed to implement the new RFS requirements. These 
regulations are subject to tight statutory deadlines.
    With regard to motor vehicle regulations, EISA did not amend CAA 
section 202, which contains EPA's general authority to regulate motor 
vehicle emissions. However, EISA did substantially alter DOT's 
authority to set CAFE standards under EPCA. The

[[Page 44399]]

legislation directs the Department to set CAFE standards that achieve 
fleet-wide average fuel economy of at least 35 miles per gallon by 2020 
for light-duty vehicles, and for the first time to establish fuel 
economy standards for heavy-duty vehicles after a period of study.
    In view of this new statutory authority, EPA and DOT have reviewed 
the previous regulatory activities they had undertaken pursuant to the 
President's May 14 directive and EO 13432. While EPA recognizes that 
EISA does not change the Agency's obligation to respond to the Supreme 
Court's decision in Massachusetts v. EPA or the scientific basis for 
any decision, the new law has changed the context for any action EPA 
might take in response to the decision by requiring significant 
improvements in vehicle fuel economy that will in turn achieve 
substantial reductions in vehicle emissions of CO2.\25\
---------------------------------------------------------------------------

    \25\ The Current Unified Agenda and Regulatory Plan (Regulatory 
Plan) available in May 2008 reflects that EPA is addressing its 
response to Massachusetts v. EPA as part of today's notice. The 
latest Regulatory Plan also contains a new entry for the renewable 
fuels standard program EPA is undertaking pursuant to Title II of 
EISA (RIN 2060-AO81). The current Regulatory Plan is available at 
http://www.reginfo.gov/public/do/eAgendaMain.
---------------------------------------------------------------------------

3. Review of CAA Authorities
    As part of EPA's efforts to respond to the Supreme Court's 
decision, the Agency conducted a thorough review of the CAA to identify 
and assess any other CAA provisions that might authorize regulation of 
GHG emission sources. That review made clear that a decision to control 
any source of GHG emissions could or would impact other CAA programs 
with potentially far-reaching implications for many industrial sectors. 
In particular, EPA recognized that regulation of GHG emissions from 
motor vehicles under section 202(a)(1) or from other sources of GHG 
emissions under many other provisions of the Act would subject major 
stationary sources to preconstruction permitting under the CAA. As 
discussed later in this notice, the Prevention of Significant 
Deterioration (PSD) program established in Part C of Title I of the Act 
requires new major stationary sources and modified stationary sources 
that significantly increase their emissions of regulated air pollutants 
to apply for PSD permits and put on controls to reduce emissions of 
those pollutants that reflect the best available control technology 
(BACT). Because CO2 is typically emitted in much larger quantities 
relative to traditional air pollutants, CAA regulation of CO2 would 
potentially extend PSD requirements to many stationary sources not 
previously subject to the PSD program, including large buildings heated 
by natural gas or oil, and add new PSD requirements to sources already 
subject to the program. This and other CAA implications of regulation 
of GHG emissions under the Act are explored later in this notice.

C. Other Pending GHG Actions Under the CAA

1. Additional Mobile Source Petitions
    Since the Supreme Court's Massachusetts decision, EPA has received 
seven additional petitions requesting that the Agency make the 
requisite endangerment findings and undertake rulemaking under CAA 
sections 202(a)(3), 211, 213 and 231 to regulate GHG emissions \26\ 
from (1) fuels and a wide array of mobile sources including ocean-going 
vessels; (2) all other types of nonroad engines and equipment, such as 
locomotives, construction equipment, farm tractors, forklifts, harbor 
crafts, and lawn and garden equipment; (3) aircraft; and (4) rebuilt 
heavy-duty highway engines. The petitioners represent state and local 
governments, environmental groups, and nongovernmental organizations. 
Copies of these seven petitions can be found in the docket for this 
notice.
---------------------------------------------------------------------------

    \26\ While petitioners vary somewhat in their definition of 
GHGs, taken together they seek regulation of CO2, CH4, N2O, HFCs, 
PFCs, and SF6, water vapor, and soot or black carbon.
---------------------------------------------------------------------------

    These petitions have several common elements. First, the 
petitioners state that climate change is occurring and is driven by 
increases in GHG emissions; that the mobile sources described in the 
petitions account for a significant and growing portion of these 
emissions; and that those mobile sources must therefore be regulated 
under the CAA. Second, the petitioners assert that EPA should 
expeditiously regulate GHG emissions from those mobile sources because 
they are already harming the petitioners' health and welfare and 
further delay by the Agency will only increase the severity of future 
harms to public health and welfare. Lastly, the petitioners contend 
that technology is currently available to reduce GHG emissions from the 
mobile sources for which regulation is sought.
    Section VI of this notice provides a brief discussion of these 
petitions. The section also summarizes information on the GHG emissions 
of each of the three mobile source categories, technologies and other 
strategies for reducing GHG emissions from those categories, and 
potential approaches for EPA to address their emissions. We request 
comment on all issues raised by the petitioners.
2. New Source Performance Standards
    The Massachusetts decision also impacts several stationary source 
rulemakings. A group of state and local governments and environmental 
organizations petitioned the U.S. Court of Appeals for the D.C. Circuit 
to review a 2006 decision by EPA not to regulate the GHG emissions of 
several types of steam generating units when the Agency conducted the 
periodic review of the new source performance standard (NSPS) for those 
units as required by CAA section 111. EPA based its decision on the 
position it announced in denying the ICTA petition that the CAA does 
not authorize regulation of GHG emissions. After the Supreme Court 
ruled that the CAA does provide authority for regulating GHG emissions, 
the Agency filed a request with the D.C. Circuit to have the NSPS rule 
remanded to us for further actions consistent with the Supreme Court's 
opinion. Our motion was granted, and this ANPR represents the next step 
in our efforts to evaluate and respond to the court's decision.
    Another NSPS affected by the Supreme Court's decision is the 
standard applicable to petroleum refineries. Pursuant to a consent 
decree deadline, EPA proposed revisions to the NSPS on April 30, 2007, 
less than one month following the Supreme Court decision. During the 
comment period for the review, EPA received comments calling for the 
NSPS to be revised to include limits on GHG emissions. In our final 
rule on April 30, 2008, we declined to adopt standards for GHGs at that 
time. First, we noted that, in the context of statutorily mandated 8-
year reviews for NSPS, EPA has discretion regarding the adoption of 
standards for pollutants not previously covered by an NSPS. We also 
explained that the significant differences between GHGs and the other 
air pollutants for which we have previously established standards under 
section 111 require a more thorough and deliberate process to identify 
and fully evaluate the implications of a decision to regulate under 
this and other provisions of the CAA before deciding how to regulate 
GHGs under the Act. We pointed to this notice as the means for 
providing that process. We further noted that the time period available 
for proposing NSPS was too short for EPA to evaluate and develop 
proposed standards in light of the Massachusetts decision.
    EPA also recently issued proposed revisions of the Portland cement 
NSPS in accordance with the schedule of a

[[Page 44400]]

consent decree. In its May 30, 2008 notice, EPA decided not to propose 
adding GHG emission requirements to the Portland cement NSPS for 
essentially the same reasons the Agency gave in deciding against adding 
GHG controls to the refinery NSPS.
3. Prevention of Significant Deterioration Permitting
    As noted previously, the CAA's PSD program requires new major 
stationary sources and modified major stationary sources that 
significantly increase emissions to obtain air pollution permits before 
construction can begin. As part of the permit issuance process, the 
public can comment on drafts of these permits. Since the Massachusetts 
decision, the number and scope of issues raised by public comments on 
draft permits has increased.\27\ The main issue that has been raised is 
whether EPA should be establishing facility-specific emission limits 
for CO2 in these permits as a result of the Court's decision. EPA's 
interpretation, discussed in more detail later in this notice, is that 
CO2 is not a regulated pollutant under the Act and that we therefore 
currently lack the legal authority to establish emission limits for 
this pollutant in PSD permits. That interpretation has been challenged 
to EPA's Environmental Appeals Board, and we anticipate a decision in 
this case later this year.\28\ The Appeals Board's decision could also 
affect several other permits awaiting issuance by EPA, and may have 
significant implications for the entire PSD program. The broader 
consequences of CO2 and other GHGs being classified as a regulated 
pollutant are discussed later in this notice.
    EPA has also received other GHG related comments related to other 
elements of the PSD program, such as the consideration of GHG emissions 
in establishing controls for other pollutants, the consideration of 
alternatives to the proposed project, and related issues. EPA is 
currently considering these comments in the context of evaluating each 
PSD permit application on a case-by-case basis, applying current law.
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    \27\ Most PSD permits are issued by states under EPA-approved 
state rules. Other states without approved rules can also issue 
permits on behalf of EPA under delegation agreements. EPA is the 
permitting authority in New York, Massachusetts, Washoe Co (Nevada), 
Puerto Rico, Guam, American Samoa, and the Virgin Islands. EPA also 
issues PSD permits for sources on tribal lands.
    \28\ See, In Re Deseret Power Electric Cooperative, PSD Appeal 
No. 07-03 (http://www.epa.gov/region8/air/permitting/deseret.html).
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4. GHG Reporting Rule
    In EPA's most recent appropriations bill, Congress called on EPA to 
develop and issue a mandatory GHG emissions reporting rule by the 
middle of 2009.\29\
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    \29\ The fiscal year 2008 Consolidated Appropriations Act states 
that ``not less than $3,500,000 shall be provided for activities to 
develop and publish a draft rule not later than 9 months after the 
date of enactment of this Act, and a final rule not later than 18 
months after the date of enactment of this Act, to require mandatory 
reporting of greenhouse gas emissions above appropriate thresholds 
in all sectors of the economy * * *.''
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    Accordingly, EPA is now developing a proposed rule that would 
collect emissions and emissions-related information from stationary and 
mobile sources. The overall purpose of the rule is to obtain 
comprehensive and accurate GHG data relevant to future climate policy 
decisions, including potential regulation under the CAA. EPA expects 
the rule to provide valuable additional information on the number and 
types of U.S. GHG sources and on the GHG emission levels of those 
sources.

D. Today's Action

    In view of the interrelationship of CAA authorities and the many 
pending CAA actions concerning GHGs before the Agency, EPA decided to 
issue this ANPR to elicit information that will assist us in developing 
and evaluating potential action under the CAA. In this ANPR, we review 
the bases for a potential endangerment finding in the context of the 
pending petition concerning new motor vehicles, explore 
interconnections between CAA provisions that could lead to broader 
regulation of GHG emissions, and examine the full range of potential 
CAA regulation of GHGs, including a discussion of the issues raised by 
regulation of GHG emissions of mobile and stationary sources under the 
Act. The ANPR will help us shape an overall approach for potentially 
addressing GHG emissions under the CAA as part of a broader set of 
actions to address GHG emissions taken by Congress, EPA, other federal 
departments and agencies, state and local governments, the private 
sector, and the international community.

III. Nature of Climate Change and Greenhouse Gases and Related Issues 
for Potential Regulation

    Much of today's notice is devoted to a detailed examination of the 
various CAA authorities that might be used to regulate GHG emissions 
and the scientific and technical bases for potentially exercising those 
authorities. A key question for EPA is whether and how potentially 
applicable CAA provisions could be used to regulate GHG emissions in an 
effective and efficient manner in light of the terms of those 
provisions. The global nature of climate change, the unique 
characteristics of GHGs, and the ubiquity of GHG emission sources 
present special challenges for regulatory design. In this section of 
the notice, we identify and discuss these and several other important 
considerations that we believe should inform our examination and 
potential use of CAA authorities. Throughout this notice we ask for 
comment on whether particular CAA authorities would allow EPA to 
develop regulations that address those considerations in an effective 
and appropriate manner.

A. Key Characteristics of Greenhouse Gases

    The six major GHGs of concern are those directly emitted by human 
activities. These are CO2, CH4, N2O, HFCs, perfluorocarbons (PFCs), and 
sulfur hexafluoride (SF6). GHGs have a climatic warming effect by 
trapping heat in the atmosphere that would otherwise escape to space.
    Global emissions of these six GHGs have grown since pre-industrial 
times and particularly over recent decades, having increased by 70% 
between 1970 and 2004.\30\ In 2000, U.S. GHG emissions accounted for 
approximately 21% of the global total. Other major emitting countries 
include China, the Russian Federation, Japan, Germany, India and 
Brazil. Future projections show that, for most scenarios assuming no 
additional GHG emission reduction policies, global atmospheric 
concentrations of GHGs are expected to continue climbing for most if 
not all of the remainder of this century and to result in associated 
increases in global average temperature. The Intergovernmental Panel on 
Climate Change (IPCC) projects an increase of global GHG emissions by 
25 to 90% between 2000 and 2030 under a range of different scenarios. 
For the U.S., under a business as usual scenario, total gross GHG 
emissions are expected to rise 30 percent between 2000 and 2020.\31\
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    \30\ The data provided here come from ``Contribution of Working 
Group III to the Fourth Assessment Report of the Intergovernmental 
Panel on Climate Change (IPCC)''--Summary for Policymakers.
    \31\ Fourth U.S.Climate Action Report, 2007. http://www.state.gov/g/oes/rls/rpts/car/.
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    A significant difference between the major GHGs and most air 
pollutants regulated under the CAA is that GHGs have much longer 
atmospheric

[[Page 44401]]

lifetimes.\32\ Once emitted, GHG can remain in the atmosphere for 
decades to centuries while traditional air pollutants typically remain 
airborne for days to weeks. The fact that GHGs remain in the atmosphere 
for such long periods of time has several important and related 
consequences:
---------------------------------------------------------------------------

    \32\ Some pollutants regulated under the CAA have long 
atmospheric lifetimes, including those regulated for protection of 
stratospheric ozone and mercury.
---------------------------------------------------------------------------

    (1) Unlike most traditional air pollutants, GHGs become well mixed 
throughout the global atmosphere so that the long-term distribution of 
GHG concentrations is not dependent on local emission sources. Instead, 
GHG concentrations tend to be relatively uniform around the world.
    (2) As a result of this global mixing, GHGs emitted anywhere in the 
world affect climate everywhere in the world. U.S. GHG emissions have 
climatic effects not only in the U.S. but in all parts of the world, 
and GHG emissions from other countries have climatic effects in the 
U.S.
    (3) Emissions of the major GHGs build up in the atmosphere so that 
past, present and future emissions ultimately contribute to total 
atmospheric concentrations. While concentrations of most traditional 
air pollutants can be reduced relatively quickly (over months to 
several years) once emission controls are applied, atmospheric 
concentrations of the major GHGs cannot be so quickly reversed. Once 
applied, GHG emission controls would first reduce the rate of build-up 
of GHGs in the atmosphere and, depending on the degree of controls over 
the longer term, would gradually result in stabilization of atmospheric 
GHG concentrations at some level.
    (4) GHG emissions have long-term consequences. Once emitted, the 
major GHGs exert their climate changing effects for a long period of 
time. Past and current GHG emissions thus lead to some degree of 
commitment to climate change for decades or even centuries. According 
to the IPCC, past GHG emissions have already resulted in an increase in 
global average temperature and associated climatic changes. Much of 
those past emissions will continue to contribute to temperature 
increases for some time to come, while current and future GHG emissions 
contribute to climate change over a similarly long period. See section 
V for a fuller discussion of the effects of GHG emissions as they 
relate to making an endangerment finding under the CAA.\33\
---------------------------------------------------------------------------

    \33\ Another important difference between CO2 and 
traditional air pollutants is the high volume of CO2 
emissions relative to other pollutants for most sources. The 
significance of this difference is discussed later in this section 
and in section VII of this notice.
---------------------------------------------------------------------------

    The large temporal and spatial scales of the climate change 
challenge introduce regulatory issues beyond those typically presented 
for most traditional air pollutants. Decision makers are faced with 
many uncertainties over long time frames and across national 
boundaries, such as population and economic growth, technological 
change, the exact rate and magnitude of climate change in response to 
different emissions pathways, and the associated effects of that 
climate change. These uncertainties increase the complexity of 
designing an effective long-term regulatory strategy.
    Acknowledging that overall risk increases with increases in both 
the rate and magnitude of climate change, the United Nations Framework 
Convention on Climate Change (UNFCCC), signed and ratified by the U.S. 
in 1992, states as its ultimate objective the ``* * * stabilization of 
greenhouse gas concentrations in the atmosphere at a level that would 
prevent dangerous anthropogenic interference with the climate system.'' 
In 2007, the U.S. and other Parties to the UNFCCC recognized that ``* * 
* deep cuts in global emissions will be required to achieve the 
ultimate objective of the Convention * * *'' and emphasized ``* * * the 
urgency to address climate change as indicated * * *'' by the IPCC.
    Determining what constitutes ``dangerous anthropogenic 
interference'' is not a purely scientific question; it involves 
important value judgments regarding what level of climate change may or 
may not be acceptable. It is not the purpose of this ANPR to make any 
judgment regarding what an appropriate stabilization goal may be. In 
the absence of further policy action, the IPCC notes that, ``With 
current climate change mitigation policies and related sustainable 
development practices, global GHG emissions will continue to grow over 
the next few decades.''
    As indicated above, to stabilize GHGs at any level in the 
atmosphere, emissions would need to peak and decline thereafter. A 
decision to stabilize at lower concentrations and associated 
temperature increases would necessarily advance the date by which 
emissions would need to peak, and would therefore require greater 
emissions reductions earlier in time. According to the IPCC, mitigation 
efforts over the next two to three decades will have a large impact on 
the ability of the world to achieve lower stabilization levels. For 
illustration, IPCC projected that, in order to prevent long-term global 
temperatures from exceeding 2.8 [deg]C (approximately 5 [deg]F) 
relative to pre-industrial temperatures, atmospheric CO2 
concentrations would need to be stabilized at 440 parts per million 
(ppm) (current levels stand at about 379 ppm), translating into global 
CO2 emission reductions by 2050 of up to 60% (relative to 
emissions in the year 2000). Stabilization targets that aim to prevent 
even more warming would require steeper and earlier emission 
reductions, whereas stabilization targets that allow for more warming 
(with higher associated risks and impacts) would require less steep and 
later emission reductions.

B. Types and Relative Emissions of GHG Emission Sources

1. Background
    Each year EPA prepares a complete inventory of the anthropogenic 
emissions and sinks of all six major GHGs in the United States.\34\ 
Anthropogenic in this context means that emissions result from human 
activities. ``Sinks'' are the opposite of emissions in that they are 
activities or processes that remove GHGs from the atmosphere (e.g., 
CO2 uptake by plants through photosynthesis). EPA prepares 
the inventory in cooperation with numerous federal agencies as part of 
the U.S. commitment under the UNFCCC.\35\ This inventory is derived 
largely from top-down national energy and statistical data. As 
mentioned previously, EPA is currently developing a proposed GHG 
reporting rule that will provide bottom-up data from covered reporters 
and thus provide greater detail on the emissions profile of specific 
source categories.
---------------------------------------------------------------------------

    \34\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-
2006, (April 2008) USEPA 430-R-08-005. http://www.epa.gov/climatechange/emissions/usinventoryreport.html.
    \35\ See Articles 4 and 12 of the UNFCCC treaty. http://www.unfccc.int. Parties to the Convention ``shall develop, 
periodically update, publish and make available * * * national 
inventories of anthropogenic emissions by sources and removals by 
sinks of all greenhouse gases not controlled by the Montreal 
Protocol, using comparable methodologies * * *''
---------------------------------------------------------------------------

2. Emissions by Gas
    In 2006, total U.S. GHG emissions were 7,054 million metric tons of 
CO2 equivalent (MMTCO2e).\36\ Overall, total U.S. 
GHG emissions have risen by 14.7% from 1990 to 2006. GHG emissions 
decreased from 2005 to 2006 by 1.1 percent (or 76 MMTCO2e). 
Figure III-1 illustrates the relative share of each

[[Page 44402]]

gas, and trend since 1990, weighted by global warming potential.\37\ 
All GHG units and percentage changes provided in this section are based 
on CO2-equivalency.
---------------------------------------------------------------------------

    \36\ International standards for reporting are established by 
the IPCC, which uses metric units. 1 MMTCO2e is equal to 
1 teragram (Tg) or 10 12 grams. 1 metric ton is equal to 
1.1023 short tons.
    \37\ Emissions of different GHGs are compared using global 
warming potentials (GWPs). The GWP of a GHG is the ratio of heat 
trapped by one unit mass of the GHG compared to that of one unit 
mass of CO2 over a specified time period, which is 100 
years for the GWPs estimated by the IPCC used here. The reference 
gas is CO2, and therefore GWP-weighted emissions are 
measured in teragrams of CO2 equivalent (Tg 
CO2 Eq.). The GWP values used in this analysis come from 
the IPCC Second Assessment report, consistent with the UNFCCC 
reporting requirements for Parties listed in Annex I.
[GRAPHIC] [TIFF OMITTED] TP30JY08.026

    Carbon Dioxide: The primary GHG emitted as a result of human 
activities in the United States is CO2, representing approximately 85% 
of total GHG emissions. CO2 results primarily from fossil fuel 
combustion to generate electricity, power vehicles and factories, heat 
buildings, etc. Fossil fuel-related CO2 emissions accounted for 
approximately 79% of CO2 emissions since 1990, and increased at an 
average annual rate of 1.1% from 1990 to 2006. Changes in CO2 emissions 
from fossil fuel combustion are influenced by many long-term and short-
term factors, including population and economic growth, energy price 
fluctuations, technological changes, and seasonal temperatures.
    Methane: According to the IPCC, CH4 is more than 20 times as 
effective as CO2 at trapping heat in the atmosphere. By 2006, CH4 
emissions had declined from 1990 levels by just under 9%, and now make 
up approximately 8% of total U.S. GHG emissions. Enteric fermentation 
(22.7%) is the largest anthropogenic source of CH4 emissions in the 
United States, followed by landfills (22.6%), natural gas systems 
(18.4%), coal mining (10.5%), and manure management (7.5%). Smaller 
sources such as rice cultivation and incomplete fossil fuel combustion 
account for the remainder.
    Nitrous Oxide: While total N2O emissions are much lower than CO2 
emissions in terms of mass, N2O is approximately 300 times more 
powerful than CO2 at trapping heat in the atmosphere. U.S. emissions of 
N2O are just over 5% of total U.S. GHG emissions, and have declined by 
4% since 1990. The main anthropogenic activities producing N2O in the 
United States are agricultural soil management (72%), and fuel 
combustion in motor vehicles (9%). A variety of chemical production 
processes and liquid waste management sources also emit N2O.
    HFCs, PFCs, and SF6: These GHGs are often grouped together because 
they contain fluorine, typically have large global warming potentials, 
and are produced only through human activities (there are no natural 
sources), either intentionally for use or unintentionally as an 
industrial byproduct. HFCs and some PFCs are increasingly being used--
and therefore emitted--as substitutes for the ozone depleting 
substances controlled under the Montreal Protocol and Title VI of the 
CAA. The largest source is the use of HFCs in air conditioning and 
refrigeration systems. Other sources include HFC-23 emitted during the 
production of HCFC-22, electrical transmission and distribution systems 
(SF6), and PFC emissions from semiconductor manufacturing and primary 
aluminum production. U.S. HFC emissions have increased 237% over 1990 
levels, while emissions of PFCs and SF6 have decreased by 71 and 47%, 
respectively, from 1990 levels. Combined, these GHGs made up 2.1% of 
total U.S. GHG emissions in 2006.
3. Emissions by Sector
    An alternative way to look at GHG emissions is by economic sector. 
All U.S. GHG sources can be grouped into the electricity, industrial, 
commercial, residential, transportation and agriculture sectors. 
Additionally, there are changes in carbon stocks that result in 
emissions and sinks associated with land-use and land-use change 
activities. Figure III-2 illustrates the relative contributions and 
historical trends of these economic sectors.
    Electricity Generation: The electricity generation sector includes 
all facilities that generate electricity primarily for sale rather than 
for use on site (e.g., most large-scale power plants). Electricity 
generators emitted 33.7% of all U.S. GHG emissions in 2006. The type of 
fuel combusted by electricity generators has a significant effect on

[[Page 44403]]

their emissions. For example, some electricity is generated with low or 
no CO2 emitting energy technologies, particularly non-fossil options 
such as nuclear, hydroelectric, or geothermal energy. However, over 
half of the electricity in the U.S. is generated by burning coal, 
accounting for 94% of all coal consumed for energy in the U.S. in 2006.
    Transportation Sector: The transportation sector includes 
automobiles, airplanes, railroads and a variety of other sources. 
Transportation activities (excluding international bunker fuels) 
accounted for approximately 28% of all GHG emissions in 2006, primarily 
through the combustion of fossil fuels.\38\ Virtually all of the energy 
consumed in this end-use sector came from petroleum products. Over 60% 
of the CO2 emissions resulted from gasoline consumption for personal 
vehicle use.
---------------------------------------------------------------------------

    \38\ International bunker fuels are used in aviation and marine 
trips between countries.
---------------------------------------------------------------------------

    Industrial Sector: The industrial sector includes a wide variety of 
facilities engaged in the production and sale of goods. The largest 
share of emissions from industrial facilities comes from the combustion 
of fossil fuels. Emissions of CO2 and other GHGs from U.S. industry 
also occur as a result of specialized manufacturing processes (e.g., 
calcination of limestone in cement manufacturing). The largest emitting 
industries tend to be the most energy intensive: Iron and steel, 
refining, cement, lime, chemical manufacturing, etc. Overall, 19.4% of 
total U.S. GHG emissions came from the industrial sector in 2006.
    Residential and Commercial Sectors: These two sectors directly emit 
GHGs primarily through operation and maintenance of buildings (i.e., 
homes, offices, universities, etc.). The residential and commercial 
end-use sectors accounted for 4.8 and 5.6% of total emissions, 
respectively, with CO2 emissions from consumption of natural gas and 
petroleum for heating and cooking making up the largest share.
    Agriculture Sector: The agriculture sector includes all activities 
related to cultivating soil, producing crops, and raising livestock. 
Agricultural GHG emissions result from a variety of processes, 
including: Enteric fermentation in domestic livestock, livestock manure 
management, rice cultivation, agricultural soil management, and field 
burning of agricultural residues. Methane and N2O are the primary GHGs 
emitted by agricultural activities.\39\ In 2006, agriculture emission 
sources were responsible for 6.4% of total U.S. GHG emissions.
---------------------------------------------------------------------------

    \39\ Agricultural soils also emit CO2 and sequester carbon. The 
fluxes are discussed under the Land-Use, Land-Use Change and 
Forestry section because of the integrated nature of methodological 
approaches to the carbon cycle, and international reporting 
conventions.
---------------------------------------------------------------------------

    Land Use, Land-Use Change, and Forestry: Land use is not an 
economic sector per se but affects the natural carbon cycle in ways 
that lead to GHG emissions and sinks. Included in this category are 
emissions and sequestration of CO2 from activities such as 
deforestation, afforestation, forest management and management of 
agricultural soils. Emissions and sequestration depend on local 
conditions, but overall land use in the U.S. was a net sink in 2006 
equivalent to 12.5% of total GHG emissions.
BILLING CODE 6560-50-P

[[Page 44404]]

[GRAPHIC] [TIFF OMITTED] TP30JY08.027

C. Advancing Technology

    President Bush, the IPCC, and many other private and public groups 
have spotlighted the critical importance of technology to reducing GHG 
emissions and the risks of climate change. International, U.S., and 
private studies have identified a broad range of potential strategies 
that can reduce emissions from diverse economic sectors. Many 
strategies, such as increasing energy efficiency and conservation and 
employing hybrid and diesel vehicle technologies, are available today. 
There is also broad consensus that for many sectors of the economy new 
technologies will be

[[Page 44405]]

needed to achieve deep reductions in GHG emissions at less cost than 
today's technologies alone can achieve.
    In developing potential CAA (or other) controls, one important 
question is the extent to which needed technological development can be 
expected to occur as a result of market forces alone (e.g., as a result 
of increasing prices for oil and other fossil fuels), and the extent to 
which government or other action may be needed to spur development. 
There are several different pathways for technological change, 
including investment in research and development (private and public), 
spillovers from research and development in other sectors (e.g., 
advances in computing made hybrid vehicles possible), learning by doing 
(i.e., efficiency gains through repetition), and scale economies (i.e., 
aggregate cost reductions from improved process efficiencies). As 
further discussed later in this section, market-based incentives that 
establish a price (directly or indirectly through a limit) for carbon 
and/or other GHGs could continuously spur technological innovation that 
could lower the cost of reducing emissions. However, even with such a 
policy, markets tend to under-invest in development of new technologies 
when investors can only capture a portion of the returns. This is 
particularly true at the initial stages of research and development 
when risks are high and market potential is not evident. In such cases, 
policies to encourage the development and diffusion of technologies 
that are complements to pollution control policies may be 
warranted.\40\
---------------------------------------------------------------------------

    \40\ Economic Report of the President, February 2007.
---------------------------------------------------------------------------

    This section draws insights from IPCC and other reports on 
available and needed technologies. In later sections of this notice, we 
explain each potentially applicable CAA provision and consider the 
extent to which that provision authorizes regulatory actions and 
approaches that could spur needed technology development.
1. The Role of Existing and New Technology in Addressing Climate Change
    The 2007 IPCC report on mitigation of climate change examined the 
availability of current technologies and the need for new technologies 
to mitigate climate change.\41\ Among its conclusions, the IPCC states:
---------------------------------------------------------------------------

    \41\ IPCC, 2007, ``Climate Change 2007: Mitigation. Contribution 
of Working Group III to the Fourth Assessment Report of the 
Intergovernmental Panel on Climate Change,'' [B. Metz, O.R. 
Davidson, P.R. Bosch, R. Dave, L.A. Meyers (eds)], Cambridge 
University Press, Cambridge, United Kingdom and New York, NY.

     The range of stabilization levels assessed [by the 
IPCC] can be achieved by deployment of a portfolio of technologies 
that are currently available and those that are expected to be 
commercialized in coming decades. This assumes that appropriate and 
effective incentives are in place for development, acquisition, 
deployment and diffusion of technologies and for addressing related 
barriers.\42\
---------------------------------------------------------------------------

    \42\ Ibid, ``Summary for Policymakers,'' p. 25.

    According to one study, five groups of strategies that could 
substantially reduce emissions between now and 2030 include (1) 
improving energy efficiency in buildings and appliances; (2) increasing 
fuel efficiency and reducing GHG emissions from vehicles and the carbon 
intensity of transportation fuels; (3) industrial equipment upgrades 
and process changes to improve energy efficiency; (4) increasing forest 
stocks and improving soil management practices; and (5) reducing carbon 
emissions from electric power production through a shift toward 
renewable energy, expanded nuclear capacity, improved power plant 
efficiency, and use of carbon capture and storage technology on coal-
fired generation.\43\ (Note that EPA is not rank-ordering these 
technologies by their relative cost effectiveness.) As noted elsewhere 
in this notice, there is federal regulatory or research and development 
activity ongoing in most of these areas.
---------------------------------------------------------------------------

    \43\ See McKinsey & Company, ``Reducing U.S. Greenhouse Gas 
Emissions: How Much at What Cost?'', U.S. Greenhouse Gas Abatement 
Mapping Initiative, Executive Report, December 2007. This study 
performed an economic assessment of potential control methods based 
on a ``bottom-up'' partial equilibrium model, which does not account 
for interactions among economic sectors. Bottom-up models include 
many more specific technologies than ``top-down'' general 
equilibrium models, which account for cross-sector interactions.
---------------------------------------------------------------------------

    Many energy efficiency technologies exist that appear to be 
extremely cost-effective in reducing fuel costs compared to other 
alternatives. However, they have yet to be adopted as widely as 
expected because of market barriers. Such barriers include lack of 
knowledge or confidence in the technology by potential users, 
uncertainty in the return on investment (potentially due to uncertainty 
in either input prices or output prices), concerns about effects of 
energy efficiency technologies on the quality of inputs or outputs, 
size of the initial capital investment (coupled with potential 
liquidity constraints), and requirements for specialized human capital 
investments. Some of these costs are lower in larger firms, due to the 
increased availability of financial resources and human capital.\44\ 
Vendor and other projections of cost-savings for energy efficiency 
technologies are often based on average pay-back and thus do not 
reflect differences among firms that can affect the costs and benefits 
of these technologies and therefore the likelihood of adoption. Over 
time, as firms gain more experience with these technologies, the rate 
of adoption will likely increase if significant cost-savings are 
realized by early adopters.
---------------------------------------------------------------------------

    \44\ Pizer, et al., ``Technology Adoption and Aggregate Energy 
Efficiency,'' December 2002, December 2002 Resources for the Future 
Discussion Paper 02-52.
---------------------------------------------------------------------------

    The IPCC report on mitigation identified technologies that are 
currently available and additional technologies that are expected to be 
commercialized by 2030, as shown in the following table.\45\ These 
include technologies and practices in the energy supply, 
transportation, buildings, industry, agriculture, forest, and waste 
sectors:
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    \45\ IPCC 2007, ``Summary for Policymakers,'' p. 14. Figure III-
3

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[[Page 44406]]

[GRAPHIC] [TIFF OMITTED] TP30JY08.028

    How much any of the mitigation strategies identified by these 
studies would actually be deployed to address climate change is an open 
question. It is possible that unanticipated technologies could play a 
significant role in reducing emissions. The point of these studies is 
to illustrate that potentially feasible technologies exist that could 
be employed to mitigate GHG emissions, not to predict the precise role 
they will play or to suggest sectors or methods for regulation. The 
particular policies pursued by governments, including the U.S. under 
the CAA or other authorities, will influence the way in which these 
technologies are deployed as well as incentives for developing and 
deploying new technologies.
2. Federal Climate Change Technology Program
    The U.S. government is investing in a diverse portfolio of 
technologies with

[[Page 44407]]

the potential to yield substantial reductions in emissions of GHGs. The 
Climate Change Technology Program (CCTP) is a multi-agency planning and 
coordination entity that assists the government in carrying out the 
President's National Climate Change Technology Initiative. Managed by 
the Department of Energy, the program is organized around five 
technology areas for which working groups were established. EPA 
participates in all of the working groups and chairs the group focused 
on non-CO2 GHGs.
    The CCTP strategic plan, released in September 2006, provides 
strategic direction and organizes approximately $3 billion in federal 
spending for climate change-related technology research, development, 
demonstration, and deployment.\46\ The plan sets six complementary 
goals, including five aimed at developing technologies to:
---------------------------------------------------------------------------

    \46\ U.S. Climate Change Technology Program Strategic Plan, 
September 2006; http://www.climatetechnology.gov/stratplan/final/index.htm.
---------------------------------------------------------------------------

     Reduce emissions from energy end-use and infrastructure;
     Reduce emissions from energy supply, particularly through 
development and commercialization of no- or low-emission technologies;
     Capture, store and sequester CO2;
     Reduce emissions of non-CO2 GHGs; and
     Enhance the measurement and monitoring of CO2 
emissions.

The first four of these goals focus on GHG emissions reduction 
technologies, and the fifth addresses a key need for developing 
comprehensive GHG control strategies. The sixth CCTP goal is to 
strengthen the contributions of basic science to climate change 
technology development.
3. Potential for CAA Regulation to Encourage Technology Development
    Past EPA efforts to reduce air pollution under the CAA demonstrate 
that incentives created by regulation can help encourage technology 
development and deployment. As noted in a recent EPA regulatory 
analysis, 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 emission control in relation to 
original estimates.\47\ Among the examples are motor vehicle emission 
controls, diesel fuel and engine standards to reduce NOX and 
particulate matter emissions, engine idle-reduction technologies, 
selective catalytic reduction and ultra-low NOX burners for 
NOX emissions, high-efficiency scrubbers for SO2 
emissions from boilers, CFC-free air conditioners and refrigerators, 
low or zero VOC paints, and idle-reduction technologies for 
engines.\48\
---------------------------------------------------------------------------

    \47\ See section 5.4 of Final Ozone NAAQS Regulatory Impact 
Analysis, March 2008, EPA-HQ-OAR-2007-0225. The RIA is available at 
http://www.epa.gov/ttn/ecas/ria.html#ria2007.
    \48\ Ibid.
---------------------------------------------------------------------------

    One of the issues raised by potential CAA regulation of GHGs is 
whether the CAA can help spur needed technological development for 
reducing GHG emissions and the costs of those reductions. The 
regulatory authorities in the CAA vary in their potential for 
encouraging new technology. As discussed later in this notice, some 
provisions offer little flexibility in standard-setting criteria, 
emission control methods, compliance deadlines and potential for 
market-oriented regulation. Other provisions offer more potential to 
encourage new technology through market incentives or to establish 
standards based on anticipated advances in technology. EPA 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 research to promote technological development.

D. Relationship to Traditional Air Pollutants and Air Pollution 
Controls

    An issue for any regulation of GHGs under the CAA or other 
statutory authority is how a GHG control program would and should 
interact with existing air quality management programs. This section 
describes the relationships between climate change and air quality and 
between GHG emissions and traditional air pollution control programs. 
As explained below, those relationships suggest the need for integrated 
approaches to climate change mitigation and air quality protection. 
Differences between GHGs and traditional air pollutants should also be 
taken into account in considering how CAA authorities could be employed 
for GHG regulation.
1. Connections Between Climate Change and Air Quality Issues
    Climate change affects some types of air pollution, and some 
traditional air pollutants affect climate. According to the IPCC, 
climate change can be expected to influence the concentration and 
distribution of air pollutants through a variety of direct and indirect 
processes. In its recent review of the NAAQS for ozone, EPA examined 
how climate change can increase ozone levels and how ozone, itself a 
GHG, can contribute to climate change. Similarly, in its reviews of the 
NAAQS for particulate matter, the Agency examined the extent to which 
some particles help absorb solar energy in the earth's atmosphere and 
others help reflect it back to space.\49\ How EPA regulates those 
pollutants under the CAA is potentially part of an overall strategy for 
addressing climate change, and how GHGs are regulated is potentially an 
important component of protecting air quality. For example, it is 
likely to become more difficult and expensive to attain the ozone NAAQS 
in a future, warmer climate.
---------------------------------------------------------------------------

    \49\ EPA did not have adequate information in these reviews for 
impacts on climate change to change the Agency's decision on whether 
or how to revise the standards. See, e.g., 71 FR 61144, 61209-10 
(October 17, 2006) (PM NAAQS review).
---------------------------------------------------------------------------

    Most of the largest emitters of GHGs are also large emitters of 
traditional air pollutants and therefore are already regulated under 
the CAA. The electricity generation, transportation and industrial 
sectors, the three largest contributors to GHG emissions in the U.S., 
are subject to CAA controls to help meet NAAQS, control acid rain, and 
reduce exposures to toxic emissions. Some manufacturers of the GHGs 
that are fluorinated gases are subject to CAA regulations for 
protection of the stratospheric ozone layer.
    Many measures for controlling GHG emissions also contribute to 
reductions in traditional air pollutants, and some measures for 
controlling traditional air pollutants result in reductions in 
GHGs.\50\ Co-benefits from reduced air pollution as a result of actions 
to reduce GHG emissions can be substantial.\51\ In general, fossil fuel 
combustion results in emissions not only of CO2 but also of 
many traditional air pollutants, including SO2, 
NOX, CO and various toxic air pollutants. For many types of 
sources, to the extent fossil fuel combustion is reduced, emissions of 
all those pollutants are reduced as well. Some control measures reduce 
GHGs and traditional air pollutants, including leak detection and fuel 
switching. However, some measures for controlling traditional air 
pollutants increase GHGs, and some measures for controlling GHGs may 
increase traditional air pollutants. For example, controls to decrease 
SO2 emissions from industrial sources require energy to 
operate and result in reduced process efficiencies and increases in 
GHGs, and changing

[[Page 44408]]

the composition of transportation fuels to reduce GHGs may affect 
traditional air pollutant emissions.
---------------------------------------------------------------------------

    \50\ EPA, OAP, Clean Energy-Environmental Guide to Act, http://www.epa.gov/cleanenergy/documents/gta/guide_action_full.pdf.
    \51\ IPCC, 2007, Working Group III, Summary for Policymakers.
---------------------------------------------------------------------------

    By considering policies for addressing GHGs and traditional air 
pollutants in an integrated manner, EPA and the sectors potentially 
subject to GHG emission controls would also have the opportunity to 
consider and pursue the most effective way of accomplishing emission 
control across pollutants. For example, adoption of some air quality 
controls could result in a degree of ``technology lock-in'' that 
restricts the ability to implement GHG control technologies for 
significant periods of time because of the investment in capital and 
other resources to meet the air quality control requirements. Sections 
VI and VII below discuss technologies and opportunities for controlling 
GHGs in more detail from various sectors, including transportation, 
electricity generation, and manufacturing. EPA requests comment on 
strategies and technologies for simultaneously achieving reductions in 
both traditional air pollutants and GHG emissions.
    In light of the connections between climate change and air quality, 
the large overlap of GHG and traditional air pollution sources, and the 
potential interactions of GHG and traditional air pollution controls, 
it makes sense to consider regulation of GHGs and traditional air 
pollutants in an integrated manner. Indeed, the National Academy of 
Sciences recommends that development of future policies for air 
pollution control be integrated with climate change considerations.\52\ 
GHG control measures implemented today could have immediate impacts on 
air pollution and air quality. Similarly, air pollution controls 
implemented today could have near term impacts on GHG emissions and 
thus long term impacts on climate. Ideally, any GHG control program 
under the Act, or other statutory authority would address GHGs in ways 
that simultaneously reduce GHGs and traditional air pollutants as 
needed to mitigate climate change and air pollution.\53\
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    \52\ National Academy of Sciences, ``Radiative Forcing of 
Climate Change: Expanding the Concept and Addressing 
Uncertainties,'' October 2005.
    \53\ Integration of planning efforts related to air quality, 
land use, energy efficiency, and transportation to improve air 
quality and reduce GHG emissions is in line with the CAA Advisory 
Committee Air Quality Management Subcommittee's Phase II 
recommendations (June 2007), and the recommendations of the National 
Research Council of the National Academy of Sciences in its January 
2004 report, ``Air Quality Management in the United States.'' EPA 
has initiated several programs to encourage integrated planning 
efforts, including the Sustainable Skylines Initiative, a public-
private partnership to reduce air emissions and promote 
sustainability in urban environments, and the Air Quality Management 
Plan pilot program for testing a comprehensive, multipollutant 
planning approach.
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2. Issues in Applying CAA Controls to GHGs
    One important issue for regulation of GHGs under some CAA 
provisions concerns the emissions thresholds established by the Act for 
determining the applicability of those provisions. Several CAA 
provisions require stationary sources that emit traditional air 
pollutants above specific emission thresholds to comply with certain 
requirements. Applying the same thresholds to GHGs could result in 
numerous sources, such as space heaters in large residential and 
commercial buildings, becoming newly subject to those requirements. 
Currently regulated sources could become subject to additional 
requirements. This would occur in part because most sources typically 
emit CO2, the predominant GHG, in much larger quantities 
than traditional air pollutants. Issues related to threshold levels are 
discussed in more detail in Section VII below.
    Other important issues for CAA regulation of GHGs are raised by the 
different temporal and spatial scope of GHGs compared to traditional 
pollutants. Air pollutants currently regulated under the CAA tend to 
have local (a few kilometers) or regional (hundreds to thousands of 
kilometers) impacts and relatively short atmospheric lifetimes (days to 
a month). Historically, this has meant that EPA could identify and 
differentiate between affected and unaffected areas and devise control 
strategies appropriate for each area. Controls applied within an area 
with high concentrations of traditional air pollutants generally have 
been effective in achieving significant reductions in air pollution 
concentrations within that area in a relatively short amount of time. 
The spatial nature of traditional air pollution also has made it 
appropriate to place the primary responsibility for planning controls 
on state, tribal, or local governments.
    In the years since the CAA was enacted, we have learned that some 
traditional air pollutants (e.g., ozone, particulates and their 
precursors) are transported across regions of the country and thus have 
geographically broader impacts than individual states can address on 
their own. Our control strategies for those pollutants have evolved 
accordingly. The Nitrogen Oxides (NOX) SIP Call Rule and the 
Clean Air Interstate Rule (CAIR) are examples of regional control 
programs that significantly supplement local control measures. NSPS and 
motor vehicle controls are examples of national measures that also help 
improve air quality locally and regionally.
    The global nature and effect of GHG emissions raise questions 
regarding the suitability of CAA provisions that are designed to 
protect local and regional air quality by controlling local and 
regional emission sources.\54\ As noted above, GHGs are relatively 
evenly distributed throughout the global atmosphere. As a result, the 
geographic location of emission sources and reductions are generally 
not important to mitigating global climate change. Instead, total GHG 
emissions in the U.S. and elsewhere in the world over time determine 
cumulative global GHG concentrations, which in turn determine the 
extent of climate change. As a result, it will be the total emission 
reductions achieved by the U.S. and the other countries of the world 
that will determine the extent of climate change mitigation. The global 
nature of GHGs suggests that the programmatic and analytical tools used 
to address local and regional pollutants under the CAA (e.g., SIPs, 
monitoring networks, and models) would need to be adapted to inventory, 
analyze, control effectively and evaluate progress in achieving GHG 
reductions.
---------------------------------------------------------------------------

    \54\ It should be noted that international transport of ozone 
and particulate matter precursors contributes to NAAQS nonattainment 
in some areas of the U.S. Nevertheless, most traditional air 
pollution problems are largely the result of local and regional 
emission sources, while for GHGs, worldwide emissions determine the 
extent of the problem.
---------------------------------------------------------------------------

    EPA seeks information about how differences in pollutant 
characteristics should inform regulation of these pollutants under the 
CAA. EPA also requests comment on the types of effective programs at 
all levels (local, regional, national and international) that may be 
feasible to design and implement under existing CAA authorities.

E. Relationship to Other Environmental Media

    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. Examples of these impacts include the 
potential for groundwater contamination from geological

[[Page 44409]]

sequestration of CO2, the generation of spent sorbent 
material from carbon capture systems, or the depletion of water 
resources and increased nutrient runoff into surface waters from 
increased production of bioenergy feedstocks. EPA and other regulatory 
agencies at the tribal, state, and local level may need to respond to 
such impacts to prevent or minimize their impact to the environment and 
public health under authorities other than the CAA.
    Since the nature and extent of these impacts would depend upon the 
technologies and approaches that are implemented under a GHG control 
program, an important consideration in designing GHG controls is 
minimizing or mitigating such impacts EPA seeks comment on how 
different regulatory approaches to GHG control under the CAA could 
result in environmental impacts to water or land that could require 
response under the CAA or EPA's other legislative authorities.

F. Other Key Policy and Economic Considerations for Selecting 
Regulatory Approaches

    This section identifies general policy considerations relevant to 
developing potential regulatory approaches for controlling GHG 
emissions. In developing approaches under the CAA, EPA must first 
consider the Act's provisions as well as the Agency's previous 
interpretation of the provisions and relevant and controlling court 
opinions. Provisions of the CAA vary in terms of the degree of 
flexibility afforded EPA in designing implementing regulations under 
the Act. To the extent particular provisions permit, EPA believes the 
following considerations should guide its choice among available 
regulatory approaches. This section also discusses three selected 
issues in greater depth because of their importance to designing 
effective GHG controls: advantages of market-oriented regulatory 
approaches, economy-wide and sector-based regulation under the CAA, and 
emissions leakage and international competitiveness. In discussing 
these and other policy and economic considerations, EPA is not directly 
or indirectly implying that it possesses the requisite statutory 
authority in all areas.
1. Overview of Policy and Economic Considerations
    The following considerations are useful in developing potential 
regulatory approaches to the extent permissible under the CAA. These 
considerations are also generally applicable to the design of GHG 
control legislation. EPA is in the process of evaluating the CAA 
options described later in this notice in light of these 
considerations.
    Effectiveness of health and environmental risk reduction: How much 
would the approach reduce negative health and environmental impacts (or 
the risk of such impacts), relative to other potential approaches?
    Certainty and transparency of results: How do the potential 
regulatory approaches balance the trade-off between certainty of 
emission reductions and costs? To what extent can compliance 
flexibility be provided for regulated entities while maintaining 
adequate accountability for emission reductions?
    Cost-effectiveness and economic efficiency considerations: To what 
extent does the approach allow for achieving health and environmental 
goals, determined in a broader policy process, in a manner that imposes 
the least cost? How do the societal benefits compare to the societal 
costs? To what extent are there non-monetizable or unquantifiable 
benefits and costs? Given the uncertainties associated with climate 
change, to what extent can economic efficiency be judged?
    Equity considerations (i.e., distributional effects): Does the 
approach by itself or in combination with other programs result in a 
socially acceptable apportionment of the burden of emission reduction 
across groups in our society? Does the approach provide adequate 
protection for those who will experience the adverse effects of 
emissions, including future generations?
    Policy flexibility over time: Does the approach allow for updating 
of environmental goals and mechanisms for meeting those goals as new 
information on the costs and benefits of GHG emission reductions 
becomes available?
    Incentives for innovation and technology development: Does the 
approach provide incentives for development and deployment of new, 
cleaner technologies in the United States and transfer abroad? Does the 
approach create incentives for individual regulated entities to achieve 
greater-than-required emissions reductions?
    Competitiveness/emissions shifts: Can the approach be designed to 
reduce potential adverse impacts and consequent shifts in production 
and emissions to other sectors or geographic areas? Can the policy be 
designed to minimize the shifting, or ``leakage,'' of emissions to 
other sectors or other countries, which would offset emission reduction 
benefits of the policy? To what extent can the approach consider the 
degree and nature of action taken by other countries?
    Administrative feasibility: How complex and resource-intensive 
would the approach be for federal, state, and local governments and for 
regulated entities? Do personnel in the public and private sectors have 
sufficient expertise, or can they build sufficient expertise, to 
successfully implement the approach?
    Enforceability: Is the approach enforceable in practice? Do 
available regulatory options differ regarding whether the government or 
the regulated entity bears the burden of demonstrating compliance?
    Unintended consequences: Does the approach result in unintended 
consequences or unintended effects for other regulations? Does the 
approach allow for consideration of, and provide tools to address, any 
perverse incentives?
    Suitability of tool for the job: Overall, is the approach well-
suited to the environmental problem, or the best-suited among imperfect 
alternatives? For example, does the regulatory approach fit the 
characteristics of the pollutant in question (e.g., the global and 
long-lived nature of GHGs, high volume of CO2 emissions)?
2. Market-Oriented Regulatory Approaches for GHGs
    EPA believes that market-oriented regulatory approaches, when well-
suited to the environmental problem, offer important advantages over 
non-market-oriented approaches. A number of theoretical and empirical 
studies have shown these advantages.\55\ In general, market-oriented 
approaches include ways of putting a price on emissions through a fixed 
price (e.g., a tax) or exchangeable quantity-based instrument (e.g., a 
cap-and-trade program), while non-market-oriented approaches set 
performance standards limiting the rate at which individual entities 
can emit, or prescribe what abatement behaviors or technologies they 
should use.\56\ The primary regulatory advantage of a market-oriented 
approach is that it can achieve a particular emissions target at a 
lower

[[Page 44410]]

social cost than a non-market-oriented \57\ approach (Baumol and Oates, 
1971; Tietenberg, 1973).\58\ This is because market-oriented approaches 
leave the method for reducing pollution to the emitter, and emitters 
have an incentive to find the least cost way of achieving the 
regulatory requirement. Efficient market-oriented regulatory systems 
provide a common emissions price for all emitters that contribute to a 
particular harm, either through the tax on emissions or the price of an 
exchangeable right to emit. As a result, the total abatement required 
by the policy can theoretically be distributed across all emitters in 
such a way that the marginal cost of control is equal for all emitters 
and the cost of reducing emissions is minimized.\59\ Non-market-
oriented policies offer emitters fewer choices on how to reduce 
emissions, which can lead to higher costs than are necessary to achieve 
the overall environmental objective (i.e. emission level).
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    \55\ See EPA (2000), Baumol and Oates (1988), Tietenberg (2006) 
and Burtraw et al. (2005) for a detailed description of the 
advantages of market-oriented policies, such as the Title IV sulfur 
dioxide trading program, over non-market-oriented approaches.
    \56\ Performance standards provide a source flexibility to use 
any emission reduction method that meets the performance standard; 
they can be coupled with market-oriented approaches such as 
emissions trading to promote lower costs and technology innovation, 
as described later in this section.
    \57\ Many studies use the term ``command-and-control'' to refer 
to non-market-oriented approaches. Here we use the term ``non-
marketed-oriented'' because the term ``command and control'' may be 
misleading when used to refer to performance-based emission limits 
that allow the regulated entity to choose the control technology or 
strategy for compliance.
    \58\ It is important to note that judgments about the 
appropriate mitigation approach also may consider important societal 
values not fully captured in economic analysis, such as political, 
legal, and ethical considerations. For example, different regulatory 
forms may result in different distributions of costs and benefits 
across individuals and firms. This is a particularly sensitive issue 
with policies that raise energy costs, which are known to be 
regressive. However, these issues are not discussed at length here.
    \59\ For a standard textbook treatment supporting this finding 
see Tietenberg (2006) or Callan and Thomas (2007).
---------------------------------------------------------------------------

    As noted previously, it is especially important that any GHG 
emission reduction policy encourage the innovation, development and 
diffusion of technologies to provide a steady decline in the costs of 
emission reductions. Another advantage of market-oriented approaches is 
that they generally provide a greater incentive to develop new ways to 
reduce pollution than non-market-oriented approaches (Malueg 1989; 
Milliman and Prince 1989; Jung et al., 1996). Polluters not only have 
an incentive to find the least cost way of adhering to a standard but 
they also have an incentive to continually reduce emissions beyond what 
is needed to comply with the standard. For every unit of emissions 
reduced under a market-oriented policy, the emitter either has a lower 
tax burden or can sell an emissions permit (or buy one less emissions 
permit). Also, there are more opportunities under a market-oriented 
approach for developers of new control technologies to work directly 
with polluters to find less expensive ways to reduce emissions, and 
polluters are faced with less compliance risk if a new pollution 
control technique does not work as expected. This is because they can 
either pay for their unanticipated emissions through the tax or by 
purchasing emission rights instead of being subject to enforcement 
action (Hahn, 1989).
    There are a number of examples of CAA rules in which market-
oriented approaches have been used for groups of mobile or stationary 
sources. Usually this has taken the form of emissions trading within a 
sector or subsector of a source category, although there are some 
examples of broader trading programs. Differences in implications of 
sector-specific and economy-wide market-oriented systems are discussed 
in subsection below.
    The cost advantage of market-oriented policies can be extended when 
emitters are allowed to achieve a particular environmental objective 
across multiple pollutants that affect environment quality in the same 
way but differ in the magnitude of that effect (e.g., different GHGs 
have different global warming potentials). Either a cap-and-trade or a 
tax approach could be designed so that the effective price per unit of 
emissions is higher for those pollutants that have a greater 
detrimental effect. Under a cap, the quantity of emissions reductions 
is fixed but not the price; under a tax, the price is fixed but not the 
emissions reductions. Some current legislative proposals include 
flexible multiple-pollutant market-oriented policies for the control of 
GHG emissions.
    Market-oriented approaches are relatively well-suited to 
controlling GHG emissions. Since emissions of the major GHGs are 
globally well-mixed, a unit of GHG emissions generally has the same 
effect on global climate regardless of where it occurs. Also, while 
policies can control the flow of GHG emissions, what is of ultimate 
concern is the concentration of cumulative GHGs in the atmosphere. 
Providing flexibility on the method, location and precise timing of GHG 
reduction would not significantly affect the global climate protection 
benefits of a GHG control program (assuming effective enforcement 
mechanisms), but could substantially reduce the cost and encourage 
technology innovation.\60\ However, it should be noted that for GHG 
control strategies that also reduce emissions of traditional 
pollutants, the timing and location of those controls could 
significantly affect air quality in local or regional areas. There is 
the potential for positive air quality effects from strategies that 
reduce both GHGs and traditional pollutants, and for adverse air 
quality effects that may be avoidable through complementary measures to 
address air quality. For example, when the acid rain control program 
was instituted, existing sulfur dioxide control programs were left in 
place to ensure that trading under the acid rain program did not 
undermine achievement of local air quality objectives.
---------------------------------------------------------------------------

    \60\ We say ``precise'' timing because the qualifier is 
important: The IPCC and others have noted that lower GHG 
stabilization targets would require steeper and earlier emission 
reductions, whereas stabilization targets that allow for more 
warming (with higher associated risks and impacts) would require 
less steep and later emission reductions.
---------------------------------------------------------------------------

    As noted previously, broad-based market-oriented approaches include 
emissions taxes and cap-and-trade programs with and without cost 
containment mechanisms. While economists disagree on which of these 
approaches--emissions taxes or cap-and-trade programs--may be 
particularly well-suited to the task of mitigating GHG emissions, they 
do agree that attributes such as flexibility, cost control, and broad 
incentives for minimizing abatement costs and developing new 
technologies are important policy design considerations.\61\ For a 
description of various market-oriented approaches, see section VII.G.
---------------------------------------------------------------------------

    \61\ These approaches also raise the issue of the potential use 
of revenues from collecting a tax or auctioning allowances to emit 
GHGs at levels that do not exceed the cap. See Chapter 4 of U.S. EPA 
(2000), ``Guidelines for Preparing Economic Analyses,'' EPA 240-R-
00-003.
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3. Legal Authority for Market-Oriented Approaches Under the Clean Air 
Act
    The ability of each CAA regulatory authority potentially applicable 
to GHGs to support market-oriented regulatory approaches is discussed 
in sections VI and VII of this notice. To summarize, some CAA 
provisions permit or require market-oriented approaches, and others do 
not. Trading programs within sectors or subsectors have been 
successfully implemented for a variety of mobile and stationary source 
categories under the Act, including the Acid Rain Control Program (58 
FR 3590 (Jan. 11, 1993)) and a variety of on-road and non-road vehicle 
and fuel rules. Multi-sector trading programs, though not economy-wide, 
have been successfully implemented under section 110(a)(2)(D) for 
nitrogen oxides (i.e. the NOX SIP Call Rule) and under Title 
VI for ozone-depleting substances, and may be

[[Page 44411]]

possible among stationary source sectors under section 111. An economy-
wide system might be legally possible under CAA section 615 (if the 
two-part test unique to that section were met) or if a NAAQS were 
established for GHGs. However, any economy-wide program under either 
provision would not stand alone; it would be accompanied by source-
specific or sector-based requirements as a result of other CAA 
provisions (e.g., PSD permitting under section 165).
    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 we will refer to collectively as 
fees). EPA may promulgate regulations that impose fees only if the 
specific statutory provision at issue authorizes such fees, whether 
directly or through a grant of regulatory authority that is written 
broadly enough to encompass them. For example, CAA section 110(a)(2)(A) 
allows for the use of ``economic incentives such as fees, marketable 
permits, and auctioning allowances.'' Under this provision, some states 
intend to auction allowances under CAIR (70 FR 25162 (May 12, 2005)) 
and some have under the NOX SIP Call Rule (63 FR 57356 (Oct. 
27, 1998)). By the same token, states have authority to impose 
emissions fees as economic incentives as part of their SIPs and collect 
the revenues. Similarly, section 110(a)(2)(A) authorizes EPA to impose 
fees as economic incentives as part of a Federal Implementation Plan 
(FIP) under section 110(c), although EPA has never done so.\62\
---------------------------------------------------------------------------

    \62\ Any such revenues from a FIP would be deposited in the 
Federal Treasury under the Miscellaneous Receipts Act, and not 
retained and disbursed by EPA.
---------------------------------------------------------------------------

    Section 111 authorizes EPA to promulgate ``standards of 
performance,'' which are defined as ``standard[s] for emissions of air 
pollutants.'' EPA has taken the position that this term authorizes a 
cap-and-trade program under certain circumstances. A fee program 
differs from a cap and trade because it does not establish an overall 
emission limitation, and we have not taken a position on whether, given 
this limitation, a fee program fits the definition of a ``standard of 
performance.'' Even so, 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. 
Also, there may be advantages of including an emission fee feature into 
a cap-and-trade program (i.e., as a price ceiling). The use of a price 
ceiling that is not expected 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.
    We request comment 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. Furthermore, we request comments on the use of emission fee 
programs under other sections of the Act. We also seek comment on 
whether sector-specific programs, or inter-sector programs where 
emission fees on a CO2 equivalent basis are harmonized, 
might be more appropriate as possible regulatory mechanisms under the 
Act.
4. Economy-Wide and Sector-Based Regulation in a Clean Air Act Context
    Several legislative cap-and-trade proposals for reducing GHG 
emissions are designed to be nearly economy wide, meaning that they 
attempt to reduce GHG emissions in most economic sectors through a 
single regulatory system. By contrast, many CAA authorities are 
designed for regulations that apply to a sector, subsector or source 
category, although broader trading opportunities exist under some 
authorities. This section discusses the relative merits of economy-wide 
systems and sector-based market-oriented approaches. These 
considerations may also be relevant in considering the use of CAA 
provisions in tandem with any climate change legislation.
i. Economy-Wide Approach
    Economic theory suggests that establishing a single price for GHG 
emissions across all emitters through an economy-wide, multiple GHG, 
market-oriented policy would promote optimal economic efficiency in 
pursuing GHG reductions. According to the economics literature, 
economy-wide GHG trading or GHG emissions taxes could offer 
significantly greater cost savings than a sector-by-sector approach for 
GHGs because the broader the universe of sources covered by a single 
market-oriented approach (within a sector, across sectors, and across 
regions), the greater the potential for finding lower-cost ways to 
achieve the emissions target. If sources of pollution are 
compartmentalized into different sector-specific or pollutant-specific 
approaches, including the relatively flexible cap-and-trade approaches, 
each class of polluter may still face a different price for their 
contribution to the environmental harm, and therefore some trading 
opportunities that reduce pollution control costs will be unrealized 
(Burtraw and Evans, 2008).\63\ Taking a sector-by-sector approach to 
controlling GHG emissions is likely to result in higher costs to the 
economy. For example, limiting a market-oriented GHG policy to the 
electricity and transportation sectors could double the welfare cost of 
achieving a five percent reduction in carbon emissions compared to when 
the industrial sector is also included.\64\
---------------------------------------------------------------------------

    \63\ With traditional pollutants there are geographic issues to 
consider.
    \64\ William Pizer, Dallas Burtraw, Winston Harrington, Richard 
Newell, and James Sanchirico (2006), ``Modeling Economywide versus 
Sectoral Climate Policies Using Combined Aggregate-Sectoral 
Models,'' The Energy Journal, Vol. 27, No. 3: 135-168.
---------------------------------------------------------------------------

    A second factor that favors making the scope of a market-oriented 
system as broad as possible is that the incentive for development, 
deployment and diffusion of new technologies would be spread across the 
economy. In contrast to an approach targeting a few key sectors, an 
economy-wide approach would affect a greater number of diverse GHG-
emitting activities, and would influence a larger number of individual 
economic decisions, potentially leading to innovation in parts of the 
economy not addressed by a sector-by-sector approach.
    As stated at the outset of this section, there are, first and most 
important, CAA authority issues as well as other policy and practical 
considerations in addition to economic efficiency that must be weighed 
in evaluating potential CAA approaches to GHG regulation. An economy-
wide, market-oriented environmental regulation has never been 
implemented before in the U.S. The European Union, after encountering 
difficulties in early years of implementation, recently adopted major 
revisions to its broad multi-sector cap-and-trade system; this 
illustrates that some time and adjustments may be needed for such a 
program to achieve its intended effect. Although EPA has successfully 
designed and implemented market-oriented systems of narrower scope, a 
single economy-side system would involve new design and implementation 
challenges, should the CAA make possible such a system. For example --
     Administrative costs may be a concern, because more 
sources and sectors would have to be subject to

[[Page 44412]]

reporting and measurement, monitoring, and verification requirements.
     Some sources and sectors are more amenable to market-
oriented approaches than others. The feasibility and cost of accurate 
monitoring and compliance assurance needed for trading programs 
(whether economy-wide or sector-based) varies among sectors and source 
size. As a result, there are potential tradeoffs between trading 
program scope and level of assurance that required emissions reductions 
will be achieved.
     To broaden the scope of cap-and-trade systems, covered 
sources could be allowed to purchase GHG emission reductions 
``offsets'' from non-covered sources. However, offsets raise additional 
accountability issues, including how to balance cost efficiency against 
certainty of emissions reductions, how to quantify resulting emissions 
reductions, and how to ensure that the activities generating the 
offsets are conducted and maintained over time.
     Allocating allowances or auction revenues for an economy-
wide GHG trading system would be very challenging for an executive 
branch agency because of high monetary stakes and divergent stakeholder 
views on how to distribute the allowances or revenues to promote 
various objectives. For example, many economists believe that 
auctioning allowances under a cap-and-trade system and using the 
proceeds to reduce taxes that distort economic incentives would be 
economically efficient, but regulated entities typically favor free 
allowance allocations to offset their compliance costs.65 66
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    \65\ Many economists also suggest that an emissions tax with 
proceeds used to decrease distortionary taxes would be economically 
efficient; however, the CAA does not authorize such a program.
    \66\ Bovenberg and Goulder (2001) find that freely allocating 
20% of allowances to fossil fuel suppliers is enough to keep profits 
from falling. When all allowances are freely allocated, profits are 
found to be higher than in the absence of the carbon cap-and-trade 
policy. Free allocation of allowances or an approach that exempts 
particular sectors also raises the specter of ``rent-seeking,'' the 
notion that sectors or particular source categories will lobby to 
gain preferential treatment and, in essence, be subject to less 
regulatory oversight than other sectors or competitors.
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ii. Sector-Based and Multi-Sector Trading Under the Clean Air Act
    As mentioned above, EPA has implemented multi-sector, sector and 
subsector-based cap-and-trade approaches in a number of CAA programs, 
including the Acid Rain (SO2) Program, the NOX 
SIP Call Rule, the Clean Air Interstate Rule (CAIR), and the 
stratospheric ozone-depleting substances (ODS) phase-out rule. In the 
case of the acid rain and ODS rules, the CAA itself called for federal 
controls. By contrast, the NOX SIP Call rule and CAIR were 
established by EPA through regulations under CAA section 110(a)(2)(d) 
to help states attain various NAAQS. The two rules and EPA's 
accompanying model rules enable states to adopt compatible cap-and-
trade programs that form regional interstate trading programs. The 
power sector and a few major industrial source categories are included 
in the trading system for the NOX SIP Call, and the trading 
system for CAIR focuses on the electricity generation sector.
    In addition to creating cap-and-trade systems, EPA has often 
incorporated market-oriented emissions trading elements into the more 
traditional performance standard approach for mobile and stationary 
sources. Coupling market-oriented provisions with performance standards 
provides some of the cost advantages and market flexibility of market-
oriented solutions while also directly incentivizing technology 
innovation within the particular sector, as discussed below. For 
example, performance standards for mobile sources under Title II have 
for many years been coupled with averaging, banking and trading 
provisions within a subsector. In general, averaging allows covered 
parties to meet their emissions obligation on a fleet- or unit-wide 
basis rather than requiring each vehicle or unit to directly comply. 
Banking provides direct incentives for additional reductions by giving 
credit for over-compliance; these credits can be used toward future 
compliance obligations and, as such, allow manufacturers to put 
technology improvements in place when they are ready for market, rather 
than being forced to adhere to a strict regulatory schedule that may or 
may not conform to industry or company developments. Allowing trading 
of excess emission reductions with other covered parties provides an 
incentive for reducing emissions beyond what is required.
    Based on our experience with these programs, EPA believes that 
sector and multi-sector trading programs for GHGs--relative to non-
market regulatory approaches--could offer substantial compliance 
flexibility, cost savings and incentives for innovation to regulated 
entities. In addition, as discussed below, in some sectors there may be 
a need to more directly incentivize technology development because of 
market barriers that a sector-specific program might help to overcome. 
To the extent sector-based approaches could provide for control of 
multiple pollutants (e.g., traditional pollutants and GHGs), they could 
provide additional cost savings relative to multiple single-pollutant, 
sector-based regulations. Another consideration is that it may be 
simpler and thus faster to move forward with cap-and-trade programs for 
sectors already involved in, and thus familiar with, cap-and-trade 
programs. This raises the question of whether it would make sense to 
phase in an economy-wide system over time.
    Sector and multi-sector approaches would not offer the relative 
economic efficiency of the economy-wide model for the reasons explained 
above. To the extent the program sets more stringent requirements for 
new sources than for existing source, a sector or multi-sector approach 
could also pose the vintage issues discussed below. It is also 
important to keep in mind that the economic efficiency of any CAA cap-
and-trade approach for GHGs, sector- or economy-wide, could be reduced 
to a significant extent by the application of other GHG control 
requirements (e.g., PSD permitting) to the sources covered by the cap-
and-trade program, if the result were to restrict compliance options.
iii. Combining Economy-Wide and Sector-Based Approaches
    It is worth noting that market-oriented approaches may not 
incentivize the most cost-effective reductions when information 
problems, infrastructure issues, technological issues or other factors 
pose barriers that impeded the market response to price incentives. In 
such instances, there may be economic arguments for combining an 
economy-wide approach with complementary sector-based requirements 
unless these problems can be directly addressed, for instance by 
providing the information needed or directly subsidizing the creation 
of needed infrastructure.
    For instance, given the relative inelasticity of demand for 
transportation, even a relative high permit price for carbon may not 
substantially change consumer vehicle purchases or travel demand, 
although recent reports indicate that the current price of gasoline and 
diesel are inducing an increasing number of consumers to choose more 
fuel efficient vehicles and drive less. Some have expressed concern 
that this relatively inelastic demand may be related to undervaluation 
by consumers of fuel economy when making vehicle purchasing decisions. 
If consumers adequately value fuel economy, fuel saving technologies 
will come online as a result of market forces. However, if

[[Page 44413]]

consumers undervalue fuel economy, vehicle or engine manufacturers may 
need a more direct incentive for making improvements or the technology 
innovation potential may well be delayed or not fully realized. Beyond 
this consumer valuation issue, questions have been raised as to whether 
a carbon price alone (especially if the impact is initially to raise 
gasoline prices by pennies a gallon) will provide adequate incentives 
for vehicle manufacturers to invest now in breakthrough technologies 
with the capability to achieve significantly deeper emissions 
reductions in the future, and for fuel providers to make substantial 
investments in a new or enhanced delivery infrastructure for large-
scale deployment of lower carbon fuels.\67\
---------------------------------------------------------------------------

    \67\ See Kopp and Pizer, ``Assessing U.S. Climate Policy 
Options,'' Chapter 12, RFF Press: Washington, DC (2007).
---------------------------------------------------------------------------

    EPA requests comment on how to balance the different policy and 
economic considerations involved in selecting potential regulatory 
approaches under the CAA, and on how the potential enactment of 
legislation should affect EPA's deliberations on how to use CAA 
authorities.
5. Other Selected Policy Design Issues
    Another policy and legal issue in regulatory design is whether 
requirements should differentiate between new and existing sources. 
Because it is generally more costly to retrofit pollution control 
equipment than to incorporate it into the construction or manufacture 
of a new source, environmental regulations, including under the CAA, 
frequently apply stricter standards to new or refurbished sources than 
to ``grandfathered'' sources that pre-date the regulation. New sources 
achieve high-percentage reductions and over time existing high-emitting 
sources are replaced with much cleaner ones. For example, emissions 
from the U.S. auto fleet have been dramatically reduced over time 
through new vehicle standards. However, some suggest that stricter 
pollution control requirements for new or refurbished sources may 
retard replacement of older sources, discouraging technology 
investment, innovation and diffusion while encouraging older and less 
efficient sources to remain in operation longer, thereby reducing the 
environmental effectiveness and cost-effectiveness of the regulation. 
Others believe that economic factors other than differences in new and 
existing source requirements (e.g., capital outlay, power prices and 
fuel costs) have the most impact on rate of return, and that 
differences in regulatory stringency generally do not drive business 
decisions on when to build new capacity.
    A 2002 EPA report on new source review requirements found that NSR 
``appears to have little incremental impact on construction of new 
electricity generation,'' but also found that ``there were credible 
examples of cases in which uncertainty over the [NSR] exemption for 
routine activities has resulted in delay or cancellation of projects 
[at existing plants]'' that would have increased energy capacity, 
improved energy efficiency and reduced air pollution.\68\ To the extent 
that a gap in new and existing source requirements affects business 
decisions, regulating existing as well as new sources can diminish or 
eliminate that gap. In the power sector, the gap has narrowed over 
time, in part as a result of CAA national and regional cap-and-trade 
systems that do not discriminate between new and existing facilities 
(i.e., both new and old power plants must hold allowances to cover 
their NOX and SO2 emissions). Another 
consideration is that equity issues can arise when applying retroactive 
requirements to existing sources. For GHGs, EPA requests comment on the 
concept of a market-oriented approach that does not differentiate 
between new and existing source controls and, by avoiding different 
marginal costs of control at new and existing sources, would promote 
more cost-effective emissions reductions. In addition, EPA requests 
comment on whether GHG regulations should differentiate between new and 
existing sources for various sectors, and whether there are 
circumstances in which requirements for stringent controls on new 
sources would have policy benefits despite the existence of a cap-and-
trade system that also would apply to those sources.
---------------------------------------------------------------------------

    \68\ ``New Source Review: Report to the President, June 2002,'' 
U.S. EPA, pp. 30-31.
---------------------------------------------------------------------------

    Another possible design consideration for a GHG program is whether 
and how lifecycle approaches to controlling GHG emissions could or 
should be used. Lifecycle (LC) analysis and requirements have been 
proposed for determining and regulating the entire stream of direct and 
indirect emissions attributable to a regulated source. Indirect 
emissions are emissions from the production, transportation, and 
processing of the inputs that go into producing that good. Section VI.D 
describes possible CAA approaches for reducing GHG emissions from 
transportation fuels through lifecycle analysis and includes a brief 
discussion of a potential lifecycle approach to reducing fuel-related 
GHG emissions. In that context, displacing petroleum-based fuels with 
renewable or alternative fuels can reduce fuel-related GHGs to the 
extent the renewable or alternative fuels are produced in ways that 
result in lower GHG emissions than the production of an equivalent 
amount of fossil-based fuels. Tailpipe GHG emissions typically do not 
vary significantly across conventional and alternative or renewable 
fuels.
    EPA recognizes that other programs, such as stationary source or 
area source programs described in this notice, could potentially 
address at least some of the indirect GHG emissions from producing 
fuels. We note that the technology and fuel changes that may result 
from an economy-wide cap-and-trade approach would likely be different 
from the technology and fuel changes that may result from a lifecycle 
approach.
    EPA asks for comment on how a lifecycle approach for fuels could be 
integrated with other stationary source approaches and whether there 
are potentially overlapping incentives or disincentives. EPA also asks 
for comments on whether a lifecycle approach to reducing GHG emissions 
may be appropriate for other sectors and types of sources, and what the 
implications for regulating other sectors would be if a lifecycle 
approach is taken for fuels.
6. ``Emissions Leakage'' and International Competitiveness
    A frequently raised concern with domestic GHG regulation 
unaccompanied by comparable policies abroad is that it might result in 
emissions leakage or adversely affect the international competitiveness 
of certain U.S. industries. The concern is that if domestic firms faced 
significantly higher costs due to regulation, and foreign firms 
remained unregulated, this could result in price changes that shift 
emissions, and possibly some production capacity, from the U.S. to 
other countries. Emissions leakage also could occur without being 
caused by a competitiveness issue: for instance, if a U.S. GHG policy 
raised the domestic price of petroleum-based fuels and led to reduced 
U.S. demand for those fuels, the resulting world price decline could 
spur increased use of petroleum-based fuels abroad, leading to 
increased GHG emissions abroad that offset U.S. reductions.
    The extent to which international competitiveness is a potential 
concern varies substantially by sector. This issue is mainly raised for 
industries with high energy use and substantial potential

[[Page 44414]]

foreign competition. Even for vulnerable sectors, the concern would 
depend on the actual extent which a program would raise costs for an 
energy intensive firm facing international competition, and on whether 
policies to address the competitiveness issue were adopted (either as 
part of the rule or in another venue).
    Leakage also could occur within the U.S. if emissions in one sector 
or region are controlled, but other sources are not. In this case, the 
market effects could lead to increased activity in unregulated sectors 
or regions, offsetting some of the policy's emissions reductions. In 
turn, this would raise the cost of achieving the environmental 
objective. The more uniform the price signal for an additional unit 
reduction in GHG emissions across sectors, states, and countries, the 
less potential there is for leakage to occur.
    A recent report has identified and evaluated five conceptual 
options for addressing competitiveness concerns in a legislative 
context; some options might also be available in a regulatory 
context.\69\ The first option, weaker program targets, would affect the 
entire climate protection policy. Four other options also could 
somewhat decrease environmental stringency but would allow for the 
targeting of industries or sectors particularly vulnerable to adverse 
economic impacts:
---------------------------------------------------------------------------

    \69\ Morgenstern, Richard D., ``Issue Brief 8: Addressing 
Competitiveness Concerns in the Context of a Mandatory Policy for 
Reducing U.S. Greenhouse Gas Emissions,'' in Assessing U.S. Climate 
Policy Options: A report summarizing work at RFF [Resources for the 
Future] as part of the inter-industry U.S. Climate Policy Forum, 
November 2007, Raymond J. Kopp and William A. Pizer, eds.
---------------------------------------------------------------------------

     Exemptions
     Non-market regulations to avoid direct energy price 
increases on an energy-intensive industry
     Distribution of free allowances to compensate adversely 
affected industries in a cap-and-trade system
     Trade-related policies such as import tariffs on carbon or 
energy content, export subsidies, or requirements for importers to 
submit allowances to cover the carbon content of certain products.

Significantly, the report noted that identifying the industries most 
likely to be adversely affected by domestic GHG regulation, and 
estimating the degree of impact, is complex in terms of data and 
analytical tools needed.
    We request comment on the extent to which CAA authorities described 
in this notice could be used to minimize competitiveness concerns and 
leakage of emissions to other sectors or countries, and which 
approaches should be preferred.

G. Analytical Challenges for Economic Analysis of Potential Regulation

    In the event that EPA pursues GHG emission reduction policies under 
the CAA or as a result of legislative action, we are required by 
Executive Order 12866 to analyze and take into account to the extent 
permitted by law the costs and benefits of the various policy options 
considered. Economic evaluation of GHG mitigation is particularly 
challenging due to the temporal and spatial dimensions of the problem 
discussed previously: GHG emissions have extremely long-run and global 
climate implications. Furthermore, changes to the domestic economy are 
likely to affect the global economy. In this section, we discuss a few 
overarching analytical challenges that follow from these points. Many 
of the issues discussed are also relevant when valuing changes in GHGs 
associated with non-climate policies.
1. Time Horizon and International Considerations in General
    As discussed earlier in this section, changes in GHG emissions 
today will affect environmental, ecological, and economic conditions 
for decades to centuries into the future. In addition, changes in U.S. 
GHG emissions that result from U.S. domestic policy will affect climate 
change everywhere in the world, as will changes in the GHG emissions of 
other countries. U.S. domestic policy could trigger emissions changes 
across the U.S. economy and across regions globally, as production and 
competitiveness change among economic activities. Similarly, 
differences in the potential impacts of climate change across the world 
can also affect competitiveness and production. Capturing these effects 
requires long-run, global analysis in addition to traditional domestic 
and sub-national analyses.
2. Analysis of Benefits and Costs Over a Long Time Period
    Since changes in emissions today will affect future generations in 
the U.S. and internationally, costs and benefits of GHG mitigation 
options need to be estimated over multiple generations. Typically, 
federal agencies discount future costs or benefits back to the present 
using a discount rate, where the discount rate represents how society 
trades-off current consumption for future consumption. With the 
benefits of GHG emissions reductions distributed over a very long time 
horizon, benefit and cost estimations are likely to be very sensitive 
to the discount rate. For policies that affect a single generation of 
people, the analytic approach used by EPA is to use discount rates of 
three and seven percent at a minimum.\70\ According to the Office of 
Management and Budget (OMB), a three percent rate is consistent with 
what a typical consumer might expect in the way of a risk free market 
return (e.g., government bonds). A seven percent rate is an estimate of 
the average before-tax rate of return to private capital in the U.S. 
economy. A key challenge facing EPA is the appropriate discount rate 
over the longer timeframe relevant for GHGs.
---------------------------------------------------------------------------

    \70\ EPA (U.S. Environmental Protection Agency), 2000. 
Guidelines for Preparing Economic Analyses. EPA 240-R-00-003. See 
also OMB (U.S. Office of Management and Budget), 2003. Circular A-4. 
September 17, 2003.
---------------------------------------------------------------------------

    There are reasons to consider even lower discount rates in 
discounting the costs of benefits of policy that affect climate change. 
First, changes in GHG emissions--both increases and reductions--are 
essentially long-run investments in changes in climate and the 
potential impacts from climate change. When considering climate change 
investments, they should be compared to similar alternative investments 
(via the discount rate). Investments in climate change are investments 
in infrastructure and technologies associated with mitigation; however, 
they yield returns in terms of avoided impacts over a period of one 
hundred years and longer. Furthermore, there is a potential for 
significant impacts from climate change, where the exact timing and 
magnitude of these impacts are unknown. These factors imply a highly 
uncertain investment environment that spans multiple generations.
    When there are important benefits or costs that affect multiple 
generations of the population, EPA and OMB allow for low but positive 
discount rates (e.g., 0.5-3% noted by U.S. EPA, 1-3% by OMB).\71\ In 
this multi-generation context, the three percent discount rate is 
consistent with observed interest rates from long-term investments 
available to current generations (net of risk premiums) as well as 
current estimates of the impacts of climate change that reflect 
potential impacts on consumers. In addition, rates of three percent or 
lower are consistent with long-run uncertainty in economic growth and 
interest rates, considerations of issues associated with the transfer 
of wealth between generations, and the risk of

[[Page 44415]]

high impact climate damages. Given the uncertain environment, analysis 
could also consider evaluating uncertainty in the discount rate (e.g., 
Newell and Pizer, 2001, 2003).\72\ EPA solicits comment on the 
considerations raised and discounting alternatives for handling both 
benefits and costs for this long term, inter-generational context.
---------------------------------------------------------------------------

    \71\ OMB (2003). EPA (2000). These documents are the guidance 
used when preparing economic analyses for all EPA rulemakings.
    \72\ Newell, R. and W. Pizer, 2001. Discounting the benefits of 
climate change mitigation: How much do uncertain rates increase 
valuations? PEW Center on Global Climate Change, Washington, DC. 
Newell, R. and W. Pizer, 2003. Discounting the distant future: how 
much do uncertain rates increase valuations? Journal of 
Environmental Economics and Management 46: 52-71.
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3. Uncertainty in Benefits and Costs
    The long time horizon over which benefits and costs of climate 
change policy would accrue and the global relationships they involve 
raise additional challenges for estimation. The exact benefits and 
costs of virtually every environmental regulation is at least somewhat 
uncertain, because estimating benefits and costs involves projections 
of future economic activity and the future effects and costs of 
reducing the environmental harm. In almost every case, some of the 
future effects and costs are not entirely known or able to be 
quantified or monetized. In the case of climate change, the uncertainly 
inherent in most economic analyses of environmental regulations is 
magnified by the long-term and global scale of the problem and the 
resulting uncertainties regarding socio-economic futures, corresponding 
GHG emissions, climate responses to emissions changes, the bio-physical 
and economic impacts associated with changes in climate, and the costs 
of reducing GHG emissions. For example, uncertainties about the amount 
of temperature rise for a given amount of GHG emissions and rates of 
economic and population growth over the next 50 or 100 years will 
result in a large range of estimates of potential benefits and costs. 
Lack of information with regard to some important benefit categories 
and the potential for large impacts as a result of climate exceeding 
known but uncertain thresholds compound this uncertainty. Likewise, 
there are uncertainties regarding the pace and form of future 
technological innovation and economic growth that affect estimates of 
both costs and benefits. These difficulties in predicting the future 
can be addressed to some extent by evaluating alternative scenarios. In 
uncertain situations such as that associated with climate, EPA 
typically recommends that analysis consider a range of benefit and cost 
estimates, and the potential implications of non-monetized and non-
quantified benefits.
    Given the substantial uncertainties in quantifying many aspects of 
climate change mitigation and impacts, it is difficult to apply 
economic efficiency criteria, or even positive net benefit 
criteria.\73\ Identifying an efficient policy requires knowing the 
marginal benefit and marginal cost curves for GHG emissions reductions. 
If the marginal benefits are greater than the marginal costs, then 
additional emissions reductions are merited (i.e., they are efficient 
and provide a net benefit). However, the curves are not precise lines; 
instead they are wide and partially unknown bands. Similarly, estimates 
of total benefits and costs can be expressed only as ranges. As a 
result, it is difficult to both identify the efficient policy and 
assess net benefits.
---------------------------------------------------------------------------

    \73\ IPCC WGI. (2007). Climate Change 2007--The Physical Science 
Basis Contribution of Working Group I to the Fourth Assessment 
Report of the IPCC, http://www.ipcc.ch/. IPCC WGII. (2007). Climate 
Change 2007--Impacts, Adaptation and Vulnerability Contribution of 
Working Group II to the Fourth Assessment Report of the IPCC, http://www.ipcc.ch/. IPCC WGIII (2007). Climate Change 2007--Mitigation 
Contribution of Working Group III to the Fourth Assessment Report of 
the IPCC, http://www.ipcc.ch/. U.S. Congressional Budget Office 
(2005). Uncertainty in Analyzing Climate Change: Policy 
Implications. The Congress of the United States, January 2005.
---------------------------------------------------------------------------

    In situations with large uncertainties, the economic literature 
suggests a risk management framework as being appropriate for guiding 
policy (Manne and Richels, 1992; IPCC WGIII, 2007).\74\ In this 
framework, the policymaker selects a target level of risk and seeks the 
lowest cost approach for reaching that goal. In addition, the decision-
making process is an iterative one of acting, learning, and acting 
again (as opposed to there being a single decision point). In this 
context, the explicit or implicit value of changes in risk is 
important. Furthermore, some have expressed concern in the economics 
literature that standard deterministic approaches (i.e., approaches 
that imply there is only one known and single realization of the world) 
do not appropriately characterize the uncertainty and risk related to 
climate change and may lead to a substantial underestimation of the 
benefits from taking action (Weitzman, 2007a, 2007b).\75\ Formal 
uncertainty analysis may be one approach for at least partially 
addressing this concern. EPA solicits comment on how to handle 
uncertainty in benefits and costs calculations and application, given 
the quantified and unquantified uncertainties.
---------------------------------------------------------------------------

    \74\ Manne, A. and R. Richels (1992). ``Buying Greenhouse 
Insurance--the Economic Costs of Carbon Dioxide Emission Limits'', 
MIT Press book, Cambridge, MA, 1992. IPCC WGIII (2007).
    \75\ Weitzman, M., 2007a, ``The Stern Review of the Economics of 
Climate Change,'' Journal of Economic Literature. Weitzman, M., 
2007b, ``Structural Uncertainty and the Statistical Life in the 
Economics of Catastrophic Climate Change,'' Working paper http://econweb.fas.harvard.edu/faculty/weitzman/papers/ValStatLifeClimate.pdf.
---------------------------------------------------------------------------

4. Benefits Estimation Specific Issues--Scope, Estimates, State-of-the-
art
    Another important issue in economic analysis of climate change 
policies is valuing domestic and international benefits. U.S. GHG 
reductions are likely to yield both domestic and global benefits. 
Typically, because the benefits and costs of most environmental 
regulations are predominantly domestic, EPA focuses on benefits that 
accrue to the U.S. population when quantifying the impacts of domestic 
regulation. However, OMB's guidance for economic analysis of federal 
regulations specifically allows for consideration of international 
effects.\76\
---------------------------------------------------------------------------

    \76\ OMB (2003), page 15.
---------------------------------------------------------------------------

    GHGs are global pollutants. Economic principles suggest that the 
full costs to society of emissions should be considered in order to 
identify the policy that maximizes the net benefits to society, i.e., 
achieves an efficient outcome (Nordhaus, 2006).\77\ Estimates of global 
benefits capture more of the full value to society than domestic 
estimates and can therefore help guide policies towards higher global 
net benefits for GHG reductions.\78\ Furthermore, international effects 
of climate change may also affect domestic benefits directly and 
indirectly to the extent U.S. citizens value international impacts 
(e.g., for tourism reasons, concerns for the existence of ecosystems, 
and/or concern for others); U.S. international interests are affected 
(e.g., risks to U.S. national security, or the U.S. economy from 
potential disruptions in other nations); and/or domestic mitigation 
decisions affect the level of mitigation and emissions changes in 
general in other countries (i.e, the benefits realized in the U.S. will 
depend on emissions changes in the U.S. and internationally). The 
economics literature also suggests that policies based on direct 
domestic benefits will result in little appreciable

[[Page 44416]]

reduction in global GHGs (e.g., Nordhaus, 1995).\79\
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    \77\ Nordhaus, W., 2006, ``Paul Samuelson and Global Public 
Goods,'' in M. Szenberg, L. Ramrattan, and A. Gottesman (eds), 
Samuelsonian Economics, Oxford.
    \78\ Both the United Kingdom and the European Commission 
following these economic principles in consideration of the global 
social cost of carbon (SCC) for valuing the benefits of GHG emission 
reductions in regulatory impact assessments and cost-benefit 
analyses (Watkiss et al, 2006).
    \79\ Nordhaus, William D. (1995). ``Locational Competition and 
the Environment: Should Countries Harmonize Their Environmental 
Policies?'' in Locational Competition in the World Economy, 
Symposium 1994, ed., Horst Siebert, J. C. B. Mohr (Paul Siebeck), 
Tuebingen, 1995.
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    These economic principles suggest that global benefits should also 
be considered when evaluating alternative GHG reduction policies.\80\ 
In the literature, there are a variety of global marginal benefits 
estimates (see the Tol, 2005, and Tol, 2007, meta analyses).\81\ A 
marginal benefit is the estimated monetary benefit for each additional 
unit of carbon dioxide emissions reduced in a particular year.\82\
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    \80\ Recently, the National Highway Traffic Safety 
Administration (NHTSA) proposed a new rulemaking for average fuel 
economy standards for passenger cars and light trucks that is based 
on domestic marginal benefit estimates for carbon dioxide 
reductions. See section V.A.7.l.(iii) ``Economic value of reductions 
in CO2 emissions'' (p. 24413) of Vol. 73 of the Federal 
Registry. Department of Transportation, National Highway Traffic 
Safety Administration, 49 CFR Parts 523, 531, 533, 534, 536 and 537 
[Docket No. NHTSA-2008 -0089], RIN 2127-AK29, Average Fuel Economy 
Standards: Passenger Cars and Light Trucks, Model Years 2011-2015, 
http://www.regulations.gov/fdmspublic/component/main?main=DocumentDetail&;o=0900006480541adc.
    \81\ Tol, Richard, 2005. The marginal damage costs of carbon 
dioxide emissions: an assessment of the uncertainties. Energy Policy 
33: 2064-2074. Tol, Richard, 2007. The Social Cost of Carbon: 
Trends, Outliers and Catastrophes. Economics Discussion Papers 
Discussion Paper 2007-44, September 19, 2007. Tol (2007) has been 
published on-line with peer review comments (http://www.economics-ejournal.org/economics/discussionpapers/2007-44).
    \82\ This is sometimes referred to as the social cost of carbon, 
which specifically is defined as the net present value of the change 
in climate change impacts over the atmospheric life of the 
greenhouse gas and the resulting climate inertia associated with one 
additional net global metric ton of carbon emitted to the atmosphere 
at a particular point in time.
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    Based on the characteristics of GHGs and the economic principles 
that follow, EPA developed ranges of global and U.S. marginal benefits 
estimates. The estimates were developed as part of the work evaluating 
potential GHG emission reductions from motor vehicles and their fuels 
under Executive Order 13432. However, it is important to note at the 
outset that the estimates are incomplete since current methods are only 
able to reflect a partial accounting of the climate change impacts 
identified by the IPCC (discussed more below). Also, as noted above, 
domestic estimates omit potential impacts on the United States (e.g., 
economic or national security impacts) resulting from climate change 
impacts in other countries. The global estimates were developed from a 
survey analysis of the peer reviewed literature (i.e. meta analysis). 
U.S. estimates, and a consistent set of global estimates, were 
developed from a single model and are highly preliminary, under 
evaluation, and likely to be revised.
    The range of estimates is wide due to the uncertainties described 
above relating to socio-economic futures, climate responsiveness, 
impacts modeling, as well as the choice of discount rate. For instance, 
for 2007 emission reductions and a 2% discount rate the global meta 
analysis estimates range from $-3 to $159/tCO2, while the 
U.S. estimates range from $0 to $16/tCO2. For 2007 emission 
reductions and a 3% discount rate, the global meta-estimates range from 
$-4 to $106/tCO2, and the U.S. estimates range from $0 to 
$5/tCO2.\83\ The global meta analysis mean values for 2007 
emission reductions are $68 and $40/tCO2 for discount rates 
of 2% and 3% respectively (in 2006 real dollars) while the domestic 
mean value from a single model are $4 and $1/tCO2 for the 
same discount rates. The estimates for future year emission changes 
will be higher as future marginal emissions increases are expected to 
produce larger incremental damages as physical and economic systems 
become more stressed as the magnitude of climate change increases.\84\
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    \83\ See the Technical Support Document on Benefits of Reducing 
GHG Emissions for global estimates consistent with the U.S. 
estimates in the text and for a comparison to the Tol (2005) meta 
analysis peer reviewed estimates. Tol (2005) estimates were cited in 
NHTSA's proposed rule and by the 9th U.S. Circuit Court (Center for 
Biodiversity v. NHTSA, F. 3d. 9th Cir., Nov. 15, 2007).
    \84\ Note that, except for illustrative purposes, marginal 
benefits estimates in the peer reviewed literature do not use 
consumption discount rates as high as 7%.
---------------------------------------------------------------------------

    The current state-of-the-art for estimating benefits is also 
important to consider when evaluating policies. There are significant 
partially unquantified and omitted impact categories not captured in 
the estimates provided above. The IPCC WGII (2007) concluded that 
current estimates are ``very likely'' to be underestimated because they 
do not include significant impacts that have yet to be monetized.\85\ 
Current estimates do not capture many of the main reasons for concern 
about climate change, including non-market damages (e.g., species 
existence value and the value of having the option for future use), the 
effects of climate variability, risks of potential extreme weather 
(e.g., droughts, heavy rains and wind), socially contingent effects 
(such as violent conflict or humanitarian crisis), and potential long-
term catastrophic events. Underestimation is even more likely when one 
considers that the current trajectory for GHG emissions is higher than 
typically modeled, which when combined with current regional population 
and income trajectories that are more asymmetric than typically 
modeled, imply greater climate change and vulnerability to climate 
change.
    Finally, with projected increasing changes in climate, some types 
of potential climate change impacts may occur suddenly or begin to 
increase at a much faster rate, rather than increasing gradually or 
smoothly. In this case, there are likely to be jumps in the functioning 
of species and ecosystems, the frequency and intensity of extreme 
conditions (e.g., heavy rains, forest fires), and the occurrence of 
catastrophic events (e.g., collapse of the West Antarctic Ice Sheet). 
As a result, different approaches are necessary for quantifying the 
benefits of ``small'' (incremental) versus ``large'' (non-incremental) 
reductions in global GHGs. Marginal benefits estimates, like those 
presented above, can be useful for estimating benefits for small 
changes in emissions. However, for large changes in emissions, a more 
comprehensive assessment of impacts would be needed to capture changes 
in economic and biophysical dynamics and feedbacks in response to the 
policy. Even small reductions in global GHG emissions are expected to 
reduce climate change risks, including catastrophic risks.
---------------------------------------------------------------------------

    \85\ IPCC WGII, 2007. In the IPCC report, ``very likely'' was 
defined as a greater than 90% likelihood based on expert judgment.
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    EPA solicits comment on 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. We also seek comment on our estimates of 
the global and U.S. marginal benefits of GHG emissions reductions that 
EPA has developed, including the scientific and economic foundations, 
the methods employed in developing the estimates, the discount rates 
considered, current and proposed future consideration of uncertainty in 
the estimates, marginal benefits estimates for non-CO2 GHG 
emissions reductions, and potential opportunities for improving the 
estimates. We are also interested in comments on methods for 
quantifying benefits for non-incremental reductions in global GHG 
emissions.
5. Energy Security
    In recent actions, both EPA and NHTSA have considered other 
benefits of a regulatory program that, though not directly 
environmental, can result from compliance with the program and may

[[Page 44417]]

be quantified.\86\ One of these potential benefits, related to the 
transportation sector, is increased energy security due to reduced oil 
imports. It is clear that both financial and strategic risks can result 
within the U.S. economy if there is a sudden disruption in the supply 
or a spike in the costs of petroleum. Conversely, actions that promote 
development of lower carbon fuels that can substitute for petroleum or 
technologies that more efficiently combust petroleum during operation 
can result in reduced U.S. oil imports, and can therefore reduce these 
financial and strategic risks. This reduction in risks is a measure of 
improved energy security and represents a benefit to the U.S. As the 
Agency evaluates potential actions to reduce GHGs from the U.S. 
economy, it intends to also consider the energy security impacts 
associated with these actions.
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    \86\ The EPA has worked with Oak Ridge National Laboratory to 
develop a methodology that quantifies energy security benefits 
associated with the reduction of imported oil. This methodology was 
used to support the EPA's 2007 Renewable Fuels Standards Rulemaking 
and NHTSA's 2008 proposed Average Fuel Economy Standards for 
Passenger Cars and Light Trucks Rulemaking for Model Years 2001--
2015.
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6. Interactions With Other Policies
    Climate change and GHG mitigation policies will likely affect most 
biophysical and economic systems, and will therefore affect policies 
related to these systems. For example, as previously mentioned, climate 
change will affect air quality and GHG mitigation will affect criteria 
pollutant emissions. These effects will need to be evaluated, both in 
the context of economic costs and benefits, as well as policy design in 
order to exploit synergies and avoid inefficiencies across policies. 
Non-climate policies, whether focused on traditional air pollutants, 
energy, transportation, or other areas, can also affect baselines and 
mitigation opportunities for climate policies. For instance, energy 
policies can change baseline GHG emissions and the development path of 
particular energy technologies, potentially affecting the GHG 
mitigation objectives of climate policies as well as changing the 
relative costs of mitigation technologies. EPA seeks comment on 
important policy interactions.
7. Integrating Economic and Noneconomic Considerations
    While economics can answer questions about the cost effectiveness 
and efficiency of policies, judgments about the appropriate mitigation 
policy, potential climate change impacts, and even the discount rate 
can be informed by economics and science but also involve important 
policy, legal, and ethical questions. The ultimate choice of a global 
climate stabilization target may be a policy choice that incorporates 
both economic and non-economic factors, while the choice of specific 
implementation strategies may be based on effectiveness criteria. 
Furthermore, other quantitative analyses are generally used to support 
the development of regulations. Distributional analyses, environmental 
justice analyses, and other analyses can be informative. For example, 
to the extent that climate change affects the distribution of wealth or 
the distribution of environmental damages, then climate change 
mitigation policies may have significant distributional impacts, which 
may in some cases be more important than overall efficiency or net 
benefits. EPA seeks comment on how to adequately inform economic 
choices, as well as the broader policy choices, associated with GHG 
mitigation policies.

IV. Clean Air Act Authorities and Programs

    In developing a response to the Massachusetts decision, EPA 
conducted a thorough review of the CAA to identify and assess all of 
the Act's provisions that might be applied to GHG emissions. Although 
the Massachusetts decision addresses only CAA section 202(a)(1), which 
authorizes new motor vehicle emission standards, the Act contains a 
number of provisions that could conceivably be applied to GHGs 
emissions. EPA's review of these provisions and their interconnections 
indicated that a decision to regulate GHGs under section 202(a) or 
another CAA provision could or would lead to regulation under other CAA 
provisions. This section of the notice provides an overview of the CAA 
and examines the various interconnections among CAA provisions that 
could lead to broad regulation of GHG emission sources under the Act.

A. Overview of the Clean Air Act

    The CAA provides broad authority to combat air pollution. Cars, 
trucks, construction equipment, airplanes, and ships, as well as a 
broad range of electric generation, industrial, commercial and other 
facilities, are subject to various CAA programs. Implementation of the 
Act over the past four decades has resulted in significant reductions 
in air pollution at the same time the nation's economy has grown.
    As more fully examined in Section VII of this notice, the CAA 
provides three main pathways for regulating stationary sources of air 
pollutants. They include, in order of their appearance in the Act, 
national ambient air quality standards (NAAQS) and state plans for 
implementing those standards (SIPs); performance standards for new and 
existing stationary sources; and hazardous air pollutant standards for 
stationary sources. In addition, the Prevention of Significant 
Deterioration (PSD) program requires preconstruction permitting and 
emission controls for certain new and modified major stationary 
sources, and the Title V program requires operating permits for all 
major stationary sources.
    Section 108 of the CAA authorizes EPA to list air pollutants that 
are emitted by many sources and that cause or contribute to air 
pollution problems such as ozone (smog) and particulate matter (soot). 
For every pollutant listed, EPA is required by section 109 to set NAAQS 
that are ``requisite'' to protect public health and welfare. EPA may 
not consider the costs of meeting the NAAQS in setting the standards. 
Under section 110, every state develops and implements plans for 
meeting the NAAQS by applying enforceable emission control measures to 
sources within the state. The Act's requirements for SIPs are more 
detailed and stringent for areas not meeting the standards 
(nonattainment areas) than for areas meeting the standards (attainment 
areas). Costs may be considered in implementing the standards. States 
are aided in their efforts to meet the NAAQS by federal emissions 
standards for mobile sources and major categories of stationary sources 
issued under other sections of the Act.
    Under CAA section 111, EPA establishes emissions performance 
standards for new stationary sources and modifications of existing 
sources for categories of sources that contribute significantly to 
harmful air pollution. These new source performance standards (NSPS) 
reduce emissions of air pollutants addressed by NAAQS, but can be 
issued regardless of whether there is a NAAQS for the pollutants being 
regulated. NSPS requirements for new sources help ensure that when 
large sources of air pollutants are built or modified, they apply 
available emission control technologies and strategies.
    When EPA establishes a NSPS for a pollutant, section 111(d) calls 
upon states to issue a standard for existing sources in the regulated 
source category except in two circumstances. First, section 111(d) 
prohibits regulation of a NAAQS pollutant. Second, ``where a source 
category is being regulated under section 112, a section 111(d) 
standard of performance cannot be established to

[[Page 44418]]

address any HAP listed under section 112(b) that may be emitted from 
that particular source category.''\87\ In effect, existing source NSPS 
provides a ``regulatory safety net'' for pollutants not otherwise 
subject to major regulatory programs under the CAA. Section 111 
provides EPA and states with significant discretion concerning the 
sources to be regulated and the stringency of the standards, and allows 
consideration of costs in setting NSPS.
---------------------------------------------------------------------------

    \87\ See 70 FR 15994, 16029-32 (Mar. 29, 2005).
---------------------------------------------------------------------------

    CAA section 112 provides EPA with authority to list and issue 
national emissions standards for hazardous air pollutants (HAPs) from 
stationary sources. HAPs are broadly defined as pollutants that 
present, or may present, a threat of adverse human or environmental 
effects. HAPs include substances which are, or may reasonably be 
anticipated to be, carcinogenic, mutagenic, neurotoxic or acutely or 
chronically toxic. Section 112 contains low emissions thresholds for 
regulation in view of its focus on toxic pollutants, and requires 
regulation of all major sources of HAPs. Section 112 also provides for 
``maximum achievable control technology'' (MACT) standards for major 
sources, limiting consideration of cost.
    The PSD program under Part C of Title I of the Act is triggered by 
regulation of a pollutant under any other section of the Act except for 
sections 112 and 211(o). As mentioned previously in this notice, under 
this program, new major stationary sources and modifications at 
existing major stationary sources undergo a preconstruction permitting 
process and install best available control technology (BACT) for each 
regulated pollutant. These basic requirements apply regardless of 
whether a NAAQS exists for the pollutant; additional PSD requirements 
apply in the event of a NAAQS. The PSD program's control requirements 
help prevent large new and modified sources of air pollutants from 
significantly degrading the air quality in clean air areas. A similar 
program, called ``new source review,'' ensures that new or modified 
large sources in areas not meeting the NAAQS do not make it more 
difficult for the areas to eventually attain the air quality standards.
    Title II of the CAA provides comprehensive authority for regulating 
mobile sources of air pollutants. As more fully described in Section VI 
of this notice, Title II authorizes EPA to address all categories of 
mobile sources and take an integrated approach to regulation by 
considering the unique aspects of each category, including passenger 
vehicles, trucks and nonroad vehicles, as well as the fuels that power 
them. Title II requires EPA to consider technological feasibility, 
costs, safety and other factors in setting standards, and gives EPA 
discretion to set technology-forcing standards as appropriate. In 
addition, section 211(o) of the Act establishes the renewable fuel 
standard (RFS) program, which was recently strengthened by EISA to 
require substantial increases in the use of renewable fuels, including 
renewable fuels with significantly lower lifecycle GHG emissions than 
the fossil fuel-based fuels they replace.\88\ The CAA's mobile source 
authorities work in tandem with the Act's stationary source authorities 
to help protect public health and the environment from air pollution.
---------------------------------------------------------------------------

    \88\ As explained further below, EISA provides that regulation 
of renewable fuels based on lifecycle GHG emissions does not trigger 
any other regulation of GHGs under the CAA.
---------------------------------------------------------------------------

    Title VI of the CAA authorizes EPA to take various actions to 
protect stratospheric ozone, a layer of ozone high in the atmosphere 
that helps protect the Earth from harmful UVB radiation. As discussed 
in Section VIII of this notice, section 615 provides broad authority to 
regulate any substance, practice, process or activity that may 
reasonably be anticipated to affect the stratosphere and that effect 
may reasonably be anticipated to endanger public health or welfare.

B. Interconnections Among Clean Air Act Provisions

    The provisions of the CAA are interconnected in multiple ways such 
that a decision to regulate one source category of GHGs could or would 
lead to regulation of other source categories of GHGs. As described in 
detail below, there are several provisions in the CAA that contain 
similar endangerment language. An endangerment finding for GHGs under 
one provision of the Act could thus have ramifications under other 
provisions of the Act. In addition, CAA standards applicable to GHGs 
for one category of sources could trigger PSD requirements for other 
categories of sources that emit GHGs. How a term is interpreted for one 
part of the Act could also affect other provisions using the same term.
    These CAA interconnections are by design. As described above, the 
Act combats air pollutants in several ways that reflect the nature and 
effects of the particular air pollutant being addressed. The Act's 
approaches are in many cases complementary and reinforcing, ensuring 
that air pollutants emitted by various types of emission sources are 
reduced in a manner and to an extent that reflects the relative 
contribution of particular categories of sources. The CAA's authorities 
are intended to work together to achieve air quality that protects 
public health and welfare.
    For GHGs, the CAA's interconnections mean that careful attention 
needs to be paid to the consequences and specifics of decisions 
regarding endangerment and regulation of any particular category of GHG 
sources under the Act. In the case of traditional air pollutants, EPA 
and States have generally regulated pollutants incrementally over time, 
adding source categories or program elements as evolving circumstances 
make appropriate. In light of the broad variety and large number of GHG 
sources, any decision to regulate under the Act could lead, relatively 
quickly, to more comprehensive regulation of GHG sources under the Act. 
A key issue to consider in examining the Act's provisions and their 
interconnections is the extent to which EPA may choose among and/or 
tailor the CAA's authorities to implement a regulatory program that 
makes sense for GHGs, given the unique challenges and opportunities 
that regulating them would present.
    This section of the notice explores these interconnections, and 
later sections explain how each CAA provision might apply to GHGs.
1. Similar Endangerment Language Is Found in Numerous Sections of the 
Clean Air Act
    The Supreme Court's decision in Massachusetts v. EPA requires EPA 
to address whether GHG emissions from new motor vehicles meet the 
endangerment test of CAA section 202(a)(1). That section states:

    [t]he Administrator shall by regulation prescribe (and from time 
to time revise) * * * standards applicable to the emissions of any 
air pollutant from any class or classes of new motor vehicles or new 
motor vehicle engines, which in his judgment cause, or contribute 
to, air pollution which may reasonably be anticipated to endanger 
public health or welfare.

CAA section 202(a)(1). If the Administrator makes a positive 
endangerment determination for GHG emissions from new motor vehicles, 
he must regulate those GHG emissions under section 202(a) of the Act.
    Similar endangerment language is found in numerous sections of the 
CAA, including sections 108, 111, 112, 115, 211, 213, 231 and 615. For 
example, CAA section 108(a)(1) (regarding listing pollutants to be 
regulated by NAAQS)

[[Page 44419]]

states, ``[T]he Administrator shall * * * publish, and shall from time 
to time thereafter revise, a list which includes each air pollutant (A) 
emissions of which, in his judgment, cause or contribute to air 
pollution which may reasonably be anticipated to endanger public health 
or welfare * * *'' CAA section 111(b)(1)(A) (regarding listing source 
categories to be regulated by NSPS) states: ``[The Administrator] shall 
include a category of sources in such list if in his judgment it 
causes, or contributes significantly to, air pollution which may 
reasonably be anticipated to endanger public health or welfare.''\89\
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    \89\ Other CAA endangerment provisions read as follows:
    CAA section 115 (regarding international air pollution) states: 
``Whenever the Administrator, upon receipt of reports, surveys or 
studies from any duly constituted international agency has reason to 
believe that any air pollutant or pollutants emitted in the United 
States cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare in a foreign 
country or whenever the Secretary of State requests him to do so 
with respect to such pollution which the Secretary of State alleges 
is of such a nature, the Administrator shall give formal 
notification thereof to the Governor of the State in which such 
emissions originate.''
    CAA section 211(c)(1) (regarding regulating fuels and fuel 
additives) states: ``The Administrator may, * * * [regulate fuels or 
fuel additives] (A) if in the judgment of the Administrator any 
emission product of such fuel or fuel additive causes, or 
contributes, to air pollution which may reasonably be anticipated to 
endanger public health or welfare, (B) * * *''
    CAA section 213(a)(4) (regarding regulating nonroad engines) 
states: ``If the Administrator determines that any emissions not 
referred to in paragraph 2 [regarding CO, NOX and VOC 
emissions] from new nonroad engines or vehicles significantly 
contribute to air pollution which may reasonably be anticipated to 
endanger public health or welfare, the Administrator may promulgate 
* * * standards applicable to emissions from those classes or 
categories of new nonroad engines and new nonroad vehicles (other 
than locomotives) which in the Administrator's judgment cause, or 
contribute to, such air pollution, * * *''.
    CAA section 231 (regarding setting aircraft standards) states: 
``The Administrator shall * * * issue proposed emissions standards 
applicable to the emission of any air pollutant from any class or 
classes of aircraft engines which in his judgment causes, or 
contributes to, air pollution which may reasonably be anticipated to 
endanger public health or welfare.''
    CAA section 615 (regarding protection of stratospheric ozone) 
states: ``If, in the Administrator's judgment, any substance, 
practice, process, or activity may reasonably be anticipated to 
affect the stratosphere, especially ozone in the stratosphere, and 
such effect may reasonably be anticipated to endanger public health 
or welfare, the Administrator shall promptly promulgate regulations 
respecting the control of such substance, practice, process, or 
activity * * *''
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    While no two endangerment tests are precisely the same, they 
generally call on the Administrator of EPA to exercise his or her 
judgment regarding whether a particular air pollutant or source 
category causes or contributes to air pollution which may reasonably be 
anticipated to endanger public health or welfare. For provisions 
containing endangerment language, a positive finding of endangerment is 
a prerequisite for regulation under that provision.\90\ The precise 
effect of a positive or negative finding depends on the specific terms 
of the provision under which it is made. For some provisions, a 
positive endangerment finding triggers an obligation to regulate (e.g., 
section 202(a)(1)), while for other provisions, a positive finding 
allows the Agency to regulate in its discretion (e.g., section 213). In 
some cases, other criteria must also be met to authorize or require 
regulation (e.g., section 108). Each of these sections is discussed in 
more detail later in this notice.
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    \90\ As defined by the CAA, ``air pollutant'' includes virtually 
any substance or material emitted into the ambient air. Given the 
breadth of that term, many CAA provisions require the Administrator 
to determine whether a particular air pollutant causes or 
contributes to an air pollution problem as a prerequisite to 
regulating emissions of that pollutant.
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2. Potential Impact Cross the Clean Air Act From a Positive or Negative 
Endangerment Finding or Regulation of GHGs Under the Act
a. Potential Impact on Sections Containing Similar Endangerment 
Language
    One important issue is whether a positive or negative endangerment 
finding under one section of the CAA (e.g., under section 202(a) in 
response to the ICTA petition remand) would necessarily or 
automatically lead to similar findings under other provisions of the 
Act containing similar language. Even though CAA endangerment tests 
vary to some extent, an endangerment finding under one provision could 
have some bearing on whether endangerment could or should be found 
under other CAA provisions, depending on their terms and the facts at 
issue. EPA request comment on the extent to which an endangerment 
finding under any section of the CAA would lead EPA to make a similar 
endangerment finding under another provision.
    In discussing the implications of making a positive endangerment 
finding under any CAA section, we use the actual elements of the 
endangerment test in section 202(a) for new motor vehicles as an 
example. The section 202(a) endangerment test asks two distinct 
questions--
    (1) whether the air pollution at issue may reasonably be 
anticipated to endanger public health or welfare, and
    (2) whether emissions from new motor vehicles cause or contribute 
to that air pollution. The first question is generic and looks at 
whether the type of air pollution at issue endangers public health or 
welfare. The second question is specific to motor vehicles, and 
considers the contribution of motor vehicle emissions to the particular 
air pollution problem. EPA must answer both questions in the 
affirmative for the Agency to regulate under section 202(a) of the Act.
    A finding of endangerment under one section of the Act would not by 
itself constitute a complete finding of endangerment under any other 
section of the CAA. How much of a precedent an endangerment finding 
under one CAA provision would be for other CAA provisions would depend 
on the basis for the finding, the statutory tests for making findings, 
and the facts. For example, the two-part endangerment test in section 
202(a) (motor vehicles) is similar to that in sections 211(c)(1) 
(highway and nonroad fuels) and 231(a)(2) (aircraft). An affirmative 
finding under section 202(a) on the first part of the test--whether the 
air pollution at issue endangers public health or welfare--would appear 
to satisfy the first part of the test for the other two provisions as 
well. However, an affirmative finding on the second part of the test, 
regarding the contribution of the particular source category to that 
air pollution, would not satisfy the test for the other provisions, 
which apply to different source categories. Still, a finding that a 
particular source category's emissions cause or contribute to the air 
pollution problem would likely establish some precedent for what 
constitutes a sufficient contribution for purposes of making a positive 
endangerment finding for other source categories.
    Other similarities and differences among endangerment tests are 
also relevant. While the first part of the test in sections 213(a)(4) 
(nonroad engines and vehicles) and 111(b) (NSPS) is similar to that in 
other sections (i.e., whether the air pollution at issue endangers 
public health or welfare), the second part of the test in sections 
213(a)(4) and 111(b) requires a finding of ``significant'' 
contribution. In addition, the test under section 111(b) applies to 
source categories, not to a particular air pollutant.\91\ Sections 112 
and 615 have somewhat different tests.
---------------------------------------------------------------------------

    \91\ As discussed below, EPA has already listed a very wide 
variety of source categories under section 111(b)(1)(A).
---------------------------------------------------------------------------

    The extent to which an endangerment finding would set precedent 
would also depend on the pollutants at issue. For example, the ICTA 
petition to regulate motor vehicles under section 202(a)

[[Page 44420]]

addresses CO2, CH4 , N2O, and HFCs, 
while the petitions to regulate GHGs from other mobile source 
categories collectively address water vapor, NOX and black 
carbon, as well as CO2, CH4, and N2O. 
As further discussed below, the differences in the GHGs emitted by 
different types of sources may be relevant to the issue of how to 
define ``air pollutant'' for purposes of applying the endangerment 
tests.
    In addition, some CAA sections require EPA to act following a 
positive endangerment finding, while others do not. In the case of 
section 202(a)(1), if we make a positive endangerment finding, we are 
required to issue standards applicable to motor vehicle emissions of 
the GHGs covered by the finding. Section 231(a) (aircraft) uses similar 
mandatory language, while sections 211(c)(1) (highway and nonroad fuel) 
and 213(a)(4) (nonroad engines and vehicles) authorize but do not 
require the issuance of regulations. Section 108 (NAAQS pollutants) 
requires that EPA list a pollutant under that section if a positive 
endangerment finding is made and two other criteria are met.
    In sum, a positive or negative endangerment finding for GHG 
emissions under one provision of the Act could have a significant and 
direct impact on decisions under other CAA sections containing similar 
endangerment language. EPA requests comment on the interconnections 
between the CAA endangerment tests and the impact that a finding under 
one provision of the Act would have for other CAA provisions.
b. Potential Impact on PSD Program
    Another important issue is the potential for a decision to regulate 
GHGs for mobile or stationary sources to automatically trigger 
additional permitting requirements for stationary sources under the PSD 
program. As explained previously and in detail in Section VII of this 
notice, the main element of the PSD program under Part C of Title I of 
the Act is the requirement that a PSD permit be obtained prior to 
construction of any new major source or any major modification at an 
existing major source. Such a permit must contain emissions limitations 
based on BACT for each pollutant subject to regulation under the Act. 
EPA does not interpret the PSD program provisions to apply to GHG at 
this time, but any requirement to control CO2 or other GHGs 
promulgated by EPA under other provisions of the CAA would make parts 
of the PSD program applicable to any additional air pollutant(s) that 
EPA regulates in this manner.
    The PSD program applies to each air pollutant (other than a HAP) 
that is ``subject to regulation under the Act'' within the meaning of 
sections 165(a)(4) and 169(3) of the Clean Air Act and EPA's 
regulations.\92\ As a practical matter, the identification of 
pollutants subject to the PSD program is driven by the BACT requirement 
because this requirement applies to the broadest range of pollutants. 
Under EPA's PSD program regulations, BACT is required for ``each 
regulated NSR pollutant.'' 40 CFR 52.21(j)(2)-(3). EPA has defined this 
term to include pollutants that are regulated under a NAAQS or NSPS, a 
class I or II substance under Title VI of the Act, or ``[a]ny pollutant 
otherwise subject to regulation under the Act.'' See 52.21(b)(50).\93\ 
Similarly, the determination of whether a source is a major source 
subject to PSD is based on whether the source emits more than 100 or 
250 tons per year (depending on the type of source) of one or more 
regulated pollutants.\94\
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    \92\ Section 112(b)(6) precludes listed HAPs from the PSD 
program. Section 210(b) of EISA provides that nothing in section 
211(o) of the Act, or regulations issued pursuant to that 
subsection, ``shall affect or be construed to affect the regulatory 
status of carbon dioxide or any other greenhouse gas, or to expand 
or limit regulatory authority regarding carbon dioxide or any other 
greenhouse gas, for purposes of other provisions (including section 
165) of this Act.''
    \93\ This definition reflects EPA's interpretation of the phrase 
``each pollutant subject to regulation under the Act'' that is used 
in the provisions in the Clean Air Act that establish the BACT 
requirement. Since this statutory language (as implemented in the 
definition of ``regulated NSR pollutant'') can apply to additional 
pollutants that are not also subject to a NAAQS, the scope of the 
BACT requirement determines the overall range of pollutants that are 
subject to the PSD permitting program.
    \94\ Under the relevant regulations, a major stationary source 
is determined by its emissions of ``any regulated NSR pollutant.'' 
See 40 CFR 52.21(b)(1)(i). Thus, the emissions that are considered 
in identifying a major source are determined on the basis of the 
same definition that controls the applicability of the BACT.
---------------------------------------------------------------------------

    EPA has historically interpreted the phrase ``subject to regulation 
under the Act'' to describe air pollutants subject to CAA statutory 
provisions or regulations that require actual control of emissions of 
that pollutant.\95\ PSD permits have not been required to contain BACT 
emissions limit for GHGs because GHGs (and CO2 in 
particular) have not been subject to any CAA provisions or EPA 
regulations issued under the Act that require actual control of 
emissions.\96\ Although CAA section 211(o) now targets GHG emissions, 
EISA provides that neither it nor implementing regulations affect the 
regulatory status of GHGs under the CAA. In the absence of statutory or 
regulatory requirements to control GHG emissions under the Act, a 
stationary source need not consider those emissions when determining 
its major source status.
---------------------------------------------------------------------------

    \95\ 43 FR 26388, 26397 (June 19, 1978); Gerald E. Emison, 
Director, Office of Air Quality Planning and Standards, 
Implementation of North County Resource Recovery PSD Remand (Sept. 
22, 1987) (footnote on the first page).
    \96\ See briefs filed before the Environmental Appeal Board on 
behalf of specific EPA offices in challenges to the PSD permits for 
Deseret Power Electric Cooperative (PSD Appeal No. 07-03) and 
Christian County Generation LLC (PSD Appeal No. 07-01), as well as 
the Response to Public Comments on Draft Air Pollution Control 
Prevention of Significant Deterioration (PSD) Permit to Construct 
[for Deseret Power Electric Cooperative], Permit No. PSD-OU-0002-
04.00 (August 30, 2007), at 5-6, available at http://www.epa.gov/region8/air/permitting/deseret.html. EPA has not previously 
interpreted the BACT requirement to apply to air pollutants that are 
only subject to requirements to monitor and report emissions. See, 
67 FR 80186, 80240 (Dec. 31, 2002); 61FR 38250, 38310 (July 31, 
1996); In Re Kawaihae Cogeneration Project 7 E.A.D. 107, 132 (EAB 
1997); Inter-power of New York, 5 E.A.D. 130, 151 (EAB 1994); 
Memorandum from Jonathan Z. Cannon, General Counsel to Carol M. 
Browner, Administrator, entitled EPA's Authority to Regulate 
Pollutants Emitted by Electric Power Generation Sources (April 10, 
1998) (emphasis added); Memorandum from Lydia N. Wegman, Deputy 
Director, Office of Air Quality Planning and Standards, entitled 
Definition of Regulated Air Pollutant for Purposes of Title V, at 5 
(April 26, 1993).
---------------------------------------------------------------------------

    The Supreme Court's conclusion that GHGs are ``air pollutants'' 
under the CAA did not automatically make these pollutants subject to 
the PSD program. A substance may be an ``air pollutant'' under the Act 
without being regulated under the Act. The Supreme Court directed the 
EPA Administrator to determine whether GHG emissions from motor 
vehicles meet the endangerment test of CAA section 202(a). A positive 
finding of endangerment would require the Administrator to then set 
standards applicable to GHG emissions from motor vehicles under the 
Act. The positive finding itself would not constitute a regulation 
requiring actual control of emissions. GHGs would become regulated 
pollutants under the Act if and when EPA subjects GHGs to control 
requirements under a CAA provision other than sections 112 and 211(o).
c. Definition of ``Air Pollutant''
    Another way in which a decision to regulate GHGs under one section 
of the Act could impact other sections of the Act involves how the term 
``air pollutant'' is defined as part of the endangerment analysis. As 
described above, many of the Act's endangerment tests require a two-
part analysis: Whether the air pollution at issue may reasonably be 
anticipated to endanger public health or welfare, and whether emissions 
of particular air pollutants cause or contribute to that air pollution.

[[Page 44421]]

As discussed in more detail in the following sections, what GHGs might 
be defined as an ``air pollutant'' and whether those GHGs are treated 
individually or as a group could impact EPA's flexibility to define the 
GHGs as air pollutants elsewhere in the CAA.
    For example, as noted above, how EPA defines GHGs as air pollutants 
in making any positive endangerment finding could carry over into 
implementation of the PSD program. If EPA defines each individual GHG 
as a separate air pollutant in making a positive endangerment finding, 
then each GHG would be considered individually as a ``regulated NSR 
pollutant'' in the PSD program. On the other hand, if EPA defines the 
group of GHGs as an air pollutant, then the PSD program would need to 
treat the GHGs in the same manner--as a group. As discussed in more 
detail below, there are flexibilities and considerations under various 
approaches. One question is whether we could or should define GHGs as 
an ``air pollutant'' one way under one section of the Act (e.g., 
section 202) and another way under another section (e.g., section 231). 
See, e.g., Environmental Defense v. Duke Energy Corp., 127 S.Ct. 1423, 
1432 (2007) (explaining that the general presumption that the same term 
has the same meaning is not rigid and readily gives way to context). 
Another question is whether having different definitions of ``air 
pollutant'' would result in both definitions applying to the PSD 
program, and whether that result would mean that any flexibilities 
gained under one definition would be lost with the application of the 
second.
    Another consideration, noted above, is that different source 
categories emit different GHGs. This fact could impact the definition 
of ``air pollutant'' more broadly. EPA requests comment on the issues 
raised in this section, to assist the Agency as it considers the 
implications of how to define a GHG ``air pollutant'' for the first 
time under any section of the Act.
2. Relationships Among Various Stationary Source Programs
    As a result of other interactions among various CAA sections, a 
decision to act under one part of the CAA may preclude action under 
another part of the Act. These interactions reflect the Act's different 
regulatory treatment of pollutants meeting different criteria, and 
prevent duplicative regulation. For instance, listing a pollutant under 
section 108(a), which leads to setting a NAAQS and developing SIPs for 
the pollutant, generally precludes listing the same air pollutant as a 
HAP under section 112(b), which leads to every major source of a listed 
HAP having to comply with MACT standards for the HAP. CAA section 
112(b)(2).\97\ Listing an air pollutant under section 108(a) also 
preludes regulation of that air pollutant from existing sources under 
section 111(d), which is intended to provide for regulation of air 
pollutants not otherwise subject to the major regulatory programs under 
the Act. CAA section 111(d)(1)(A).
---------------------------------------------------------------------------

    \97\ ``No air pollutant which is listed under section 108(a) may 
be added to the list under this section, except that the prohibition 
of this sentence shall not apply to any pollutant which 
independently meets the listing criteria of this paragraph and is a 
precursor to a pollutant which is listed under section 108(a) or to 
any pollutant which is in a class of pollutants listed under such 
section.''
---------------------------------------------------------------------------

    Similarly, regulation of a substance under Title VI precludes 
listing that substance as a HAP under section 112(b) based solely on 
the adverse effects on the environment of that air pollutant. CAA 
section 112(b)(2). Moreover, listing an air pollutant as a HAP under 
section 112(b) generally precludes regulation of that air pollutant 
from existing sources under section 111(d). CAA section 
111(d)(1)(A).\98\ Finally, section 112(b)(6) provides that the 
provisions of the PSD program ``shall not apply to pollutants listed 
under [section 112].'' CAA section 112(b)(6), 42 U.S.C. 7412(b)(6)
---------------------------------------------------------------------------

    \98\ However, see 70 FR 15994, 16029-32 (2005) (explaining EPA's 
interpretation of the conflicting amendments to section 111(d) 
regarding HAPs).
---------------------------------------------------------------------------

V. Endangerment Analysis and Issues

    In this section, we present our work to date on an endangerment 
analysis in response to the Supreme Court's decision in Massachusetts 
v. EPA. As explained previously, the Supreme Court remanded EPA's 
denial of the ICTA petition and 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.
    In 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. We also analyzed direct GHG effects 
on human health and welfare, i.e., those effects from elevated 
concentrations of GHGs that do not occur via climate change. This 
information, summarized briefly below, is contained in the Endangerment 
Technical Support Document found in the docket for today's notice. In 
addition, we compiled information concerning motor vehicle GHG 
emissions to assess whether motor vehicles cause or contribute to 
elevated concentrations of GHGs in the atmosphere. Information on motor 
vehicle emissions is contained in the Section 202 Technical Support 
Document, also found in the docket.
    As discussed above, making an endangerment finding under one 
section of the CAA has implications for other sections of the Act. In 
this ANPR, we consider, and seek comment on these implications and 
other questions relevant to making an endangerment finding regarding 
GHG emissions.
    This section is organized as follows. Section A discusses the legal 
framework for the endangerment analysis. Section B provides information 
on how ``air pollution'' could be defined for purposes of the 
endangerment analysis, as well as a summary of the science regarding 
GHGs and climate change and their effects on health and welfare. 
Section C uses the information on emissions of GHGs from the mobile 
source categories relevant to the ICTA Petition to frame a discussion 
about whether GHGs as ``air pollutants'' ``cause or contribute'' to 
``air pollution'' which may reasonably be anticipated to endanger 
public health or welfare.

A. Legal Framework

    The endangerment language relevant to the ICTA petition is 
contained in section 202(a) of the CAA. As explained previously, it is 
similar to endangerment language in many other provisions of the Act 
and establishes a two-part test. First, the Administrator must decide 
if, in his judgment, air pollution may reasonably be anticipated to 
endanger public health or welfare. Second, the Administrator must 
decide whether, in his judgment, emissions of any air pollutant from 
new motor vehicles or engines cause or contribute to this air 
pollution.
1. Origin of Current Endangerment and Cause or Contribute Language
    The endangerment language in section 202(a) and other provisions of 
the CAA share a common legislative history that sheds light on the 
meaning of this language. As part of the 1977 amendments to the CAA, 
Congress added or revised endangerment language in various sections of 
the Act. The legislative history of those amendments, particularly the 
report by the House Committee on Interstate and Foreign Commerce, 
provides important information regarding Congress' intent

[[Page 44422]]

when it revised this language. See H.R. Rep. 95-294 (1977), as 
reprinted in 4 A Legislative History of the Clean Air Act Amendments of 
1977 at 2465 (hereinafter ``LH'').
a. Ethyl Corp. v. EPA
    In revising the endangerment language, Congress relied heavily on 
the approach discussed in a federal appeals court opinion interpreting 
the pre-1977 version of CAA section 211. In Ethyl Corp v. EPA, 541 F.2d 
1 (D.C. Cir. 1976), the en banc (i.e. full) court reversed a 3-judge 
panel decision regarding an EPA rule restricting the content of lead in 
leaded gasoline.\99\ The en banc court began its opinion by stating:
---------------------------------------------------------------------------

    \99\ At the time of the 1973 rules requiring the reduction of 
lead in gasoline, section 211(c)(1)(A) of the CAA stated that the 
Administrator may promulgate regulations that control or prohibit 
the manufacture, introduction into commerce, offering for sale, or 
sale of any fuel or fuel additive for use in a motor vehicle or 
motor vehicle engine (A) if any emissions product of such fuel or 
fuel additive will endanger the public health or welfare * * * .
    CAA section 211(c)(1)(A) (1970) (emphasis added). The italicized 
language in the above quote is the relevant language revised by the 
1977 amendments.

    Man's ability to alter his environment has developed far more 
rapidly than his ability to foresee with certainty the effects of 
---------------------------------------------------------------------------
his alterations.

541 F.2d at 6. After reviewing the relevant facts and law, the full-
court evaluated the statutory language at issue to see what level of 
``certainty [was] required by the Clean Air Act before EPA may act.'' 
Id.
    By a 2-1 vote, the 3-judge panel had held that the statutory 
language ``will endanger'' required proof of actual harm, and that the 
actual harm had to come from fuels ``in and of themselves.'' Id. at 12. 
The en banc court rejected this approach, finding that the term 
``endanger'' allowed the Administrator to act when harm is threatened, 
and did not require proof of actual harm. Id. at 13. ``A statute 
allowing for regulation in the face of danger is, necessarily, a 
precautionary statute.'' Id. Optimally, the court held, regulatory 
action would not only precede, but prevent, a perceived threat. Id.
    The court also rejected petitioners' argument that any threatened 
harm must be ``probable'' before regulation was authorized. 
Specifically, the court recognized that danger ``is set not by a fixed 
probability of harm, but rather is composed of reciprocal elements of 
risk and harm, or probability or severity.'' Id. at 18. Next, the court 
held that EPA's evaluation of risk is necessarily an exercise of 
judgment, and that the statute did not require a factual finding. Id. 
at 24. Thus, ultimately, the Administrator must ``act, in part on 
`factual issues,' but largely on choices of policy, on an assessment of 
risks, [and] on predictions dealing with matters on the frontiers of 
scientific knowledge * * * .'' Id. at 29 (citations omitted). Finally, 
the en banc court agreed with EPA that even without the language in 
section 202 regarding ``cause or contribute to,'' section 211 
authorized EPA to consider the cumulative impact of lead from numerous 
sources, not just the fuels being regulated under section 211. Id. at 
29-31.
b. The 1977 Clean Air Act Amendments
    The dissent in the original Ethyl Corp decision and the en banc 
opinion were of ``critical importance'' to the House Committee which 
proposed the revisions to the endangerment language in the 1977 
amendments to the CAA. H.R. Rep. 95-294 at 48, 4 LH at 2515. In 
particular, the Committee believed the Ethyl Corp decision posed 
several ``crucial policy questions'' regarding the protection of public 
health and welfare.'' Id.\100\ The Committee addressed those questions 
with the endangerment language that now appears in section 202(a) and 
several other CAA provisions--``which in [the Administrator's] judgment 
cause, or contribute to, air pollution which may reasonably be 
anticipated to endanger public health or welfare.''
---------------------------------------------------------------------------

    \100\ The Supreme Court recognized that the current language in 
section 202(a)(1) is ``more-protective'' than the 1970 version that 
was similar to the section 211 language before the D.C. Circuit in 
Ethyl Corp. 127 S.Ct. at 1447, fn 1.
---------------------------------------------------------------------------

    The Committee intended the language to serve several purposes 
consistent with the en banc decision in Ethyl Corp.\101\ First, the 
phrases ``in his judgment'' and ``in the judgment of the 
Administrator'' call for the Administrator to make comparative 
assessment of risks and projections of future possibilities, consider 
uncertainties, and extrapolate from limited data. Thus, the 
Administrator must balance the likelihood of effects with the severity 
of the effects in reaching his judgment. The Committee emphasized that 
``judgment'' is different from a factual ``finding.'' Importantly, 
projections, assessments and estimates must be reasonable, and cannot 
be based on a ``crystal ball inquiry.'' Moreover, procedural safeguards 
apply (e.g., CAA 307(d)) to the exercise of judgment, and final 
decisions are subject to judicial review. Also, the phrase ``in his 
judgment'' modifies both phrases ``cause and contribute'' and ``may 
reasonably be anticipated'' discussed below. H.R. Rep. 95-294 at 50-51, 
4 LH at 2517-18.
---------------------------------------------------------------------------

    \101\ Specifically, the language (1) emphasizes the 
precautionary or preventive purpose of the CAA; (2) authorizes the 
Administrator to reasonably project into the future and weigh risks; 
(3) requires the consideration of the cumulative impact of all 
sources; (4) instructs that the health of susceptible individuals, 
as well as healthy adults, should be part of the analysis; and (5) 
indicates an awareness of the uncertainties and limitations in 
information available to the Administrator. H.R. Rep. 95-294 at 49-
50, 4 LH at 2516-17. Congress also wanted to standardize this 
language across the various sections of the CAA which address 
emissions from both stationary and mobile sources which may 
reasonably be anticipated to endanger public health or welfare. H.R. 
Rep. 95-294 at 50, 4 LH at 2517; Section 401 of CAA Amendments of 
1977.
---------------------------------------------------------------------------

    As the Committee further explained, the phrase ``may reasonably be 
anticipated'' builds upon the precautionary and preventative goals 
already provided in the use of the term ``endanger.'' Thus, the 
Administrator is to assess current and future risks rather than wait 
for proof of actual harm. This phrase is also intended to instruct the 
Administrator to consider the limitations and difficulties inherent in 
information on public health and welfare. H.R. Rep. 95-294 at 51, 4 LH 
at 2518.
    Finally, the phrase ``cause or contribute'' ensures that all 
sources of the contaminant which contribute to air pollution be 
considered in the endangerment analysis (e.g., not a single source or 
category of sources). It is also intended to require the Administrator 
to consider all sources of exposure to a pollutant (e.g., food, water, 
air) when determining risk. Id.
3. Additional Considerations for the ``Cause or Contribute'' Analysis
    While the legislative history sheds light on what should be 
considered in making an endangerment finding, it is not clear regarding 
what constitutes a sufficient ``contribution'' for purposes of making a 
finding. The CAA does not define the concept ``cause or contribute'' 
and instead requires that the Administrator exercise his judgment when 
determining whether emissions of air pollutants cause or contribute to 
air pollution. As a result, the Administrator has the discretion to 
interpret ``cause or contribute'' in a reasonable manner when applying 
it to the circumstances before him.
    The D.C. Circuit has discussed the concept of ``contribution'' in 
the context of a CAA section 213 rule for nonroad vehicles. In 
Bluewater Network v. EPA, 370 F.3d 1 (2004), industry argued that 
section 213(a)(3) requires a finding of a significant contribution 
before EPA could regulate, but EPA argued that the CAA requires a 
finding only of ``contribution.'' \102\ Id. at 13. The court

[[Page 44423]]

looked at the ``ordinary meaning of `contribute''' when upholding EPA's 
reading. After referencing dictionary definitions of contribute,\103\ 
the court also noted that ``[s]tanding alone, the term has no inherent 
connotation as to the magnitude or importance of the relevant `share' 
in the effect; certainly it does not incorporate any `significance' 
requirement.'' Id.\104\ The court also found relevant the fact that 
section 213(a) uses the term ``significant contributor'' in some places 
and the term ``contribute'' elsewhere, suggesting that the 
``contribute'' language invests the Administrator with discretion to 
exercise his judgment regarding what constitutes a sufficient 
contribution for the purpose of making an endangerment finding. Id. at 
14
---------------------------------------------------------------------------

    \102\ The relevant language in section 213(a)(3) reads ``[i]f 
the Administrator makes an affirmative determination under paragraph 
(2) the Administrator shall, * * * promulgate (and from time to time 
revise) regulations containing standards applicable to emissions 
from those classes or categories of new nonroad engines and new 
nonroad vehicles (other than locomotives or engines used in 
locomotives) which in the Administrator's judgment cause, or 
contribute to, such air pollution.'' Notably, CAA section 213(a)(2), 
which is referenced in section 213(a)(3), requires that the 
``Administrator shall determine * * * whether emissions of carbon 
monoxide, oxides of nitrogen, and volatile organic compounds from 
new and existing nonroad engines or nonroad vehicles (other than 
locomotives or engines used in locomotives) are significant 
contributors to ozone or carbon monoxide concentrations in more than 
1 area which has failed to attain the national ambient air quality 
standards for ozone or carbon monoxide'' (emphasis added).
    \103\ Specifically, the decision noted that `` `contribute' 
means simply `to have a share in any act or effect,' Webster's Third 
New International Dictionary 496 (1993), or `to have a part or share 
in producing,' 3 Oxford English Dictionary 849 (2d ed. 1989).'' 370 
F.3d at 13.
    \104\ The court explained, ``The repeated use of the term 
`significant' to modify the contribution required for all nonroad 
vehicles, coupled with the omission of this modifier from the 
`cause, or contribute to' finding required for individual categories 
of new nonroad vehicles, indicates that Congress did not intend to 
require a finding of `significant contribution' for individual 
vehicle categories.'' Id.
---------------------------------------------------------------------------

    In the past the Administrator has looked at emissions of air 
pollutants in various ways to determine whether they ``cause or 
contribute'' to the relevant air pollution. For instance, in some 
mobile source rulemakings, the Administrator has looked at the percent 
of emissions from the regulated mobile source category compared to the 
total mobile source inventory for that air pollutant. See, e.g., 66 FR 
5001 (2001) (heavy duty engine and diesel sulfur rule). In other 
instances the Administrator has looked at the percent of emissions 
compared to the total nonattainment area inventory of the air pollution 
at issue. See, e.g., 67 FR 68,242 (2002) (snowmobile rule). EPA has 
found that air pollutant emissions that amount to 1.2% of the total 
inventory ``contribute.'' Bluewater Network, 370 F.3d at 15 (``For 
Fairbanks, this contribution was equivalent to 1.2% of the total daily 
CO inventory for 2001.'').
    We solicit comment on these prior precedents, including their 
relevance to contribution findings EPA may be considering regarding GHG 
emissions. Where appropriate, may the Administrator determine that 
emissions at a certain level or percentage contribute to air pollution 
in one instance, while also finding that the same level or percentage 
of another air pollutant and involving different air pollution, and 
different overall circumstances, does not contribute? When exercising 
his judgment, is it appropriate for the Administrator to consider not 
only the cumulative impact, but also the totality of the circumstances 
(e.g., the air pollutant, the air pollution, the type of source 
category, the number of sources in the source category, the number and 
type of other source categories that may emit the air pollutant) when 
determining whether the emissions ``justify regulation'' under the CAA? 
See Ethyl Corp., 541 F.2d at 31, n62 (``Moreover, even under a 
cumulative impact theory emissions must make more than a minimal 
contribution to total exposure in order to justify regulation under 
Sec.  211(c)(1)(A).'').

B. Is the Air Pollution at Issue Reasonably Anticipated to Endanger 
Public Health or Welfare?

    This section discusses options for defining, with respect to GHGs, 
the ``air pollution'' that may or may not be reasonably anticipated to 
endanger public health or welfare, the first part of the two part 
endangerment test. It also summarizes the state of the science on GHGs 
and climate change, and relates that science to the endangerment 
question. We solicit comment generally on the information and issues 
discussed below.
1. What is the Air Pollution?
    As noted above, in applying the endangerment test in section 202(a) 
or other sections of the Act to GHG emissions, the Administrator must 
define the scope and nature of the relevant ``air pollution'' that may 
or may not be reasonably anticipated to endanger public health or 
welfare. The endangerment issue discussed in today's notice involves, 
primarily, anthropogenic emissions of GHGs, the accumulation of GHGs in 
the atmosphere, the resultant impacts including climate change, and the 
risks and impacts to human health and welfare associated with those 
impacts.
a. The Six Major GHGs of Concern
    The six major GHGs of concern are CO2, CH4, 
N2O, HFCs, PFCs, and SF6. The IPCC focuses on 
these six GHGs for both scientific assessments and emissions inventory 
purposes because these are the six long-lived, well-mixed GHGs not 
controlled by the Montreal Protocol on Substances that Deplete the 
Ozone Layer. These six GHGs are directly emitted by human activities, 
are reported annually in EPA's Inventory of U.S. Greenhouse Gas 
Emissions and Sinks, and are the common focus of the climate change 
research community. The ICTA petition addresses the first four of these 
GHGs, and the President's Executive Orders 13423 and 13432 define GHGs 
to include all six of these GHGs.
    Carbon dioxide is the most important GHG directly emitted by human 
activities, and is the most significant driver of climate change. The 
anthropogenic combined heating effect (referred to as forcing) of 
CH4, N2O, HFCs, PFCs and SF6 is about 
40% as large as the CO2 cumulative heating effect since pre-
industrial times, according to the Fourth Assessment Report of the 
IPCC.
b. Emissions and Elevated Concentrations of the Six GHGs
    As mentioned previously, these six GHGs can remain in the 
atmosphere for decades to centuries. Therefore, these GHGs, once 
emitted, become well mixed throughout the global atmosphere regardless 
of their emission origin, such that their average concentrations over 
the U.S. are roughly the same as the global average. This also means 
that current GHG concentrations are the cumulative result of both 
historic and current emissions, and that future concentrations will be 
the cumulative result of historic, current and future emissions.
    Greenhouse gases trap some of the Earth's heat that would otherwise 
escape to space. The additional heating effect caused by the buildup of 
anthropogenic GHGs in the atmosphere enhances the Earth's natural 
greenhouse effect and causes global temperatures to increase, with 
associated climatic changes (e.g., change in precipitation patterns, 
rise in sea levels, and changes in the frequency and intensity of 
extreme weather events). Current atmospheric concentrations of all of 
these GHGs are significantly higher than pre-industrial (~1750) levels 
as a result of human activities. Atmospheric concentrations of 
CO2 and other GHGs

[[Page 44424]]

are projected to continue to climb over the next several decades.
    The scientific literature that assesses the potential risks and 
end-point impacts of climate change (driven by the accumulation of 
atmospheric concentrations of GHGs) does not assess these impacts on a 
gas-by-gas basis. Observed climate change and associated effects are 
driven by the buildup of all GHGs in the atmosphere, as well as other 
natural and anthropogenic factors that influence the Earth's energy 
balance. Likewise, the future projections of climate change that have 
been done are driven by emission scenarios of all six GHGs, as well as 
other pollutants, many of which are already regulated in the U.S. and 
other countries.
    For these reasons, EPA is considering defining the ``air 
pollution'' related to GHGs as the elevated combined current and 
projected atmospheric concentration of the six GHGs. This approach is 
consistent with other provisions of the CAA and previous EPA practice 
under the CAA, where separate air pollutants from different sources but 
with common properties may be treated as a class (e.g., Class I and 
Class II substances under Title VI of the CAA). It also addresses the 
cumulative effect that the elevated concentrations of the six GHGs have 
on climate, and thus on different elements of health, society and the 
environment. We seek comment on this potential approach, as well as 
other alternative ways to define ``air pollution.'' One alternative 
would be to define air pollution as the elevated concentration of an 
individual GHG; however, in this case the Administrator may still have 
to consider the impact of the individual GHG in combination with the 
impacts caused by the elevated concentrations of the other GHGs.
c. Other Anthropogenic Factors That Have a Climatic Warming Effect 
Beyond the Six Major GHGs
    There are other GHGs and aerosols that have climatic warming 
effects: water vapor, chlorofluorocarbons (CFCs), 
hydrochlorofluorocarbons (HCFCs), halons, stratospheric and 
tropospheric ozone (O3), and black carbon. Each of these is 
discussed here. We seek comment on whether and how they should be 
considered in the definition of ``air pollution'' for purposes of an 
endangerment finding.
    Water vapor is the most abundant naturally occurring GHG and 
therefore makes up a significant share of the natural, background 
greenhouse effect. However, water vapor emissions from human activities 
have only a negligible effect on atmospheric concentrations of water 
vapor. Significant changes to global atmospheric concentrations of 
water vapor occur indirectly through human-induced global warming, 
which then increases the amount of water vapor in the atmosphere 
because a warmer atmosphere can hold more moisture. Therefore, changes 
in water vapor concentrations are not an initial driver of climate 
change, but rather an effect of climate change which then acts as a 
positive feedback that further enhances warming. For this reason, the 
IPCC does not list direct emissions of water vapor as an anthropogenic 
forcing agent of climate change, but does include this water vapor 
feedback mechanism in response to human-induced warming in all modeling 
scenarios of future climate change. Based on this recognition that 
anthropogenic emissions of water vapor are not a significant driver of 
anthropogenic climate change, EPA's annual Inventory of U.S. Greenhouse 
Gas Emissions and Sinks does not include water vapor, and GHG inventory 
reporting guidelines under the United Nations Framework Convention on 
Climate Change (UNFCCC) do not require data on water vapor emissions.
    Water vapor emissions may be an issue for concern when they are 
emitted by aircraft at high altitudes, where, under certain conditions, 
they can lead to the formation of condensation trails, referred to as 
contrails. Similar to high-altitude, thin clouds, contrails have a 
warming effect. Extensive cirrus clouds can also develop from aviation 
contrails, and increases in cirrus cloud cover would also have a 
warming effect. The IPCC Fourth Assessment Report estimated a very 
small positive radiative forcing effect for linear contrails, with a 
low degree of scientific understanding. Unlike the warming effects 
associated with the six long-lived, well-mixed GHGs, the warming 
effects associated with contrails or contrail-induced cirrus cloud 
cover are more regional and temporal in nature. Further discussion of 
aviation contrails can be found in Section VI on mobile sources. EPA 
invites input and comment on the scientific and policy issues related 
to consideration of water vapor's association with aviation contrails 
in an endangerment analysis.
    The CFCs, HCFCs, and halons are all strong anthropogenic GHGs that 
are long-lived in the atmosphere and are adding to the global 
anthropogenic heating effect. Therefore, these gases share common 
climatic properties with the six GHGs discussed above. The production 
and consumption of these substances (and hence their anthropogenic 
emissions) are being controlled and phased out, not because of their 
effects on climate change, but because they deplete stratospheric 
O3, which protects against harmful ultraviolet B (UVB) 
radiation. The control and phase-out of these substances in the U.S. 
and globally is occurring under the Montreal Protocol on Substances 
that Deplete the Ozone Layer, and in the U.S. under Title VI of the CAA 
as well.\105\ Therefore, the climate change research and policy 
community typically does not focus on these substances, precisely 
because they are essentially already being 'taken care of' with non-
climate policy mechanisms. For example, the UNFCCC does not address 
these substances, and instead defers their treatment to the Montreal 
Protocol. As mentioned above, the President's Executive Orders 13423 
and 13432 do not include these substances in the definition of GHGs. 
For these reasons, EPA's preliminary conclusion is that we would not 
include CFCs, HCFCs and halons in the definition of ``air pollution'' 
for purposes of an endangerment finding. We seek comment on this issue.
---------------------------------------------------------------------------

    \105\ Under the Montreal Protocol, production and consumption of 
CFCs were phased out in developed countries in 1996 (with some 
essential use exemptions) and are scheduled for phase-out by 2010 in 
developing countries (with some essential use exemptions). For 
halons the schedule was 1994 for phase out in developed countries 
and 2010 for developing countries; HCFC production was frozen in 
2004 in developed countries, and in 2016 production will be frozen 
in developing countries; and HCFC consumption phase-out dates are 
2030 for developed countries and 2040 in developing countries.
---------------------------------------------------------------------------

    The depletion of stratospheric O3 due to CFCs, HCFCs, 
and other ozone-depleting substances has resulted in a small cooling 
effect on the planet.
    Increased concentrations of tropospheric O3 are causing 
a significant anthropogenic warming effect, but, unlike the long-lived 
six GHGs, tropospheric O3 has a short atmospheric lifetime 
(hours to weeks), and therefore its concentrations are more variable 
over space and time. For these reasons, its global heating effect and 
relevance to climate change tends to entail greater uncertainty 
compared to the well-mixed, long-lived GHGs. More importantly, 
tropospheric ozone is already listed as a NAAQS pollutant and is 
regulated through SIPs and other measures under the CAA, due to its 
direct health effects including increases in respiratory infection, 
medicine use by asthmatics, emergency department visits and hospital 
admissions, and its potential to contribute to premature death, 
especially in susceptible populations such as asthmatics,

[[Page 44425]]

children and the elderly. Tropospheric O3 is not addressed 
under the UNFCCC. For these reasons, EPA's preliminary conclusion is 
that we would not include tropospheric O3 in the definition 
of ``air pollution'' for purposes of an endangerment finding because, 
as with CFCs, HCFCs and halons, it is already being addressed by 
regulatory actions that control precursor emissions (NOX and 
volatile organic compounds (VOCs)) from major U.S. sources. We invite 
comment on this issue.
    Black carbon is an aerosol particle that results from incomplete 
combustion of the carbon contained in fossil fuels, and it remains in 
the atmosphere for about a week. Black carbon causes a warming effect 
by absorbing incoming sunlight in the atmosphere (whereas GHGs cause 
warming by trapping outgoing, infrared heat), and by darkening bright 
surfaces such as snow and ice, which reduces reflectivity and increases 
absorption of sunlight at the surface. Some recent research,\106\ 
published after the IPCC Fourth Assessment Report, has suggested that 
black carbon may play a larger role in warming than previously thought. 
Like other aerosols, black carbon can also alter the reflectivity and 
lifetime of clouds, which in turn can have an additional climate 
effect. How black carbon and other aerosols alter cloud properties is a 
key source of uncertainty in climate change science. Given these 
reasons, there is considerably more uncertainty associated with black 
carbon's warming effect compared to the estimated warming effect of the 
six long-lived GHGs.
---------------------------------------------------------------------------

    \106\ Ramathan, V, and G. Carmichael (2008) Global and regional 
climate changes due to black carbon. Nature Geoscience, 1: 221-227.
---------------------------------------------------------------------------

    Black carbon is also co-emitted with organic carbon, which tends to 
have a cooling effect on climate because it reflects and scatters 
incoming sunlight. The ratio of black carbon to organic carbon varies 
by fuel type and by combustion efficiency. Diesel vehicles, for 
example, emit a much greater portion of black carbon, whereas forest 
fires tend to emit much more organic carbon. The net effect of black 
carbon and organic carbon on climate should therefore be considered. 
Also, black carbon is a subcomponent of particulate matter (PM), which 
is regulated as a NAAQS pollutant under the CAA due to its direct 
health effects caused by inhalation. Diesel vehicles are estimated to 
be the largest source of black carbon in the U.S., but these emissions 
are expected to decline substantially over the coming decades due to 
recently promulgated EPA regulations targeting PM2.5 
emissions from on-road and off-road diesel vehicles (the Highway Diesel 
Rule and the Clean Air Nonroad Diesel Rule, the Locomotive and Marine 
Compression Ignition Rule). Non-regulatory partnership programs such as 
the National Clean Diesel Campaign and Smartway are reducing black 
carbon as well. In sum, black carbon has different climate properties 
compared to long-lived GHGs, and major U.S. sources of black carbon are 
already being aggressively reduced through regulatory actions due to 
health concerns. Nevertheless, EPA has recently received petitions 
asking the Agency to reduce black carbon emissions from some mobile 
source categories (see Section VI.). Therefore, EPA seeks comment on 
how to treat black carbon (and co-emitted organic carbon) regarding the 
definition of ``air pollution'' in the endangerment context.
2. Science Summary
    The following provides a summary of the underlying science that was 
reviewed and utilized in the Endangerment Technical Support Document 
for the endangerment discussion, which in turn relied heavily on the 
IPCC Fourth Assessment Report. We seek comment on the best available 
science for purposes of the endangerment discussion, and in particular 
on the use of the more recent findings of the U.S. Climate Change 
Science Program.
a. Observed Global Effects
    The global atmospheric CO2 concentration has increased about 35% 
from pre-industrial levels to 2005, and almost all of the increase is 
due to anthropogenic emissions. The global atmospheric concentration of 
CH4 has increased by 148% since pre-industrial levels. Current 
atmospheric concentrations of CO2 and CH4 far exceed the recorded 
natural range of the last 650,000 years. The N2O concentration has 
increased 18%. The observed concentration increase in these non-CO2 
gases can also be attributed primarily to anthropogenic emissions. The 
industrial fluorinated gases, HFCs, PFCs, and SF6, have relatively low 
atmospheric concentrations but are increasing rapidly; these gases are 
entirely anthropogenic in origin.
    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.
    The global average net effect of the increase in atmospheric GHG 
concentrations, plus other human activities (e.g., land use change and 
aerosol emissions), on the global energy balance since 1750 has been 
one of warming. This total net radiative forcing (a measure of the 
heating effect caused by changing the Earth's energy balance) is 
estimated to be +1.6 Watts per square meter (W/m\2\). The combined 
radiative forcing due to the cumulative (i.e., 1750 to 2005) increase 
in atmospheric concentrations of CO2, CH4, and N2O is +2.30 W/m\2\. The 
rate of increase in positive radiative forcing due to these three GHGs 
during the industrial era is very likely to have been unprecedented in 
more than 10,000 years. The positive radiative forcing due to the 
increase in CO2 concentrations is the largest (+1.66 W/m\2\). The 
increase in CH4 concentrations is the second largest source of positive 
radiative forcing (+0.48 W/m2). The increase in N2O has a positive 
radiative forcing of +0.16 W/m\2\.
    Warming of the climate system is unequivocal, as is now evident 
from observations of increases in global average air and ocean 
temperatures, widespread melting of snow and ice, and rising global 
average sea level. Global mean surface temperatures have risen by 
0.74[deg]C (1.3[deg]F) over the last 100 years. The average rate of 
warming over the last 50 years is almost double that over the last 100 
years. Global mean surface temperature was higher during the last few 
decades of the 20th century than during any comparable period during 
the preceding four centuries.
    Most of the observed increase in global average temperatures since 
the mid-20th century is very likely due to the observed increase in 
anthropogenic GHG concentrations. Global observed temperatures over the 
last century can be reproduced only when model simulations include both 
natural and anthropogenic forcings, i.e., simulations that remove 
anthropogenic forcings are unable to reproduce observed temperature 
changes. Thus, the warming cannot be explained by natural variability 
alone.
    Observational evidence from all continents and most oceans shows 
that many natural systems are being affected by regional climate 
changes, particularly temperature increases. Observations show that 
changes are occurring in the amount, intensity, frequency and type of 
precipitation. There is strong evidence that global sea level gradually 
rose in the 20th century and is currently rising at an increased rate. 
Widespread changes in extreme temperatures have been observed in the 
last 50 years. Globally, cold days, cold nights, and frost have become 
less frequent, while hot days, hot nights, and heat waves have become 
more frequent.

[[Page 44426]]

    The Endangerment Technical Support Document provides evidence that 
the U.S. and the rest of the world are experiencing effects from 
climate change now.
b. Observed U.S. Effects
    U.S. temperatures also warmed during the 20th and into the 21st 
century. U.S. temperatures are now approximately 1.0 [deg]F warmer than 
at the start of the 20th century, with an increased rate of warming 
over the past 30 years. The past nine years have all been among the 25 
warmest years on record for the contiguous U.S., a streak which is 
unprecedented in the historical record. Like the average global 
temperature increase, the observed temperature increase for North 
America has been attributed to the global buildup of anthropogenic GHG 
concentrations in the atmosphere.
    Widespread changes in extreme temperatures have been observed in 
the last 50 years across all world regions including the U.S. Cold 
days, cold nights, and frost have become less frequent, while hot days, 
hot nights, and heat waves have become more frequent.
    Total annual precipitation has increased over the U.S. on average 
over the last century (about 6%), and there is evidence of an increase 
in heavy precipitation events. Nearly all of the Atlantic Ocean shows 
sea level rise during the past decade with highest rate in areas that 
include the U.S. east coast.
    Observations show that climate change is currently impacting the 
nation's ecosystems and services in significant ways.
c. Projected Effects
    The Endangerment Technical Support Document, the IPCC Fourth 
Assessment Report, and a report under the U.S. Climate Change Science 
Program, provide projections of future ambient concentrations of GHGs, 
future climate change, and future anticipated effects from climate 
change under various scenarios. This section summarizes some of the key 
global projections, such as changes in global temperature, as well as 
those particular to North America and the United States.
    Overall risk to human health, society and the environment increases 
with increases in both the rate and magnitude of climate change. 
Climate warming may increase the possibility of large, abrupt, and 
worrisome regional or global climatic events (e.g., disintegration of 
the Greenland Ice Sheet or collapse of the West Antarctic Ice Sheet). 
The majority of the climate change impacts literature assesses the 
potential effects on health, society and the environment due to 
projected changes in average conditions (e.g., temperature increase, 
precipitation change, sea level rise) and do not take into account how 
the frequency and severity of extreme events due to climate change may 
cause certain additional impacts. Likewise, impact studies typically do 
not account for large, abrupt climatic events, and generally consider 
rates of warming that would result from climate sensitivities \107\ 
within the most likely range, not at the tails of the distribution. To 
weigh the full range of risks and impacts, it is important to consider 
these possible extreme outcomes, including those that are of low 
probability.
---------------------------------------------------------------------------

    \107\ ``Climate sensitivity'' is a term used to describe how 
much long-term global warming occurs if global atmospheric 
concentrations of CO2 are doubled compared to their pre-
industrial levels. The IPCC Fourth Assessment Report states that 
climate sensitivity is very likely greater than 1.5[deg]C (2.7 
[deg]F) and likely to lie in the range of 2 [deg]C to 4.5 [deg]C 
(3.6 [deg]F to 8.1 [deg]F), with a most likely value of about 3 
[deg]C (5.4 [deg]F), and that a climate sensitivity higher than 4.5 
[deg]C cannot be ruled out.
---------------------------------------------------------------------------

i. Global Effects
    The majority of future reference-case scenarios (assuming no 
explicit GHG mitigation actions beyond those already enacted) project 
an increase of global GHG emissions over the century, with climbing GHG 
concentrations and associated increases in radiative forcing and 
average global temperatures.
    Projected ambient concentrations of CO2 and other GHGs remain well 
below published thresholds for any direct adverse health effects, such 
as respiration or toxic effects.
    Through about 2030, the global warming rate is affected little by 
different future scenario assumptions or different model sensitivities, 
because there is already some degree of commitment to future warming 
given past and present GHG emissions. By mid-century, the choice of 
scenario becomes more important for the magnitude of the projected 
warming because only about a third of that warming is projected to be 
due to climate change that is already committed. By the end of the 
century, projected average global warming (compared to average 
temperature around 1990) varies significantly by emissions scenario, 
with IPCC's best estimates ranging from 1.8 to 4.0 [deg]C (3.2 to 7.2 
[deg]F), with a fuller likely range of 1.1 to 6.4 [deg]C (2.0 to 11.5 
[deg]F), which takes into account a wider range of future emission 
scenarios and a wider range of uncertainties.\108\
---------------------------------------------------------------------------

    \108\ The IPCC scenarios are also described in the Technical 
Support Document and include a range of future global emission 
scenarios and a range of climate sensitivities (which measure how 
much global warming occurs for a given increase in global 
CO2 concentrations).
---------------------------------------------------------------------------

    The IPCC identifies the most vulnerable world regions as the 
Arctic, because of high rates of projected warming on natural systems; 
Africa, especially the sub-Saharan region, because of current low 
adaptive capacity; small islands, due to high exposure of population 
and infrastructure to risk of sea-level rise and increased storm surge; 
and Asian mega deltas, due to large populations and high exposure to 
sea level rise, storm surge, and river flooding. Climate change impacts 
in certain regions of the world may exacerbate problems that raise 
humanitarian and national security issues for the U.S. Climate change 
has been described as a potential threat multiplier regarding national 
security issues.
ii. United States Effects
    Projected global warming is anticipated to lead to effects in the 
U.S. For instance, all of the U.S. is very likely to warm during this 
century, and most areas of the U.S. are expected to warm by more than 
the global average. The U.S, along with the rest of the world, is 
projected to see an increase in the intensity of precipitation events 
and the risk of flooding, greater runoff and erosion, and thus the 
potential for adverse water quality effects.
    Severe heat waves are projected to intensify in magnitude, 
frequency, and duration over the portions of the U.S. where these 
events already occur, with likely increases in mortality and morbidity, 
especially among the elderly, young, and frail. Warmer temperatures can 
also lead to fewer cold-related deaths. It is currently not possible to 
quantify the balance between decreased cold-related deaths and 
increased heat-related deaths attributable to climate change over time.
    The IPCC projects with virtual certainty (i.e., greater than 99% 
likelihood) 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. Climate change is 
expected to lead to increases in regional ozone pollution, with 
associated risks for respiratory infection, aggravation of asthma, and 
potential premature death, especially for people in susceptible groups. 
Climate change effects on ambient PM are currently less certain.
    Additional human health concerns include a change in the range of 
vector-

[[Page 44427]]

borne diseases, and a likely trend towards more intense hurricanes 
(even though any single hurricane event cannot be attributed to climate 
change) and other extreme weather events. For many of these issues, 
sensitive populations, such as the elderly, young, asthmatics, the 
frail and the poor, are most vulnerable.
    Moderate climate change in the early decades of the century is 
projected to increase aggregate yields of rainfed agriculture in the 
United States by 5-20%. However, as temperatures continue to rise, 
grain and oilseed crops will increasingly experience failure, 
especially if climate variability increases and precipitation lessens 
or becomes more variable. How climatic variability and extreme weather 
events will continue to change under a changing climate is a key 
uncertainty, and these events also have the potential to offset the 
benefits of CO2 fertilization and a longer growing season.
    Climate change is projected to constrain over-allocated water 
resources in the U.S., increasing competition among agricultural, 
municipal, industrial, and ecological uses. Rising temperatures will 
diminish snowpack and increase evaporation, affecting seasonal 
availability of water.
    Disturbances like wildfire and insect outbreaks are increasing and 
are likely to intensify in a warmer future with drier soils and longer 
growing seasons. Overall forest growth in the U.S. will likely increase 
by 10-20% as a result of extended growing seasons and elevated 
CO2 over the next century, but with important spatial and 
temporal variation. Although recent climate trends have increased 
vegetation growth in parts of the United States, continuing increases 
in disturbances are likely to limit carbon storage, facilitate invasive 
species, and disrupt ecosystem services.
    The U.S. will be affected by global sea level rise, which is 
expected to increase between 0.18 and 0.59 meters by the end of the 
century relative to around 1990. These numbers represent the lowest and 
highest projections of the 5 to 95% ranges for all scenarios considered 
collectively and include neither uncertainty in carbon cycle feedbacks 
nor rapid dynamical changes in ice sheet flow. U.S. coastal communities 
and habitats will be increasingly stressed by climate change 
interacting with development and pollution. Sea level is already rising 
along much of the coast, and the rate of change is expected to increase 
in the future, exacerbating the impacts of progressive inundation, 
storm-surge flooding, and shoreline erosion.
    Climate change is likely to affect U.S. energy use (e.g., heating 
and cooling requirements), and energy production (e.g., effects on 
hydropower), physical infrastructures (including coastal roads, 
railways, transit systems and runways) and institutional 
infrastructures. Climate change will likely interact with and possibly 
exacerbate ongoing environmental change and environmental pressures in 
some settlements, particularly in Alaska where indigenous communities 
are facing major environmental and cultural impacts.
3. Endangerment Discussion Regarding Air Pollution
    The Administrator must exercise his judgment in evaluating whether 
the first part of the endangerment test is met, i.e., whether air 
pollution (e.g., the elevated concentrations of GHGs) is reasonably 
anticipated to endanger public health or welfare. As discussed above, 
in exercising his judgment it is appropriate for the Administrator to 
make comparative assessments of risk and projections of future 
possibilities, consider uncertainties, and extrapolate from limited 
data. The precautionary nature of the statutory language also means 
that the Administrator should act to prevent harm rather than wait for 
proof of actual harm.
    The scientific record shows there is compelling and robust evidence 
that observed climate change can be attributed to the heating effect 
caused by global anthropogenic GHG emissions. The evidence goes beyond 
increases in global average temperature to include observed changes in 
precipitation patterns, sea level rise, extreme hot and cold days, sea 
ice, glaciers, ecosystem functioning and wildlife patterns. Global 
warming trends over the last 50 years stand out as significant compared 
to estimated global average temperatures for at least the last few 
centuries. Some degree of future warming is now unavoidable given the 
current buildup of atmospheric concentrations of GHGs, as the result of 
past and present GHG emissions. Based on the scientific evidence, it is 
reasonable to conclude that future climate change will result from 
current and future emissions of GHGs. Future warming over the course of 
the 21st century, even under scenarios of low emissions growth, is very 
likely to be greater than observed warming over the past century.
    The range of potential impacts that can result from climate change 
spans many elements of the global environment, and all regions of the 
U.S. will be affected in some way. The U.S. has a long and populous 
coastline. Sea level rise will continue and exacerbate storm-surge 
flooding and shoreline erosion. In areas where heat waves already 
occur, they are expected to become more intense, more frequent, and 
longer lasting. Wildfires and the wildfire season are already 
increasing and climate change is expected to continue to worsen 
conditions that facilitate wildfires. Where water resources are already 
scarce and over-allocated in the western U.S., climate change is 
expected to put additional strain on these water management issues for 
municipal, agricultural, energy and industrial uses. Climate change 
also introduces an additional stress on ecosystems which are already 
affected by development, habitat fragmentation, and broken ecological 
dynamics. There is a wide range in the magnitude of these estimated 
impacts, with there being more confidence in the occurrence of some 
effects and less confidence in the occurrence of others.
    In addition to the effects from changes in climate, there are some 
additional welfare effects that occur directly from the anthropogenic 
GHG emissions themselves. For example, ocean acidification occurs 
through elevated concentrations of CO2, and crop and other 
vegetation growth can be enhanced through elevated CO2 
concentrations as well.
    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, which would occur as a result of the 
elevated GHG concentrations themselves rather than through the effects 
of climate change. However, there are indirect human health risks 
(e.g., heat-related mortality, exacerbated air quality, extreme events) 
and benefits (e.g., less cold-related mortality) that occur due to 
climate change. We seek comment on how these human health impacts 
should be characterized under the CAA for purposes of an endangerment 
analysis.
    Some elements of human health, society and the environment may 
benefit from climate change (e.g., short-term increases in agricultural 
yields, less cold-related mortality). We seek comment on how the 
potential for some benefits should be viewed against the full weight of 
evidence showing numerous risks and the potential for adverse impacts.
    Quantifying the exact nature and timing of impacts due to climate 
change over the next few decades and beyond, and across all vulnerable 
elements of U.S. health, society and the environment, is currently not 
possible. However, the full weight of evidence as

[[Page 44428]]

summarized above and as documented in the Endangerment Technical 
Support Document points towards the robust conclusion that expected 
rates of climate change (driven by past, present and plausible future 
GHG emissions) pose a number of serious risks to the U.S., even if the 
exact nature of the risks is difficult to quantify with confidence. The 
uncertainties in this context can also mean that future rates of 
climate change are being underestimated, and that the potential for 
associated and difficult-to-predict-and-quantify extreme events is not 
adequately incorporated into impact assessments. The scientific 
literature states that risk increases with increases in both the rate 
and magnitude of climate change. We solicit comment on how these 
uncertainties should be considered.
    We seek comment on whether, in light of the precautionary nature of 
the statutory language, the Administrator needs to find that current 
levels of GHG concentrations endanger public health or welfare now. As 
noted above, the fact that GHGs remain in the atmosphere for decades to 
centuries means that future concentrations are dependent not only on 
tomorrow's emissions, but also on today's emissions. Should the 
Administrator consider both current and projected future elevated 
concentrations of GHGs, as well as the totality of the observed and 
projected effects that result from current and projected 
concentrations? Or should the Administrator focus on future projected 
elevated concentrations of GHGs and their projected effects in the 
United States because they are larger and of greater concern than 
current GHG concentrations and observed effects?
    In sum, EPA invites comment on all issues relevant to making an 
endangerment finding, including the scientific basis supporting a 
finding that there is or is not endangerment under the CAA, as well as 
the potential scope of the finding (i.e., public health, welfare, or 
both).

C. Illustration for the ``Cause or Contribute'' Part of the 
Endangerment Discussion: Do emissions of air pollutants from motor 
vehicles or fuels cause or contribute to the air pollution that may 
reasonably be anticipated to endanger public health or welfare in the 
United States?

 1. What Is/Are the Air pollutant(s)?
a. Background and Context
    If the Administrator, in his judgment, finds that GHG ``air 
pollution'' may reasonably be anticipated to endanger public health or 
welfare, he must then define ``air pollutant(s)'' for purposes of 
making the ``cause or contribute'' determination. The question is 
whether the ``air pollutants'' to be evaluated for ``cause or 
contribute'' should be the individual GHGs, or whether the ``air 
pollutant'' is one or more classes of GHGs as a group.
    We recognize that the alternative definitions could have important 
implications for how GHGs are treated under other provisions of the 
Act. The Administrator seeks comment on these options, and is 
particularly interested in views regarding the implications for the 
potential future regulation of GHGs under other parts of the Act.
b. Defining ``Air Pollutant'' as Each Individual Greenhouse Gas
    Under this approach, the Administrator could define ``air 
pollutant'' as each individual GHG rather than as GHGs as a collective 
whole for the purposes of assessing ``cause or contribute.'' The 
Administrator would evaluate each individual GHG to determine if it 
causes, or contributes to, the elevated combined level of GHG 
concentrations.
    This approach enables an evaluation of the unique characteristics 
and properties of each GHG (e.g., radiative forcing, lifetimes, etc.), 
as well as current and projected emissions. This facilitates a 
customized approach accounting for these factors. This approach also is 
consistent with the approach taken in several federal GHG programs 
which target reductions of individual greenhouse gases. For example, 
EPA manages a variety of partnership programs aimed at reducing 
emissions of specific sources of methane and the fluorinated gases 
(HFCs, PFCs and SF6).
c. Defining ``Air Pollutants'' Collectively as a Class of Greenhouse 
Gases
    Under this approach, the Administrator could define the ``air 
pollutant'' as (a) the collective group of the six GHGs discussed above 
(CO2, CH4, N2O, HFCs, PFCs, and 
SF6), (b) the collective group of the specific GHGs that are 
emitted from the relevant source category at issue in the endangerment 
finding (e.g., for section 202 sources it would be CO2, 
CH4, N2O, and HFCs), or (c) other reasonable 
groupings.
    There are several federal and state climate programs, such as EPA's 
Climate Leaders program, DOE's 1605b program, and Multi-state Climate 
Registry, that encourage firms to report (and reduce) emissions of all 
six GHGs, recognizing that the non-CO2 GHG emissions are a 
significant part of the atmospheric buildup of GHG concentrations and 
thus radiative forcing. In addition, the President's recent 2007 
Executive Orders (13423 and 13432) and his 2002-2012 intensity goal 
both encompass the collective emissions of all six GHGs. Consideration 
of a class of gases collectively takes into account the multiple 
effects of mitigation options and technologies on each gas, thus 
enabling a more coordinated approach in addressing emissions from a 
source. For example, collection and combustion of fugitive methane will 
lead to net increases in CO2 and possibly nitrous oxide 
emissions, but this is nevertheless desirable from an overall 
mitigation perspective given the lower total radiative forcing.
2. Discussion of ``Cause or Contribute''
    Once the ``air pollutant(s)'' is defined, the Administrator must 
look at the emissions of the air pollutant from the relevant source 
category in determining whether those emissions cause or contribute to 
the air pollution he has determined may reasonably be anticipated to 
endanger public health or welfare. There arguably are many possible 
ways of assessing ``cause and contribute'' and different approaches 
have been used in previous endangerment determinations under the CAA. 
For example, EPA could consider how emissions from the relevant source 
category would compare as a share of the following:
     Total global aggregated emissions of the 6 GHGs discussed 
in the definition of ``air pollution'';
     Total aggregated U.S. emissions of the 6 GHGs;
     Total global emissions of the individual GHG in question;
     Total U.S. emissions of the individual GHG in question; 
and
     Total global atmospheric concentrations of the GHG in 
question.
    In the past, the smallest level or amount of emissions that the 
Administrator determined ``contributed'' to the air pollution at issue 
was just less than 1% (67 FR 68242 (2002)). We solicit comment on other 
factors that may be relevant to a contribution determination for GHG 
emissions. For example, given the global nature of the air pollution 
being addressed in this rulemaking, one might expect that the 
percentage contribution of specific GHGs and sectors would be much 
smaller than for previous rulemakings when the nature of the air 
pollution at issue was regional or local. On an absolute basis, a small 
U.S. GHG source on a global scale may have emissions at the same level 
as one of the largest sources in a single small to medium size country, 
and given the

[[Page 44429]]

large size of the global denominator, even sectors with significant 
emissions could be very small in percentage terms.
    In addition, EPA notes that the EPA promotes the reduction of 
particular GHG emissions through a variety of voluntary programs (e.g., 
EPA's domestic CH4 partnership programs and the international Methane 
to Markets Partnership (launched in 2004)). EPA requests comment on how 
these and other efforts to encourage the voluntary reductions in even 
small amounts of GHG emissions are relevant to decisions about what 
level of ``contribution'' merits mandatory regulations.
    Below we use the section 202 source category to illustrate these 
and other various ways to consider and compare source category GHG 
emissions for the ``cause or contribute'' analysis. In keeping with the 
discussion above regarding possible definitions of ``air pollutant,'' 
we provide the information on an individual GHG and collective GHG 
basis. In addition, we raise various policy considerations that could 
be relevant to a ``cause or contribute'' determination. EPA invites 
comment on the various approaches, data, and policy considerations 
discussed below.
a. Overview of Section 202 Source Categories
    The relevant mobile sources under section 202(a)(1) of the Clean 
Air Act are ``any class or classes of new motor vehicles or new motor 
vehicle engines, * * * '' CAA section 202(a)(1). To support this 
illustrative assessment, EPA analyzed historical GHG emissions data for 
motor vehicles and motor vehicle engines in the United States from 1990 
to 2006.\109\
---------------------------------------------------------------------------

    \109\ The source of the emissions data is the Inventory of U.S. 
Greenhouse Gas Emissions and Sinks: 1990-2006 (USEPA #430-R-08-005) 
(hereinafter ``U.S. Inventory''). See the Emissions Technical 
Support Document for a discussion on the correspondence between 
Section 202 source categories and IPCC source categories. The most 
recent year for which official EPA estimates are available is 2006.
---------------------------------------------------------------------------

    The motor vehicles and motor vehicle engines (hereinafter ``section 
202 source categories'') addressed include passenger cars, light-duty 
trucks, motorcycles, buses, medium/heavy-duty trucks, and cooling.\110\ 
Of the six primary GHGs, four are associated with section 202 source 
categories: CO2, CH4, N2O, and HFCs.
---------------------------------------------------------------------------

    \110\ Greenhouse gas emissions result from the use of HFCs in 
cooling systems designed for passenger comfort, as well as auxiliary 
systems for refrigeration.
---------------------------------------------------------------------------

    A summary of the section 202 emissions information is presented 
here, and a more detailed description along with data tables is 
contained in the Emissions Technical Support Document. All annual 
emissions data are considered on a CO2 equivalent basis.
b. Carbon Dioxide Emissions From Section 202 Sources
    CO2 is emitted from motor vehicles and motor vehicle 
engines during the fossil fuel combustion process. During combustion, 
the carbon stored in the fuels is oxidized and emitted as 
CO2 and smaller amounts of other carbon compounds.\111\
---------------------------------------------------------------------------

    \111\ Detailed CO2 emissions data from section 202 
source categories are presented in the Emissions Technical Support 
Document. Other carbon compounds emitted such as CO, and non-methane 
volatile organic compounds oxidize in the atmosphere to form 
CO2 in a period of hours to days.
---------------------------------------------------------------------------

    CO2 is the dominant GHG emitted from motor vehicles and 
motor vehicle engines, and the dominant GHG emitted in the U.S. and 
globally.\112\ CO2 emissions from section 202 sources grew 
by 32% between 1990 and 2006, largely due to increased CO2 
emissions from light-duty trucks (61% since 1990) and medium/heavy-duty 
trucks (76%). Emissions of CO2 from section 202 sources, and 
U.S. and global emissions are presented below in Table V-1.
---------------------------------------------------------------------------

    \112\ EPA typically uses current motor vehicle fleet emissions 
information when making a contribution analysis under section 202. 
We solicit comment on how or whether the reductions in 
CO2 emissions expected by implementation of EISA, or any 
other projected change in emissions from factors such as growth in 
the fleet or vehicle miles traveled, would impact a contribution 
analysis for CO2.

          Table V-1--Section 202 CO2, U.S. and Global Emissions
------------------------------------------------------------------------
                                                            Sec 202 CO2
             U.S. Emissions                    2006            share
                                                             (percent)
------------------------------------------------------------------------
Section 202 CO2.........................         1,564.6
All U.S. CO2............................          5983.1            26.2
U.S. emissions of Sec 202 GHG...........         1,665.4            93.9
All U.S. GHG emissions..................         7,054.2           22.2%
------------------------------------------------------------------------


 
                                                            Sec 202 CO2
                                                             share (in
            Global Emissions                   2000            2000)
                                                             (percent)
------------------------------------------------------------------------
All global CO2 emissions................        30,689.5             4.8
Global transport GHG emissions..........         5,315.2            27.5
All global GHG emissions................        36,727.9             4.0
------------------------------------------------------------------------


 
                                                           Share of U.S.
        Other Sources of U.S. CO2              2006        CO2 emissions
                                                             (percent)
------------------------------------------------------------------------
Electricity Sector CO2..................          2360.3            39.4
Industrial Sector CO2...................           984.1            16.4
------------------------------------------------------------------------

    Arguably, based on these data, if the Administrator did not find 
that, for purposes of section 202, that CO2 emissions from 
section 202 source categories contribute to the elevated combined level 
of GHG concentrations, it is unlikely that he would find that the other 
GHGs emitted by section 202 source categories contribute.
c. Methane Emissions From Section 202 Source Categories
    Methane (CH4) emissions from motor vehicles are a function of the 
CH4 content of the motor fuel, the amount of

[[Page 44430]]

hydrocarbons passing uncombusted through the engine, and any post-
combustion control of hydrocarbon emissions (such as catalytic 
converters). Methane emissions from these source categories decreased 
by 58% between 1990 and 2006, largely due to decreased CH4 emissions 
from passenger cars and light-duty trucks.\113\ Emissions of 
CH4 from section 202 sources, and U.S. and global emissions 
are presented below in Table V-2.
---------------------------------------------------------------------------

    \113\ Detailed methane emissions data for section 202 source 
categories are presented in the Emissions Technical Support 
Document.

          Table V-2--Section 202 CH4, U.S. and Global Emissions
------------------------------------------------------------------------
                                                            Sec 202 CH4
             U.S. Emissions                    2006            share
                                                             (percent)
------------------------------------------------------------------------
Section 202 CH4.........................            1.80
All U.S. CH4............................           555.3            0.32
U.S. emissions of Sec 202 GHG...........        1,665.40            0.11
All U.S. GHG emissions..................        7,054.20            0.03
------------------------------------------------------------------------


 
                                                            Sec 202 CH4
                                                             share (in
            Global Emissions                   2000            2000)
                                                             (percent)
------------------------------------------------------------------------
All global CH4 emissions................        5,854.90            0.05
Global transport GHG emissions..........        5,315.20            0.05
All global GHG emissions................       36,727.90            0.01
------------------------------------------------------------------------


 
                                                           Share of U.S.
        Other Sources of U.S. CH4              2006        CH4 emissions
                                                             (percent)
------------------------------------------------------------------------
Landfill CH4 emissions..................           125.7            22.6
Natural Gas CH4 emissions...............           102.4            18.4
------------------------------------------------------------------------

    EPA also notes that the EPA promotes the reduction of 
CH4 and other non-CO2 GHG emissions, as 
manifested in its domestic CH4 partnership programs and the 
international Methane to Markets Partnership (launched in 2004), which 
are not focused on the transportation sector. EPA requests comment on 
how these and other efforts to encourage the voluntary reductions in 
even small amounts of GHG emissions are relevant to decisions about 
what level of ``contribution'' merits mandatory regulations.
d. Nitrous Oxide Emissions From Section 202 Source Categories
    Nitrous oxide (N2O) is a product of the reaction that 
occurs between nitrogen and oxygen during fuel combustion. 
N2O (and nitrogen oxide (NOX)) emissions from 
motor vehicles and motor vehicle engines are closely related to fuel 
characteristics, air-fuel mixes, combustion temperatures, and the use 
of pollution control equipment.
    Nitrous oxide emissions from section 202 sources decreased by 27% 
between 1990 and 2006, largely due to decreased emissions from 
passenger cars and light-duty trucks.\114\ Earlier generation control 
technologies initially resulted in higher N2O emissions, 
causing a 24% increase in N2O emissions from motor vehicles 
between 1990 and 1995. Improvements in later-generation emission 
control technologies have reduced N2O output, resulting in a 
41% decrease in N2O emissions from 1995 to 2006. Emissions 
of N2O from section 202 sources, and U.S. and global 
emissions are presented below in Table V-3.
---------------------------------------------------------------------------

    \114\ Detailed nitrous oxide emissions data for section 202 
source categories are presented in the Emissions Technical Support 
Document.

          Table V-3--Section 202 N2O, U.S. and Global Emissions
------------------------------------------------------------------------
                                                            Sec 202 N2O
             U.S. Emissions                    2006            share
                                                             (percent)
------------------------------------------------------------------------
Section 202 N2O.........................            29.5
All U.S. N2O............................           367.9             8.0
U.S. emissions of Sec 202 GHG...........          1665.4             1.8
All U.S. GHG emissions..................          7054.2             0.4
------------------------------------------------------------------------


 
                                                            Sec 202 N2O
                                                             share (in
            Global Emissions                   2000            2000)
                                                             (percent)
------------------------------------------------------------------------
All global N2O emissions................         3,113.8             1.6
Global transport GHG emissions..........         5,315.2             0.9
All global GHG emissions................        36,727.9             0.1
------------------------------------------------------------------------


[[Page 44431]]


 
                                                           Share of U.S.
        Other Sources of U.S. N2O              2006        N2O emissions
                                                             (percent)
------------------------------------------------------------------------
Agricultural Soil N2O emissions.........           265.0            72.0
Nitric Acid N2O emissions...............            15.6             4.3
------------------------------------------------------------------------

    Past experience has shown that substantial emissions reductions can 
be made by small N2O sources. For example, the 
N2O emissions from adipic acid production is smaller than 
that of Section 202 sources, and this sector reduced its emission by 
over 60 percent from 1990 to 2006 as a result of voluntary adoption of 
N2O abatement technology by the three major U.S. adipic acid 
plants.\115\
---------------------------------------------------------------------------

    \115\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 
1990-2006 (USEPA #430-R-08-005), p.2-22.
---------------------------------------------------------------------------

e. Hydrofluorocarbons Emissions From Section 202 Source Categories
    Hydrofluorocarbons (a term which encompasses a group of eleven 
related compounds) are progressively replacing CFCs and HCFCs in 
section 202 cooling and refrigeration systems as they are being phased 
out under the Montreal Protocol and Title VI of the CAA.\116\
---------------------------------------------------------------------------

    \116\ 2006 IPCC Guidelines, Volume 3, Chapter 7. Page 43.
---------------------------------------------------------------------------

    Hydrofluorocarbons were not used in motor vehicles or refrigerated 
rail and marine transport in the U.S. in 1990, but by 2006 emissions 
had increased to 70 Tg CO2e.\117\ Emissions of HFC from 
section 202 sources, and U.S. and global emissions are presented below 
in Table V-4.
---------------------------------------------------------------------------

    \117\ Detailed HFC emissions data for section 202 source 
categories are presented in Tables in the Emissions Technical 
Support Document.

          Table V-4--Section 202 HFC, U.S. and Global Emissions
------------------------------------------------------------------------
                                                            Sec 202 HFC
             U.S. Emissions                    2006            share
                                                             (percent)
------------------------------------------------------------------------
Section 202 HFC.........................            69.5
All U.S. HFC............................           124.5            55.8
U.S. emissions of Sec 202 GHG...........          1665.4             4.2
All U.S. GHG emissions..................          7054.2             1.0
------------------------------------------------------------------------


 
                                                            Sec 202 HFC
                                                             share (in
            Global Emissions                   2000            2000)
                                                             (percent)
------------------------------------------------------------------------
All global HFC emissions................           259.2            20.3
Global transport GHG emissions..........         5,315.2             1.0
All global GHG emissions................        36,727.9             0.1
------------------------------------------------------------------------


 
                                                           Share of U.S.
        Other Sources of U.S. HFC              2006        HFC emissions
                                                             (percent)
------------------------------------------------------------------------
HCFC-22 Production......................            13.8            11.1
Other ODS Substitutes...................            41.2            33.1
------------------------------------------------------------------------

    EPA notes that section 202 HFC emissions are the largest source of 
HFC emissions in the United States, that these emissions increased by 
274% from 1995 to 2006, and that section 202 sources are also the 
largest source of emissions of high GWP gases (i.e., HFCs, PFCs or 
SF6) in the U.S. Thus, a decision not to set standards for 
HFCs under section 202 could be viewed as precedential with respect to 
the likelihood of future regulatory actions for any of these three 
gases.
f. Perfluorocarbons and Sulfur Hexafluoride
    Perfluorocarbons (PFCs) and sulfur hexafluoride (SF6) 
are not emitted from motor vehicles or motor vehicle engines in the 
United States.
g. Total GHG Emissions From Section 202 Source Categories
    We note if ``air pollutant'' were defined as the collective group 
of four to six GHGs, the emissions of a single component (e.g., 
CO2) could theoretically support a positive contribution 
finding. We also solicit comment on whether the fact that total GHG 
emissions from section 202 source categories are approximately 4.3% of 
total global GHG emissions would mean that adopting this definition of 
``air pollutant'' would make it unnecessary to assess the individual 
GHG emissions levels less than that amount. Table V-5 below presents 
the contribution of individual GHGs to total GHG emissions from section 
202 sources, and from all sources in the U.S.

              Table V-5--Contribution of Individual gases in 2006 to Section 202 and U.S. Total GHG
                                                  (In percent)
----------------------------------------------------------------------------------------------------------------
                                                   CO2        CH4        N2O        HFC        PFC        SF6
----------------------------------------------------------------------------------------------------------------
Section 202...................................       93.9        0.1        1.8        4.2

[[Page 44432]]

 
U.S. Total....................................       84.8        7.9        5.2        1.8        0.1        0.2
----------------------------------------------------------------------------------------------------------------

    Emissions of GHG from section 202 sources, and U.S. and global 
emissions are presented below in Table V-6.

          Table V-6--Section 202 GHG, U.S. and Global Emissions
------------------------------------------------------------------------
                                                            Sec 202 GHG
             U.S. Emissions                    2006            share
                                                             (percent)
------------------------------------------------------------------------
Section 202 GHG.........................          1665.4
All U.S. GHG emissions..................          7054.2            23.6
------------------------------------------------------------------------


 
                                                            Sec 202 GHG
                                                             share (in
            Global Emissions                   2000            2000)
                                                             (percent)
------------------------------------------------------------------------
Global transport GHG emissions..........         5,315.2            29.5
All global GHG emissions................        36,727.9             4.3
------------------------------------------------------------------------


 
                                                           Share of U.S.
        Other Sources of U.S. GHG              2006       GHG  emissions
                                                             (percent)
------------------------------------------------------------------------
Electricity Sector emissions............          2377.8            33.7
Industrial Sector emissions.............          1371.5            19.4
------------------------------------------------------------------------

h. Summary of Requests for Comment
    EPA is seeking comment on the approach outlined above in the 
context of section 202 source categories, regarding how ``air 
pollutant'' should be defined, and contribution analyzed. Specifically, 
EPA is interested in comments regarding the data and comparisons 
underlying the above example contained in Emissions Technical Support 
Document. We also welcome comment on prior precedents for assessing 
contributions, as well as the potential precedential impact of a 
positive section 202 contribution findings for other potential sources 
of these and other GHGs. We also welcome comment on the relationship of 
these proposals to existing U.S. climate change emissions reduction 
programs and the magnitude of reductions sought under these programs.

VI. Mobile Source Authorities, Petitions, and Potential Regulation

A. Mobile Sources and Title II of the Clean Air Act

    Title II of the CAA provides EPA's statutory authority for mobile 
source air pollution control. Mobile sources include cars and light 
trucks, heavy trucks and buses, nonroad recreational vehicles (such as 
dirt bikes and snowmobiles), farm and construction machines, lawn and 
garden equipment, marine engines, aircraft, and locomotives. The Title 
II program has led to the development and widespread commercialization 
of emission control technologies throughout the various categories of 
mobile sources. Overall, the new technologies sparked by EPA regulation 
over four decades have reduced the rate of emission of regulated 
pollutants from personal vehicles by 98% or more, and are key 
components of today's high-tech cars and SUVs. EPA's heavy-duty, 
nonroad, and transportation fuels regulatory programs have likewise 
promoted both pollution reduction and cost-effective technological 
innovation.
    In this section, we consider how Title II authorities could be used 
to reduce GHG emissions from mobile sources and the fuels that power 
them. The existing mobile source emissions control program provides one 
possible model for how EPA could use Title II of the CAA to achieve 
long-term reductions in mobile source GHG emissions. The approach would 
be to set increasingly stringent performance standards that 
manufacturers would be required to meet over 10, 20 or 30 years using 
flexible compliance mechanisms like emissions averaging, trading and 
banking to increase the economic effectiveness of emission reductions 
over less flexible approaches. These performance standards would 
reflect EPA's evaluation of available and developing technologies, 
including the potential for technology innovation, that could provide 
sustained long-term GHG emissions reductions while allowing mobile 
sources to satisfy the full range of consumer and business needs.
    Another approach we explore is the extent to which CAA authorities 
could be used to establish a cap-and-trade system for reducing mobile 
source-related GHG emissions that could provide even greater 
flexibility to manufacturers in finding least cost emission reductions 
available within the sector. With respect to cars and light trucks, we 
also present and discuss an alternative approach to standard-setting, 
focused on technology already in the market today in evaluating near 
term standards, that EPA began developing in 2007 as part of an inter-
agency effort in response to the Massachusetts decision and the 
President's May 2007 directive. This approach took into consideration 
and used as a starting point the President's 20-in-10 goals for vehicle 
standards. Congress subsequently

[[Page 44433]]

addressed many of the 20-in-10 goals through its action in passing EISA 
in December 2007.
    EPA seeks public comment on how a Title II regulatory program could 
serve as an approach for addressing GHG emissions from mobile sources. 
In addition, EPA invites comments on the following specific questions:
     What are the implications for developing Title II programs 
in view of the global and long-lived nature of GHGs?
     What factors should be considered in developing a long-
term, i.e, 2050, GHG emissions target for the transportation sector?
     Should the transportation sector make GHG emission 
reductions proportional to the sector's share of total U.S. GHG 
emissions or should other approaches be taken to determining the 
relative contribution of the transportation sector to GHG emission 
reductions?
     What are the merits and challenges of different regulatory 
timeframes such as 5 years, 10-15 years, 30-40 years?
     Should Title II GHG standards be based on environmental 
need, current projections of future technology feasibility, and/or 
current projections of future net societal benefits?
     Could Title II accommodate a mobile sources cap-and-trade 
program and/or could Title II regulations complement a broader cap-and-
trade program?
     Should trading between mobile sources and sources in other 
sectors be allowed?
     Is it necessary or would it be helpful to have new 
legislation to complement Title II (such as legislation to provide 
incentives for the development and commercialization of low-GHG mobile 
source technologies)?
     How best can EPA fulfill its CAA obligations under Title 
II yet avoid inconsistency with NHTSA's regulatory approach under EPCA?

EPA also invites comments on whether there are specific limitations of 
a Title II program that would best be addressed by new legislation.
1. Clean Air Act Title II Authorities
    In this section we review the Title II provisions that could be 
applied to GHG emissions from various categories of motor vehicles and 
fuels. For each provision, we describe the relevant category of mobile 
sources, the terms of any required ``endangerment'' finding, and the 
applicable standard-setting criteria. We also identify the full range 
of factors EPA may consider, including costs and safety, and discuss 
the extent to which standards may be technology-forcing.
a. CAA Section 202(a)
    Section 202(a)(1) provides broad authority to regulate new ``motor 
vehicles,'' which are on-road vehicles. While other provisions of Title 
II address specific model years and emissions of motor vehicles, 
section 202(a)(1) provides the authority that EPA would use to regulate 
GHGs from new on-road vehicles. The ICTA petition sought motor vehicle 
GHG emission standards under this section of the Act.
    As previously discussed, section 202(a)(1) makes a positive 
endangerment finding a prerequisite for setting emission standards for 
new motor vehicles. Any such standards ``shall be applicable to such 
vehicles * * * for their useful life.'' Emission standards under CAA 
section 202(a)(1) are technology-based, i.e. the levels chosen must be 
premised on a finding of technological feasibility. They may also be 
technology-forcing to the extent EPA finds that technological advances 
are achievable in the available lead time and that the reductions such 
advances would obtain are needed and appropriate. However, EPA also has 
the discretion to consider and weigh various additional factors, such 
as the cost of compliance (see section 202(a)(2)), lead time necessary 
for compliance (section 202(a)(2)), safety (see NRDC v. EPA, 655 F. 2d 
318, 336 n. 31 (D.C. Cir. 1981)) and other impacts on consumers, and 
energy impacts. Also see George E. Warren Corp. v. EPA, 159 F.3d 616, 
623-624 (D.C. Cir. 1998). CAA section 202(a)(1) does not specify the 
weight to apply to each factor, and EPA accordingly has significant 
discretion in choosing an appropriate balance among the factors. See 
EPA's interpretation of a similar provision, CAA section 231, at 70 FR 
69664, 69676 (Nov. 17, 2005), upheld in NACAA v. EPA, 489 F.3d 1221, 
1230 (2007).
b. CAA Section 213
    CAA section 213 provides broad authority to regulate emissions of 
non-road vehicles and engines, which are a wide array of mobile sources 
including ocean-going vessels, locomotives, construction equipment, 
farm tractors, forklifts, harbor crafts, and lawn and garden equipment.
    CAA section 213(a)(4) authorizes EPA to establish standards to 
control pollutants, other than NOX, volatile organic 
compounds and CO, which are addressed in section 213(a)(3), if EPA 
determines that emissions from nonroad engines and vehicles as a whole 
contribute significantly to air pollution ``which may reasonably be 
anticipated to endanger public health or welfare''. Once this 
determination is made, CAA section 213(a)(4) provides that EPA ``may'' 
promulgate standards it deems ``appropriate'' for ``those classes or 
categories of new nonroad engines and new nonroad vehicles (other than 
locomotives or engines used in locomotives), which in the 
Administrator's judgment, cause or contribute to, such air pollution, 
taking into account costs, noise, safety, and energy factors associated 
with the application of available technology to those vehicles and 
engines.'' As with section 202(a)(1), this provision authorizes EPA to 
set technology-forcing standards to the extent appropriate considering 
all the relevant factors.
    CAA section 213(a)(5) authorizes EPA to adopt standards for new 
locomotives and new locomotive engines. These standards must achieve 
the greatest degree of emissions reduction achievable through the 
application of available technology, giving appropriate consideration 
to the cost of applying such technology, lead time, noise, energy and 
safety. Section 213(a)(5) does not require that EPA review the 
contribution of locomotive emissions to air pollution which may 
reasonably be expected to endanger public health or welfare before 
setting emission standards, although in the past, EPA has provided such 
information in its rulemakings.
c. CAA Section 231
    CAA section 231(a) provides broad authority for EPA to establish 
emission standards applicable to the ``emission of any air pollutant 
from any class or classes of aircraft engines, which in the 
Administrator's judgment, causes, or contributes to, air pollution 
which may reasonably be anticipated to endanger public health or 
welfare.'' NACAA v. EPA, 489 F.3d 1221, 1229 (D.C. Cir. 2007). As with 
sections 202(a) and 213(a)(4), this provision authorizes, but does not 
require, EPA to set technology-forcing standards to the extent 
appropriate considering all the relevant factors, including noise, 
safety, cost and necessary lead time for the development and 
application of requisite technology.
    Unlike the motor vehicle and non-road programs, however, EPA does 
not directly enforce its standards regulating aircraft engine 
emissions. Under CAA section 232, the Federal Aviation Administration 
(FAA) is required to prescribe regulations to insure compliance with 
EPA's standards. Moreover, FAA has authority to regulate aviation 
fuels, under Federal Aviation

[[Page 44434]]

Act section 44714. However, under the Federal Aviation Act, the FAA 
prescribes standards for the composition or chemical or physical 
properties of an aircraft fuel or fuel additive to control or eliminate 
aircraft emissions the EPA ``decides under section 231 of the CAA 
endanger the public health or welfare[.]''
d. CAA Section 211
    Section 211(c) authorizes regulation of vehicle fuels and fuel 
additives (excluding aircraft fuel) as appropriate to protect public 
health and welfare, and section 211(o) establishes requirements for the 
addition of renewable fuels to the nation's vehicle fuel supply.\118\ 
In relevant parts, section 211(c) states that, ``[t]he Administrator 
may * * * by regulation, control or prohibit the manufacture, 
introduction into commerce, offering for sale, or sale of any fuel or 
fuel additive for use in a motor vehicle, motor vehicle engine, or 
nonroad engine or nonroad vehicle'' if, in the judgment of the 
Administrator, any fuel or fuel additive or any emission product of 
such fuel or fuel additive causes, or contributes, to air pollution or 
water pollution (including any degradation in the quality of 
groundwater) which may reasonably be anticipated to endanger the public 
health or welfare, * * *'' Similar to other CAA mobile source 
provisions, section 211(c)(1) involves an endangerment finding that 
includes considering the contribution to air pollution made by the fuel 
or fuel additive.
---------------------------------------------------------------------------

    \118\ EPA's authority to regulate fuels under CAA section 211 
does not exend to aircraft engine fuel. Instead, under the Federal 
Aviatiion Act, the FAA prescribes standads for the compositiion or 
chemical or physical properties of an aircraft fuel or additive to 
control or eliminate aircraft emissions the EPA ``decides under 
section 231 of the Clean Air Act endanger the public health or 
welfare[.]'' 49 U.S.C. 44714.
---------------------------------------------------------------------------

    The Energy Policy Act of 2005 also added section 211(o) to 
establish the volume-based Renewable Fuels Standard program. Section 
211(o) was amended by the Energy Independence and Security Act of 2007.
    Section VI.D of this notice provides more information and 
discussion about the CAA section 211 authorities.
2. EPA's Existing Mobile Source Emissions Control Program
    In this notice, EPA is examining whether and how the regulatory 
mechanisms employed under Title II to reduce conventional emissions 
could also prove effective for reducing GHG emissions. Under Title II, 
mobile source standards are technology-based, taking such factors as 
cost and lead time into consideration. Various Title II provisions 
authorize or require EPA to set standards that are technology forcing, 
such as standards for certain pollutants for heavy-duty or nonroad 
engines.\119\ Title II also provides for comprehensive regulation of 
mobile sources so that emissions of air pollutants from all categories 
of mobile sources may be addressed as needed to protect public health 
and the environment.
---------------------------------------------------------------------------

    \119\ Technology-forcing standards are based upon performance of 
technology that EPA determines will be available (considering 
technical feasibility, cost, safety, and other relevant factors) 
when the standard takes effect, as opposed to standards based upon 
technology which is already available. Technology-forcing standards 
further Congress' goal of having EPA project future advances in 
pollution control technology, rather than being limited by 
technology which already exists. NRDC v. Thomas, 805 F. 2d 410, 428 
n. 30 (D.C. Cir. 1981). Technology-forcing standards are performance 
standards and do not require the development or use of a specific 
technology.
---------------------------------------------------------------------------

    Pursuant to Title II, EPA has taken a comprehensive, integrated 
approach to mobile source emission control that has produced benefits 
well in excess of the costs of regulation. In developing the Title II 
program, the Agency's historic, initial focus was on personal vehicles 
since that category represented the largest source of mobile source 
emissions. Over time, EPA has established stringent emissions standards 
for large truck and other heavy-duty engines, nonroad engines, and 
marine and locomotive engines, as well. The Agency's initial focus on 
personal vehicles has resulted in significant control of emissions from 
these vehicles, and also led to technology transfer to the other mobile 
source categories that made possible the stringent standards for these 
other categories.
    As a result of Title II requirements, new cars and SUVs sold today 
have emissions levels of hydrocarbons, oxides of nitrogen, and carbon 
monoxide that are 98-99% lower than new vehicles sold in the 1960s, on 
a per mile basis. Similarly, standards established for heavy-duty 
highway and nonroad sources require emissions rate reductions on the 
order of 90% or more for particulate matter and oxides of nitrogen. 
Overall ambient levels of automotive-related pollutants are lower now 
than in 1970, even as economic growth and vehicle miles traveled have 
nearly tripled. These programs have resulted in millions of tons of 
pollution reduction and major reductions in pollution-related deaths 
(estimated in the tens of thousands per year) and illnesses. The net 
societal benefits of the mobile source programs are large. In its 
annual reports on federal regulations, the Office of Management and 
Budget reports that many of EPA's mobile source emissions standards 
typically have projected benefit-to-cost ratios of 5:1 to 10:1 or more. 
Follow-up studies show that long-term compliance costs to the industry 
are typically lower than the cost projected by EPA at the time of 
regulation, which result in even more favorable real world benefit-to-
cost ratios. Title II emission standards have also stimulated the 
development of a much broader set of advanced automotive technologies, 
such as on-board computers and fuel injection systems, which are at the 
core of today's automotive designs and have yielded not only lower 
emissions, but improved vehicle performance, reliability, and 
durability.
    EPA requests comment on whether and how the approach it has taken 
under Title II could effectively be employed to reduce mobile source 
emissions of GHGs. In particular, EPA seeks comment and information on 
ways to use Title II authorities that would promote development and 
transfer of GHG control technologies for and among the various mobile 
source categories. The Agency is also interested in receiving 
information on the extent to which GHG-reducing technologies developed 
for the U.S. could usefully and profitably be exported around the 
world. Finally, EPA requests comments on how the Agency could implement 
its independent obligations under the CAA in a manner to avoid 
inconsistency with NHTSA CAFE rulemakings, in keeping with the Supreme 
Court's observation in the Massachusetts decision (``there is no reason 
to think the two agencies cannot both administer their obligations yet 
avoid inconsistencies'').
3. Mobile Sources and GHGs
    The domestic transportation sector emits 28% of total U.S. GHG 
emissions based on the standard accounting methodology used by EPA in 
compiling the inventory of U.S. GHG emissions pursuant to the United 
Nations Framework Convention on Climate Change (Figure VI-1).
BILLING CODE 6560-50-P

[[Page 44435]]

[GRAPHIC] [TIFF OMITTED] TP30JY08.029

    The only economic sector with higher GHG emissions is electricity 
generation which accounts for 34% of total U.S. GHG emissions. However, 
the inventory accounting methodology attributes to other sectors two 
sources of emissions that EPA has the authority to regulate under Title 
II of the CAA. First, the methodology includes upstream transportation 
fuel emissions (associated with extraction, shipping, refining, and 
distribution, some of which occur outside of the U.S.) in the emissions 
of the industry sector, not the transportation sector. However, 
reducing transportation fuel consumption would automatically and 
proportionally reduce upstream transportation fuel-related GHG 
emissions as well. Second, nonroad mobile sources (such as 
construction, farm, and lawn and garden equipment) are also included in 
the industry sector contribution. All of these emissions can be 
addressed under CAA Title II authority, at least with respect to 
domestic usage. Including these upstream transportation fuel (some of 
which occur outside of U.S. boundaries) and nonroad equipment GHG 
emissions in the mobile sources inventory would raise the contribution 
from mobile sources and the fuels utilized by mobile sources to 
approximately 36% of total U.S. GHG emissions. Since, based on 2004 
data, the U.S. emits about 23% of global GHG emissions, under the 
traditional accounting methodology the U.S. transportation sector 
contributes about 6% of the total global inventory. If upstream 
transportation fuel emissions and nonroad equipment emissions are also 
included, U.S. mobile sources are responsible for about 8% of total 
global GHG emissions.
    Personal vehicles (cars, sport utility vehicles, minivans, and 
smaller pickup trucks) emit 54% of total U.S. transportation sector GHG 
emissions (including nonroad mobile sources), with heavy-duty vehicles 
the second largest contributor at 18%, aviation at 11%, nonroad sources 
at 8%, marine at 5%, rail at 3%, and pipelines at 1% (Figure VI-2). 
CO2 is responsible for about 95% of transportation GHG 
emissions, with air conditioner refrigerant HFCs accounting for 3%, 
vehicle tailpipe nitrous oxide emissions for 2%, and vehicle tailpipe 
methane emissions for less than 1% (Figure VI-3).

[[Page 44436]]

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[GRAPHIC] [TIFF OMITTED] TP30JY08.031

    As noted previously, global climate change is a long-term problem. 
Climate experts such as the IPCC often use 2050 as a key reference 
point for future projections. Long-term projections of U.S. mobile 
source GHG emissions show that there is likely to be a major increase 
in transportation GHG emissions in the future.
    Prior to the passage of EISA, U.S. transportation GHG emissions 
(including upstream fuel emissions) were projected to grow 
significantly, from about 2800 million metric tons in 2005 to about 
4800 million metric tons in 2050 (see Figure VI-4, top curve). The fuel 
economy and renewable fuels provisions of EISA (Figure VI.A.2.-4, 
second curve from top) provide significant near-term mobile source GHG 
emissions reductions relative to the non-EISA baseline case. However, 
addressing climate change requires setting long-term goals. President 
Bush has proposed a new goal of stopping the growth of GHG emissions by 
2025, and the IPCC has modeled several long-term climate mitigation 
targets for 2050.

[[Page 44437]]

    Using Title II authority, mobile sources could achieve additional 
GHG emission reductions based on a variety of criteria including the 
amount of reduction needed, technological feasibility and cost 
effectiveness. While EISA's fuel economy and renewable fuel 
requirements will contribute to mobile source GHG emission reductions, 
its fuel economy standards affect only CO2 emissions and do 
not apply to the full range of mobile source categories. EISA also 
specifies that fuel economy standards be set for no more than five 
years at a time, effectively limiting the extent to which those 
standards can take into account advancing technologies. Moreover, its 
renewable fuel provisions are limited in the extent to which they 
provide for GHG emission reductions, although EISA does mandate the use 
of renewable fuels that meet different lifecycle GHG emission reduction 
requirements.
    Under Title II, EPA has broad authority to potentially address all 
GHGs from all categories of mobile sources. In addition, Title II does 
not restrict EPA to specific timeframes for action. If circumstances 
warrant, EPA could set longer term standards and promote technological 
advances by basing standards on the performance of technologies not yet 
available but which are projected to be available at the time the 
standard takes effect. Title II also provides authority to potentially 
require GHG emission reductions from transportation fuels. 
Consequently, the CAA authorizes EPA to consider what GHG emissions 
reductions might be available and appropriate to require from the 
mobile source sector, consistent with the Act.
    EPA has not determined what level of GHG emission reduction would 
be appropriate from the mobile source sector in the event a positive 
endangerment finding is made, although this ANPR includes some 
discussion of possible reductions. Any such determination is 
necessarily the province of future rulemaking activity. Without 
prejudging this important issue, and for illustrative purposes only, 
the final three curves in Figure VI-4 illustrate the additional 
reductions mobile sources would have to achieve if mobile sources were 
to make a proportional contribution to meeting the President's climate 
goal, the IPCC 450 CO2 ppm stabilization scenario, and an 
economy-wide GHG emissions cap based on a 70% reduction in 2005 
emissions by 2050.\120\ As the figure illustrates, EISA provides about 
25%, 15% and 10% of the transportation GHG emissions reductions that 
would be needed for mobile sources to make a proportional contribution 
to meeting the President's climate goal by 2050 (Figure VI-4, third 
curve), the IPCC 450 CO2 ppm stabilization scenario in 2050 
(Figure VI-4, fourth curve), and a 70% reduction in 2005 levels in 2050 
(Figure VI-4, bottom curve), respectively.\121\ These curves shed light 
on the possible additional role the transportation sector could play in 
achieving reductions, but do not address whether such reductions would 
be cost effective compared to other sectors. Title II regulation of GHG 
emissions could conceivably achieve greater emissions reductions so 
that mobile sources would make a larger contribution to meeting these 
targets. EPA requests comment on the usefulness of the information 
provided in Figure VI-4 and on approaches for determining what 
additional mobile source GHG emissions reductions would be appropriate. 
As described later in this section, our assessment of available and 
developing mobile source technologies for reducing GHG emissions 
indicates that mobile sources could feasibly achieve significant 
additional reductions.
---------------------------------------------------------------------------

    \120\ Prior to the passage of EISA, an EPA analysis projected 
that, absent additional regulatory approaches, transportation would 
provide about one-tenth of the GHG emission reductions that would be 
required to comply with an emissions cap based on a 70% reduction 
from 2005 levels in 2050, even though transportation is responsible 
for 28% of the official U.S. GHG emissions inventory.
    \121\ Calculation of the GHG emission reductions that EISA's 
fuel economy provisions will achieve include standards that result 
in an industry-wide fleet average fuel economy of 35 miles per 
gallon by 2020.

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[[Page 44438]]

[GRAPHIC] [TIFF OMITTED] TP30JY08.032

4. Potential Approaches for Using Clean Air Act Title II To Reduce 
Mobile Source GHG Emissions
    The regulatory approach and principles that guided development of 
our current mobile source emissions control program may prove useful in 
considering a possible mobile source GHG emissions control strategy 
under Title II of the CAA. As explained above, under Title II, EPA 
could potentially apply its historical approach for regulating 
traditional tailpipe emissions to long-term mobile source GHG emissions 
control, with the aim of providing strong incentives for technological 
innovation. The Agency invites public comment on the principles and 
underlying legal authority it has applied in the past and other 
possible principles for establishing GHG emissions standards under 
Title II, including--
     Coverage of all key vehicle, engine, and equipment sub-
sectors in the entire transportation sector so that GHG emission 
standards are set not only for cars and light trucks, but for heavy-
duty vehicles, non-road engines and equipment, including locomotive and 
marine engines, and aircraft as well. This broader regulatory coverage 
would provide more comprehensive mobile source GHG emissions reductions 
and market incentives to seek the most cost-effective solutions within 
the sector.
     Coverage of all GHGs emitted by the transportation sector 
by setting emissions standards that address every GHG for which the 
Agency makes the appropriate cause or contribute endangerment finding.
     Inclusion of transportation fuels in the program by 
considering vehicles and fuels as a system, rather than as isolated 
components.
     Addressing transportation fuels by setting GHG standards 
that account for the complete lifecycle of GHG emissions, including 
upstream GHG emissions associated with transportation fuel 
production.\122\
---------------------------------------------------------------------------

    \122\ EPA invites comment on how such an approach would interact 
with GHG regulations under other parts of the CAA or with a possible 
economy-wide approach.
---------------------------------------------------------------------------

     Identifying long-term U.S. mobile source GHG emissions 
targets based on scientific assessments of environmental need, and 
basing the stringency of standards for individual mobile source sub-
sectors on technology feasibility, cost and fuel savings, taking into 
account the relationship of mobile source reductions to reductions in 
other sectors under any economy-wide program.
     Allowing for staggered rulemakings for various sub-sectors 
and fuels, rather than regulating all mobile source entities at one 
time. EPA seeks comment on its CAA authority in this area, as well as 
on an approach to base the timing of the staggered rulemakings on 
factors such as the contribution of the mobile source sub-sector to the 
overall GHG emissions inventory and the lead time necessary for the 
commercialization of innovative technology.
     Use of Title II statutory authority to adopt technology-
forcing standards, when appropriate, in conjunction with periodic 
reviews of technology and other key analytical inputs as a ``reality 
check'' to determine whether mid-course corrections in GHG emissions 
standards are needed.
     Use of our statutory authority to increase the rate of 
emissions reduction targets over time while allowing sufficient time 
for entrepreneurs and engineers to develop cost-effective technological 
solutions and minimize the risk of early retirement of capital 
investments.
     Establishment of a flexible compliance program that would 
allow averaging, banking and borrowing, and credit trading. Existing 
Title II programs generally allow credit trading only within individual 
mobile source sub-sector programs. EPA solicits comments on whether the 
global nature of climate

[[Page 44439]]

change supports allowing credit trading between obligated parties 
across all mobile source sub-sectors and whether this would allow the 
sector as a whole to seek the lowest-cost solutions.
     Design of enforcement programs to ensure real world 
emissions reductions over the life of vehicles, engines, and equipment.
     Providing sufficient flexibility so that mobile source GHG 
emissions control programs can complement and harmonize with existing 
regulatory programs for certain pollutants.
    In developing potential approaches to design of a Title II program, 
it is critical for EPA to understand the full ramifications of advanced 
technologies. Accordingly, EPA seeks public comment on potential GHG 
reducing technologies and their impacts, including availability, 
practicality, emissions reduction potential, cost, performance, 
reliability, and durability. EPA also seeks comment on how best to 
balance factors such as the need to send effective long-term signals 
that stimulate technology innovation, the imprecision of predictions of 
future technology innovation, and the importance of lead time to allow 
orderly investment cycles.
    While advanced technology for reducing GHGs would likely increase 
the initial cost of vehicles and equipment to consumers and businesses, 
it would also increase efficiency and reduce fuel costs. In many cases, 
there is the potential for the efficiency advantages of low-GHG 
technologies to offset or more than offset the higher initial 
technology cost over the lifetime of the vehicle or equipment. EPA 
recognizes that not all consumers may understand or value changes to 
vehicles that reduce GHG emissions by increasing fuel efficiency, even 
though these changes lower fuel costs (see discussion in Section 
VI.C.2). One analytic issue that has policy implications is the most 
appropriate method for treating future consumer fuel savings when 
calculating cost effectiveness for a mobile sources GHG control 
strategy. Some analyses that consider the decisions made by automakers 
in isolation from the market and consumers exclude future fuel savings 
entirely. A second approach, used in models trying to predict future 
consumer behavior based on past experience, counts only those future 
fuel savings which consumers implicitly value in their new vehicle 
purchase decisions. A third method, reflecting a societal-wide 
accounting of benefits, includes all future fuel savings over vehicle 
lifetimes, whether overtly valued by new vehicle purchasers or not. EPA 
seeks comments on what could be done under Title II, or under any new 
legislation to complement Title II, to establish economic incentives 
that send long-term market signals to consumers and manufacturers that 
would help spark development of and investment in the necessary 
technology innovation.
    An effective mobile source emissions compliance and enforcement 
program is fundamental to ensuring that the environmental benefits of 
the emission standards are achieved. We request comments on all aspects 
of the compliance approaches discussed in this notice and any other 
approaches to a compliance program for mobile source GHG emissions 
control. Topics to address could include, but are not limited to, 
methods for classifying, grouping and testing vehicles for 
certification, useful life and component durability demonstration, in-
use testing, warranty and tampering, prohibited acts, and flexibilities 
for manufacturers.
    Historically, EPA's programs to reduce criteria pollutants have 
typically included provisions to allow the generation, averaging, 
banking, and trading of emission credits within a vehicle or engine 
category. For example, there are averaging, banking, and trading (ABT) 
programs for light-duty vehicles, heavy-duty engines, and nonroad 
engines, among others. In these programs, manufacturers with vehicles 
or engines designed to over-comply with the standards can generate 
credits. These credits can then be used by that manufacturer or sold to 
other manufacturers in order to allow similar vehicles or engines with 
emissions above the standards to be certified and sold.
    However, for a variety of reasons, we have in most cases not 
provided for trading of emission credits from one mobile source 
category to another. For example, credits generated in the light-duty 
vehicle program cannot be used for heavy-duty engines to comply, or 
credits generated for lawn and garden equipment cannot be used for 
larger gasoline engines to comply. These limitations are generally 
grounded in characteristics of required pollutants that do not 
necessarily apply in the case of GHG emissions. For instance, in the 
case of hydrocarbon emissions, because our programs are meant, in part, 
to reduce the pollutant in areas where it most contributes to ozone 
formation, we have not allowed farm tractors in rural areas to generate 
credits that would allow urban passenger cars to be sold with little or 
no emission control. Similarly, for problems like carbon monoxide ``hot 
spots'' or direct, personal exposure to diesel PM, it has been 
important to ensure a certain minimum degree of control from each 
vehicle or engine, rather than allowing the very localized benefits to 
be ``traded away.''
    Given the global nature of the major GHGs, we request comment on 
whether new provisions could be used to allow broad trading of 
CO2-equivalent emission credits among the full range of 
mobile sources, and if so, how they could be designed, including 
highway and nonroad vehicles and engines as well as mobile source 
fuels.
    EPA has also considered the potential of GHG emissions leakage to 
other domestic economic sectors, or to other countries, should EPA 
adopt Title II standards for motor vehicle GHG emissions and GHG 
emissions from transportation fuels. As discussed in more detail later 
in this section, there are transportation fuels (such as grid 
electricity) that do not result in tailpipe GHG emissions, but that do 
result in GHG emissions when the fuel is produced. Greater use of such 
fuels in transportation would reduce GHG emissions covered by Title II, 
but would increase GHG emissions covered by Title I, requiring 
coordination among the CAA programs to ensure the desired level of 
overall GHG control. In addition, GHG emissions from potential land use 
changes caused by transportation fuel changes could cause GHG emissions 
leakage unless accounted for in any transportation fuels GHG program. 
Finally, since transportation fuels can be fungible commodities, if 
other countries do not adopt similar GHG control programs, it is 
possible that lower-lifecycle GHG fuels will be concentrated in the 
U.S. market, while higher-lifecycle GHG fuels will be concentrated in 
unregulated markets. For example, sugar cane-based ethanol, if it were 
determined to have more favorable upstream GHG emissions, could shift 
from the Brazilian to the U.S. market, and corn-based ethanol, if it 
were determined to have less favorable upstream GHG emissions, could 
shift from the U.S. to the Brazilian market. This shifting could ease 
compliance with U.S. transportation fuel GHG regulations, but could 
actually increase global GHG emissions due to the GHG emissions that 
would result from transporting both types of ethanol fuels over greater 
distances. EPA seeks comments on all possible GHG emissions leakage 
issues associated with mobile source GHG regulation, and in particular 
on whether the theoretical concern with fungible transportation fuels 
is likely to be realized.
    While the preceding discussion has focused on using the existing 
CAA Title

[[Page 44440]]

II model for regulating mobile source GHG emissions, there are other 
alternative regulatory approaches on which EPA invites comments. In 
particular, long-term mobile source GHG emissions reductions from 
vehicles and equipment might be achieved by establishing GHG emissions 
caps on vehicle, engine, and/or equipment manufacturers to the extent 
authorized by the CAA. EPA's existing regulatory program uses 
performance standards that are rate-based, meaning that they require 
manufacturers to meet a certain gram/mile average for their fleet, as 
in the Tier 2 light-duty vehicle program. Manufacturers produce 
vehicles with varying rates of emissions performance, and through 
averaging, banking, and trading demonstrate compliance with this 
performance standard on a sales-weighted average basis. While a 
manufacturer must take its fleet mix of higher-emitting and lower-
emitting models into account in demonstrating compliance, the sales-
weighted average is independent of overall sales as long as the fleet 
mix does not change. As a result, a manufacturer's fleet may emit more 
or less total pollution depending on its total sales, so long as the 
sales-weighted average emissions of its vehicles do not exceed the 
standard.
    In a cap-and-trade program, the standard set by EPA would not be an 
average, sales-weighted rate of emissions, but rather a cap on overall 
emissions from a manufacturer's production. Under such a program, the 
emissions attributable to a manufacturer's fleet could not grow with 
sales unless the manufacturer obtained (e.g., through trading) 
additional allowances to cover higher emissions. Presumably, EPA could 
assign a VMT or usage value to be used by manufacturers, and 
manufacturers would demonstrate compliance by combining the rate of 
performance of their vehicles, their sales volume, and the assigned VMT 
or usage value to determine overall emissions.
    EPA could set standards under an emissions cap-and-trade program by 
assessing the same kind of factors as we have in the past: Availability 
and effectiveness of technology, cost, safety, energy factors, etc. 
Setting an appropriate emissions cap would be more complex, and EPA 
would need to demonstrate that the cap is appropriate, given that 
changes in sales levels (both industry-wide and for individual 
manufacturers) must be accounted for in the standard-setting process. 
An emissions cap approach also raises difficult issues of how allowable 
emissions under the cap would be allocated among the manufacturers, 
including new entrants.
    EPA invites comment on all issues involving this emissions cap-and-
trade approach, including comment on relevant technical and policy 
issues, and on EPA's authority to adopt such an approach under Title 
II.
    A third possible model for regulating mobile source GHG emissions 
would combine elements of these approaches. This type of hybrid 
approach would include, as one element, either rate-based GHG emissions 
performance standards similar to the existing mobile source program for 
conventional pollutants or GHG emissions caps for key vehicle, engine, 
and/or equipment manufacturers, both of which would be promulgated 
under Title II of the CAA. The second element of this hybrid approach 
would be an upstream emissions cap on fuel refiners for all life-cycle 
GHG emissions associated with transportation fuels, including both 
upstream fuel production GHG emissions and downstream vehicle GHG 
emissions, to the extent authorized under the CAA or future climate 
change legislation. For a discussion of issues associated with 
including direct mobile source obligations in combination with an 
economy-wide approach, see section III.F.3.
    An important interrelationship between stationary sources and 
mobile sources would develop if grid electricity becomes a more 
prevalent transportation fuel in the future. There is considerable 
interest, both by consumers and automakers, in the possible development 
and commercialization of plug-in hybrid electric vehicles (PHEVs) that 
would use electricity from the grid as one of two sources of energy for 
vehicle propulsion. Use of grid electricity would yield zero vehicle 
tailpipe GHG emissions, providing automakers with a major incentive to 
consider PHEVs, which may be appropriate given that vehicle cost is the 
single biggest market barrier to PHEV commercialization. But it would 
also result in a net increase in demand for electricity, which could 
add to the challenge of reducing GHG emissions from the power sector. 
Any evaluation of the overall merits of using grid electricity as a 
transportation fuel could not be done in isolation, but would require a 
coordinated assessment and approach involving both mobile sources under 
CAA Title II and stationary sources under CAA Title I. Linking efforts 
under Titles I and II would allow for needed coordination regarding any 
type of future transportation fuel that would have zero vehicle 
tailpipe GHG emissions but significant fuel production GHG emissions.
    EPA seeks comment on all aspects, including the advantages and 
disadvantages, of using Title II regulations to complement an economy-
wide cap-and-trade GHG emissions program.
    EPA also seeks public comment on the available authority for, and 
the merits of, allowing credit trading between mobile sources and non-
mobile source sectors. One of the potential limitations of allowing 
credit trading only within the transportation sector is that it would 
not permit firms to take advantage of emission reduction opportunities 
available elsewhere in the economy. In particular, EPA requests comment 
on the advantages and disadvantages of allowing trading across sectors, 
and how to ensure that credit trading would have environmental 
integrity and that credits are real and permanent.
    Finally, EPA seeks public comment on two remaining issues: (1) How 
a CAA Title II mobile source GHG emissions control program and NHTSA's 
corporate average fuel economy program for cars and light-duty trucks 
could best be coordinated; and (2) whether and how Title II, or other 
provisions in the CAA, could be used to promote lower vehicle miles 
traveled and equipment activity.

B. On-Highway Mobile Sources

1. Passenger Cars and Light-Duty Trucks
    In this section, we discuss and request comment on several 
potential approaches for establishing light-duty vehicle GHG emission 
standards under section 202(a)(1). These approaches build off of, to 
varying extents, the analysis EPA undertook during 2007 to support the 
development of a near-term control program for GHG emissions for 
passenger cars and light duty trucks under the authorities of Title II 
of the CAA.
    We begin this section with a discussion of one potential approach 
for establishing GHG standards under section 202(a) of the CAA that 
reflects EPA's historical approach used for traditional pollutants, 
including the principles EPA has used in the past under Title II. This 
approach focuses on long-term standard setting based on the technology-
forcing authority provided under Title II. Next we present and discuss 
the results of alternative approaches to standard-setting which EPA 
considered during 2007 in the work performed under EO 13432. This 
alternative approach is based on setting near-term standards based 
primarily on technology already in the market today.

[[Page 44441]]

This is followed by a discussion of the wide range of technologies 
available today and technologies that we project will be available in 
the future to reduce GHG emissions from light-duty vehicles. We next 
include a discussion of a potential approach to reduce HFC, methane, 
N2O, and vehicle air conditioning-related CO2 
emissions. We conclude with a discussion of the key implementation 
issues EPA has considered for the development of a potential light-duty 
vehicle GHG control program.
    Our work to date indicates that there are significant reductions of 
GHG emissions that could be achieved for passenger cars and light-duty 
trucks up to 2020 and beyond that would result in large net monetized 
benefits to society. For example, taking into account specific vehicle 
technologies that are likely to be available in that time period and 
other factors relevant to motor vehicle standard-setting under the CAA, 
EPA's analysis suggests that substantial reductions can occur where the 
cost-per-ton of GHG reduced is more than offset by the value of fuel 
savings, and the net present value to society could be on the order of 
$340 to $830 billion without considering benefits of GHG reductions 
(see section VI.B.1.b).\123\
---------------------------------------------------------------------------

    \123\ These estimates do not account for the future CAFE 
standards that will be established under EISA.
---------------------------------------------------------------------------

a. Traditional Approach to Setting Light-Duty Vehicle GHG Standards
    In this section we discuss and request comment on employing EPA's 
traditional approach to setting mobile source emissions standards to 
develop standards aimed at ensuring continued, long-term, technology-
based GHG reductions from light-duty vehicles, in light of the unique 
properties of GHG emissions. We also request comment on how EPA could 
otherwise use its CAA Title II authorities to provide incentives to the 
market to accelerate the development and introduction of ultra clean, 
low GHG emissions technologies.
    Based on our work to date, we expect that such an approach could 
result in standards for the 2020 to 2025 time frame that reflect a 
majority of the new light-duty fleet achieving emission reductions 
based on what could be accomplished by many of the most advanced 
technologies we know of today (e.g., hybrids, diesels, plug-in hybrid 
vehicles, full electric vehicles, and fuel cell vehicles, all with 
significant use of light-weight materials). Our analysis (presented in 
section VI.B.1.b) indicates that standards below 250 g/mile 
CO2 (above 35 mpg) could be achievable in this time frame, 
and the net benefit to society could be in excess of $800 billion. 
These estimates, however, do not account for future CAFE standards that 
will be established under EISA.
    EPA's historical approach for setting air pollutant standards for 
mobile sources has been to assess the capabilities of pollution control 
technologies, including advanced control technologies; whether 
reductions associated with these technologies are feasible considering 
cost, safety, energy, and other relevant factors; and the benefits of 
these controls in light of overall public health and environmental 
goals. Public health and environmental goals provide the important 
context in which this technology-driven process occurs. In many cases 
in the past, the goals have involved the need for emissions reductions 
to attain and maintain NAAQS.
    As mentioned previously, EPA has utilized the CAA to establish 
mobile source programs which apply progressively more stringent 
standards over many years, often with substantial lead time to maximize 
the potential for technology innovation, and where appropriate, we have 
included technology reviews along the way to allow for ``mid-course 
corrections,'' if needed. We have also provided incentives for 
manufacturers to develop and introduce low emission technologies more 
quickly than required by the standards. For example, in our most recent 
highway heavy-duty engine standards for PM and NOX, we 
established technology-forcing standards via a rulemaking completed in 
2000 which provided six years of lead-time for the start of the program 
and nearly ten years of lead-time for the completion of the phase-in of 
the standards. In addition, EPA performed periodic technology reviews 
to ensure industry was on target to comply with the new standards, and 
these reviews allowed EPA to adjust the program if necessary. This same 
program provided early incentive emission credits for manufacturers who 
introduced products complying with the standards well in advance of the 
program requirements.
    Consistent with the CAA and with our existing mobile source 
programs, we request comment on using the following traditional 
principles for development of long-term GHG standards for light-duty 
vehicles: Technology-forcing standards, sufficient lead-time (including 
phase-in of standards reflecting use of more advanced technologies), 
continual improvements in the rate of emissions reduction, appropriate 
consideration of the costs and benefits of new standards, and the use 
of flexible mechanisms such as banking and credit trading (between 
sources within or outside of this sector). EPA's goal would be to 
determine the appropriate level of GHG emission standards to require by 
an appropriate point in the future. We would establish the future time 
frame in light of the needs of the program. EPA would evaluate a broad 
range of technologies in order to determine what is feasible and 
appropriate in the time frame chosen, when considering the fleet as a 
whole. EPA would analyze the costs and reductions associated with the 
technologies, and compare those to the benefits from and the need for 
such reductions. We would determine what reductions are appropriate to 
require in that time frame, assuming industry started now, and then 
determine what appropriate interim standards should be set to most 
effectively move to this long-term result.
    In developing long-term standards, we would consider known and 
projected technologies which in some cases are in the market in limited 
production or which may not yet be in the market but which we project 
can be, provided sufficient lead-time. We would consider how broadly 
and how rapidly specific technologies could be applied across the 
industry. If appropriate, EPA could include technology reviews during 
the implementation of new standards to review the industry's progress 
and to make adjustments as necessary. EPA would evaluate the amount of 
lead-time necessary and if appropriate the phase-in period for long-
term standards. To the extent that future standards may result in 
significant increases in advanced technologies such as plug-in electric 
hybrid or full electric vehicles, we would consider how a Title II 
program might interact with a potential Title I program to ensure that 
reductions in GHG emissions due to a decrease in gasoline consumption 
are not off-set by increases in GHG emissions from the electric utility 
sector. We would also consider the need for flexibilities and 
incentives to promote technology innovation and provide incentives for 
advanced technologies to be developed and brought to the market. We 
would consider the need for orderly manufacturer production planning to 
ensure that capital investments are wisely used and not stranded. 
Finally, EPA would evaluate the near and long-term costs and benefits 
of future standards in order to ensure the appropriate relationship 
between benefits and costs, e.g. ensuring that

[[Page 44442]]

benefits of any future standards exceed the costs. This could lead to 
standard phase-in schedules significantly different from the two 
approaches contained in our Light-duty Vehicle Technical Support 
Document analysis (available in the docket for this advance notice); 
which under one approach was the same incremental increase in 
stringency each year (the 4% per year approach), and for the second 
approach lead to large increases in stringency the first several years 
followed by small changes in the later years (the model-optimized 
approach).
    One critical element in this approach is the time frame over which 
we should consider new GHG standards for light-duty vehicles. We 
request comment on the advantages and disadvantages of establishing 
standards for the 2020 or 2025 time frame, which is roughly consistent 
with EPA's traditional approach to setting standards while allowing a 
sufficient time period for investment and technological change, and 
even longer. There are two major factors which may support a long-term 
approach. First, addressing climate change will require on-going 
reductions from the transportation sector for the foreseeable future. 
Thus, establishing short-term goals will not provide the long-term road 
map which the environmental problem requires. Second, providing a long-
term road map could have substantial benefits for the private sector. 
The automotive industry itself is very capital intensive--the costs for 
developing and producing a major vehicle model is on the order of 
several billion dollars. A manufacturer making a major investment to 
build a new engine, transmission or vehicle production plant expects to 
continue to use such a facility without major additional investments 
for at least 15 years, if not more. A regulatory approach which 
provides a long-term road map could allow the automotive industry to 
plan their future investments in an orderly manner and minimize the 
potential for stranded capital investment, thus helping to ensure the 
most efficient use of societal resources. A long-term regulatory 
program could also provide industry with the regulatory certainty 
necessary to stimulate technology development, and help ensure that the 
billions of dollars invested in technology research and development are 
focused on long-term needs, rather than on short-term targets alone.
    There could also be disadvantages to establishing long-term 
standards. For example, uncertainties in the original analysis 
underlying the long-term standards could result in overly conservative 
or optimistic assumptions about emission reductions could and should be 
accomplished. Long-terms standards could also reduce flexibility to 
respond to more immediate market changes or other unforeseen events. 
EPA has tools, such as technology reviews, that could help reduce these 
risks of long-term standards. We request comment on the advantages and 
disadvantages of a long-term approach to standard-setting, and any 
issues it might raise for integration with an economy-wide approach to 
emission reductions.
    More generally, EPA requests comment on the issues discussed in 
this section, and specifically the appropriateness of a light-duty 
vehicle GHG regulatory approach in which EPA would identify long-term 
emissions targets (e.g., the 2020-2025 time frame or longer) based on 
scientific assessments of environmental need, and developing standards 
based on a technology-forcing approach with appropriate consideration 
for lead-time, costs and societal benefits.
b. 2007 Approach to Setting Light-Duty Vehicle Emission Standards
i. CAA and EPCA Authority; Passage of EISA
    As indicated above in section VI.A.2, CAA section 202(a) provides 
broad authority to regulate light-duty vehicles. Standards which EPA 
promulgates under this authority are technology-based and applicable 
for the useful life of a vehicle. EPA has discretion to consider and 
weigh various additional factors, including the cost of compliance, 
safety and other impacts on consumers, and energy impacts.
    NHTSA authority to set CAFE standards derives from the Energy 
Policy and Conservation Act (42 U.S.C. section 6201 et seq.) as amended 
by EISA. This statutory authority, enacted in December 2007, directs 
NHTSA to consider four factors in determining maximum feasible fuel 
economy standards--technological feasibility, economic practicability, 
the effect of other standards issued by the government on fuel economy, 
and the need of the nation to conserve energy. NHTSA may also take into 
account other relevant considerations such as safety.
    EISA amends NHTSA's fuel economy standard-setting authority in 
several ways. Specifically it replaces the statutory default standard 
of 27.5 miles per gallon for passenger cars with a mandate to establish 
separate passenger cars and light truck standards annually beginning in 
model year 2011 to reflect the maximum feasible level. It also requires 
that standards for model years 2011-2020 be set sufficiently high to 
ensure that the average fuel economy of the combined industry-wide 
fleet of all new passenger cars and light trucks sold in the U.S. 
during MY 2020 is at least 35 miles per gallon. In addition, EISA 
provides that fuel economy standards for no more than five model years 
be established in a single rulemaking, and mandated the reform of CAFE 
standards for passenger cars by requiring that all CAFE standards be 
based on one or more vehicle attributes, among other changes.\124\ EISA 
also directs NHTSA to consult with EPA and the Department of Energy on 
its new CAFE regulations.
---------------------------------------------------------------------------

    \124\ For a full discussion of EISA requirements and NHTSA 
interpretation of its statutory authority please see 73 FR 24352 
(May 2, 2008).
---------------------------------------------------------------------------

    Pursuant to EISA's amendments to EPCA, NHTSA recently issued a 
notice of proposed rulemaking for new, more stringent CAFE standards 
for model years 2011-2015 for both passenger cars and light-duty 
trucks. 73 FR 24352 (May 2, 2008).
    Prior to EISA's enactment, EPA and NHTSA had coordinated under EO 
13432 on the development of CAA rules that would achieve large GHG 
emission reductions and CAFE rules that would achieve large 
improvements in fuel economy. As discussed later in this section, there 
are important differences in the two agencies' relevant statutory 
authorities. EPA nevertheless believes that it is important that any 
future GHG regulations under CAA Title II and future fuel economy 
regulations under NHTSA's statutory authority be designed to ensure 
that an automaker's actions to comply with CAA standards not interfere 
with or impede actions taken for meeting fuel economy standards and 
vice versa. The goals of oil savings and GHG emissions reductions are 
often closely correlated, but they are not the same. As the Supreme 
Court pointed out in its Massachusetts decision, ``[EPA's] statutory 
obligation is wholly independent of DOT's mandate to promote energy 
efficiency'', and ``[t]he two obligations may overlap, but there is no 
reason to think the two agencies cannot both administer their 
obligations and yet avoid inconsistency.'' It is thus important for EPA 
and NHTSA to maximize coordination between their programs so that both 
the appropriate degree of GHG emissions reductions and oil savings are 
cost-effectively achieved, given the agencies' respective statutory 
authorities. EPA asks for comment on how EPA's and NHTSA's respective 
statutory authorities can best be

[[Page 44443]]

coordinated under all of the alternatives presented in this section so 
that inconsistency can be avoided.
ii. 2007 Approach
    In this section, we present an overview of two alternative 
approaches for setting potential light-duty vehicle GHG standards based 
on our work during 2007 under EO 13432. As noted previously, in 
response to Massachusetts v. EPA and as required by EO 13432, prior to 
EISA's passage, we coordinated with NHTSA and the Department of Energy 
in developing approaches and options for a comprehensive near-term 
program under the CAA to reduce GHG emissions from cars and light-duty 
trucks.\125\ Results from this effort are discussed below and in a 
Technical Support Document, ``Evaluating Potential GHG Reduction 
Programs for Light Vehicles'' (referred to as the ``Light-duty Vehicle 
TSD'' in the remainder of this notice).
---------------------------------------------------------------------------

    \125\ E.O. 13432 called on the agencies to, ``undertake such 
regulatory action, to the maximum extent permitted by law and 
determined by the head of the agency to be practicable, jointly with 
other agencies.''
---------------------------------------------------------------------------

    The Light-duty Vehicle TSD represents EPA's assessment during 2007 
of how a light-duty vehicle program for GHG emissions reduction under 
the CAA might be designed and implemented in keeping with program 
parameters (e.g., time frame, program structure, and analytical tools) 
developed with NHTSA prior to enactment of EISA. In addition, the 
Light-duty Vehicle TSD assesses the magnitude of the contribution of 
light-duty vehicles to U.S. GHG emissions. It also addresses both 
tailpipe CO2 emissions as measured by EPA tests used for 
purposes of determining compliance with CAFE standards, and control of 
other vehicular GHG emissions. These other emissions are not accounted 
for if the regulatory focus is solely on CO2, and involve 
greenhouse gases that have higher global warming potentials than 
CO2. These emissions, as well as air-conditioning-related 
CO2, are not measured by the existing EPA test procedure for 
determining compliance with CAFE standards, so that there is no overlap 
with control of these emissions and CAFE standards if these emissions 
are controlled under the CAA. As described in the section VI.B.1.d of 
this advance notice, these emissions account for 10 percent of light-
duty vehicle GHG emissions on a CO2 equivalent basis. They 
include emissions of CO2 from air conditioning use and 
emissions of HFCs from air conditioning system leaks. Technologies 
exist which can reduce these emissions on the order of 40 to 75% (for 
air conditioning efficiency improvements and HFC leakage control, 
respectively), at an initial cost to the consumer of less than $110. 
This initial cost would be more than offset by the reduced maintenance 
and fuel savings due to the new technology over the life of the 
vehicle. We also considered standards which would prevent future 
increases in N2O and methane.
    Based on our work in 2007 pursuant to Executive Order 13432, EPA 
developed two different analytical approaches which could be pursued 
under the CAA for establishing light-duty vehicle CO2 
standards. Both are attribute-based approaches, using vehicle footprint 
(correlating roughly to vehicle size) as the attribute. Under either 
approach, a CO2-footprint continuous function curve is 
defined that establishes different CO2 emission targets for 
each unique vehicle footprint. In general, the larger the vehicle 
footprint, the higher (less stringent) the corresponding vehicle 
CO2 emission target will be. Each manufacturer would have a 
different overall fleet average CO2 emissions standard 
depending on the distribution of footprint values for the vehicles it 
sells. See Section VI.B.1.d and the Light-duty Vehicle TSD of this 
Advance Notice for additional discussion of attribute-based standards 
and other approaches (e.g., a non-attribute, or universal standard).
    One approach was based on a fixed percentage reduction per year in 
CO2 emissions. We examined a 4% per year reduction in CO2 emissions, 
reflecting the projected reductions envisioned by the President in his 
20-in-10 plan in the 2007 State of the Union address and subsequent 
legislative proposals . The other approach identified CO2 standards 
which an engineering optimization model projects as resulting in 
maximum net benefits for society (hereafter referred to as the ``model-
optimized'' approach). That approach uses a computer model developed by 
the Department of Transportation Volpe Center called the CAFE Effects 
and Compliance Model (the ``Volpe Model''). The Volpe Model was 
designed by DOT as an analytical tool which could evaluate potential 
changes in the stringency and structure of the CAFE program, and was 
first used in DOT's 2006 rulemaking establishing CAFE standards for 
model years 2008-2011 light-trucks.126 127
---------------------------------------------------------------------------

    \126\ See 66 FR 17566--Average Fuel Economy Standards for Light 
Trucks Model Years 2008-2011.
    \127\ See ``CAFE Compliance and Effects Modeling System 
Documentation, Draft, 1/26/07'' published by DOT, a copy of which is 
available in the docket for this Advanced Notice.
---------------------------------------------------------------------------

    Using the fixed percentage reduction approach, projections 
regarding technology feasibility, technology effectiveness, and lead-
time are critical as these are the most important factors in 
determining whether and how the emission reductions required by a 
future standard would be achieved. When using the model-optimized 
approach, a larger set of inputs are critical, as each of these inputs 
can have a significant impact in the model's projections as to the 
future standard. These inputs include technology costs and 
effectiveness, lead-time, appropriate discount rates, future fuel 
prices, and the valuation of a number of externalities (e.g., criteria 
air pollution improvements, GHG emission reductions, and energy 
security). Although all of these factors are relevant under either 
approach, there are major differences in the way this information is 
used in each approach to develop and evaluate appropriate standards.
    EPA believes both of these approaches for establishing fleet-wide 
average CO2 emissions standards are permissible, conceptually, under 
section 202(a) of the Act. Section 202(a)(2) requires EPA to give 
consideration to ``the cost of compliance'' for use of the technology 
projected to be used to achieve the standards (``requisite 
technology''). The model-optimized approach can be used in appropriate 
circumstances to satisfy this requirement.\128\ The fixed percent per 
year approach is broadly consistent with EPA's traditional means of 
setting standards for mobile sources, which identifies levels of 
emissions reductions that are technologically feasible at reasonable 
cost with marginal emissions reduction benefits which may far outweigh 
marginal program costs, without adverse impacts on safety and with 
positive impacts on energy utilization, and which address a societal 
need for reductions.\129\ Comparing and contrasting these approaches 
with the model-optimized approach is one way to evaluate options for 
appropriate standards under section 202(a). We request comment on these 
approaches and whether one or the other is a more appropriate method 
for EPA to consider future light-duty GHG standards under section 202 
of the CAA. We also request comment on other potential approaches

[[Page 44444]]

EPA should consider, including the approach described in section 
VI.B.1.a.
---------------------------------------------------------------------------

    \128\ See Husqvarna AB v. EPA, 254 F. 3d 195, 200 (D.C. Cir. 
2001) (EPA reasonably chose not to use marginal cost-benefit 
analysis to analyze standards [under the technology-forcing section 
213 of the Act], where section 213 does not mandate a specific 
method of cost analysis).
    \129\ See NRDC v. EPA, 655 F. 2d 318, 332-334 (D.C. Cir. 1981).
---------------------------------------------------------------------------

    During 2007, EPA, DOT's Volpe Center, and NHTSA expended a major 
technical effort to make a series of significant enhancements to the 
Volpe Model by reviewing and updating, where possible, many of the 
critical inputs to the Model (e.g., cost reduction learning curves, the 
number and estimated costs and effectiveness of potential CO2/mpg 
control technologies), as well as making updates to the Model itself. 
This technical work notably improved the Volpe Model. However, the 
Volpe Model was designed specifically to analyze potential changes to 
NHTSA's CAFE program, and there remained several aspects of the 
analysis we conducted that did not reflect differences between EPA and 
NHTSA statutory authorities, and we were not able to address these 
aspects in 2007. As a result, our analysis tended to underestimate the 
benefits and/or overestimate the costs of light-duty vehicle CO2 
standards that could be established under the CAA. We discuss these 
issues below.
    First, past NHTSA CAFE regulatory actions have generally had a 
short-term focus (a 3-5 year timeframe), and NHTSA is currently 
proposing more stringent CAFE standards for five model years, 2011-
2015, in keeping with its revised statutory authority, as discussed 
above. In contrast, EPA's Title II authority permits EPA to set 
standards over a significantly longer period of time as appropriate in 
light of environmental goals, developing technologies, costs, and other 
factors. A short-term focus can have a significant implication for the 
technology assumptions which go into a standard-setting analysis.
    In our 2007 analysis, we assumed limited technology innovation 
beyond what is known today, and did not include several commercially 
available or promising technologies such as advanced lightweight 
materials for all vehicle classes (several auto companies have recently 
announced plans for large future reductions in vehicle weight), plug-in 
hybrids, optimized ethanol vehicles, and electric vehicles. To the 
extent such innovations penetrate the market over the next 10 years, 
the societal benefits and/or decreased societal cost of CO2 standards 
will be greater than what we projected. A short-term focus may yield a 
more reliable short-term projection because it relies on available 
technology and is less prone to uncertainties involved in projecting 
technological developments and other variables over a longer term. The 
trade-off is that such a focus may not stimulate the development of 
advanced, low GHG-emitting technologies. For the auto industry, 
significant technological advances have historically required many 
years and large amounts of capital.
    Second, our 2007 analysis does not account for a series of 
flexibilities that EPA may employ under the CAA to reduce compliance 
costs, such as multi-year strategic planning, and credit trading and 
banking. As mentioned previously, EPA has used many of these 
flexibilities in its existing mobile source programs, and we would 
attempt to include such flexibilities in any future EPA GHG standards 
analysis.
    Third, under the CAA manufacturers traditionally choose to comply 
instead of non-comply, since they cannot sell new vehicles unless they 
receive a certificate of conformity from EPA that is based on a 
demonstration of compliance. Under the penalty provisions of the CAA, 
light-duty vehicle manufacturers may not pay a civil penalty or a fine 
for non-compliance with the standards and still introduce their 
vehicles into commerce. In our 2007 analysis, we assumed a number of 
manufacturers would pay fees rather than comply with the analyzed 
standards. This assumption resulted in a lower compliance cost 
estimation and lower GHG benefits.
    Fourth, in our 2007 analysis, we did not reflect the difference in 
carbon content between gasoline and diesel fuel. This difference has 
not been germane to NHTSA's setting of CAFE standards, but it is 
important to the GHG emissions reductions that different standards can 
achieve. Therefore, our Light-duty Vehicle TSD analysis did not account 
for the higher CO2 emissions which result from the use of a gallon of 
diesel fuel compared to a gallon of gasoline (diesel fuel has a higher 
carbon content than gasoline fuel), and we would address this issue in 
any future EPA GHG standards analysis.
    As noted previously, our 2007 analysis relied upon the use of key 
inputs concerning predictions of future technologies and fuel prices 
and valuation of a number of externalities, such as the benefits of 
climate change mitigation and improvements in energy security. The 
information used for these key inputs can have a significant effect on 
projections regarding the costs of a standard based on a fixed 
percentage reduction or the level of a model-optimized standard. In the 
analyses we present in this notice, we have generally taken an approach 
similar to NHTSA's, although we have also used alternative values in 
some cases to illustrate the impact from different, alternative values. 
For example, to account for large uncertainties regarding the magnitude 
of the marginal benefits of GHG emission reductions, we looked at 
alternative approaches to valuing those benefits and developed a range 
of values to capture the uncertainties. (See section III.G in this ANPR 
for a discussion of GHG benefits issues and marginal benefits 
estimates.)
    Another key, but uncertain, input is the future price of fuel. 
Important for any analysis of fuel savings over a long time frame is an 
adequate projection of future oil prices. Typically, EPA relies on 
Annual Energy Outlook (AEO) forecasts made by the Energy Information 
Agency. However, AEO forecasts in past decades have at times over-
predicted the price of oil, and more recently, with the rapid increase 
in oil prices over the past several years, AEO forecasts have 
consistently under-predicted near-term oil prices. In the Light-duty 
Vehicle TSD analysis, we used the Energy Information Administration's 
2007 AEO projections for future oil and fuel prices, which correspond 
to a projected retail gasoline price of slightly more than $2 per 
gallon in the 2010-2020 time period, while current gasoline fuel prices 
are on the order of $3.50 to $3.80 per gallon or more. Since our 
analyses are sensitive to the oil price used, this raised concerns 
regarding the ability to accurately estimate fuel savings. In addition, 
when using a model-optimized approach, this can have a significant 
impact on the appropriate standard predicted by the model. For our 
updated analysis (described in more detail below), however, we have 
continued to use the AEO2007 forecasted fuel prices. The ``baseline'' 
for our Light-duty Vehicle TSD and updated analysis reflects 
projections from the automotive manufacturers regarding future product 
offerings which were developed by the manufacturers in late 2006 
through the spring of 2007. The AEO2007 fuel price projections are more 
representative of the fuel prices considered by the manufacturers when 
they developed the baseline future product offerings used as an input 
in the analysis.
    This approach has certain limitations. Given the large increases in 
fuel price in the past year, most major automotive companies have since 
announced major changes to their future product offerings, and these 
changes are not represented in our analysis. However, the projection of 
future product offerings (model mix and sales volume) is static in the 
analysis we have performed, both for the baseline (projections with no 
new standards) and in the control scenarios (projections

[[Page 44445]]

with the impact of new standards). Our analysis to date does not 
account for a range of possible consumer and automaker responses to 
higher fuel prices, higher vehicle prices and attribute-based standards 
that could affect manufacturer market share, car/truck market share, or 
vehicle model mix changes. EPA has initiated work with Resources for 
the Future to develop a consumer choice economic model which may allow 
us to examine the impact of consumer choice and varying fuel prices 
when analyzing potential standard scenarios in the future, and to more 
realistically estimate a future baseline. Higher fuel prices than those 
predicted in AEO2007 can certainly have a large impact on the projected 
costs and benefits of future light-duty GHG limits, and we will 
continue to examine this issue as part of our on going work.
    We ask for comment on the relative importance of, and how best to 
address, the various issues we have highlighted with our analysis of 
potential light-duty vehicle GHG standards performed to date. In 
particular, we seek comment on the feasibility and utility of 
incorporating into the regulations themselves a mechanism for 
correcting mistaken future projections or accomplishing the same 
through a periodic review of the regulations.
    We now summarize the results from our 2007 analysis. Since 2007 we 
have updated this analysis to address several of the issues noted 
above, in order to evaluate the impact of these issues. EPA requests 
comment on the two approaches we examined for setting standards, and 
seeks input on alternative approaches, including the approach described 
in section VI.B.1.a.
    In Table VI-1 we present weighted combined car and truck standards 
we developed based on efforts to update the work we did in 2007 to 
address some of the issues identified above. We show the results from 
our 2007 analysis, as well as the updated results when we utilize the 
same methodology for the 4% per year approach, but attempt to address a 
number of the issues discussed above. As part of addressing these 
issues, we have extended the time frame for our analysis to 2020, while 
our Light-duty Vehicle TSD analysis was limited to 2018. Our updated 
analysis results are documented in a separate technical memorandum 
available in the public docket for this Advance Notice.\130\
---------------------------------------------------------------------------

    \130\ See EPA Technical Memorandum, ``Documentation of Updated 
Light-duty Vehicle GHG Scenarios.''

 Table VI-1--Projected Vehicle CO2 (Gram/Mile Units) and MPG Standards (MPG Units in Square Brackets), Including
                                                 A/C CO2 Limits
----------------------------------------------------------------------------------------------------------------
                                                              Light-duty vehicle TSD analysis     Updated 2008
                                                           ------------------------------------     analysis
                           Year                                                                -----------------
                                                               4% per year     Model-Optimized     4% per year
----------------------------------------------------------------------------------------------------------------
2011......................................................        338 [26.3]        334 [26.6]        335 [26.5]
2012......................................................        323 [27.5]        317 [28.0]        321 [27.7]
2013......................................................        309 [28.8]        295 [30.1]        307 [28.9]
2014......................................................        296 [30.0]        287 [31.0]        293 [30.3]
2015......................................................        285 [31.2]        281 [31.6]        283 [31.4]
2016......................................................        274 [32.4]        275 [32.3]        272 [32.7]
2017......................................................        263 [33.8]        270 [32.9]        261 [34.0]
2018......................................................        253 [35.1]        266 [33.4]        251 [35.4]
2019......................................................               n/a               n/a        241 [36.9]
2020......................................................               n/a               n/a        232 [38.3]
----------------------------------------------------------------------------------------------------------------

    Compared to the Light-duty Vehicle TSD analysis, we have attempted 
in the updated analysis to address for potential CAA purposes several, 
but not all, of the noted issues, and as such we continue to believe 
that the results of this analysis are conservative--that is, they tend 
to overestimate the costs and/or underestimate the benefits. We have 
included the following updates:

--Inclusion of plug-in hybrids as a viable technology beginning in 
2012;
--Consideration of multi-year planning cycles available to 
manufacturers;
--Consideration of CO2 trading between car and truck fleets 
within the same manufacturer;
--Assumption that all major manufacturers would comply with the 
standards rather than paying a monetary penalty;
--Correction of the CO2 reduction effectiveness for diesel 
technology.

    Our updated analysis does not address all of the issues we 
discussed previously. For example, we have not considered the 
widespread use of lightweight materials, further improvements in the 
CO2 reduction effectiveness of existing technologies, 
potential for cost reductions beyond our 2007 analysis, and the 
potential for new technologies. We also have not addressed the 
potential changes in vehicle market shifts that may occur in the future 
in response to new standards, new consumer preferences, or the 
potential for higher fuel prices. Recent trends in the U.S. auto 
industry indicate there may be a major shift occurring in consumer 
demand away from light-duty trucks and SUVs and towards smaller 
passenger cars.\131\ Such potential trends are not captured in our 
analysis and they could have a first-order impact on the results.
---------------------------------------------------------------------------

    \131\ See ``As Gas Costs Soar, Buyers Are Flocking to Small 
Cars'', New York Times, May 2, 2008, page A1.
---------------------------------------------------------------------------

    Table VI-2 summarizes the most important societal and consumer 
impacts of the standards we have analyzed.

[[Page 44446]]



      Table VI-2--Summary of Societal and Consumer Impacts From Potential Light-Duty Vehicle GHG Standards
                                          [2006 $s, AEO2007 oil prices]
----------------------------------------------------------------------------------------------------------------
                                            Light-duty vehicle TSD analysis *             Updated 2008 analysis
                                  ------------------------------------------------------------------------------
                                          4% per year              Model-Optimized             4% per year
----------------------------------------------------------------------------------------------------------------
                                                Societal Impacts
----------------------------------------------------------------------------------------------------------------
GHG Reductions (MMTCO2 equivalent  378......................  343.....................  635
 in 2040).
Fuel Savings (million bpd in       2.3......................  2.0.....................  4.2
 2040).
Net Societal Benefits in 2040      $54 + B..................  $54 + B.................  $130 + B
 (Billion $s) **.
Net Present Value of Net Benefits
 through 2040 (Billion $s): **
    3% DR........................  $320 + B.................  $390 + B................  $830 + B
    7% DR........................  $120 + B.................  $160 + B................  $340 + B
----------------------------------------------------------------------------------------------------------------
                                                Consumer Impacts
----------------------------------------------------------------------------------------------------------------
Per-Vehicle Costs:
    2015.........................  $736.....................  $672....................  $565
    2018.........................  $1,567...................  $995....................  $1,380
    2020.........................  n/a......................  n/a.....................  $1,924
Payback Period: ***
    3% DR........................  6.2 yr. (2018)...........  4.8 yr. (2018)..........  6.0 yrs. (2020)
    7% DR........................  8.9 yr. (2018)...........  6.0 yr. (2018)..........  8.7 yrs. (2020)
Lifetime Monetary Impact: ***
    3% DR........................  $2,753 (2018)............  $2,245 (2018)...........  $1,630 (2020)
    7% DR........................  $1,850 (2018)............  $1,508 (2018)...........  $437 (2020)
----------------------------------------------------------------------------------------------------------------
* The Light-duty Vehicle TSD Societal Impacts are based on new stds. for 2011-2018 for cars and 2012-2017 for
  trucks, while the updated analysis is based on new stds. for 2011-2020 for cars and trucks.
** The identified ``B'' = unquantified benefits, for example, we have not quantified the co-pollutant impacts
  (PM, ozone, and air toxics), and does not include a monetized value for the social cost of carbon. Societal
  benefits exclude all fuel taxes because they represent transfer payments. In addition, for the updated
  analysis, we have not included the increased costs nor the GHG emissions of electricity associated with the
  use of plug-in electric hybrid vehicles. We have also not quantified the costs and/or benefits associated with
  changes in consumer preferences for new vehicles.
*** The payback period and lifetime monetary impact values for Light-duty Vehicle TSD analysis is for the
  average 2018 vehicle, and 2020 for the updated analysis.

    Given the current uncertainty regarding the social cost of carbon, 
Table VI-2 does not include a monetized value for the reduction in GHG 
emissions. We present here a number of different values and indicate 
what impact they would have on the net social benefits for our updated 
analysis. Presentation of these values does not represent, and should 
not be interpreted to represent, any determination by EPA as to what 
the social cost of carbon should be for purposes of calculating 
benefits pursuant to the Clean Air Act.
    We have analyzed the valuation for the social cost of carbon of $40 
per metric ton (for emission changes in year 2007, in 2006 dollars, 
grown at a rate of 3% per year) that reflects potential global, 
including domestic, benefits of climate change mitigation. This 
valuation (which is the mean value from a meta analysis of global 
marginal benefits estimates for a 3% discount rate discussed in section 
III.G. of this Advance Notice) would result in an increase in the 2040 
monetized benefits for the 2008 updated analysis of $67 billion. Given 
the nature of the investment in GHG reductions, we believe that values 
associated with lower discount rates should also be considered. For 
example, for a 2% discount rate for year 2007, the mean value from the 
meta analysis is $68 per metric ton. This valuation would result in an 
increase in the 2040 monetized benefits for the 2008 updated analysis 
of $110 billion.
    As discussed in section III.G, another approach to developing a 
value for the social cost of carbon is to consider only the domestic 
benefits of climate change mitigation. The two approaches--use of 
domestic or global estimates--are discussed in section III.G of this 
notice. There is considerable uncertainty regarding the valuation of 
the social cost of carbon, and in future analyses EPA would likely 
utilize a range of values (see section III.G).\132\ Furthermore, 
current estimates are incomplete and omit a number of impact categories 
such that the IPCC has concluded that current estimates of the social 
cost of carbon are very likely to underestimate the benefits of GHG 
reductions.
---------------------------------------------------------------------------

    \132\ Ranges better reflect the available scientific information 
and the uncertainties in marginal benefits estimates, and the fact 
that there are estimates well above the means. The corresponding 
ranges for the 2007 mean estimates discussed above are the 
following: For the meta-analysis global marginal benefits estimates, 
the range is $-4 to $106 per metric ton CO2 based on a 3 
percent discount rate, or $-3 to $159 per metric ton CO2 
based on a 2 percent discount rate. The preliminary domestic ranges 
derived from a single model are $0 to $5 per metric ton 
CO2 based on a 3 percent discount rate, and $0 to $16 per 
metric ton CO2 based on a 2 percent discount rate.
---------------------------------------------------------------------------

    This Advance Notice asks for comment on the appropriate value or 
range of values to use to quantify the benefits of GHG emission 
reductions, including the use of a global value. While OMB Guidance 
allows for consideration of international effects, it also suggests 
that the Agency consider domestic benefits in regulatory analysis. 
Section III.G.4 discusses very preliminary ranges for U.S. domestic 
estimates with means of $1 and $4 per metric ton in 2007, depending on 
the discount rate. These valuations ($1 and $4 per metric ton in 2007) 
would result in an increase in the 2040 monetized benefits for the 2008 
updated analysis of $1.7-6.7 billion. In its recent proposed 
rulemaking, NHTSA utilized $7 per metric ton as the initial value for 
U.S. CO2 emissions in 2011.
    Table VI-2 shows the impact of addressing a number of the issues 
noted

[[Page 44447]]

above. With respect to per-vehicle costs, the updated 4% per year 
approach shows a $171 per vehicle lower cost in 2015 and a $187 per 
vehicle lower cost in 2018 compared to our 2007 analysis, for a 
slightly more stringent standard in both cases. This is primarily due 
to the impact of including multi-year planning and car-truck trading 
within a given manufacturer.
    The estimated CO2 reductions in 2040 from the updated 
analysis are much larger than the 2007 analysis (by nearly a factor of 
2). This occurs primarily because we have addressed the diesel 
CO2 issue noted above, and because we have extended the time 
frame for the analyzed standards to 2020. The estimated fuel savings 
are also larger primarily due to the additional years we extended the 
4% per year standard to. The estimated monetized net benefits for the 
updated analysis are also significantly higher than our previous 
estimates. This is a result of a combination of factors: lower 
estimates for the increased vehicle costs due to multi-year planning 
and within manufacturer car-truck trading; and the extension of the 
analyzed standards to 2020.
    Table VI-2 also provides estimates of ``payback period'' and 
``lifetime monetary impact''. The payback period is an estimate of how 
long it will take for the purchaser of the average new vehicle to 
break-even; that is, where the increased vehicle costs is off-set by 
the fuel savings. Our updated analysis shows for the average 2020 
vehicle that period of time ranges from 6.0 to 8.7 years (depending 
upon the assumed discount rate). The lifetime monetary impact provides 
an estimate of the costs to the consumer who owns a vehicle for the 
vehicle's entire life. The lifetime monetary impact is simply the 
difference between the higher initial vehicle cost increase and the 
lifetime, discounted fuel savings. Our updated analysis indicates the 
lifetime, discounted fuel savings will exceed the initial cost increase 
substantially. As shown in the table, the positive lifetime monetary 
impact ranges from about $440 to $1,630 per vehicle (depending upon the 
assumed discount rate). Section VI.C.2 of the Light-duty Vehicle TSD 
discusses possible explanations for why consumers do not necessarily 
factor in these fuel savings in making car-buying decisions.
    Our updated analysis projects the 2020 CO2 limit of 232 
gram/mile (38.3 mpg) shown in Table VI-1, could be achieved with about 
33% of the new vehicle fleet in 2020 using diesel engines and full 
hybrid systems (including plug-in electric hybrid vehicles). Higher 
penetrations of these and other advanced technologies (including for 
example the wide-spread application of light-weight materials) could 
result in a much greater GHG reductions.
    The results of our updated analysis indicate that:

    --Technology is readily available to achieve significant reductions 
in light-duty vehicle GHG emissions between now and 2020 (and beyond);
    --The benefits of these new standards far outweigh their costs;
    --Owners of vehicles complying with the new standard will recoup 
their increased vehicle costs within 6-9 years, and;
    --New standards would result in substantial reductions in GHGs.

    We request comment on all aspects of this analysis, the 
appropriateness of the two approaches described, and the inputs and the 
tools that we utilized in performing the assessment, when considering 
the setting of light-duty vehicle GHG standards under the CAA. We also 
request comment on the alternative approach for establishing light-duty 
vehicle GHG standards described in section VI.B.1.a of this advance 
notice.
c. Technologies Available To Reduce Light-Duty Vehicle GHGs
    In this section we discuss a range of technologies that can be used 
to significantly reduce GHG emissions from cars and light trucks. We 
discuss EPA's assessment of the availability of these technologies, 
their readiness for introduction into the market, estimates of their 
cost, and estimates of their GHG emission reduction potential. We 
request comment on all aspects of our current assessment, including 
supporting data regarding technology costs and effectiveness.
    In the past year EPA undertook a comprehensive review of 
information in the literature regarding GHG-reducing technologies 
available for cars and light trucks. In addition, we reviewed 
confidential business information from the majority of the major 
automotive companies, and we met with a large number of the automotive 
companies as well as global automotive technology suppliers regarding 
the costs and effectiveness of current and future GHG-reducing 
technologies. EPA also worked with an internationally recognized 
automotive technology firm to perform a detailed assessment of the GHG 
reduction effectiveness of a number of advanced automotive 
technologies.\133\
---------------------------------------------------------------------------

    \133\ See ``A Study of Potential Effectiveness of Carbon Dioxide 
Reducing Vehicle Technologies'', Ricardo, Inc., EPA Report 420-R-08-
004a, June 2008.
---------------------------------------------------------------------------

    EPA recently published a Staff Technical Report describing the 
results of our assessment, and we provided this report to the National 
Academy of Sciences Committee on the Assessment of Technologies for 
Improving Light-Duty Vehicle Fuel Economy.\134\ This Staff Technical 
Report details our estimates of the costs and GHG reduction potential 
of more than 40 technologies applicable to light-duty vehicles, and is 
one of the key inputs to our analysis of potential future standards 
presented in Section VI.B.1.b. These technologies span a large range of 
effectiveness and technical availability, from technologies as simple 
as reduced rolling resistance tires (offering a 1-2% reduction in 
vehicle CO2 emissions) to advanced powertrain systems like 
gasoline and diesel hybrids, plug-in electric hybrids, and full 
electric vehicles (offering up to a 100% reduction in vehicle 
CO2 emissions).
---------------------------------------------------------------------------

    \134\ See ``EPA Staff Technical Report: Cost and Effectiveness 
Estimates of Technologies Used to Reduce Light-duty Vehicle Carbon 
Dioxide Emissions'', EPA Report 420-R-08-008, March 2008.
---------------------------------------------------------------------------

    The majority of the technologies we investigated are in production 
and available on vehicles today, either in the United States, Japan or 
Europe. Over the past year, most of the major automotive companies or 
suppliers have announced the introduction of new technologies to the 
U.S. market. The following are some recent examples:

--Ford's new ``EcoBoost'' turbocharged, down-sized direct-injection 
gasoline engines;
--Honda's new 2009 global gasoline hybrid and 2009 advanced diesel 
powertrain;
--Toyota and General Motors plans for gasoline plug-in hybrid systems 
within the next two to three years;
--General Motors breakthroughs in lower-cost advanced diesel engines;
--Nissan's 2010 introduction of a clean diesel passenger car;
--Chrysler's widespread use of dual-clutch automated manual 
transmissions beginning in 2009; and,
--Mercedes' new product offerings for clean diesel applications as well 
as diesel-electric hybrid technologies.

    We also evaluated the costs and potential GHG emissions reductions 
from some of the advanced systems not currently in production or that 
are only available in specialty niche vehicles, such as gasoline 
homogeneous charge compression ignition engines, camless valve 
actuation systems, hydraulic hybrid powertrains, and full electric

[[Page 44448]]

vehicles. These technologies are described in detail, along with our 
estimates for costs and GHG reduction potential, in our Staff Technical 
Report.
    An additional area where we see opportunities for significant 
CO2 emissions reduction is in material weight substitution. 
The substitution of traditional vehicle materials (e.g., steel, glass) 
with lighter materials (e.g., aluminum, plastic composites) can provide 
substantial reductions in CO2 emissions while maintaining or 
enhancing vehicle size, comfort, and safety attributes. Several 
companies have recently announced plans to utilize weight reduction as 
a means to improve vehicle efficiency while meeting all applicable 
safety standards.\135\ We request data and comment on the extent to 
which material substitution should be considered as a means to reduce 
GHG emissions, and information on the costs and potential scope of 
material substitution over the next 5 to 20 years.
---------------------------------------------------------------------------

    \135\ See Automotive News, February 11, 2008, in which Daimler-
Benz CEO states that Mercedes-Benz will reduce the weight of all new 
vehicle models by 5%, and Ford announces every model will lose 
between 250 and 750 pounds.
---------------------------------------------------------------------------

    Finally, we note that in the past 30 years there has been a steady, 
nearly linear increase in the performance of cars and light trucks. We 
estimate that the average new vehicle sold in 2007 had a 0-60 miles/
hour acceleration time of 9.6 seconds--compared to 14.1 seconds in 
1975.\136\ If this historic trend continues, by 2020 the average 0-60 
acceleration for the combined new car and truck fleet will be less than 
8 seconds. During the past 20 years, this increase in acceleration has 
been accompanied by a gradual increase in vehicle weight. It is 
generally accepted that over the past 20 years, while fuel economy for 
the light-duty fleet has changed very little, the fuel efficiency has 
in fact improved but has largely been used to enable increases in both 
the weight and the performance of vehicles. We request comment on how 
we should consider the potential for future changes in vehicle weight 
and performance (e.g., acceleration time) in assessing the costs and 
benefits of standards for reducing GHG emissions.
---------------------------------------------------------------------------

    \136\ See ``Light-Duty Automotive Technology and Fuel Economy 
Trends: 1995-2007'', EPA Report EPA420-R-07-008, September 2007.
---------------------------------------------------------------------------

d. Potential Options for Reducing HFCs, N2O, CH4, 
and Air Conditioning-Related CO2
    As described above, in addition to fleet average and in-use 
CO2 standards, EPA has analyzed how new control measures 
might be developed for other car and light truck emissions that have 
global warming impacts: air conditioning (``A/C'')-related emissions of 
HFCs and CO2, and tailpipe emissions of nitrous oxide 
(N2O), and methane (CH4). Under CAA section 
202(a), EPA may regulate these emissions if a positive endangerment 
finding is made for the relevant GHGs. Together, these emissions 
account for about 10% of greenhouse gases from light-duty cars and 
trucks (on a CO2 equivalent basis). The direct HFC emissions 
account for 4.3%, while the A/C CO2 emissions are 3.1%. 
N2O and CH4 account for 2.7% and 0.2% 
respectively. With regard to air conditioning-related emissions, 
significant opportunity exists to reduce HFC emissions from refrigerant 
leakage and CO2 from A/C induced engine loads, and EPA has 
considered potential standards to reduce these emissions. In addition, 
EPA has considered potential limits for N2O and 
CH4 emissions that could apply to both cars and light trucks 
that would limit future growth of these emissions.
i. Potential Controls for Air Conditioning-Related GHG Emissions
    Over 95% of the new cars and light trucks in the U.S. are equipped 
with A/C systems. There are two mechanisms by which A/C systems 
contribute to the emissions of GHGs. The first is through direct 
leakage of the refrigerant (currently the HFC compound R134a) into the 
air. Based on the higher GWP of HFCs, a small leakage of the 
refrigerant has a greater global warming impact than a similar amount 
of emissions of other mobile source GHGs. Leakage can occur slowly 
through seals, gaskets, hose permeation and even small failures in the 
containment of the refrigerant, or more quickly through rapid component 
deterioration, vehicle accidents or during maintenance and end-of-life 
vehicle scrappage (especially when refrigerant capture and recycling 
programs are less efficient). The leakage emissions can be reduced 
through the choice of leak-tight, durable components, or the global 
warming impact of leakage emissions can be addressed through the 
implementation of an alternative refrigerant. Refrigerant emissions 
during maintenance and at the end of the vehicle's life (as well as 
emissions during the initial charging of the system with refrigerant) 
are already addressed by the CAA Title VI stratospheric ozone 
protection program, as described in section VIII of this notice.\137\
---------------------------------------------------------------------------

    \137\ The second mechanism by which vehicle A/C systems 
contribute to GHG emissions is through the consumption of excess 
fuel when the A/C system is running, and from carrying around the 
weight of the A/C system hardware all-year round. This excess fuel 
required to run the system is converted into CO2 by the 
engine during combustion. This excess CO2 from A/C 
operation can thus be reduced by increasing the efficiency of the 
overall vehicle-A/C system.
---------------------------------------------------------------------------

    EPA's analysis indicates that together, these A/C-related emissions 
account for about 7.5% of the GHG emissions from cars and light trucks. 
EPA considered standards designed to reduce direct leakage emissions by 
75% and to reduce the incremental increase of A/C related 
CO2 emissions by 40% in model year 2015 vehicles, phasing in 
starting in model year 2012. It is appropriate to separate the 
discussion of these two categories of A/C-related emissions because of 
the fundamental differences in the emission mechanisms and the methods 
of emission control. Refrigerant leakage control is akin in many 
respects to past EPA fuel evaporation control programs in that 
containment of a fluid is the key control feature, while efficiency 
improvements are more similar to the vehicle-based control of 
CO2 in that they would be achieved through specific hardware 
and controls.
    The Memo to the Docket, ``Light-Duty Vehicle Hydrofluorocarbon, 
Nitrous Oxide, Methane, and Air Conditioning-Related Carbon Dioxide 
Emissions'' provides a more detailed discussion of the air 
conditioning-related GHG emissions, both refrigerant leakage and 
CO2 emissions from A/C use, as well as potential test 
procedure and compliance approaches that have been considered by EPA.
ii. Feasibility of Potential A/C Reduction Approaches
    EPA believes that significant reductions in A/C HFC leakage and A/C 
CO2 emissions would be readily technically feasible and 
highly cost effective. The types of technologies and methods that 
manufacturers could use to reduce both types of A/C emissions are 
commercially available and used today in many models of U.S. cars and 
light trucks. For example, materials and components that reduce leakage 
as well as electronic monitoring systems have been used on various 
vehicles in recent years. Regarding A/C CO2 reduction, such 
technologies as variable-displacement compressors and their controls 
are also in use today. Although manufacturers might find that more 
advanced technologies, like alternate refrigerants, become economically 
attractive in the coming years, EPA believes that currently available 
technologies and systems designs would

[[Page 44449]]

be sufficient to meet potential limits being assessed by EPA.
iii. Potential Impacts of Requiring Improved A/C Systems
(1) Emission Reductions for Improved A/C Systems
    Manufacturers producing cars and light trucks for the U.S. market 
have not historically had economic or regulatory incentives or 
requirements to reduce refrigerant leakage and CO2 from A/C 
systems. As a result, there is an opportunity for significant 
reductions in both of these types of emissions. With potential 
standards like the ones considered above, EPA has estimated that 
reductions in HFC refrigerant leakage, converted to CO2 
equivalent emissions, and added to projected A/C CO2 
reductions, these limits would result in an average per-vehicle 
reduction in CO2-equivalent emissions of about 4.7% 
(excluding CH4 and N2O from the baseline). This 
reduction is equivalent to about 7.5% of light vehicle CO2-
equivalent emissions, or about 2 tons per year.
(2) Potential Costs for Improved A/C Systems
    Although the technologies and system designs EPA expects could be 
used to comply with the two A/C related standards being considered are 
currently available, not all manufacturers are using them on all 
vehicles. Thus, the industry would necessarily incur some costs to 
apply these technologies more broadly across the car and truck fleet. 
EPA estimates that the cost of meeting the full HFC leakage standard it 
is considering would average about $40 per vehicle (retail price 
equivalent or RPE) and that the cost of meeting the A/C CO2 
standard would be about $70 per vehicle (RPE). At the same time, 
complying with such limits would result in very significant savings in 
fuel costs (as system efficiency improves) and in A/C-related 
maintenance costs (as more durable systems result in less frequent 
repairs). In fact, EPA's analysis shows that these cost savings would 
significantly exceed projected retail costs of the potential A/C 
standards, more than offsetting the costs of both types of A/C system 
improvements.\138\
---------------------------------------------------------------------------

    \138\ See Appendix 3.B. of the EPA Technical Memorandum 
``Documentation of Updated Light-duty Vehicle GHG Scenarios'' for a 
detailed discussion of these costs estimates.
---------------------------------------------------------------------------

iv. Potential Interaction With Title VI Refrigerant Regulations
    As described further in Section VIII of this notice, Title VI of 
the CAA deals with the protection of stratospheric ozone. Section 608 
of the Act establishes a comprehensive program to limit emissions of 
certain ozone-depleting substances (ODS) from appliances and 
refrigeration. The rules promulgated under section 608 regulate the use 
and disposal of such substances during the service, repair or disposal 
of appliances and industrial process refrigeration. In addition, 
section 608 and the regulations promulgated under it prohibit the 
knowingly venting or releasing ODS during the course of maintaining, 
servicing, repairing or disposing of an appliance or industrial process 
refrigeration equipment. Section 609 governs the servicing of motor 
vehicle air conditioners (MVACs). The regulations promulgated under 
section 609 (40 CFR part 82, subpart B) establish standards and 
requirements regarding the servicing of MVACs. These regulations 
include establishing standards for equipment that recovers and recycles 
or only recovers refrigerant (CFC-12, HFC 134a, and for blends only 
recovers) from MVACs; requiring technician training and certification 
by an EPA-approved organization; establishing recordkeeping 
requirements; imposing sales restrictions; and prohibiting the venting 
of refrigerants.
    Another Title VI provision that could interact with potential Title 
II motor vehicle regulation of GHGs is section 612, which requires EPA 
to review substitutes for ozone depleting substances and to consider 
whether such substitutes would cause an adverse effect to human health 
or the environment as compared with other substitutes that are 
currently or potentially available. EPA promulgated regulations for 
this program in 1992 and those regulations are located at 40 CFR part 
82, subpart G. When reviewing substitutes, in addition to finding them 
acceptable or unacceptable, EPA may also find them acceptable so long 
as the user meets certain use conditions. For example, all motor 
vehicle air conditioning system must have unique fittings and a 
uniquely colored label for the refrigerant being used in the system.
    EPA views the potential program analyzed here as complementing 
these Title VI programs, and not conflicting with them. The potential 
standards would apply at pre-production when manufacturers demonstrate 
that they are utilizing requisite equipment (or utilizing other means 
designated in the potential program) to achieve the suggested 75% leak 
reduction requirement. These requirements would dovetail with the Title 
VI section 609 standards which apply to maintenance events, and to end-
of-vehicle life disposal. In fact, as noted, a benefit of a program is 
that there could be fewer and less impactive maintenance events for 
MVACs, since there would be less leakage. In addition, although the 
suggested standards would also apply in-use, the means of enforcement 
should not conflict (or overlap) with the Title VI section 609 
standards. EPA also believes the menu of leak control technologies 
described above would complement the section 612 requirements because 
these control technologies would help ensure that 134a (or other 
refrigerants) would be used in a manner that would further minimize 
potential adverse effects on human health and the environment.
v. Potential Controls for Nitrous Oxide Emissions
    Nitrous oxide, or N2O, is emitted from gasoline and 
diesel car and light truck tailpipes and is generated during specific 
catalyst warm-up temperature conditions conducive to N2O 
formation. While N2O emissions from current Tier 2 vehicles 
with conventional three-way catalysts are relatively low on a mass 
basis (e.g., around 0.005 g/mi), N2O does have a high GWP of 
310. N2O is a more significant concern with diesel vehicles 
(and potentially future gasoline lean-burn engines) equipped with 
advanced catalytic NOX emissions control systems. These 
systems can (but need not) be designed in a way that emphasizes 
efficient NOX control while allowing the formation of 
significant quantities of N2O. Excess oxygen present in the 
exhaust during lean-burn conditions in diesel (or lean-burn gasoline) 
engines equipped with these advanced systems can favor N2O 
formation if catalyst temperatures are not carefully controlled. 
Without specific attention to controlling N2O emissions in 
the development of such new NOX control systems, vehicles 
could have N2O emissions many times greater than are emitted 
by current gasoline vehicles.
    EPA has considered a ``cap'' approach to controlling N2O 
emissions would not require any new technology for current Tier 2 
gasoline vehicles, but would limit any increases in N2O 
emissions that might otherwise occur with future technology vehicles. 
Such an approach would have minimal feasibility, emissions, or cost 
impacts.
    The Memo to the Docket, ``Light-Duty Vehicle Hydrofluorocarbon, 
Nitrous Oxide, Methane, and Air Conditioning-Related Carbon Dioxide 
Emissions'' has more in-depth discussion of car and light truck 
N2O emissions, as well as of potential test procedure and 
compliance

[[Page 44450]]

approaches that have been considered by EPA.
vi. Potential Controls for Methane Emissions
    Methane, or CH4, is emitted from gasoline and diesel car 
and light truck tailpipes and is one of the family of hydrocarbon 
compounds generated in the engine as a by-product of gasoline and 
diesel fuel combustion. As such, levels of CH4 emissions 
have been somewhat controlled by the lower hydrocarbon emissions 
standards that have been phased in since the early 1970s. Current 
CH4 emissions from Tier 2 gasoline vehicles are relatively 
low (about 0.017 g/mi on average), and CH4 has a global 
warming potential of 23. The one technology where much higher 
CH4 emissions could be of concern would be natural gas-
fueled vehicles, since CH4 is the primary constituent of 
natural gas fuel and would be the largest component of unburned fuel 
emissions.
    As with N2O, EPA has considered a ``cap'' CH4 
emissions standard approach that would not require any new technology 
for current Tier 2 gasoline vehicles, but would limit any increases in 
CH4 emissions that might otherwise occur with future natural 
gas vehicles. Such an approach would have no significant feasibility, 
emissions, or cost impacts.
    The Memo to the Docket, ``Light-Duty Vehicle Hydrofluorocarbon, 
Nitrous Oxide, Methane, and Air Conditioning-Related Carbon Dioxide 
Emissions'' has greater discussion of car and light truck 
CH4 emissions.
e. Specific Programmatic Design Issues
    As discussed above, Title II of the CAA provides the Agency with 
both direction and flexibility in designing and implementing a GHG 
control program. Consistent with existing motor vehicle programs, the 
Agency would need to develop appropriate mechanisms to address issues 
such as certification of new motor vehicles to applicable standards, 
ensuring the emissions requirements are being met throughout the 
designated useful life of the vehicle, and appropriate compliance 
mechanisms if the requirements are not being met. Domestic and imported 
vehicles and engines subject to emissions standards must obtain a 
certificate of conformity in order to be sold in the U.S. marketplace. 
EPA has utilized a wide range of program design tools and compliance 
mechanisms to help address the large variation of market participants 
yet still provide a level regulatory playing field for these parties. 
As part of the design effort for a GHG program, it would be appropriate 
to take into account these flexibilities as well as existing 
requirements that the automobile and engine industries already face in 
order to help reduce compliance costs if possible while still 
maintaining our overall environmental objectives. However, given the 
nature of GHG control, it would also be appropriate to determine if new 
design structures and compliance measures might be more effective.
    The Light-duty Vehicle TSD includes a discussion of a wide range of 
programmatic and technical issues and presents potential approaches 
that would address these issues in the design of a comprehensive near-
term light-duty vehicle GHG control program. We highlight here a few of 
these issues, and point the reader to the Light-duty Vehicle TSD for 
additional detail. Among the issues discussed in the Light-duty Vehicle 
TSD are several which could differ significantly under a different 
approach. EPA specifically requests comment on these issues:

--Potential classification approaches for light-duty vehicles (e.g., 
treating cars and light trucks in a single averaging class or separate, 
and the potential classification of vehicle types as either a passenger 
car or a light truck);
--How any classification approaches would relate to NHTSA's regulatory 
approach;
--The significant flexibilities allowed under Title II which we utilize 
for existing criteria pollutant standards for light-duty vehicles, 
including detailed concepts for a GHG averaging, banking, and trading 
program;
--Potential light-duty GHG compliance program concepts.

    As we have considered various potential light-duty vehicle GHG 
approaches, significant thought and stakeholder outreach went into 
designing a potential system for determining compliance that would meet 
Agency and industry needs and goals. The Light-duty Vehicle TSD 
presents a compliance structure for vehicle GHG control that adheres to 
CAA requirements and at the same time is compatible with the existing 
CAFE program. However, this is not the only approach to compliance, as 
is discussed in the Light-duty Vehicle TSD. Other compliance approaches 
could also be considered, each with their own advantages. For example, 
a GHG compliance program patterned after the Tier 2 light duty vehicles 
emissions program offers an approach that is more similar to the 
existing compliance structure for other pollutants.
    We discuss below in detail three specific issues regarding 
potential future light-duty vehicle GHG programmatic issues: universal 
and attribute-based standards; environmental backstop standards; and 
tailpipe CO2 test cycles.
i. Universal and Attribute-Based Vehicle GHG Standard Approaches
    A specific programmatic issue that EPA would like to highlight here 
is the use of attribute-based standards for vehicle GHG standards, and 
the concept of an environmental backstop to accompany an attribute-
based standard promulgated under the CAA, in order to assure that GHG 
emission reductions which are feasible at reasonable cost under section 
202(a) are not foregone. A CAA program for reducing GHG emissions from 
light vehicles could set the average emissions standards for 
manufacturers in one of two fundamental ways. A ``universal'' GHG 
standard would apply a single numerical requirement to each 
manufacturer, to be met on average across its entire light-duty vehicle 
production. One potential consequence of the universal approach is that 
the costs of compliance may fall unevenly on different manufacturers. 
That is, complying with a single standard would be more difficult for 
companies with current product mixes weighted relatively heavily toward 
vehicles with higher compliance costs.
    The other approach EPA has considered would set individual 
standards for each manufacturer, based on one or more vehicle 
attributes (such as the footprint attribute approach currently used by 
NHTSA). Thus, to the extent a manufacturer produced vehicles with 
different attributes from the vehicles of another manufacturer; unique 
standards would be set for each company. The Light-duty Vehicle TSD 
discusses various vehicle attributes on which light duty vehicle 
CO2 standards could be based. EPA requests comment on the 
use of an attribute-based approach, and on each of the attributes 
considered in the Light-duty Vehicle TSD, as well as on a universal 
standard approach. In addition, some in the industry have suggested 
power-to-weight ratio may be an appropriate attribute for this purpose, 
and we request comment on that attribute as well.
    A key characteristic of any attribute-based program is that 
significant industry shifts in the attribute over time would increase 
or decrease the average emission performance requirement for the fleet. 
For example, if such a shift in attributes resulted in the unique 
manufacturer standards being on

[[Page 44451]]

average less stringent than those determined to be feasible and cost-
effective in the establishment of the program, the program would fall 
short of those overall emissions reductions, and conversely, market 
shifts could also result in larger emissions reductions than those 
determined to be feasible and cost-effective at the time the program 
was established. EPA seeks comment on the universal approach as 
compared to the attribute-based approach.
ii. Concepts for Light-Duty Vehicle GHG Environmental Backstops
    In order to limit the potential loss of feasible emissions control 
due to a change in market attributes, EPA could consider a supplemental 
``backstop'' carbon dioxide emissions standard for each year (also 
referred to as an ``anti-backsliding'' provision) as a complement under 
the CAA to an attribute-based standard. This would be an additional 
obligation for manufacturers that would limit the maximum fleet average 
carbon dioxide emissions, independent of attributes. The backstop 
requirement could establish fixed minimum and feasible fleet average 
CO2 g/mile standards. The backstop would apply separately to 
the domestic car, import car, and truck classes. This backstop 
obligation may not apply to small volume manufacturers. While EPA will 
quantitatively describe one specific backstop concept below, we are 
seeking public comment on a range of alternative approaches described 
qualitatively below, briefly, as well. More generally, EPA seeks 
comment as to whether a backstop approach would be appropriate under 
the CAA as a means of providing greater emission reduction certainty.
    A backstop could be an appropriate complement under the CAA to an 
attribute-based standard. The most important factor under section 
202(a) of the Act is to ensure reductions of the emissions from the 
motor vehicle sector which cause or contribute to the endangerment 
caused by greenhouse gas emissions. As discussed earlier, one important 
feature of an attribute-based program is that collective decisions by 
consumers and manufacturers could result in higher or lower industry-
wide average footprint values than projected by EPA at the time of 
promulgation. Since the attribute-based curve establishes a fleet 
average for a manufacturer based on the manufacturer's sales and 
attribute values, the actual reductions achieved by the program could 
vary as this mix varies. In the extreme, if the entire industry moved 
to much higher attribute values, then the carbon dioxide emissions 
reductions could be significantly less than projected by EPA as 
technically feasible and cost effective.
    Under section 202(a), EPA could consider a supplemental fleet 
average backstop standard that would be the same for every manufacturer 
in a given year. Such a standard would ensure that a minimum level of 
reductions would be achieved as the fleet mix changes over time. EPA 
could base such a standard on feasible carbon dioxide emission 
reductions and other important factors such as technological 
feasibility, cost, energy, and safety in analyzing section 202(a) 
standards. EPA recognizes that a CO2 emissions backstop 
could partially reduce the flexibility and market elements of an 
attribute-based approach, but believes it could be needed to provide 
for an appropriate degree of emissions reduction certainty.
    As with other structural issues such as universal versus attribute-
based approaches, EPA believes that various backstop approaches have 
conceptual advantages and disadvantages with respect to relevant 
criteria such as certainty of industry-wide carbon dioxide emissions 
reductions, flexibility with respect to consumer choice and vehicle 
offerings, varying treatment of automakers, and complexity of 
explanation and implementation. Any approach would also need to address 
the relevant factors, including cost (economic feasibility, cost 
effectiveness, and per vehicle cost) and technological feasibility. EPA 
encourages commenters to evaluate the design approaches presented 
below, as well as to suggest alternative approaches, in terms of these 
and other relevant criteria.
    As an illustrative example, Table VI-3 shows one set of fleet 
average carbon dioxide emissions and mpg backstops, along with the 
projected, average industry-wide carbon dioxide emissions and mpg 
compliance levels, for the two sets of fleet average carbon dioxide 
emissions standards based on the footprint attribute, analyzed in 
December 2007, and discussed earlier in this advance notice: The 4% per 
year and model-optimized scenarios. These carbon dioxide emissions 
backstops are based on the projected fleet average carbon dioxide 
emissions compliance levels for the high-volume car and light truck 
manufacturers with the highest projected car and light truck footprint 
levels, based on the footprint curves that were developed by EPA in 
December 2007. Chrysler is the high-volume car manufacturer with the 
highest projected footprint values, and General Motors has the highest 
projected footprint values among the high-volume truck manufacturers.
    These backstops would be universally applied to every manufacturer, 
except small volume manufacturers, and would become the effective fleet 
average standard for any automaker that would otherwise have a higher 
fleet average carbon dioxide emissions standard, for any of the three 
respective averaging sets (import and domestic cars and trucks), based 
on the footprint curve.
    The underlying rationale for this backstop approach is that the 
manufacturer that is projected to sell the highest footprint vehicles, 
which therefore is projected to be able to comply with the highest 
fleet average carbon dioxide emissions compliance levels, should be 
treated as establishing the minimum acceptable level of emissions 
reductions for the industry. Similarly, no other manufacturers should 
exceed the feasible, cost effective level established by that projected 
highest footprint manufacturer. The approach, and underlying rationale, 
is similar to the approach used by NHTSA before the 2006 truck 
standards, whereby the level of a universal standard was established 
based on the capabilities of the least capable large manufacturer 
(Public Citizen v. NHTSA, 848 F. 2d 256, 259, D.C. Cir. 1988). Although 
the backstop would not prohibit the highest footprint manufacturer from 
selling higher footprint vehicles, it would prohibit any carbon dioxide 
emissions ``backsliding'' that would otherwise be associated with that 
increase in footprint. Average carbon dioxide emissions from other 
manufacturers could increase, of course, in accordance with the 
footprint curve, but in no case could the carbon dioxide emissions 
level for any manufacturer increase beyond these backstop levels.
    The passenger car carbon dioxide emissions and mpg backstop levels 
shown in Table VI-3 adhere to the methodology described above with one 
exception. Based on Chrysler's projected footprint values, its 2011 
standard for the 4% per year option would be 325 g/mi, equivalent to a 
gasoline vehicle fuel economy of 27.3 mpg. Since the current car CAFE 
standard, which acts as an effective fuel economy backstop, is 27.5 
mpg, EPA could instead consider a 2011 backstop of 323 g/mi for the 4% 
per year option, which is equivalent to a 27.5 mpg gasoline vehicle.
    In this illustrative backstop example, the carbon dioxide emissions 
backstop levels would range from 8 to 22 g/mi, or 2 to 8%, higher than 
the projected, average industry-wide carbon dioxide levels.

[[Page 44452]]



 Table VI-3--Illustrative Backstops for the Fleet Average Carbon Dioxide Emissions Standard (CO2 grams per mile/
                                                      mpg)
----------------------------------------------------------------------------------------------------------------
                                                                             CARS
                                             -------------------------------------------------------------------
                                                  4 percent per year option          Model-optimized option
                                             -------------------------------------------------------------------
                                                 Projected                         Projected
                                               industry-wide       Backstop      industry-wide       Backstop
                                                 CO2 levels                        CO2 levels
----------------------------------------------------------------------------------------------------------------
2010 (base).................................       (323)/27.5  ...............       (323)/27.5  ...............
2011........................................         309/28.7         323/27.5         301/29.5         317/28.0
2012........................................         298/29.8         319/27.8         291/30.5         314/28.3
2013........................................         285/31.1         296/30.0         276/32.1         287/30.9
2014........................................         275/32.3         287/30.9         268/33.2         281/31.6
2015........................................         264/33.6         277/32.0         260/34.1         273/32.5
2016........................................         254/34.9         266/33.4         247/35.9         258/34.4
2017........................................         244/36.3         257/34.5         244/36.4         257/34.5
2018........................................         235/37.7         245/36.2         239/37.2         249/35.7
----------------------------------------------------------------------------------------------------------------

    A second illustrative example of a universal backstop approach 
could be modeled on the ``minimum standard'' in the Energy Independence 
and Security Act (EISA) of 2007. EISA establishes a fuel economy 
backstop for the domestic car class that is equal to 92% of the average 
fuel economy level projected for all cars. EPA believes this 92% value 
was derived by dividing the current car CAFE standard of 27.5 mpg by 
the average industry-wide car fuel economy performance over the past 
several years. The car CAFE standard, in effect, has served as a 
backstop for those manufacturers that have chosen not to pay CAFE 
penalties. Applying this model to a carbon dioxide emissions backstop 
would involve dividing the average projected industry-wide carbon 
dioxide emissions levels by 0.92, or multiplying by a factor of 1.087, 
an increase of 8.7%, to generate a universal backstop level that would 
apply to all manufacturers. Under this approach, the backstop levels 
for the 4% per year and model-optimized standards in Table VI-3 would 
be greater than the backstop levels discussed earlier in every case, 
ranging from 3 to 23 g/mi higher. This alternative approach yields 
backstop levels 20 to 31 g/mi higher than the projected, average 
industry-wide standards.
    For the backstop approaches discussed above, all automakers would 
have the same uniform backstop for domestic and import cars, and a 
higher uniform backstop for trucks. These universal approaches would 
make the backstop more of a constraint on those manufacturers that sold 
vehicles with higher average footprint levels and less of a constraint 
on those automakers that sold vehicles with lower average footprint 
levels.
    An alternative backstop approach could be to establish unique 
maximum numerical carbon dioxide emissions values that would apply to 
different automakers (e.g., X g/mi for Automaker A, and Y g/mi for 
Automaker B) and that would become the effective fleet average standard 
for an individual automaker when that automaker would otherwise be 
allowed to meet a higher fleetwide average carbon dioxide emissions 
value based exclusively on the footprint curve. The rationale for this 
type of approach would be that since manufacturers start at different 
average footprint levels, manufacturer-specific backstop values could 
provide greater insurance against carbon dioxide emissions backsliding 
for all manufacturers, rather than just those manufacturers that sold 
vehicles with higher average footprint levels. One illustrative example 
of this type of approach would be to base the annual backstop for each 
manufacturer on its 2010 carbon dioxide emissions baseline, reducing it 
by the same percentage each year. A similar approach would base the 
annual backstop for the highest-footprint manufacturer on its 2010 
carbon dioxide emissions baseline reduced by a percentage each year, 
the annual backstop for the lowest-footprint automaker on its 2010 
carbon dioxide emissions baseline reduced by a lesser percentage per 
year, and the annual backstop values for other manufacturers on annual 
percentage reductions between the higher and lower percentages. This 
latter approach would yield backstop values that would be somewhat more 
binding on manufacturers that sold vehicles with higher average 
footprint values, yet still binding to some degree on all automakers. 
This approach would also limit the degree to which manufacturers that 
sold vehicles with lower average footprint values could increase 
average footprint values over time.
    A combination of the universal and manufacturer-specific approaches 
could be to begin with manufacturer-specific backstop values, and to 
transition to uniform backstop values over a 5 or 10 year period.
    Another alternative backstop approach would not set a maximum 
numerical carbon dioxide emissions value for individual manufacturers, 
but would establish mathematical functions that would automatically 
increase the stringency of and/or ``flatten'' the footprint curves for 
future years when actual industry-wide carbon dioxide emissions 
performance in the future is found to fall short of EPA's projections 
at the time of promulgation. For example, at the time of promulgation, 
EPA could assume a certain average industry-wide carbon dioxide g/mi 
emissions level for 2011-2012. If, in 2013, EPA found that the average 
industry-wide emissions level in 2011-2012 was higher than projected in 
the final rule (and therefore the carbon dioxide emissions reductions 
were lower than projected because of higher than projected average 
footprint levels), then the backstop provisions would be triggered and 
the footprint curves for future years (say, 2016 and later) would be 
automatically changed to be more stringent and/or flatter in shape. 
This approach would reframe the backstop issue in terms of industry-
wide emissions performance, rather than in terms of individual 
automaker emissions performance.
    In lieu of a backstop, another approach would be to flatten (i.e., 
reduce the slope of) the carbon dioxide emissions-footprint curve such 
that there would a major disincentive for automakers to increase 
vehicle footprint. EPA invites comments on the pros and cons of this 
approach relative to a backstop.

[[Page 44453]]

    In conclusion, EPA seeks comment on whether a CO2 
emissions backstop is an appropriate complement to a footprint-based 
regulatory approach under the CAA to ensure that the program would 
achieve a minimum level of feasible carbon dioxide emissions 
reductions. EPA invites comments on both the potential backstop 
approaches discussed above, as well as suggestions for other 
approaches.
iii. Potential Test Procedures for Light-Duty Vehicle Tailpipe 
CO2 Emissions
    For the program options EPA analyzed to date, EPA would expect 
manufacturers and EPA to measure CO2 for certification and 
compliance purposes over the same test procedures currently used for 
measuring fuel economy, except for A/C-related CO2 
emissions. This corresponds with the data used in our analysis of the 
potential footprint-based CO2 standards presented in section 
VI.B.1.b of this advance notice, as the data on control technology 
efficiency was also developed in reference to these test procedures. 
These procedures are the Federal Test Procedure (FTP or ''city'' test) 
and the Highway Fuel Economy Test (HFET or ''highway'' test). EPA 
established the FTP for emissions measurement in the early 1970s. In 
1976, in response to requirements in the Energy Policy and Conservation 
Act (EPCA), EPA extended the use of the FTP to fuel economy measurement 
and added the HFET. The provisions in the 1976 regulation, effective 
with the 1977 model year, established procedures to calculate fuel 
economy values both for labeling and for CAFE purposes. Under EPCA, EPA 
is required to use these procedures (or procedures which yield 
comparable results) for measuring fuel economy for cars for CAFE 
purposes, but not for fuel economy labeling purposes. EPCA does not 
impose this requirement on CAFE test procedures for light trucks, but 
EPA does use the FTP and HFET for this purpose.
    On December 27, 2006, EPA established new ``5-cycle'' test 
procedures for fuel economy labeling--the information provided to the 
car-buying public to assist in making fuel economy comparisons from 
vehicle to vehicle. These procedures were originally developed for 
purposes of criteria emissions testing, not fuel economy labeling, 
pursuant to section 206(h) of the Clean Air Act, which requires EPA to 
review and revise as necessary test procedures for motor vehicles and 
motor vehicle engines ``to insure that vehicles are tested under 
circumstances which reflect the actual current driving conditions under 
which motor vehicles are used.'' In updating the fuel economy labeling 
regulations, EPA determined that these emissions test procedures take 
into account several important factors that affect fuel economy in the 
real world but are missing from the FTP and HFET tests. Key among these 
factors are high speeds, aggressive accelerations and decelerations, 
the use of air conditioning, and operation in cold temperatures. 
Consistent with section 206 (h), EPA revised its procedures for 
calculating the label estimates so that the miles per gallon (mpg) 
estimates for passenger cars and light-duty trucks would better reflect 
what consumers achieve in the real world. Under the new methods, the 
city miles per gallon estimates for the manufacturers of most vehicles 
have dropped by about 12% on average relative to the previous 
estimates, with estimates for some vehicles dropping by as much as 30%. 
The highway mpg estimates for most vehicles dropped on average by about 
8%, with some estimates dropping by as much as 25% relative to the 
previous estimates. The new test procedures only affect EPA's vehicle 
fuel economy labeling program and do not affect fuel economy 
measurements for the CAFE standards, which continue to be based on the 
original 2-cycle test procedures (FTP/HFET).
    EPA continues to believe that the new 5-cycle test procedures more 
accurately predict in-use fuel economy than the 2-cycle test 
procedures. Although, as explained below, to date there has been 
insufficient information to develop standards based on 5-cycle test 
procedures, such information could be developed and there is no legal 
constraint in the CAA to developing such standards. Indeed, section 
206(h) provides support for such an approach. Now that automotive 
manufacturers are using the 5-cycle test procedure for labeling 
purposes, we anticipate significant amount of data regarding the impact 
of the 5-cycle test on vehicle CO2 emissions will be made 
available to the Agency over the next several years.
    However, for the programs analyzed in the Light-duty Vehicle TSD, 
EPA used the original 2-cycle test. Indeed, data were simply lacking 
for the efficiencies of most fuel economy control measures as measured 
by 5-cycle tests. Thus, existing feasibility studies and analyses, such 
as the 2002 National Academy of Sciences (NAS) and the 2004 Northeast 
States Center for a Clean Air Future (NESCCAF) studies that examined 
technologies to reduce CO2, were based on the 2-cycle test 
procedures. However, as noted above, we expect that new data regarding 
the 5-cycle test procedures will be made available and could be 
considered in future analysis.
    It is important to note, however, that all of our benefits inputs, 
modeling and environmental analyses underlying the potential programs 
analyzed in the Light-duty Vehicle TSD accounted for the difference 
between emissions levels as measured by the 2-cycle test and the levels 
more likely to actually be achieved in real world performance. Thus, 
EPA applied a 20% conversion factor (2-cycle emissions result divided 
by 0.8) to convert industry-wide 2-cycle CO2 emissions test 
values to real world CO2 emissions factors. EPA used this 
industry-wide conversion factor for all of its emission reduction 
estimates, and calculated such important values as overall emission 
reductions, overall benefits, and overall cost-effectiveness using 
these corrected values. In reality, this conversion factor is not 
uniform across all vehicles. For example, the conversion factor is 
greater than 20% for vehicles with higher fuel economy/lower 
CO2 values and is less than 20% for vehicles with lower fuel 
economy/higher CO2 values. But to simplify the technology 
feasibility analysis, the analysis assumed a uniform conversion factor 
of 20% for all vehicles. EPA does not believe the overall difference 
would have a significant effect on the standards because the errors on 
either side of 20% tend to offset one another.
    EPA thus analyzed CO2 standards based on the 2-cycle 
test procedures for our analysis to date. EPA would expect to continue 
to gain additional experience and data on the 5-cycle test procedures 
used in the labeling program. If EPA determined that analyzing 
potential CO2 standards based on these test procedures would 
result in more robust control of those emissions, we would consider 
this in future analyses. EPA requests comments on the above test 
procedure issues, and the relative importance of using the 2-cycle 
versus the 5-cycle test in any future EPA action to establish standards 
for light-duty vehicle tailpipe CO2 emissions.
2. Heavy-Duty Trucks
    Like light-duty vehicles, EPA's regulatory authority to address 
pollution from heavy-duty trucks comes from section 202 of the CAA. The 
Agency first exercised this responsibility for heavy-duty trucks in 
1974. Since that time, heavy-duty truck and diesel engine technologies 
have continued to improve, and the Agency has set increasingly 
stringent emissions standards (today's diesel engines are 98% cleaner 
than those from 1974). Over that same period, freight shipment

[[Page 44454]]

by heavy-duty trucks has more than doubled. Goods shipped solely by 
truck account for 74% of the value of all commodities shipped within 
the United States. Trucked freight is projected to double again over 
the next two decades, growing from 11.5 billion tons in 2002 to over 
22.8 billion tons in 2035.\139\ Total truck GHG emissions are expected 
to grow with this increase in freight.
---------------------------------------------------------------------------

    \139\ Government Accountability Office. Freight Transportation: 
National Policy and Strategies Can Help Improve Freight Mobility 
GAO-08-287. Report to the Ranking Member, Committee on Environment 
and Public Works, U.S. Senate. January 2008.
---------------------------------------------------------------------------

    Reflecting important distinctions between light and heavy-duty 
vehicles, section 202 gives EPA additional guidelines for heavy-duty 
vehicle regulations for certain pollutants, including defined 
regulatory lead time criteria and authority to address heavy-duty 
engine rebuild practices. The Agency has further used the discretion 
provided in the CAA to develop regulatory programs for heavy-duty 
vehicles that reflect their primary function. Key differences between 
our light-duty and heavy-duty programs include vehicle standards for 
cars versus engine standards for heavy-duty trucks, gram per distance 
(mile) standards for cars versus gram per work (brake horsepower-hour) 
for trucks, and vehicle test procedures for cars versus engine-based 
tests for trucks. EPA has thus determined that in the heavy-duty 
sector, the appropriate metric to evaluate performance is per unit of 
work and that engine design plays a critical role in controlling 
criteria pollutant emissions. EPA's rules also reflect the nature of 
the heavy-duty industry with separate engine and truck manufacturers. 
As EPA considers the best way to address GHG emissions from the heavy-
duty sector, we will again be considering the important ways that 
heavy-duty vehicles differ from light-duty vehicles.
    In this section, we will characterize the heavy-duty GHG emissions 
inventory, broadly discuss the technologies available in the near- and 
long-term to reduce heavy-duty truck GHG emissions, and discuss 
potential regulatory options to address these emissions. We invite 
comment on the issues that are relevant to considering potential GHG 
emission standards for heavy-duty trucks. In particular, we invite 
commenters to compare and contrast potential heavy-duty solutions to 
our earlier discussion of light-duty vehicles and our existing heavy-
duty criteria pollutant control program in light of the differences 
between GHG emissions and traditional criteria air pollutants.
a. Heavy-Duty Truck GHG Emissions
    Heavy-duty on-road vehicles emitted 401 million metric tons of 
CO2 emissions in 2006, or approximately 19% of the mobile 
source CO2 emissions, the largest mobile source sub-category 
after light-duty vehicles.\140\ CO2 emissions from these 
vehicles are expected to increase significantly in the future, by 
approximately 29% between 2006 and 2030.\141\
---------------------------------------------------------------------------

    \140\ Emissions data in this section are from the United States 
Environmental Protection Agency. Inventory of U.S. Greenhouse Gas 
Emissions and Sinks: 1990-2006. EPA 430-R-08-005. April 2008.
    \141\ Growth data in this section is from United States 
Department of Energy, Energy Information Administration. Annual 
Energy Outlook 2008. DOE/EIA-0383. April 2008.
---------------------------------------------------------------------------

    Diesel powered trucks comprise 91% of the heavy-duty CO2 
emissions, with the remaining 9% coming from gasoline and natural gas 
engines. Heavy-duty GHG emissions come primarily from two types of 
applications, combination and single unit trucks. Combination trucks 
constitute 75% of the total heavy-duty GHG emissions--44% from long-
haul and 31% from short-haul operations. Short-haul single unit trucks 
are the third largest source at 19%. The remaining 5% consists of long-
haul single unit trucks; intercity, school, and transit buses; refuse 
trucks, and motor home emissions.\142\
---------------------------------------------------------------------------

    \142\ Breakdown of emissions data in this section is from United 
States Environmental Protection Agency. MOVES model. April 8, 2008.
---------------------------------------------------------------------------

    GHG emissions from heavy-duty trucks are dominated by 
CO2 emissions, which comprise approximately 99% of the 
total, while hydrofluorocarbon and N2O emissions represent 
0.5% and 0.3%, respectively, of the total emissions on a CO2 
equivalent basis.
b. Potential for GHG Emissions Reductions From Heavy-Duty Trucks
    Based on the work from EPA's SmartWay Transport Partnership and the 
21st Century Truck Partnership, we see a potential for up to a 40% 
reduction in GHG emissions from a typical heavy-duty truck in the 2015 
timeframe, with greater reductions possible looking beyond 2015, 
through improvements in truck and engine technologies.\143\ While 
highly effective criteria pollutant control has been realized based on 
engine system regulation alone, the following sections make clear that 
GHG emissions improvements to truck technology provide a greater 
potential for overall GHG emission reductions from this sector.
---------------------------------------------------------------------------

    \143\ 21st Century Truck Partnership. Technology Roadmap for the 
21st Century Truck Program. 21CT-001. December 2000. http://www.doe.gov/bridge.
---------------------------------------------------------------------------

    In this section, we will provide a brief summary of the potential 
for GHG emission reductions in terms of engine technology, truck 
technology and changes to fleet operations. The public docket for this 
Advance Notice includes a technical memorandum from EPA staff 
summarizing this potential in greater detail.\144\ In discussing the 
potential for CO2 emission reductions, it can be helpful to 
think of work flow through a truck's system. The initial work input is 
fuel. Each gallon of diesel fuel has the potential to produce some 
amount of work and will produce a set amount of CO2 (about 
22 lbs. of CO2 per gallon of diesel fuel). The engine 
converts the chemical energy in the fuel to useable work to move the 
truck. Any reductions in work demanded of the engine by the vehicle or 
improvements in engine fuel conversion efficiency will lead directly to 
CO2 emission reductions. Current diesel engines are about 
35% efficient over a range of operating conditions with peak efficiency 
levels of a little over 40%. This means that approximately one-third of 
the fuel's chemical energy is converted to useful work and two-thirds 
is lost to waste heat in the coolant and exhaust. In turn, the truck 
uses this work output from the engine to overcome vehicle aerodynamic 
drag (53%), tire rolling resistance (32%), and friction in the vehicle 
driveline (6%) and to provide auxiliary power for components such as 
air conditioning and lights (9%).\145\ While it may be intuitive to 
look first to the engine for CO2 reductions given that only 
about one-third of the fuel is converted to useable work, it is 
important to realize that any improvement in vehicle efficiency reduces 
both the work demanded and also the energy wasted in proportional 
amounts.
---------------------------------------------------------------------------

    \144\ Summary of GHG Emission Control Technologies for Heavy-
Duty Trucks, Memorandum to Docket XXX, May 2008.
    \145\ Approximate truck losses at 65 mph from 21st Century Truck 
Partnership. 21st Century Truck Partnership Roadmap/Technical White 
Papers: Engine Systems. 21CT-003. December 2006. http://www.doe.gov/bridge.
---------------------------------------------------------------------------

    In evaluating the potential to reduce GHG emissions from trucks and 
operations as a whole, it will be important to develop an appropriate 
metric to quantify GHG emission reductions. As discussed above, our 
current heavy-duty regulatory programs measure emissions expressed on a 
mass per work basis (g/bhp-hr). This approach has proven highly 
effective at controlling criteria pollutant emissions while normalizing 
the diverse range of

[[Page 44455]]

heavy-duty vehicle applications to a single engine-based test metric. 
While such an approach could be applied to evaluate CO2 
emission reductions from heavy-duty engines, it would not readily 
provide a mechanism to measure and compare reductions due to vehicle 
improvements. Hence, we will need to consider other performance metrics 
such as GHG emissions per ton-mile. We request comment on what types of 
metrics EPA should consider to measure and express GHG emission rates 
from heavy-duty trucks.
    We discuss below the wide range of engine, vehicle, and operational 
technologies available to reduce GHG emissions from heavy-duty trucks. 
Our discussion broadly assesses the availability of these technologies 
and their GHG emissions reduction potential. We request comment on all 
aspects of our current assessment summarized here and in more detail in 
our technical memorandum, including supporting data with regard to 
technology costs, GHG reduction effectiveness, the appropriate GHG 
metric to evaluate the technology and the timeframe in which these 
technologies could be brought into the truck market. More generally, we 
request comment on the overall GHG emissions reductions that can be 
achieved by heavy-duty trucks in the 2015 and 2030 timeframes.
i. Engine
    The majority of heavy-duty vehicles today utilize turbocharged 
diesel engines. Diesel engines are more efficient compared to gasoline 
engines due to the use of higher compression ratios, the ability to run 
with lean air-fuel mixtures, and the ability to run without a throttle 
for load control. Modern diesel engines have a peak thermal efficiency 
of approximately 42%, compared to gasoline engines that have a peak 
thermal efficiency of 30%. Turbochargers increase the engine's power-
to-weight ratio and recover some of the exhaust heat energy to improve 
the net efficiency of the engine.
    Additional engine improvements could increase efficiency through 
combustion improvements and reductions of parasitic and pumping losses. 
Increased cylinder pressure, waste heat recovery, and low viscosity 
lubricants could reduce CO2 emissions, but are not widely 
utilized in the heavy-duty industry. Individual improvements have a 
small impact on engine efficiency, but a combination of approaches 
could increase efficiency by 20% to achieve a peak engine efficiency of 
approximately 50%.\146\
---------------------------------------------------------------------------

    \146\ 21st Century Truck Partnership. 21st Century Truck 
Partnership Roadmap/Technical White Papers: Engine Systems. 21CT-
003. December 2006. http://www.doe.gov/bridge.
---------------------------------------------------------------------------

    Waste heat recovery technologies, such as Rankine bottoming cycle, 
turbocompounding and thermoelectric materials, can recover and convert 
engine waste heat to useful energy, leading to improvements in the 
overall engine thermal efficiency and consequent reduction in 
CO2 emissions. We request comment on the potential of these 
technologies to lower both GHG emissions and overall heavy-duty vehicle 
operating costs.
    In section VI.D below, we discuss the Renewable Fuel Standard (RFS) 
program and more broadly the overall role of fuel changes to reduce GHG 
emissions. As we have previously noted, the Agency has addressed 
vehicle emissions through a systems-based approach that integrates 
consideration of fuel quality and vehicle or engine emission control 
systems. For example, removing lead from gasoline and sulfur from 
diesel fuel has enabled the introduction of very clean gasoline and 
diesel engine emission control technologies. A systems approach may be 
a means to address GHG emissions as well. Since 1989, European engine 
maker Scania has offered an ethanol powered heavy-duty diesel cycle 
engine with traditional diesel engine fuel efficiency (the current 
version offers peak thermal efficiency of 43%).\147\ Depending on the 
ethanol production pathway, such an approach could offer a significant 
reduction in GHG emissions from a life cycle perspective when compared 
to more traditional diesel fuels. We request comment on the potential 
for a systems approach considering alternate fuel and engine 
technologies to reduce GHG emission from heavy-duty trucks. We also 
request comment on how EPA might structure a program to appropriately 
reflect the potential for such GHG emission reductions.
ii. Vehicle systems
    An energy audit of heavy-duty trucks shows that vehicle efficiency 
is strongly influenced by systems outside of the engine. As noted 
above, aerodynamics, tire rolling resistance, drivetrain, and weight 
are areas where technology improvements can significantly reduce GHG 
emissions through reduced energy losses. The fuel savings benefits of 
many of these technologies often offset the additional costs. 
Opportunities for HFC and additional CO2 reductions are 
available through improved air conditioning systems.
---------------------------------------------------------------------------

    \147\ Green Car Congress. Scania Extending Heavy-Duty Ethanol 
Engine Technology to Trucks. April 15, 2008. http://www.greencarcongress.com/2008/04/scania-extendin.html (April 30, 
2008).
---------------------------------------------------------------------------

    For a typical combination tractor-trailer truck traveling at 65 
mph, energy losses due to aerodynamic drag can total over 21% of the 
total energy consumed.\148\ A recent study between industry and the 
federal government demonstrated that reducing the tractor-trailer gap 
and adding trailer side skirts, trailer boat tails, and aerodynamic 
mirrors can reduce aerodynamic drag by as much as 23%. If aerodynamic 
drag were reduced from 21% to 15% (a 23% reduction), GHG emissions at 
65 mph would be reduced by almost 12%.\149\ The cost of aerodynamic 
equipment installed on a new or existing trailer is generally paid back 
within two years.\150\ As aerodynamic designs become more 
sophisticated, more consistency in how aerodynamics is measured is 
needed. There is no single, consistent approach used by industry to 
measure the coefficient of aerodynamic drag of heavy trucks. As a 
result, it is difficult for fleets to understand which truck 
configurations have the lowest aerodynamic drag. We request comment on 
the best approach to evaluate aerodynamic drag and the impact of 
aerodynamic drag on truck GHG emissions.
---------------------------------------------------------------------------

    \148\ 21st Century Truck Partnership. Technology Roadmap for the 
21st Century Truck Program. 21CT-001. December 2000. http://www.doe.gov/bridge.
    \149\ United States Department of Energy, Lawrence Livermore 
National Laboratory. Working Group Meeting on Heavy Vehicle 
Aerodynamic Drag: Presentation, Summary of Contents and Conclusion. 
UCRL-TR-214683. May 2005.
    \150\ Bachman, L. Joseph,; Anthony Erb; Cheryl Bynum. Effect of 
Single Wide Tires and Trailer Aerodynamics on Fuel Economy and 
NOx Emissions of Class 8 Line-Haul Tractor-Trailers. SAE 
Paper 2005-01-3551. 2005.
---------------------------------------------------------------------------

    For a typical combination tractor-trailer truck traveling at 65 
mph, energy losses due to tire rolling resistance can total nearly 13% 
of the total energy consumed.\151\ Approximately 80-95% of the energy 
losses from rolling resistance occur as the tire flexes and deforms 
when it meets the road surface, due to viscoelastic heat dissipation in 
the rubber. For heavy trucks, a 10% reduction in rolling resistance can 
reduce GHG emissions by 1-3%.\152\ Improvements of this magnitude and 
greater have already been demonstrated, and continued innovation in 
tire design

[[Page 44456]]

has the potential to achieve even larger improvements in the future. 
Specifying single wide tires on a new combination truck can have a 
lower initial cost and lead to immediate fuel savings.\153\ Despite the 
well-understood benefits of lower rolling resistance tires, 
manufacturers differ in how they assess tire rolling resistance. We 
seek comment on the potential for low rolling resistance tires to lower 
GHG emissions, the need for consistent protocols to measure tire 
rolling resistance, and the need for a common ranking or rating system 
to provide tire rolling resistance information to the trucking 
industry.
---------------------------------------------------------------------------

    \151\ 21st Century Truck Partnership. Technology Roadmap for the 
21st Century Truck Program. 21CT-001. December 2000. http://www.doe.gov/bridge.
    \152\ 21st Century Truck Partnership. Technology Roadmap for the 
21st Century Truck Program. 21CT-001. December 2000. http://www.doe.gov/bridge.
    \153\ United States Environmental Protection Agency. A Glance at 
Clean Freight Strategies: Single Wide-Based Tires. EPA420-F-04-004. 
February 2004.
---------------------------------------------------------------------------

    Hybrid technologies, both electric and hydraulic, offer significant 
GHG reduction potential. The hybrid powertrain is a combination of two 
or more power sources: an internal combustion engine and a second power 
source with an energy storage and recovery device. Trucks operating 
under stop-and-go conditions, such as urban delivery trucks and refuse 
trucks, lose a significant amount of energy during braking. In 
addition, engines in most applications are designed to perform under a 
wide range of requirements and are often oversized for the majority of 
their requirements. Hybrid powertrain technologies offer opportunities 
to capture braking losses and downsize the engine for more efficient 
operation. We invite comment on the potential of GHG reductions from 
hybrids in all types of heavy-duty applications.
    Currently most truck auxiliaries, such as the water pump, power 
steering pump, air conditioning compressor, air compressor and cooling 
fans, are mechanical systems typically driven by belts or gears off of 
the engine driveshaft. The auxiliary systems are inefficient because 
they produce power proportionate to the engine speed regardless of the 
actual vehicle requirements and require conversion of fuel energy to 
electrical or mechanical work. If systems were driven by electrical 
systems they could be optimized for actual requirements and reduced 
energy consumption. We request comment on the potential for these 
auxiliary systems to lower GHG emissions from heavy-duty trucks.
    Air conditioning systems are responsible for GHG emissions from 
refrigerant leakage and from the exhaust emissions generated by the 
engine to produce the load required to run the air conditioning. The 
emissions due to leakage can be reduced by the use of improved sealing 
designs, low-permeation hoses, and refrigerant substitution. Replacing 
today's refrigerant, HFC-134a, which has a high global warming 
potential (GWP=1,300), with HFC-152a (GWP=120) or CO2 
(GWP=1) reduces the impact of the air conditioning leakage on the 
environment.\154\ The load requirements of the air conditioning system 
can be reduced through the use of improved condensers, evaporators, and 
variable displacement compressors. We request comment on the impact of 
air conditioning improvements on GHG reductions in heavy-duty trucks.
iii. Operational
---------------------------------------------------------------------------

    \154\ Frey, H. Christopher and Po-Yao Kuo. Best Practices 
Guidebook for GHG Emissions Reductions in Freight Transportation. 
Prepared for U.S. Department of Transportation via Center for 
Transportation and the Environment. October 2007. Pages 26-27.
---------------------------------------------------------------------------

    The operation of the truck, including idle time and vehicle speed, 
also has significant impact on the GHG emissions. Technologies that 
improve truck operation exist and provide benefits to owners through 
reduced fuel costs.
    Idling trucks emit a significant amount of CO2 emissions 
(as well as criteria pollutants). On average, a typical truck will emit 
18 pounds of CO2 per hour of idling.\155\ Long haul truck 
idle reduction technologies can reduce main engine idling while still 
meeting cab comfort needs. Some idle reduction technologies have no 
upfront cost for the truck owner and hence represent an immediate 
savings in operating costs with lower GHG emissions. Other idle 
reduction technologies pay back within three years.\156\ In addition to 
providing information about these systems, EPA seeks comment on whether 
it should work with stakeholders to develop a formal evaluation 
protocol for the effectiveness, cost, durability, and operability of 
various idle-reduction technologies.
---------------------------------------------------------------------------

    \155\ United States Environmental Protection Agency. A Glance at 
Clean Freight Strategies: Idle Reduction. EPA420-F-04-009. February 
2004.
    \156\ EPA SmartWay Transport Partnership, Technology Package 
Savings Calculator, http://www.epa.gov/smartway/calculator/loancalc.htm.
---------------------------------------------------------------------------

    Vehicle speed is the single largest operational factor affecting 
CO2 emissions from large trucks. A general rule of thumb is 
that every mph increase above 55 mph increases CO2 emissions 
by more than 1%. Speed limiters are generally available on new trucks 
or as a low-cost retrofit, and assuming a five mph decrease in speed, 
payback occurs within a few months.\157\
---------------------------------------------------------------------------

    \157\ American Trucking Associations Petition to National 
Highway Traffic Safety Administration, (Docket NHTSA-2007-26851, 
Document ID NHTSA-2007-26851-0005), October 20, 2006, and American 
Trucking Associations Comment to Docket (Docket NHTSA-2007-26851, 
Document ID NHTSA-2007-26851-3708), March 27, 2007.
---------------------------------------------------------------------------

    Automatic tire inflation systems maintain proper inflation 
pressure, and thereby reduce tire rolling resistance. Studies indicate 
that automatic tire inflation systems result in about 0.5 to 1% 
reduction of CO2 emissions for a typical truckload or less-
than-truckload over-the-road trucking fleet.\158\ Automatic tire 
inflation systems can pay back in less than four years, assuming 
typical underinflation rates.
---------------------------------------------------------------------------

    \158\ mission reduction and payback information from United 
States Environmental Protection Agency. A Glance at Clean Freight 
Strategies: Automatic Tire Inflation Systems. EPA420-F-04-010. 
February 2004.
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    All of the technologies summarized here can provide real GHG 
reductions while providing value to the truck owner through reduced 
fuel consumption. We request comment on the potential of these specific 
technologies and on any other technologies that may allow vehicle 
operators to reduce overall GHG emissions.
c. Regulatory Options for Reducing GHGs From Heavy-Duty Trucks
    In developing any GHG program for heavy-duty vehicles, we would 
rely on our past experience addressing the multifaceted characteristics 
of this sector. In the following sections, we discuss three potential 
regulatory approaches for reducing GHG emissions from the heavy-duty 
sector. We request comments on all aspects of these options. We also 
encourage commenters to suggest other approaches that EPA should 
consider to address GHG emissions from heavy-duty trucks, recognizing 
that there are some important differences between criteria air 
pollutants and GHG emissions.
    The heavy-duty engine manufacturers have made great strides in 
reducing criteria pollutant emissions. We know these same manufacturers 
have already achieved GHG emission reductions through the introduction 
of more efficient engine technologies, and have the potential to 
realize even greater reductions. We estimate that approximately 30% of 
the overall GHG emission reduction potential from this sector comes 
from engine improvements, 60% from truck improvements, and 10% from 
operational improvements based on the technologies outlined in the 21st 
Century Truck roadmap and Best Practices Guidebook for GHG Emissions 
Reductions in Freight Transportation. We request comment on our 
assessment

[[Page 44457]]

of the relative contributions of engine, truck, and operational 
technologies.
    The first approach we could consider would be a regulatory program 
based on an engine CO2 standard or weighted GHG standard 
including N2O and methane. One advantage to this option is 
its simplicity because it preserves the current regulatory and market 
structures. The heavy-duty engine manufacturers are familiar with 
today's certification testing and procedures. They have facilities, 
engine dynamometers, and test equipment to appropriately measure 
emissions. The same equipment and test procedures can be, and already 
are, used to measure CO2 emissions. Measuring and reporting 
N2O and methane emissions would require relatively simple 
additions to existing test cell instrumentation. We request comment 
regarding issues that EPA should consider in evaluating this option and 
the most appropriate means to address the issues raised. We recognize 
that an engine-based regulatory structure would limit the potential GHG 
emission reductions compared to programs that include vehicle 
technologies and the crediting of fleets for operational improvements. 
The other approaches considered below would have the potential to 
provide greater GHG reductions by providing mechanisms to account for 
vehicle and fleet operational changes.
    Recognizing that GHG emissions could be further reduced through 
improvements to both engines and trucks, we request comment on an 
alternative test procedure that would include vehicle aspects in an 
engine-based standard. This option would still be based on an engine 
standard. However, it would provide a mechanism to adjust the engine 
test results to account for improvements in vehicle design. For 
example, if through an alternate test procedure (e.g., a vehicle 
chassis test) a hybrid truck were shown to reduce GHG emissions by 20%, 
under this option an engine based GHG test result could be adjusted 
downward by that same 20%. In this way, we could reflect a range of 
vehicle or perhaps even operational changes into an engine based 
regulatory program. In fact, we are already developing such an approach 
for a vehicle based change to provide a better mechanism to evaluate 
criteria emissions from hybrid vehicles.\159\ We are currently working 
with the heavy-duty industry to develop these new alternate test 
procedures and protocols. These new procedures could provide a 
foundation for regulatory programs to address GHG emissions as well. We 
request comment on the potential for alternate test procedures to 
reflect vehicle technologies in an engine based GHG regulatory program.
---------------------------------------------------------------------------

    \159\ As discussed in section VI.C.2, we have also applied a 
similar alternate test procedure approach in our new locomotive 
standards (see 40 CFR 1033.530(h)).
---------------------------------------------------------------------------

    A second potential regulatory option for heavy-duty truck GHG 
emissions would be to follow a model very similar to our current light-
duty vehicle test procedures. Each truck model could be required to 
meet a GHG emissions standard based on a specified drive cycle. The 
metric for the standard could be either a weighted GHG gram/mile with 
prescribed test weight and payload or GHG gram/payload ton-mile to 
recognize that heavy-duty trucks perform work. This option would 
reflect an important change from our current regulatory approach for 
most heavy-duty vehicles by direct regulation of trucks (and therefore 
truck manufacturers) rather than engines.\160\ As discussed earlier in 
this section, we have historically regulated heavy-duty engines rather 
than vehicles reflecting in part the heavy-duty industry structure and 
in part the preeminence of engine technology in controlling 
NOX and PM emissions. Clearly truck design plays a much more 
important role in controlling GHG emissions due to significant energy 
losses through aerodynamic drag and tire rolling resistance, and 
therefore, this option directly considers the regulation of heavy-duty 
trucks. We request comment on all aspects of this option including the 
appropriate test metric, the need to develop new test procedures and 
potential approaches for grouping heavy-duty vehicles into 
subcategories for GHG regulatory purposes.
---------------------------------------------------------------------------

    \160\ For some years EPA has allowed gasoline and other non-
diesel vehicle manufactures to certify to and comply with a vehicle 
based standard as compared to en engine based standard, at their 
option. See, e.g., 40 CFR 86.005-10.
---------------------------------------------------------------------------

    As described earlier, there are a number of technologies and 
operational changes that heavy-duty fleet operators can implement to 
reduce both their overall operating costs and their GHG emissions. 
Therefore, a third regulatory option that could be considered as a 
complement to those discussed previously would be to allow heavy-duty 
truck fleets to generate GHG emissions credits for applying 
technologies to reduce GHG emissions, such as idle reduction, vehicle 
speed limiters, air conditioning improvements, and improved aerodynamic 
and tire rolling resistance. In order to credit the use of such 
technologies, EPA would first need to develop procedures to evaluate 
the potential for individual technologies to reduce GHGs. Such a 
procedure could be based on absolute metrics (g/mile or g/ton-mile) or 
relative metrics (percent reductions). We would further need to address 
a wide range of complex potential issues including mechanisms to ensure 
that the reductions are indeed realized in use and that appropriate 
assurance of such future actions could be provided at the time of 
certification, which occurs prior to the sale of the new truck. Such a 
regulatory program could offer a significant opportunity to reward 
trucking fleets for their good practices while providing regulatory 
flexibility to help address the great diversity of the heavy-duty 
vehicle sector. It would not lead to any additional GHG reductions, 
however, as the credits generated by the fleet operators would be used 
by the engine or vehicle makers to comply with their standards. We 
welcome comments on the merits and issues surrounding potential 
approaches to credit operational and technical changes from heavy-duty 
fleets to reduce GHG emissions.
    In considering the regulatory options available, we are cognizant 
of the significant burden that could result if these programs were to 
require testing of every potential engine and vehicle configuration 
related to its GHG emissions. Therefore, we have been following efforts 
in Japan to control GHG emissions through a regulatory program that 
relies in part on engine test data and in part on vehicle modeling 
simulation. As currently constructed, Japan's heavy-duty fuel 
efficiency regulation considers engine fuel consumption, transmission 
type, and final drive ratio in estimating overall GHG emissions. Such a 
modeling approach may be a worthwhile first step and may be further 
improved by including techniques to recognize design differences in 
vehicle aerodynamics, tire rolling resistance, weight, and other 
factors. We request comment on the appropriateness of combining 
emissions test data with vehicle modeling results to quantify and 
regulate GHG emissions. In particular, we welcome comments addressing 
issues including model precision, equality aspects of model based 
regulation, and the ability to standardize modeling inputs.
    The regulatory approaches that we have laid out in this section 
reflect incremental steps along a potential path to fully address GHG 
emissions from this sector. These approaches should not be viewed as 
discrete options but rather as potential building blocks that could be 
mixed and matched in an

[[Page 44458]]

overall control program. Given the potential for significant burden, 
EPA is also interested in considering how flexibilities such as 
averaging, banking, and/or credit trading that may help to reduce costs 
may be built into any of the regulatory options discussed above. We 
request comment on all of the approaches described in this section and 
the potential to implement one or more of these approaches in a phased 
manner to capture the more straightforward approaches in the near-term 
and the more complex approaches over a longer period.
3. Highway Motorcycles
    The U.S. motorcycle fleet encompasses a vast array of types and 
styles, from small and light scooters with chainsaw-sized engines to 
large and heavy models with engines as big as those found in many 
family sedans. In 2006 approximately 850,000 highway motorcycles were 
sold in the U.S., reflecting a near-quadrupling of sales in the last 
ten years. Even as motorcycles gain in popularity, their overall GHG 
emissions remain a relatively small fraction of all mobile source GHG 
emissions. Most motorcycles are used recreationally and not for daily 
commuting, and use is seasonally limited in much of the country. For 
these reasons and the fact that the fleet itself is relatively small, 
total annual vehicle miles traveled for highway motorcycles is about 
9.5 billion miles (as compared to roughly 1.6 trillion miles for 
passenger cars).\161\
---------------------------------------------------------------------------

    \161\ ``Highway Statistics 2003,'' U.S. Department of 
Transportation, Federal Highway Administration, Table VM-1, December 
2004.
---------------------------------------------------------------------------

    The Federal Highway Administration reports that the average fuel 
economy for motorcycles in 2003 was 50 mpg, almost twice that of 
passenger cars in the same time frame. However, motorcycles are 
generally designed and optimized to achieve maximum performance, not 
maximum efficiency. As a result, many high-performance motorcycles have 
fuel economy in the same range as many passenger cars despite the 
smaller size and weight of motorcycles. Recent EPA emission regulations 
are expected to reduce fuel use and hence GHG emissions from 
motorcycles by: (1) Leading manufacturers to increase the use of 
electronic fuel injection (replacing carburetors); (2) reducing 
permeation from fuel lines and fuel tanks; and (3) eliminating the use 
of two-stroke engines in the small scooter category.\162\
---------------------------------------------------------------------------

    \162\ See 69 FR 2398, January 15, 2004.
---------------------------------------------------------------------------

    There may be additional opportunities for further reductions in GHG 
emissions. Options available to manufacturers may include incorporating 
more precise feedback fuel controls; controlling enrichment on cold 
starts and under load by electronically controlling choke operation; 
allowing lower idle speeds when the opportunity exists; optimizing 
spark for fuel and operating conditions through use of a knock sensor; 
and, like light-duty vehicles, reducing the engine size and 
incorporating a turbo-charger. The cost of these fuel saving and GHG 
reducing technologies may be offset by the fuel savings realized over 
the lifetime of the motorcycle.
    We request comment on information on what approaches EPA should 
consider for potential further reductions in GHG emissions from 
motorcycles. We also request comment and data regarding what 
technologies may be applicable to achieve further GHG reductions from 
motorcycles.

C. Nonroad Sector Sources

    As discussed previously, CAA section 213 provides broad authority 
to regulate emissions from a wide array of nonroad engines and 
vehicles,\163\ while CAA section 211 provides authority to regulate 
fuels and fuel additives from both on-highway and nonroad sources and 
CAA section 231 authorizes EPA to establish emissions standards for 
aircraft. Collectively, the Title II nonroad and fuel regulation 
programs developed by EPA over the past two decades provide a possible 
model for how EPA could structure a long-term GHG reduction program for 
nonroad engines and vehicles, fuels and aircraft.
---------------------------------------------------------------------------

    \163\ The Act does not define ``vehicle'', but we have 
interpreted section 213 from its inception to include the broad 
array of equipment, machines, and vessels powered by nonroad 
engines, including those that are not self-propelled, such as 
portable power generators. In keeping with common usage, we 
typically use the generic terms ``equipment'', ``machine'', or 
``application'', as well as the more application-specific terms 
``vehicle'' and ``vessel'', to refer to these units, as appropriate.
---------------------------------------------------------------------------

    In this section, we first review and request comment on a number of 
petitions received by EPA requesting action to regulate GHG emissions 
from these sources and we highlight the similarities and key issues 
raised in those petitions. We invite comment on all of the questions 
and issues raised in these petitions. For each of three primary 
groupings, nonroad, marine, and aircraft, we then discuss and seek 
comment on the GHG emissions from these sources and the opportunities 
to reduce GHG emissions through design and operational changes.
1. Petition Summaries
    Since the Massachusetts decision, EPA has received seven additional 
petitions requesting that we make endangerment findings and undertake 
rulemaking procedures using our authority under CAA sections 211, 213 
and 231 to regulate GHG \164\ emissions from fuels, nonroad sources, 
and aircraft. The petitioners represent states, local governments, 
environmental groups, and nongovernmental organizations (NGO) including 
the states of California, New Jersey, New Mexico, Friends of the Earth, 
NRDC, OCEANA, International Center for Technology Assessment, City of 
New York, and the South Coast Air Quality Management District. Copies 
of these seven petitions can be found in the docket for this Advance 
Notice. Following is a brief summary of these petitions. We request 
comment on all issues raised by the petitioners.
---------------------------------------------------------------------------

    \164\ While petitioners vary somewhat in their definition of 
GHGs, collectively they define carbon dioxide, methane, nitrous 
oxide, hydrofluorocarbons, perfluorocarbons, water vapor, sulfur 
hexaflouride, and soot or black carbon as GHGs.
---------------------------------------------------------------------------

a. Marine Engine and Vessel Petitions
    The Agency has received three petitions to reduce GHG emissions 
from ocean-going vessels (OGVs). California submitted its petition on 
October 3, 2007. A joint petition was filed on the same day by 
EarthJustice on behalf of three environmental organizations: Oceana, 
Friends of the Earth and the Center for Biological Diversity 
(``Environmental Petitioners''). A third petition was received from the 
South Coast Air Quality Management District (SCAQMD) on January 10, 
2008.
    The California petition requests that EPA immediately begin the 
process to regulate GHG emissions from Category 3 powered OGVs.\165\ 
According to the petition, the Governor of California has already 
recognized that, ``California is particularly vulnerable to the impacts 
of climate change,'' including the negative impact of increased 
temperature on the Sierra snowpack, one of the State's primary sources 
of water, and the further exacerbation of California's air quality 
problems.\166\ The petition outlines the steps California has already 
taken to reduce its own contributions to global warming and states that 
it is petitioning the Administrator to take action to regulate GHG 
emissions from

[[Page 44459]]

OGVs because it believes national controls will be most effective.
---------------------------------------------------------------------------

    \165\ A category 3 vessel is one where the main propulsion 
engine(s) have a per-cylinder displacement of more than 30 liters.
    \166\ State of California, Petition for Rulemaking Seeking the 
Regulation of Greenhouse Gas Emissions from Ocean--Going Vessels, 
page3, October 3, 2007 (``California Petition'').
---------------------------------------------------------------------------

    California makes three key points in its petition. First, 
California claims that EPA has clear authority to regulate OGV GHG 
emissions under CAA section 213(a)(4). The State points out that the 
``primary substantive difference'' between CAA section 202(a)(1), which 
the Supreme Court found authorizes regulation of GHGs emissions from 
new motor vehicles upon the Administrator making a positive 
endangerment finding, and section 213 is that section 202(a)(1) 
requires regulation if such an endangerment finding is made while 
section 213(a)(4) authorizes, but does not require, EPA to regulate 
upon making the requisite endangerment finding. But petitioner states 
that EPA's discretion to decide whether to regulate OGVs under section 
213(a)(4) is constrained in light of the overall structure and purpose 
of the CAA. Citing the Massachusetts decision, California asserts that 
the Supreme Court has ``set clear and narrow limits on the kinds of 
reasons EPA may advance for declining to regulate significant sources 
of GHGs''.
    The second claim California makes is that international law does 
not bar regulation of GHG emissions from foreign-flagged vessels by the 
U.S. California asserts that U.S. laws can operate beyond U.S. borders 
(referred to as extra-territorial operation of laws) when the conduct 
being regulated affects the U.S. and where Congress intended such 
extra-territorial application.\167\ Petitioner believes that such 
application of the CAA is both ``permissible and essential in this 
case'' because to effectively control GHG emissions from shipping 
vessels, the EPA must regulate foreign-flagged vessels since they 
comprise 95% of the fleet calling on U.S. ports.\168\ Petitioner cites 
two other instances where the U.S. has regulated foreign-flagged 
vessels. First, in Specto v. Norwegian Cruiseline. 545 U.S. 119 (2005), 
the Supreme Court held that the Americans with Disabilities Act (ADA) 
could be applied to foreign-flagged cruise ships that sailed from U.S. 
ports as long as the required accommodations for disabled passengers 
did not require major, permanent modification to the ships involved. 
Second, the National Park Service recently imposed air pollutant 
emissions controls on cruise ships, including foreign-flagged cruise 
ships that sail off the coast from Glacier Bay National Park, Alaska. 
The petitioner points out that in this case they did so to protect and 
preserve the natural resources of the Park, which is analogous to 
California's reasons for why EPA must regulate GHG emissions from 
foreign-flagged vessels.\169\
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    \167\ Petitioners cite EEOC v. Arabian American Oil Co., 499 
U.S. 244 (1991) (``Aramco'') as supporting this principle.
    \168\ California Petition, page 13.
    \169\ Petitioners cite regulations found at 36 CFR 13.65 (b)(4) 
and 61 FR 27008, at 27011.
---------------------------------------------------------------------------

    The third claim raised in California's petition is that technology 
is currently available to reduce GHG emissions from these vessels, 
either through NOX reductions or by reducing fuel 
consumption. Options include, using marine diesel fuel oil instead of 
bunker fuel, using selective catalytic reductions and exhaust gas 
recirculation or by reducing speed. Petitioner states that the Clean 
Air Act was intended to be a technology-forcing statute and that EPA 
can and should consider OGV control measures that force the development 
of new technology.
    California requests three forms of relief: (1) That EPA make a 
finding that carbon dioxide emissions from new marine engines and 
vessels significantly contribute to air pollution which may reasonably 
be anticipated to endanger public health and welfare; (2) that EPA use 
its CAA section 213(a)(4) authority to adopt regulations specifying 
emissions standards for CO2 emissions from these engines and 
vessels; and (3) that EPA adopt regulations specifying fuel content or 
type necessary to carry out the emission standards adopted for new 
marine engines.
    The second group requesting EPA action on OGVs, Environmental 
Petitioners, believes that climate change threatens public health and 
welfare and that marine shipping vessels make a significant 
contribution to GHG emissions, and that therefore EPA should quickly 
promulgate regulations requiring OGVs to meet emissions standards by 
``operating in a fuel-efficient manner, using cleaner fuels and/or 
employing technical controls, so as to reduce emissions of carbon 
dioxide, nitrous oxide, and black carbon.'' These petitioners further 
state that EPA should also control ``the manufacture and sale of fuels 
used in marine shipping vessels by imposing fuel standards'' to reduce 
GHG emissions.\170\
---------------------------------------------------------------------------

    \170\ Environmental Petition, Petition for Rulemaking Under the 
Clean Air Act to Reduce the Emissions of Air Pollutants from Marine 
Shipping Vessels that Contribute to Global Climate Change, page 2, 
October 3, 2007.
---------------------------------------------------------------------------

    The Environmental Petitioners focus their petition on four specific 
arguments. First, like California, they assert that OGVs play a 
significant role in global climate change. They focus on the emissions 
of four pollutants: CO2, NOX, N20, and 
black carbon (also known as soot). Petitioners cite numerous studies 
that they assert document that the impact of these GHG emissions are 
significant today and that industry trends indicate these emissions 
will grow substantially in future decades. Second, petitioners lay out 
a detailed legal argument asserting that EPA has clear authority to 
regulate these four air pollutants from OGVs, and contending that the 
Massachusetts decision must guide EPA's actions as it decides how to 
regulate GHG emissions from OGVs. Third, petitioners discuss a number 
of regulatory measures that can effectively reduce GHG emissions from 
OGVs and which EPA could adopt using its regulatory authority under CAA 
section 213(a)(4), including measures requiring restrictions on vessel 
speed; requiring the use of cleaner fuels in ships and other technical 
and operations measures petitioners believe are relatively easy and 
cost-effective. Lastly, petitioners assert that the CAA section 213 
provides EPA with clear authority to regulate GHG emissions from both 
new and remanufactured OGV engines as well as from foreign-flagged 
vessels.
    SCAQMD petition also requests Agency action under section 213 of 
the CAA and states that it has a strong interest in the regulation of 
GHG emissions from ships including emissions of NOX, PM, and 
CO2. SCAQMD states that the net global warming effect of 
NOX emissions is potentially comparable to the climate 
effect from ship CO2 emissions and that PM emissions from 
ships in the form of black carbon can also increase climate 
change.\171\ Finally, because international shipping activity is 
increasing yearly, SCAQMD asserts that if EPA dos not act quickly, 
future ship pollution will become even worse, increasing both ozone and 
GHG levels in the South Coast area of California. As with other 
petitioners, SCAQMD states that there is a clear legal basis for EPA to 
regulate ships GHG emissions under section 213(a)(4).
---------------------------------------------------------------------------

    \171\ SCAQMD, Petition for Rulemaking under the Clean Air Act to 
Reduce Global Warming Pollutants from Ships, page 2, January 10, 
2008.
---------------------------------------------------------------------------

    SCAQMD makes two additional assertions in its petition which mirror 
the California and Environmental Petitions. First, EPA can avoid 
regulation of ship GHG emissions only if it determines that 
``endangerment'' can be avoided without regulation of ship 
emissions.\172\ Second, SCAQMD believes that EPA has the authority to 
regulate foreign-flagged vessels under at

[[Page 44460]]

least two circumstances: (1) For a foreign owned and operated vessel, 
where the regulation(s) would not interfere with matters that ``involve 
only the internal order and discipline of the vessel,'' Spector v. 
Norwegian Cruise Lines, 545 U.S. 119, 131 (2005), and (2) where the 
vessel is owned and operated by a U.S. corporation, even if it is 
foreign-flagged.\173\
---------------------------------------------------------------------------

    \172\ SCAQMD Petition, page 9.
    \173\ SCAQMD Petition, page10.
---------------------------------------------------------------------------

    SCAQMD requests two types of relief: (1) That EPA, within six 
months of receiving its petition, make a positive endangerment 
determine for CO2, NOX, and black carbon 
emissions from new marine engines and vessels ``because of their 
contribution to climate change;'' and (2) that EPA promulgate 
regulations under CAA section 213 (a)(4) to obtain the maximum feasible 
reductions in emissions of these pollutants. We invite comment on all 
elements of the petitioners' assertions and requests.
b. Aircraft Petitions
    The Agency has received two petitions to reduce GHG emissions from 
aircraft.\174\ The first petition was submitted on December 4, 2007, by 
California, Connecticut, New Jersey, New Mexico, Pennsylvania's 
Department of Environmental Protection, the City of New York, the 
District of Columbia, and the SCAQMD (``State Petitioners''). A second 
petition was filed on December 31, 2007, by Earthjustice on behalf of 
four environmental organizations: Friends of the Earth, Oceana, Center 
for Biological Diversity and NRDC (``Environmental Petitioners'').
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    \174\ While aircraft engines are not ``nonroad engines'' as 
defined in CAA section 216(10) and aircraft are not ``nonroad 
vehicles'' as defined in CAA section 216(11), such that aircraft 
could be subject to regulation under CAA section 213, for 
organizational efficiency we include aircraft in this ``Nonroad 
Sector Sources'' section of today's notice.
---------------------------------------------------------------------------

    All petitioners request that EPA exercise its authority under 
section 231(a) of the CAA to regulate GHG emissions from new and 
existing aircraft and/or aircraft engine operations, after finding that 
aircraft GHG emissions cause or contribute to air pollution which may 
reasonably be anticipated to endanger public health or welfare.\175\ 
Petitioners suggest that these regulations could allow compliance 
through technological controls, operational measures, emissions fees, 
or a cap-and-trade system.
---------------------------------------------------------------------------

    \175\ Petitioners maintain that aircraft engine emissions of 
CO2, NOX, water vapor, carbon monoxide, oxides 
of sulfur, and other trace components including hydrocarbons such as 
methane and soot contribute to global warming and that in 2005, 
aircraft made up 3% of U.S. CO2 emissions from all 
sectors, and 12% of such emissions from the transportation sector. 
States of California et al, Petition for Rulemaking Seeking the 
Regulation of Greenhouse Gas Emissions from Aircraft, page 11, 
December 4, 2007, and Friends of the Earth et al., Petition for 
Rulemaking under the Clean Air Act to Reduce the Emissions of Air 
Pollutants from Aircraft that Contribute to Global Climate Change, 
pages 6-7, December 31, 2007.
---------------------------------------------------------------------------

    Both petitions discuss how aircraft engines emit GHG emissions 
which they assert have a disproportionate impact on climate change. 
Petitioners cite a range of scientific documents to support their 
statements. They assert that ground-level aircraft NOX, a 
compound they identify as a GHG, contributes to the formation of ozone, 
a relatively short-lived GHG. NOX emissions in the upper 
troposphere and tropopause, where most aircraft emissions occur, result 
in greater concentrations of ozone in those regions of the atmosphere 
compared to ground level ozone formed as a result of ground level 
aircraft NOX emissions. Petitioners contend that aircraft 
emissions contribute to climate change also by modifying cloud cover 
patterns. Aircraft engines emit water vapor, which petitioners identify 
as a GHG that can form condensation trails, or ``contrails,'' when 
released at high altitude. Contrails are visible line shaped clouds 
composed of ice crystals that form in cold, humid atmospheres. 
Persistent contrails often evolve and spread into extensive cirrus 
cloud cover that is indistinguishable from naturally occurring cirrus 
clouds. The petitioners state that over the long term this contributes 
to climate change.
    State Petitioners highlight the effects climate change will have in 
California and the City of New York as well as efforts underway in both 
places to reduce GHG emissions. They argue that without federal 
government regulation of GHG emissions from aircraft, their efforts at 
mitigation and adaptation will be undermined. Both petitioners urge 
quick action by EPA to regulate aircraft GHG emissions since these 
emissions are anticipated to increase considerably in the coming 
decades due to a projected growth in air transport both in the United 
States and worldwide. They cite numerous reports to support this point, 
including an FAA report, which indicates that by 2025 emissions of 
CO2 and NOX from domestic aircraft are expected 
to increase by 60%.\176\
---------------------------------------------------------------------------

    \176\ FAA, Office of Environment and Energy, Aviation and 
Emission: A Primer, January 2005, page 10, available at http://www.faa.gov/regulations_policies/policy_guidance/envir_policy/media/aeprimer.pdf.
---------------------------------------------------------------------------

    We request comment on all issues raised in the petitions, 
particularly on two assertions made by Environmental Petitioners: (1) 
That technology is available to reduce GHG emissions from aircraft 
allowing EPA to take swift action, and (2) that EPA has a mandatory 
duty to control GHG emissions from aircraft and can fulfill this duty 
consistent with international law governing aircraft. In addition, we 
invite comment on the petitioners' assessment of the impact of aircraft 
GHG emissions on climate change, including the scientific understanding 
of these impacts, and whether aircraft GHG emissions cause or 
contribute to air pollution which may reasonably be anticipated to 
endanger public health or welfare.
    With regard to technology, petitioners highlight existing and 
developing aviation procedures and technologies which could reduce GHG 
emissions from new and existing aircraft. For example, they point to 
various aviation operations and procedures including minimizing engine 
idling time on runways and employing single engine taxiing that could 
be undertaken by aircraft to reduce GHG emissions. Petitioners also 
discuss the availability of more efficient aircraft designs to reduce 
GHG emissions, such as reducing their weight, and they suggest that 
using alternative fuels could also reduce aviation GHG emissions.
    Environmental Petitioners contend that once EPA makes a positive 
endangerment finding for aircraft GHG emissions, EPA has a mandatory 
duty to act, but that the potential regulatory responses available to 
EPA are quite broad and should be considered for all classes of 
aircraft, including both new and in-use aircraft and aircraft engines. 
In addition, petitioners argue that EPA's authority to address GHG 
emissions from aircraft is consistent with international law-in 
particular the Convention on International Civil Aviation (the 
``Chicago Convention'')--and that the United States'' obligations under 
the Convention do not constrain EPA's authority to adopt a program that 
addresses aviation's climate change impacts, including those from 
foreign aircraft.
    The State and Environmental Petitioners each request the following 
relief: (1) That EPA make an explicit finding under CAA section 
231(a)(2)(A) that GHG emissions from aircraft cause or contribute to 
air pollution which may reasonably be anticipated to endanger public 
health or welfare; (2) that EPA propose and adopt standards for GHG 
emissions from both new and in-use aircraft as soon as possible; (3) 
that EPA adopt regulations that allow a range of compliance approaches, 
including emissions limits, operations practices and/or fees, a cap-
and-trade system, as well as measures that are more near-

[[Page 44461]]

term, such as reduced taxi time or use of ground-side electricity 
measures. The Environmental Petitioners' also request that EPA issue 
standards 90 days after proposal. We invite comment on all elements of 
the petitioners' assertions and requests, as well as the scientific and 
technical basis for their assertions and requests.
c. Nonroad Engine and Vehicle Petitions
    On January 29, 2008, EPA received two petitions to reduce GHG 
emissions from nonroad engines and vehicles. The first petition was 
submitted by California, Connecticut, Massachusetts, New Jersey and 
Oregon and Pennsylvania's Department of Environmental Protection 
(``State Petitioners''). The second petition was submitted by the 
Western Environmental Law Center on behalf of three nongovernmental 
organizations: the International Center for Technology Assessment, 
Center for Food Safety, and Friends of the Earth (``NGO Petitioners'').
    Both petitions request that EPA exercise its authority under CAA 
section 213(a)(4) to adopt emissions standards to control and limit GHG 
emissions from new nonroad engines excluding aircraft and vessels. Both 
petitions seek EPA regulatory action on a wide range of nonroad engines 
and equipment, which the petitioners believe, contribute substantially 
to GHG emissions, including outdoor power equipment, recreational 
vehicles, farm and construction machinery, lawn and garden equipment, 
logging equipment and marine vessels.\177\
---------------------------------------------------------------------------

    \177\ The two petitions request that EPA regulate slightly 
different categories of nonroad engines and vehicles under CAA 
section 213. State Petitioners exclude from their request aircraft, 
locomotives and ocean-going vessels and do not include rebuilt 
heavy-duty engines. The NGO Petitioners exclude only aircraft and 
ocean-going vessels but also request that EPA use its CAA section 
202 authority to regulate GHG emissions from rebuilt heavy-duty 
engines.
---------------------------------------------------------------------------

    The State Petitioners, mirroring the earlier State petitions on 
ocean-going vessels and aircraft, describe the harms which they believe 
will occur due to climate change, including reduced water supplies, 
increased wildfires, and threats to agricultural outputs in California; 
loss of coastal wetlands, beach erosion, saltwater intrusion of 
drinking water in Massachusetts and Connecticut; and similar harms to 
the Pennsylvania, New Jersey and Oregon. The petition highlights 
actions that California has already taken to reduce its own 
contributions to global warming but points out that only EPA has 
authority to regulate emissions from new farm and construction 
equipment under 175 horsepower, ``which constitutes a sizeable portion 
of all engines in this category.* * * '' \178\
---------------------------------------------------------------------------

    \178\ States Petition for Nonroad, page 7-8.
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    The State Petitioners present three claims which, they believe 
compel EPA action to reduce GHG emissions from nonroad sources. First, 
petitioners claim that GHG emissions from these sources are 
significant.\179\ Petitioners cite various reports documenting national 
GHG emissions from a broad range of nonroad categories which, they 
contend, provide evidence that nonroad GHG emissions are already 
substantial, and will continue to increase in the future. Petitioners, 
also cite additional inventory reports that nonroad GHG emissions 
already exceed total U.S. GHG emissions from aircraft as well as from 
boats and ships, rail, and pipelines combined.\180\ Petitioner's 
present California nonroad GHG emissions data which, they contend, 
mirror national GHG emission trends for nonroad engines and bolster 
their claim that GHG emissions from the nonroad sector, as a whole, are 
significant and are substantial for three categories: Construction and 
mining equipment, agricultural, and industrial equipment.
---------------------------------------------------------------------------

    \179\ Petitioners indicate that in 2007, non-transportation 
mobile vehicles and equipment were responsible for approximately 220 
million tons of CO2 emissions (data derived from EPA's 
Nonroad Emissions model for 2007). State of California et al, 
Petition for Rulemaking Seeking the Regulation of Greenhouse Gas 
Emissions from Nonroad Vehicles and Engines, page 8, January 29, 
2008, and International Center for Technology Assessment et al, 
Petition for Rulemaking Seeking the Regulation of Greenhouse Gas 
Emissions from Nonroad Vehicles and Engines, page 5, January 29, 
2008.
    \180\ State Petition for Nonroad, page 9.
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    State Petitioners' second claim is that EPA has the authority to 
regulate GHG emissions from nonroad sources, although they acknowledge 
that CAA section 213(a)(4) is discretionary. Petitioners contend this 
discretion is not unlimited and that the structure of the CAA must 
guide EPA's actions. Petitioners maintain that since the CAA prohibits 
States from undertaking their traditional police power role in 
regulating pollution from new construction or agricultural sources 
under 175 horsepower, ``Congress has implicitly invested EPA with the 
responsibility to act to prevent [these] harmful emissions.'' The third 
and final claim raised by State Petitioners is that both physical and 
operational controls are currently available to achieve fuel savings 
and/or to limit GHG emissions. Such measures include idle reduction, 
electrification of vehicles, the use of hybrid or hydraulic-hybrid 
technology, as well as use of ``cool paints'' that reduce the need for 
air conditioning.
    NGO petitioners make three similar claims in their petition. First, 
petitioners argue that serious public health and environmental 
consequences are projected for this century unless effective and timely 
action is taken to mitigate climate change. Petitioners further contend 
that GHG emissions from nonroad engines and vehicles are responsible 
for a significant and growing amount of GHG emissions and, like the 
State petitioners previously, they highlight three nonroad sectors 
responsible for a large portion of these GHG emission--construction, 
mining, and agriculture.
    Petitioners' second claim is that once EPA renders a positive 
endangerment determination under CAA section 202 for motor vehicles and 
engines, this finding should also satisfy the endangerment 
determination required under CAA section 213(a)(4) for nonroad engines. 
EPA's discretion under CAA section 213(a)(4) is limited, petitioners 
assert, by the relevant statutory considerations, as held by the 
Supreme Court in Massachusetts v. EPA, so that the Agency ``can decline 
to regulate nonroad engine and vehicle emissions only if EPA determines 
reasonably that such emissions do not endanger public health or 
welfare, or else, taking into account factors such as cost, noise, 
safety and energy, no such regulations would be appropriate.'' \181\ 
Like State petitioners, NGOs point out that because the CAA restricts 
states' ability to regulate pollution from new construction or farm 
vehicles and engines under 175 horsepower, Congress ``implicitly 
invested EPA with unique responsibility to act in the states'' stead so 
as to prevent such harmful emissions.'' Petitioners also argue that the 
National Environment Policy Act (NEPA) section 101(b) compels EPA 
action to fulfill its duty ``as a trustee of the environment for 
succeeding generations.''
---------------------------------------------------------------------------

    \181\ NGO Petition, page 8.
---------------------------------------------------------------------------

    NGO Petitioners' third claim is that a wide range of technology is 
currently available to reduce GHG emissions from nonroad engines and 
vehicles and that, in addition, the CAA was intended to be a 
technology-forcing statute so that EPA ``can and should'' establish 
regulations that ``substantially limit GHG emissions.* * * even where 
those regulations force the development of new technology.'' Regarding 
technology availability, petitioners provide a list of technologies 
that they believe are currently available to reduce GHG emissions from 
nonroad vehicles and engines, including auxiliary power unit systems to 
avoid engine use solely to

[[Page 44462]]

heat or cool the cab; tire inflation systems; anti-idling standards; 
use of hybrid or hydraulic-hybrid technology; use of low carbon fuels; 
and use of low viscosity lubricants.
    Both State and NGO Petitioners request three types of relief: (1) 
That EPA make a positive endangerment determination for GHG emissions 
from nonroad vehicles and engines; \182\ (2) that EPA adopt regulations 
to reduce GHG emissions from this sector; and (3) that regulations 
necessary to carry out the emissions standards also be adopted.\183\ We 
invite comment on all of the petitioners' assertions and requests.
---------------------------------------------------------------------------

    \182\ In addition, NGO Petitioners also request that EPA make a 
determination under CAA section 202 (a)(3)(D) that GHG emissions 
from rebuilt heavy-duty engines also are significant contributors to 
air pollution which may reasonably be anticipated to endanger public 
health and welfare. NGO Petition, page 11.
    \183\ State Petitioners indicate that adopting regulations 
specifying fuel type, for example, may be necessary to carry out the 
emission limitations.
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2. Nonroad Engines and Vehicles
    In this section, we discuss the GHG emissions and reduction 
technologies that are or may be available for the various nonroad 
engines and vehicles that are the subject of the petitioners described 
above. Since section 213 was added to the CAA in 1990, the Agency has 
completed a dozen major rulemakings which established programs that 
reduce traditional air pollutants from nonroad sources by over 95%, 
benefitting local, regional, and national air quality. EPA's approach 
has been to set standards based on technology innovation, with 
flexibility for the regulated industries to meet environmental goals 
through continued innovation that can be integrated with marketing 
plans.
    With help from industry, environmental groups and state regulators, 
EPA has designed nonroad regulatory programs that have resulted in 
significant air quality gains with little sacrifice of products' 
ability to serve their purpose. In fact, manufacturers have generally 
added new features and performance improvements that are highly 
desirable to users. Because GHG reductions from nonroad sources can be 
derived from fuel use reductions that directly benefit the user's 
bottom line, we expect that manufacturers' incentive to increase the 
fuel efficiency of their products will be even stronger in the future. 
This potential appears higher for nonroad engines compared to highway 
engines because in the past energy consumption has been less of a focus 
in the nonroad sector, so there may be more opportunity for 
improvement, while at the same time higher fuel prices are now 
beginning to make fuel expenses more important to potential equipment 
purchasers.
    The Agency and regulated industries have in the past grouped 
nonroad engines in a number of ways. The first is by combustion cycle, 
with two primary cycles in use: compression-ignition (CI) and spark-
ignition (SI). The combustion cycle is closely linked to grouping by 
fuel type, because CI engines largely burn diesel fuel while SI engines 
burn gasoline or, for forklifts and other indoor equipment, liquefied 
petroleum gas (LPG). It has also been useful to group nonroad engines 
by application category. Regulating nonroad engine application 
categories separately has helped the Agency create effective control 
programs, due to the nonroad sector's tremendous diversity in engine 
types and sizes, equipment packaging constraints, affected industries, 
and control technology opportunities. Although for the sake of 
discussion we use these application groupings, we solicit comment on 
what grouping engines and applications would make the most sense for 
GHG regulation, especially if flexible emissions credit and averaging 
concepts are pursued across diverse applications.
a. Nonroad Engine and Vehicle GHG Emissions
    Nonroad engines emitted 249 million metric tons of CO2 
in 2006, 12% of the total mobile source CO2 emissions.\184\ 
CO2 emissions from the nonroad sector are expected to 
increase significantly in the future, approximately 46% between 2006 
and 2030. Diesel engines emit 71% of the total nonroad CO2 
emissions. The other 29% comes from gasoline, LPG, and some natural 
gas-fueled engines. CO2 emissions from individual nonroad 
application categories in decreasing order of prominence are: Nonroad 
diesel (such as farm tractors, construction and mining equipment), 
diesel locomotives, small SI (such as lawn mowers, string trimmers, and 
portable power generators), large SI (such as forklifts and some 
construction machines), recreational marine SI, and recreational 
offroad SI (such as all terrain vehicles and snowmobiles).
---------------------------------------------------------------------------

    \184\ Emissions data in this section are from Inventory of U.S. 
Greenhouse Gas Emissions and Sinks: 1990-2006. EPA 430-R-08-005. 
April 2008, and EPA NONROAD2005a model.
---------------------------------------------------------------------------

    GHG emissions from nonroad applications are dominated by 
CO2 emissions which comprise approximately 97% of the total. 
Approximately 3% of the GHG emissions (on a CO2 equivalent 
basis) from nonroad applications are due to hydrofluorocarbon 
emissions, mainly from refrigerated rail transport. Methane and 
N2O make up less than 0.2% of the nonroad sector GHG 
emissions on a CO2 equivalent basis. Much of the following 
discussion focuses on technology opportunities for CO2 
reduction, but we note that these technologies will generally reduce 
N2O and methane emissions as well, and we ask for comment on 
measures and options for specifically addressing N2O and 
methane emissions.
b. Potential for GHG Reductions From Nonroad Engines and Vehicles
    The opportunity for GHG reductions from the nonroad sector closely 
parallels the highway sector, especially for the heavy-duty highway and 
nonroad engines that share many design characteristics. In addition, 
there is potential for significant further GHG reductions from changes 
to vehicle and equipment characteristics. A range of GHG reduction 
opportunities is summarized in the following discussion. Comment is 
requested on these opportunities and on additional suggestions for 
reducing GHGs from nonroad sources.
    It should be noted that any means of reducing the energy 
requirements necessary to power a nonroad application can yield the 
desired proportional reductions of GHGs (and other pollutants as well). 
Although in past programs, the Agency has typically focused on a new 
engine's emissions per unit of work, such as gram/brake horsepower-hour 
(g/bhp-hr), it may prove more effective to achieve GHG reductions by 
redesigning the equipment or vehicle that the engine powers so that the 
nonroad application accomplishes its task while expending less energy. 
Improvements such as these do not show up in measured g/bhp-hr 
emissions levels, but would be reflected in some other metric such as 
grams emitted by a locomotive in moving a ton of freight one mile.
    EPA solicits comment on possible nonroad GHG emissions reduction 
strategies for the various ``pathways'' by which GHGs can be impacted. 
Although it is obvious that internal combustion engines emit GHGs via 
the engine exhaust, it is helpful to take the analysis to another level 
by putting it in the context of energy use and examining the pathways 
by which energy is expended in a nonroad application, such as through 
vehicle braking. Because of the diversity of nonroad applications, we 
are taking a different approach here than in other sections of this 
notice: first, we summarize some of the engine, equipment, and 
operational pathways

[[Page 44463]]

and opportunities for GHG reductions that are common to all or at least 
a large number of nonroad applications; next, we examine more closely 
just one of the hundreds of nonroad applications, locomotives, to 
illustrate the many additional application-specific pathways for GHG 
reductions that are available. Our assessment is that, despite the 
great diversity in nonroad applications, technology-based solutions 
exist for every application to achieve cost-effective and substantial 
GHG emissions reductions.
i. Common GHG Reduction Pathways
    To ensure that this advance notice initiates the widest possible 
discussion of potential GHG control solutions, the following discussion 
includes all three types of possible control measures: engine, 
equipment, and operational.
(1) Engine Pathways
    To date, improving fuel usage in many nonroad applications has not 
been of great concern to equipment users and therefore to designers. 
There is potential for technologies now fairly commonplace in the 
highway sector, such as advanced lubricants and greater use of 
electronic controls, to become part of an overall strategy for GHG 
emissions reduction in the nonroad sector. We welcome comment on the 
opportunities and limitations of doing so.
    One engine technology in particular warrants further discussion. 
Two-stroke gasoline engines have been popular especially in handheld 
lawn care applications and recreational vehicles because they are 
fairly light and inexpensive. However, they also produce more GHGs than 
four-stroke engines. Much progress has been made in recent years in the 
development of four-stroke engines that function well in these 
applications. We ask for comment on the extent to which a shift to 
four-stroke engines would be feasible and beneficial.
    Although today's nonroad gasoline and diesel engines produce 
significantly less GHGs than earlier models, further improvements are 
possible. Engine designers are continuing to work on new designs 
incorporating technologies that produce less GHGs, such as homogeneous 
charge CI, waste heat recovery through turbo compounding, and direct 
fuel injection in SI engines. Most of this work has already been done 
for the automotive sector where economies of scale can justify the 
large investments. Much of this innovation can eventually be adapted to 
nonroad applications, as has occurred in the past with such 
technologies as electronic fuel injection and common rail fueling. We 
therefore request comment on the feasibility and potential for these 
advanced highway sector technologies, discussed in section VI.B, to be 
introduced or accelerated in the nonroad sector.
(2) Equipment and Operational Pathways
    Technology solutions in both the equipment design and operations 
can reach beyond the engine improvements to further reduce GHG 
emissions. We broadly discuss the following technologies below: 
Regenerative energy recovery and hybrid power trains, CVT 
transmissions, air conditioning improvements, component design 
improvements, new lighting technologies, reduced idling, and consumer 
awareness.
    Locomotives, as an example, have significant potential to recover 
energy otherwise dissipated as heat during braking. An 8,000-ton coal 
train descending through 5,000 feet of elevation converts 30 MW-hrs of 
potential energy to frictional and dynamic braking energy. Storing that 
energy on board quickly enough to keep up with the energy generation 
rate presents a challenge, but may provide a major viable GHG emissions 
reduction strategy even if only partially effective. Another 
regenerative opportunity relates to the specific, repetitive, 
predictable work tasks that many nonroad machines perform. For example, 
a forklift in a warehouse may lift a heavy load to a shelf and in doing 
so expend work. Just as often, the forklift will lower such a load from 
the shelf, and recover that load's potential energy, if a means is 
provided to store that energy on board.
    There are, however, many nonroad applications that may not have 
much potential for regenerative energy recovery (a road grader, for 
example), but in those applications a hybrid diesel-electric or diesel-
hydraulic system without a regenerative component may still provide 
some GHG benefits. A machine that today is made with a large engine to 
handle occasional peak work loads could potentially be redesigned with 
a smaller engine and battery combination sized to handle the occasional 
peak loads.
    Besides pre-existing electrical or hydraulic systems, some nonroad 
applications have one additional advantage over highway vehicles in 
assessing hybrid prospects: They often have quite predictable load 
patterns. A hybrid locomotive, for example, can be assigned to 
particular routes, train sizes, and consist (multi-locomotive) teams, 
to ensure it is used as close to full capacity as possible. The space 
needs of large battery banks could potentially be accommodated on a 
tender car, and the added weight would be offset somewhat by a smaller 
diesel fuel load (typically 35,000 lbs today) and dynamic brake grid. 
At least one locomotive manufacturer, General Electric, is already 
developing a hybrid design, and battery energy storage has been 
demonstrated for several years in rail yard switcher applications.
    We request comment on all aspects of the hybrid and regeneration 
opportunity in the nonroad sector, including the extent to which the 
electric and hydraulic systems already designed into many nonroad 
machines and vehicles could provide some cost savings in implementing 
this technology, and the extent to which plug-in technologies could be 
used in applications that have very predictable downtime such as 
overnight at construction sites, or that can use plug-in electric power 
while working or while sitting idle between tasks.
    A Continuously Variable Transmission (CVT) has an advantage over 
other conventional transmission designs by allowing the engine to 
operate at its optimum speed over a range of vehicle speeds and 
typically over a wider range of available ratios, which can provide GHG 
emission reductions. It has been estimated that CVTs can provide a 3 to 
8% decrease in fuel use over 4-speed automatic transmissions.\185\ They 
are already in use some in nonroad vehicles such as snowmobiles and 
all-terrain vehicles, and could possibly be used in other nonroad 
applications as well. We request comment on the opportunities to apply 
CVT to various nonroad applications.
---------------------------------------------------------------------------

    \185\ ``Effectiveness and Impact of Corporate Average Fuel 
Economy (CAFE) Standards,'' National Research Council, National 
Academy of Sciences, 2002.
---------------------------------------------------------------------------

    Some nonroad applications have air conditioning or refrigeration 
equipment, including large farm tractors, highway truck transport 
refrigeration units (TRUs), locomotives, and refrigerated rail cars. 
Reducing refrigerant leakage in the field or reducing its release 
during maintenance would work to reduce GHG emissions In addition, a 
switch to refrigerants with lower GHG emissions than the currently-used 
fluorinated gases can have a significant impact. We expect that the 
measures used to reduce nonroad equipment refrigerant GHGs would most 
likely involve the same strategies that have been or could be pursued 
in the highway and stationary

[[Page 44464]]

source sectors, and the reader is referred to section VI.B.1 for 
additional discussion. We request comment on the degree to which 
nonroad applications emit fluorinated gases, and on measures that may 
be taken to reduce these emissions.
    An extensive variety of energy-consuming electrical, mechanical, 
and hydraulic accessories are designed into nonroad machines to help 
them perform their tasks. Much of the energy output of a nonroad engine 
passes through these components and systems in making the machine do 
useful work, and all of them have associated energy losses through 
bearing friction, component heating, and other pathways. Designing 
equipment to use components with lower GHG impacts in these systems can 
yield substantial overall reductions in GHG emissions.
    Some nonroad applications expend significant energy in providing 
light, such as locomotive headlights and other train lighting. 
Furthermore, diesel-powered portable light towers for highway 
construction activities at night are increasingly being used to reduce 
congestion from daytime lane closures. We request comment on the extent 
to which a switch to less energy-intensive lighting could reduce GHG 
emissions.
    Many nonroad diesel engines are left idling during periods when no 
work is demanded of them, generally as a convenience to the operator, 
though modern diesel engines are usually easy to restart. In some 
applications this may occupy hours every day. Even though the hourly 
fuel rate is fairly low during idle, in the past several years 
railroads have saved considerable money by adding automatic engine stop 
start (AESS) systems to locomotives. These monitor key parameters such 
as state of battery charge, and restart the engine only as needed, 
thereby largely eliminating unnecessary idling. They reduce GHG 
emissions and typically pay for themselves in fuel savings within a 
couple of years. Our recent locomotive rule mandated these systems for 
all new locomotives as an emission control measure (40 CFR 
1033.115(g)). AESS or similar measures may be feasible for other 
nonroad applications with significant idling time as well. We request 
comment on the availability and effectiveness of nonroad idle reduction 
technologies.
ii. Application-Specific GHG Pathways
    As mentioned above, we discuss application-specific approach for 
further reducting GHG emissions from one nonroad application, 
locomotives, to illustrate application-specific opportunities for GHG 
emission reductions beyond those discussed above that apply more 
generally. We note that some of these application-specific 
opportunities, though limited in breadth, may be among the most 
important, because of their large GHG reduction potential.
    We have chosen locomotives for this illustration in part because 
rail transportation has already been the focus of substantial efforts 
to reduce its energy use, resulting in generally favorable GHG 
emissions per ton-mile or per passenger-mile. The Association of 
American Railroads calculates that railroads move a ton of freight 423 
miles on one gallon of diesel fuel.\186\ Reasons for the advantage 
provided by rail include the use of medium-speed diesel engines, lower 
steel-on-steel rolling resistance, and relatively gradual roadway 
grades. Rail therefore warrants attention in any discussion on mode-
shifting as a GHG strategy. Even if GHG emissions reduction were not at 
issue, shippers and travelers already experience substantial mode-shift 
pressure today from long-term high fuel prices. Growth in the rail 
sector highlights the critical importance of locomotive GHG emissions 
reduction.
---------------------------------------------------------------------------

    \186\ Comments of the Association of American Railroads on EPA's 
locomotive and marine engine proposal, July 2, 2007. Available in 
EPA docket EPA-HQ-OAR-2003-0190.
---------------------------------------------------------------------------

    We have listed some key locomotive-specific opportunities below. We 
note that a number of these are aimed at addressing GHG pathways from 
rail cars. Rail cars create very significant GHG reduction pathways for 
locomotives, because all of the very large energy losses from railcar 
components translate directly into locomotive fuel use. This is 
especially important when one considers that an average train has 
several dozen cars. We request comment on the feasibility of the ideas 
on this list and on other possible ways to reduce GHG emissions.
Opportunities for Rail GHG Reduction
Locomotives
     Low-friction wheel bearings
     Aerodynamic improvements
     Idle emissions control beyond AESS (such as auxiliary 
power units)
     Electronically-controlled pneumatic (ECP) brakes
     High-adhesion trucks (wheel assemblies)
     Global positioning system (GPS)-based speed management (to 
minimize braking, over-accelerations, and run-out/run-in losses at 
couplings)
Railcars
     Low-torque rail car wheel bearings
     Tare weight reduction
     Aerodynamic design of rail cars and between-car gaps
     Better insulated refrigeration cars
Rail Infrastructure
     Application of lubricants or friction modifiers to 
minimize wheel-to-track friction losses
     Higher-speed railroad crossings
     Targeted-route electrification
     Rail yard infrastructure improvements to eliminate 
congestion and idling
Operational
     Consist manager (automated throttling of each locomotive 
in a consist team for lowest overall GHG emissions)
     Optimized GPS-assisted dispatching/routing/tracking of 
rail cars and locomotives
     Optimized matching of locomotives with train load for 
every route (including optimized placement of each locomotive along the 
train)
     Expanded resource sharing among railroads
     Reduction of empty-car trips
     Early scrappage of higher-GHG locomotives
c. Regulatory Options for Nonroad Engines and Vehicles
    There is a range of options that could be pursued under CAA section 
213 to control nonroad sector GHGs. The large diversity in this sector 
allows for a great number of technology solutions as discussed above, 
while also presenting some unique challenges in developing a 
comprehensive, balanced, and effective regulatory program, and 
highlights the importance of considering multiple potential regulatory 
strategies. We have met similar challenges in regulating traditional 
air pollutants from this sector, and we request comment on the 
regulatory approaches discussed below and whether they would address 
the challenges of regulating GHGs from nonroad engines.
    As discussed in our earlier section on heavy-duty vehicles, the 
potential regulatory approaches that we discuss here should be 
considered not as discrete options but as a continuum of possible 
approaches to address GHG emissions from this sector. Just as we have 
in our technology discussion, these regulatory approaches begin with 
the engine and then expand to included potential approaches to realize 
reductions through vehicle and operational changes. In approaching the 
discussion in this way, each step along such a path has the potential 
to greater regulatory complexity but also has the

[[Page 44465]]

potential for greater regulatory flexibility, GHG reduction, and 
program benefits. For large GHG reductions in the long term we expect 
to give consideration to approaches that accomplish the largest 
reductions, but we also note that, given the long time horizons for GHG 
issues, we can consider a number of incremental regulatory steps along 
a longer path. Also, given the absence of localized effects associated 
with GHG emissions, EPA is interested in considering the incorporation 
of banking, averaging, and/or credit trading into the regulatory 
options discussed below.
    The first regulatory approach we consider is a relatively 
straightforward extension of our existing criteria pollutant program 
for nonroad engines. In its simplest form, this approach would be an 
engine GHG standard that preserves the current regulatory structure for 
nonroad engines. Nonroad engine manufacturers are already familiar with 
today's certification testing and procedures. Just like the highway 
engine manufacturers, they have facilities, engine dynamometers, and 
test equipment to appropriately measure GHG emissions. Further, 
technologies developed to reduce GHG emissions from heavy-duty engines 
could be applied to the majority of diesel nonroad engines with 
additional development to address differences in operating conditions 
and engine applications in nonroad equipment. Hence, this approach 
would benefit from both regulatory work done to develop a heavy-duty 
engine GHG program and technology development for heavy-duty engines to 
comply with a GHG program. While we do not expect that new test cycles 
would be needed to effect meaningful GHG emissions control, we request 
comment on whether new test cycles would allow for improved control, 
and especially on whether there are worthwhile GHG control technologies 
that would not be adequately exercised and measured under the current 
engine test cycles and test procedures.
    A second approach that would extend control opportunities beyond 
engine design improvements involves developing nonroad vehicle and 
equipment GHG standards. Changes to nonroad vehicles and equipment can 
offer significant opportunity for GHG emission reductions, and 
therefore any nonroad GHG program considered by EPA would need to 
evaluate the potential for reductions not just from engine changes but 
from vehicle and equipment changes as well. In section VI.B.2 we 
discussed a potential heavy-duty truck GHG standard (e.g., a gram per 
mile or gram per ton-mile standard). A similar option could be 
considered for at least some portion of nonroad vehicles and equipment. 
For example, a freight locomotive GHG standard could be considered on a 
similar mass per ton mile basis. This would be a change from our 
current mass per unit work approach to locomotive regulation, but 
section 213 of the Clean Air Act does authorize the Agency to set 
vehicle-based and equipment-based nonroad standards as well.
    However, we are concerned that there may be significant drawbacks 
to widespread adoption of this application-specific standards-setting 
approach. For the freight locomotive example given above, a gram per 
ton-mile emissions standard measured over a designated track route 
might be a suitable way to express a GHG standard, but such a metric 
would not necessarily be appropriate for other applications. Instead 
each application could require a different unit of measure tied to the 
machine's mission or output-- such as grams per kilogram of cuttings 
from a ``standard'' lawn for lawnmowers and grams per kilogram-meter of 
load lift for forklifts. Such application-specific standards would 
provide the clearest metric for GHG emission reductions. The standards 
would directly reflect the intended use of the equipment and would help 
drive equipment and engine designs that most effectively meet that need 
while reducing overall GHG emissions. However, the diversity of tasks 
performed by the hundreds of nonroad applications would lead to a 
diverse array of standard work units and measurement techniques in such 
a nonroad GHG program built on equipment-based standards. We request 
comments on this second regulatory approach, and in particular comments 
that identify specific nonroad applications that would be best served 
by such a nonroad vehicle-based regulatory approach.
    A variation on the above-described approaches would be to maintain 
the relative simplicity of an engine-based standard while crediting the 
GHG emission reduction potential of new equipment designs. Under this 
option, the new technology would be evaluated by measuring GHG 
emissions from a piece of equipment that has the new technology while 
performing a standard set of typical tasks. The results would then be 
compared with data from the same or an identical piece of equipment, 
without the new technology, performing the same tasks. This approach 
could be carried out for a range of equipment models to help improve 
the statistical case for the resulting reductions. The percentage 
reduction in GHG emissions with and without the new equipment 
technology could then be applied to the GHG emissions measured in 
certification testing of engines used in the equipment in helping to 
demonstrate compliance with an engine-based GHG standard. Thus if a new 
technology were shown to reduce the GHG emissions of a typical piece of 
equipment by 20%, that 20% reduction could be applied at certification 
to the GHG emission results from a more traditional engine-based test 
procedure and engine-based standard.
    In fact, a very similar approach has been adopted in EPA's recently 
established locomotive program (see 73 FR 25155, May 6, 2008). In this 
provision, credit is given to energy-saving measures based on the fact 
that they provide proportional reductions in the criteria pollutants. 
This credit takes the form of an adjustment to criteria pollutant 
emissions measured under the prescribed test procedure for assessing 
compliance with engine-based standards.
    A more flexible extension of this approach would be to de-link the 
equipment-based GHG reduction from the compliance demonstration for the 
particular engine used in the same equipment. Instead the GHG 
difference would provide fungible credits for each piece of equipment 
sold with the new technology, credits that then could be used in a 
credit averaging and trading program. Under this concept it would be 
important to collect and properly weight data over an adequate range of 
equipment and engine models, tasks performed, and operating conditions, 
to ensure the credits are deserved. We request comments on the option 
of applying the results of equipment testing to an engine-based GHG 
standard and the more general concept of generating GHG emission 
credits from such an approach. We also request comment on whether such 
credit-based approaches to accounting for the many promising equipment 
measures are likely to obtain similar GHG reductions as the setting of 
equipment based standards, and on whether some combined approach 
involving both standards and credits may be appropriate.
    There are also a number of ways to reduce GHG emissions in the 
nonroad sector that do not involve engine or equipment redesign. 
Rather, reductions can be achieved by altering the way in which the 
equipment is used. For example, intermodal shipping moving freight from 
trucks and onto lower GHG rail or marine services, provides a means of 
reducing these emissions for

[[Page 44466]]

freight shipments that can accommodate the logistical constraints of 
intermodal shipping. Many of the operational measures with GHG-reducing 
potential do involve a significant technology component, perhaps even 
hardware changes, but they can also involve actions on the part of the 
equipment operator or owner that go beyond simply maintaining and not 
tampering with the emission controls. For example, a railroad may make 
the capital and operational investment in sophisticated computer 
technology to dispatch and schedule locomotive resources, using onboard 
GPS-based tracking hardware. The GHG reduction benefit, though enabled 
in part by the onboard hardware, is not realized without the people and 
equipment assigned to the dispatch center.
    Credit for such operational measures could conceivably be part of a 
nonroad GHG control program and could be calculated and assigned using 
the same ``with and without'' approach to credit generation described 
above for equipment-based changes. However, some important 
implementation problems arise from the greater human element involved. 
This human element becomes increasingly significant as the scope of 
creditable measures moves further away from automatic technology-based 
solutions. Assigning credits to such measures must involve good 
correlation between the credits generated and the GHG reductions 
achieved in real world applications. It therefore may make sense to 
award these credits only after an operational measure has been 
implemented and verified as effective. This might necessitate that such 
credits have value for equipment or sources other than the equipment 
associated with the earning of the credit, such as in a broader credit 
market. This is because nonroad equipment and engines must demonstrate 
compliance with EPA standards before they are put into service. They 
therefore cannot benefit from credits created in the future unless 
through some sort of credit borrowing mechanism.
    Once verified, however, we would expect credits reflecting these 
operational reductions could be banked, averaged and traded, just as 
much as credits derived from equipment- or engine-based measures. 
Verifiable GHG reductions, regardless of how generated, have equal 
value in addressing climate change. We also note, however, that an 
effective credit program, especially one with cross-sector utility, 
should account for the degree to which a credit-generating measure 
would have happened anyway, or would have happened eventually, had no 
EPA program existed; this is likely to be challenging. We request 
comment on the appropriateness of a much broader GHG credit-based 
program as described here.
    In this section, we have laid out a range of regulatory approaches 
for nonroad equipment that takes us from a relatively simple extension 
of our existing engine-based regulatory program through equipment based 
standards and finally to a fairly wide open credit scheme that would in 
concept at least have the potential to pull in all aspects of nonroad 
equipment design and operation. In describing these approaches, we have 
noted the increasing complexity and the greater need for new mechanisms 
to ensure the emission reductions anticipated are real and verifiable. 
We seek comment on the relative merits of each of these approaches but 
also on the potential for each approach along the continuum to build 
upon the others.
3. Marine Vessels
    Marine diesel engines range from very small engines used to propel 
sailboats, or used for auxiliary power, to large propulsion engines on 
ocean-going vessels. Our current marine diesel engine emission control 
programs distinguish between five kinds of marine diesel engines, 
defined in terms of displacement per cylinder. These five types include 
small (<=37 kW), recreational, and commercial marine engines. 
Commercial marine engines are divided into three categories based on 
per cylinder displacement: Category 1 engines are less than 5 l/cyl, 
Category 2 engines are from 5 l/cyl up to 30 l/cyl, and Category 3 
engines are at or above 30 l/cyl. Category 3 engines are 2- or 4-stroke 
propulsion engines that typically use residual fuel; this fuel has high 
energy content but also has very high fuel sulfur levels that result in 
high PM emissions. Most of the other engine types are 4-stroke and can 
be used to provide propulsion or auxiliary power. These operate on 
distillate fuel although some may operate on a blend of distillate and 
residual fuel or even on residual fuel (for example, fuels commonly 
known as DMB, DMC, RMA, and RMB).
    There are also a wide variety of vessels that use marine diesel 
engines and they can be distinguished based on where they are used. 
Vessels used on inland waterways and coastal routes include fishing 
vessels that may be used either seasonally or throughout the year, 
river and harbor tug boats, towboats, short- and long-distance ferries, 
and offshore supply and crew boats. These vessels often have Category 2 
or smaller engines and operate in distillate fuels. Ocean-going vessels 
(OGVs) include container ships, bulk carriers, tankers, and passenger 
vessels and have Category 3 propulsion engines as well as some smaller 
auxiliary engines. As EPA deliberates on how to potentially address GHG 
emissions from marine vessels, we will consider the significance of the 
different engine, vessel, and fuel types. We invite comment on the 
marine specific issues that EPA should consider; in particular, we 
invite commenters to compare and contrast potential marine vessel 
solutions to our earlier discussions of highway and nonroad mobile 
sources and our existing marine engine criteria pollutant control 
programs.
a. Marine Vessel GHG Emissions
    Marine engines and vessels emitted 84.2 million metric tons of 
CO2 in 2006, or 3.9 percent of the total mobile source 
CO2 emissions. CO2 emissions from marine vessels 
are expected to increase significantly in the future, more than 
doubling between 2006 and 2030. The emissions inventory from marine 
vessels comes from operation in ports, inland waterways, and offshore. 
The CO2 inventory estimates presented here refer to 
emissions from marine engine operation with fuel purchased in the 
United States.\187\ OGVs departing U.S. ports with international 
destinations take on fuel that emits 66 percent of the marine vessel 
CO2 emissions; the other 34 percent comes from smaller 
commercial and recreational vessels.
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    \187\ U.S. EPA, ``Inventory of U.S. Greenhouse Gas Emissions and 
Sinks: 1990-2006,'' April 15, 2008.
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    GHG emissions from marine vessels are dominated by CO2 
emissions which comprise approximately 94 percent of the total. 
Approximately 5.5 percent of the GHG emissions from marine vessels are 
due to HFC emissions, mainly from reefer vessels (vessels which carry 
refrigerated containers). Methane and nitrous oxide make up less than 1 
percent of the marine vessel sector GHG emissions on a CO2 
equivalent basis. Comment is requested on the contribution of marine 
vessels to GHG emissions and on projections for growth in this sector.
b. Potential for GHG Reductions From Marine Vessels
    There are significant opportunities to reduce GHG emissions from 
marine vessels through both traditional and innovative strategies. 
These strategies include technological improvements to engine and 
vessel design as well as changes in vessel operation. This

[[Page 44467]]

section provides an overview of these strategies, and a more detailed 
description is available in the public docket.\188\ EPA requests 
comment on the advantages and drawbacks of each of the strategies 
described below, as well as on additional approaches for reducing 
greenhouse gases from marine vessels.
---------------------------------------------------------------------------

    \188\ ``Potential Technologies for GHG Reductions from 
Commercial Marine Vessels'', memorandum from Michael J. Samulski, 
U.S. EPA, to docket xx, DATE.
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i. Reducing GHG Emissions Through Marine Engine Changes
    GHG emissions may be reduced by increasing the efficiency of the 
marine engine. As discussed earlier for heavy-duty trucks, there are a 
number of improvements for CI engines that may be used to lower GHGs. 
These improvements include higher compression ratios, higher injection 
pressure, shorter injection periods, improved turbocharging, and 
electronic fuel and air management. Much of the energy produced in a CI 
engine is lost to the exhaust. Some of this energy can be reclaimed 
through the use of heat recovery systems. We request comment on the 
feasibility of reducing GHG emissions through better engine designs and 
on additional technology which could be used to achieve GHG reductions.
    As discussed above, marine engines are already subject to exhaust 
emission standards. Many of the noxious emissions emitted by internal 
combustion engines may also be GHGs. These pollutants include 
NOX, methane, and black carbon soot. Additionally, some 
strategies used to mitigate NOX and PM emissions can also 
indirectly impact GHGs through their impact on fuel use--for example, 
use of aftertreatment rather than injection timing retard to reduce 
NOX emissions. We request comment on the GHG reductions 
associated with HC+NOX and PM emissions standards for these 
engines.
    The majority of OGVs operate primarily on residual fuel, while 
smaller coastal vessels operate primarily on distillate fuel. Shifting 
more shipping operation away from residual fuel would reduce GHG 
emissions from the ship due to the lower carbon/hydrogen ratio in 
distillate fuel. Marine engines have been developed that operate on 
other lower carbon fuels such as natural gas and biodiesel. Because 
biodiesel is a renewable fuel, lifecycle GHG emissions are much lower 
than for operation on petroleum diesel. We request comment on these and 
other fuels that may be used to power marine vessels and the impact 
these fuels would have on lifecycle GHG emissions.
    A number of innovative alternatives are under development for 
providing power on marine vessels. These alternative power sources 
include fuel cells, solar power, wind power, and even wave power. While 
none of these technologies are currently able to supply the total power 
demands of larger, ocean-going vessels, they may prove to be capable of 
reducing GHG emissions through auxiliary power or power-assist 
applications. Hybrid engine designs are used in some vessels where a 
bank of engines is used to drive electric motors for power generation. 
The advantage of this approach is that the same engines may be used 
both for propulsion and auxiliary needs. Another advantage is that 
alternative power sources could be used with a hybrid system to provide 
supplemental power. We request comment on the extent to which 
alternative power sources and hybrid designs may be applied to marine 
vessels to reduce greenhouse gases.
ii. Reducing GHG Emissions Through Vessel Changes
    GHG emissions may be reduced by minimizing the power needed by the 
vessels to perform its functions. The largest power demand is generally 
for overcoming resistance as the vessel moves through the water but is 
also affected by propeller efficiency and auxiliary power needs.
    Water resistance is made up of the effort to displace water and 
drag due to friction on the hull. The geometry of the vessel may be 
optimized in many ways to reduce water resistance. Ship designers have 
used technologies such as bulbous bows and stern flaps to help reduce 
water resistance from the hull of the vessel. Marine vessels typically 
use surface coatings to inhibit the growth of barnacles or other sea 
life that would increase drag on the hull. Innovative strategies for 
reducing hull friction include coatings with textures similar to marine 
animals and reducing water/hull contact by enveloping the hull with 
small air bubbles released from the sides and bottom of the ship.
    Both the wetted surface area and amount of water displaced by the 
hull may be reduced by lowering the weight of the vessel. This may be 
accomplished through the use of lower weight materials such as aluminum 
or fiberglass composites or by simply using less ballast in the ship 
when not carrying cargo. Other options include ballast-free ship 
designs such as constantly flowing water through a series of pipes 
below the waterline or a pentamaran hull design in which the ship is 
constructed with a narrow hull and four sponsons which provide 
stability and eliminate the need for ballast water. We request comment 
to the extent that these approaches may be used to reduce GHGs by 
reducing fuel consumption from marine vessels in the future. We also 
request comment on other design changes that may reduce the power 
demand due to resistance on the vessel.
    In conventional propeller designs, a number of factors must be 
considered including load, speed, pitch, diameter, pressure pulses, and 
cavitation (formation of bubbles which may damage propeller and reduce 
thrust). Proper maintenance of the propeller can minimize energy losses 
due to friction. In addition, propeller coatings are available that 
reduce friction on the propeller and lead to energy savings. Because of 
the impact of the propeller on the operation of the vessel, a number of 
innovative technologies have been developed to increase the efficiency 
of the propeller. These technologies include contra-rotating 
propellers, azimuth thrusters, ducted propellers, and grim vane wheels. 
We request comment on the GHG reductions that may be achieved through 
improvements in vessel propulsion efficiency, either through the 
approaches listed here or through other approaches.
    Power is also needed to provide electricity to the ship and to 
operate auxiliary equipment. Power demand may be reduced through the 
use of less energy intensive lighting, improved electrical equipment, 
improved reefer systems, crew education campaigns, and automated air-
conditioning systems. We request comment on the opportunities to 
provide auxiliary power with reduced GHG emissions.
    In addition, GHG emissions may be released from leaks in air 
conditioning or refrigeration systems. There is a large amount of 
fluorinated and chlorinated hydrocarbons used in refrigeration and air-
conditioning systems on ships. We request comment on the degree to 
which marine vessels emit fluorinated and chlorinated hydrocarbons to 
the atmosphere, and on measures that may be taken to mitigate these 
emissions.
iii. Reducing GHG Emissions Through Vessel Operational Changes
    In addition to improving the design of the engine and vessel, GHG 
emissions may be reduced through operational measures. These 
operational measures include reduced speeds, improved routing and fleet 
planning, and shore-side power.

[[Page 44468]]

    In general, the power demand of a vessel increases with at least 
the square of the speed; therefore, a 10 percent reduction in speed 
could result in more than a 20 percent reduction in fuel consumption, 
and therefore in GHG emissions. An increased number of vessels 
operating at slower speeds may be able to transport the same amount of 
cargo while producing less GHGs. In some cases, vessels operate at 
higher speeds than necessary simply due to inefficiencies in route 
planning or congestion at ports. Ship operators may need to speed up to 
correct for these inefficiencies. GHG reductions could be achieved 
through improved route planning, coordination between ports, and 
weather routing systems. GHG reductions may also be achieved by using 
larger vessels and through better fleet planning to minimize the time 
ships operate at less than full capacity. We request comment on the 
extent to which greenhouse gas emissions may be practically reduced 
through vessel speed reductions and improved route and fleet planning.
    Many ports have shore-side power available for ships as an 
alternative to using onboard engines at berth. To the extent that the 
power sources on land are able to produce energy with lower GHG 
emissions than the auxiliary engines on the vessel, shore-side power 
may be an effective strategy for GHG reduction. In addition to more 
traditional power generation units, shore-side power may come from 
renewable fuels, nuclear power, fuel cells, windmills, hydro-power, or 
geothermal power. We request comment on GHG reductions that could be 
achieved through the use of shore-side power.
c. Regulatory Options for Marine Vessels
    EPA could address GHG emissions from marine vessels using 
strategies from a continuum of different regulatory tools, including 
emission standards, vessel design standards, and strategies that 
incorporate a broader range of operational controls. These potential 
regulatory strategies are briefly described below. As is the case with 
other source categories, EPA is also interested in exploring the 
potential applicability of flexible mechanisms such as banking and 
credit trading. With regard to ocean-going vessels, we are also 
exploring the potential to address GHG emissions through the 
International Maritime Organization under a program that could be 
adopted as a new Annex to the International Convention for the 
Prevention of Pollution from Ships (MARPOL). Those efforts are also 
described below. EPA requests comment on the advantages and drawbacks 
of each of these regulatory approaches.
    As with trucks and land-based nonroad equipment, the first 
regulatory approach we could consider entails setting GHG emission 
limits for new marine diesel engines. For engines with per cylinder 
displacement up to 30 liters (i.e., Category 1 and Category 2), EPA has 
already adopted stringent emission limits for several air pollutants 
that may be GHGs, including NOX, methane (through 
hydrocarbon standards) and black carbon soot (through PM standards). 
This emission control program could be augmented by setting standards 
for GHG emissions that could be met through the application of the 
technologies described above (e.g., improved engine designs, hybrid 
power). We request comment regarding issues that EPA should consider in 
evaluating this approach and the most appropriate means to address the 
issues raised. We recognize that an engine-based regulatory structure 
would limit the potential GHG emission reductions compared to programs 
that include vessel technologies and crediting operational 
improvements. In the remainder of this section, we consider other 
options that would have the potential to provide greater GHG reductions 
by providing mechanisms to account for vessel and operational changes.
    A second regulatory approach to address GHG emissions from marine 
vessels is to set equipment standards. As described above, these could 
take the form of standards that require reduced air and/or water 
resistance, improved propeller design, and auxiliary power 
optimization. Equipment standards could also address various equipment 
onboard vessels, such as refrigeration units. While Annex VI currently 
contains standards for ozone depleting substances, this type of control 
could be applied more broadly to U.S. vessels that are not subject to 
the Annex VI certification requirements.
    A critical characteristic of marine vessels that must be taken into 
account when considering equipment standards is that not all marine 
vessels are designed alike for the same purpose. A particular hull 
design change that would lower GHGs for a tugboat may not be 
appropriate for a lobster vessel or an ocean-going vessel. These 
differences will have an impact on how an equipment standard would be 
expressed. We request comment on how to express equipment standards in 
terms of an enforceable limit, and on whether it is possible to set a 
general standard or if separate standards would be necessary for 
discrete vessel types/sizes. We also request comment on the critical 
components of a compliance program for an equipment standard, how it 
can be enforced, and at what point in the vessel construction process 
it should be applied.
    In addition to the above, the spectrum of regulatory approaches we 
outline in section VI.C.2.c for nonroad engines and vehicles could 
potentially be applied to the marine sector as well, with corresponding 
GHG reductions. These would include: (1) Setting mission-based vessel 
standards (such as GHG gram per ton-mile shipping standards) for at 
least some marine applications where this can be reliably measured and 
administered, (2) allowing vessel changes such as lower resistance hull 
designs to generate credits against marine engine-based standards, (3) 
granting similar credits for operational measures such as vessel speed 
reductions, and (4) further allowing such credits to be used in wider 
GHG credit exchange programs. We note too that the implementation 
complexities for these approaches discussed in section VI.C.2.c apply 
in the marine sector as well, and these complexities increase as 
regulatory approaches move further along the continuum away from 
engine-based standards.
    Separate from the Annex VI negotiations for more stringent 
NOX and PM standards discussed above, the United States is 
working with the Marine Environment Protection Committee of the IMO to 
explore appropriate ways to reduce CO2 emissions from ships 
for several years. At the most recent meeting of the Committee, in 
April 2008, the Member States continued their work of assessing short- 
and long-term GHG control strategies. A variety of options are under 
consideration, including all of those mentioned above. The advantage of 
an IMO-based program is that it could provide harmonized international 
standards. This is important given the global nature of vessel traffic 
and given that this traffic is expected to increase in the future.
4. Aircraft
    In this section we discuss and seek comment on the impact of 
aircraft operations on GHG emissions and the potential for reductions 
in GHG emissions from these operations. Aircraft emissions are 
generated from aircraft used for public, private, and national defense 
purposes including air carrier commercial aircraft, air taxis, general 
aviation, and military aircraft.

[[Page 44469]]

Commercial aircraft include those used for scheduled service 
transporting passengers, freight, or both. Air taxis fly scheduled and 
for-hire service carrying passengers, freight or both, but they usually 
are smaller aircraft than those operated by commercial air carriers. 
General aviation includes most other aircraft (fixed and rotary wing) 
used for recreational flying, business, and personal transportation 
(including piston-engine aircraft fueled by aviation gasoline). 
Military aircraft cover a wide range of airframe designs, uses, and 
operating missions.
    As explained previously, section 231 of the CAA directs EPA to set 
emission standards, test procedures, and related requirements for 
aircraft, if EPA finds that the relevant emissions cause or contribute 
to air pollution which may reasonably be anticipated to endanger public 
health or welfare. In setting standards, EPA is to consult with FAA, 
particularly regarding whether changes in standards would significantly 
increase noise and adversely affect safety. CAA section 232 directs FAA 
to enforce EPA's aircraft engine emission standards, and 49 U.S.C. 
section 44714 directs FAA to regulate fuels used by aircraft. 
Historically, EPA has worked with FAA and the International Civil 
Aviation Organization (ICAO) in setting emission standards and related 
requirements. Under this approach international standards have first 
been adopted by ICAO, and subsequently EPA has initiated CAA 
rulemakings to establish domestic standards that are at least as 
stringent as ICAO's standards. In exercising EPA's own standard-setting 
authority under the CAA, we would expect to continue to work with FAA 
and ICAO on potential GHG emission standards, if we found that aircraft 
GHG emissions cause or contribute to air pollution which may reasonably 
be anticipated to endanger public health or welfare.
    Over the past 25-30 years, EPA has established aircraft emission 
standards covering certain criteria pollutants or their precursors and 
smoke; these standards do not currently regulate emissions of 
CO2 and other GHGs.\189\ However, provisions addressing test 
procedures for engine exhaust gas emissions state that the test is 
designed to measure various types of emissions, including 
CO2, and to determine mass emissions through calculations 
for a simulated aircraft landing and takeoff cycle (LTO). Currently, 
CO2 emission data over the LTO cycle is collected and 
reported.\190\ Emission standards apply to engines used by essentially 
all commercial aircraft involved in scheduled and freight airline 
activity.\191\
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    \189\ Our existing standards include hydrocarbon emissions and 
CH4 is a hydrocarbon. If CH4 is present in the 
engine exhaust, it would be measured as part of the LTO test 
procedure. There is not a separate CH4 emission standard 
for aircraft engines.
    \190\ Certification information includes fuel flow rates over 
the different modes (and there are specified times in modes) of the 
LTO cycle. Utilizing this information, the ICAO Engine Emissions 
Databank reports kilograms of fuel used during the entire LTO cycle 
(see http://www.caa.co.uk/default.aspx?catid=702&pagetype=90).
    \191\ Regulated aircraft engines are used on commercial aircraft 
including small regional jets, single-aisle aircraft, twin-aisle 
aircraft, and 747s and larger aircraft.
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a. GHG Emissions From Aircraft Operations
    Aircraft engine emissions are composed of about 70 percent 
CO2, a little less than 30 percent water vapor, and less 
than one percent each of NOX, CO, sulfur oxides 
(SOX), non-methane volatile organic carbons (NMVOC), 
particulate matter (PM), and other trace components including hazardous 
air pollutants (HAPs). Little or no nitrous oxide (N2O) 
emissions occur from modern gas turbines. Methane (CH4) may 
be emitted by gas turbines during idle and by relatively older 
technology engines, but recent data suggest that little or no 
CH4 is emitted by more recently designed and manufactured 
engines.\192\ By mass, CO2 and water vapor are the major 
compounds emitted from aircraft operations that relate to climate 
change.
---------------------------------------------------------------------------

    \192\ IPCC, Aviation and the Global Atmosphere, 1999, at http://www.grida.no/climate/ipcc/aviation/index.htm.
---------------------------------------------------------------------------

    In 2006, EPA estimated that among U.S. transportation sources, 
aircraft emissions constituted about 12 percent of CO2 
emissions, and more broadly, about 12 percent of the combined emissions 
of CO2, CH4, and N2O. Together 
CH4 and N2O aircraft emissions constituted only 
about 0.1 percent of the combined CO2, CH4, and 
N2O emissions from U.S. transportation sources, and they 
make up about one percent of the total aircraft emissions of 
CO2, CH4, and N2O.\193\ Aircraft 
emissions were responsible for about 4 percent of CO2 
emissions from all U.S. sources, and about 3 percent of CO2, 
CH4, and N2O emissions collectively. While 
aircraft CO2 emissions have declined by about 6 percent 
between 2000 and 2006, from 2006 to 2030, the U.S. Department of Energy 
projects that the energy use of aircraft will increase by about 60 
percent (excluding military aircraft operations).\194\ Commercial 
aircraft make up about 83 percent of both CO2 emissions and 
the combined emissions of CO2, CH4, and 
N2O for U.S. domestic aircraft operations. In addition, U.S. 
domestic commercial aircraft activity represents about 24 percent of 
worldwide commercial aircraft CO2 emissions. With 
international aircraft departures, the total U.S. CO2 
emissions from commercial aircraft are about 35 percent of the total 
global commercial aircraft CO2 emissions.195 196 
Globally, 93 percent of the fuel burn (a surrogate for CO2) 
and 92 percent of NOX emissions from commercial aircraft 
occur outside of the basic LTO cycle (i.e., operations nominally above 
3,000 feet).\197\
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    \193\ U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and 
Sinks: 1990-2006, April 2008, USEPA 430-R-08-005, available 
at http://www.epa.gov/climatechange/emissions/usinventoryreport.html.
    \194\ Energy Information Administration, Annual Energy Outlook 
2008, Report No.: DOE/EIA-0383 (2008), March 2008, available at 
http://www.eia.doe.gov/oiaf/aeo/. These Department of Energy 
projections are similar to FAA estimates (FAA, Office of Environment 
and Energy, Aviation and Emission: A Primer, January 2005, at pages 
10 and 23, available at http://www.faa.gov/regulations_policies/policy_guidance/envir_policy/media/aeprimer.pdf ). The FAA 
projections were based on FAA long-range activity forecasts that 
assume a constant rate of emissions from aircraft engines in 
conjunction with an increase in aviation operations. It does not 
take into account projected improvements in aircraft, aircraft 
engines, and operational efficiencies.
    \195\ FAA, System for Assessing Aviation's Global Emissions, 
Version 1.5, Global Aviation Emissions Inventories for 2000 through 
2004, FAA-EE-2005-02, September 2005, available at http://www.faa.gov/about/office_org/headquarters_offices/aep/models/sage/
.
    \196\ International flights are those that depart from the U.S. 
and arrive in a different country.
    \197\ FAA, System for Assessing Aviation's Global Emissions, 
Version 1.5, Global Aviation Emissions Inventories for 2000 through 
2004, FAA-EE-2005-02, September 2005, at page 10, at Table 3, 
available at http://www.faa.gov/about/office_org/headquarters_offices/aep/models/sage/.
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    The compounds emitted from aircraft that directly relate to climate 
change are CO2, CH4, N2O and, in 
highly specialized applications, SF6.\198\ Aircraft also 
emit other compounds that are indirectly related to climate change such 
as NOX, water vapor, and PM. NOX is a precursor 
to cruise-altitude ozone, which is a GHG. An increase in ozone also 
results in increased tropospheric hydroxyl radicals (OH) which reduces 
ambient CH4, thus potentially at least partially offsetting 
the warming effect from the increase in ozone. Water vapor and PM 
modify or create cloud cover, which in turn can either amplify or

[[Page 44470]]

dampen climate change.\199\ Contrails are unique to aviation 
operations, and persistent contrails are of interest because they 
increase cloudiness.\200\ The IPCC Fourth Assessment Report (2007) has 
characterized the level of scientific understanding as low to very low 
regarding the radiative forcing of contrails and aviation induced 
cirrus clouds.\201\ EPA requests information on the climate change 
compounds emitted by aircraft and the scientific understanding of their 
climate effects, including contrail formation and persistence.
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    \198\ SF6 is used as an insulating medium in the 
radar systems of some military reconnaissance planes. 2006 IPCC 
Guidelines for National Greenhouse Gas Inventories, Volume 3, 
Industrial Processes and Product Use, Chapter 8, Other Product 
Manufacture and Use, Section 8.3, Use of SF6 and HFCs in 
Other Products; http://www.ipcc-nggip.iges.or.jp/public/2006gl/index.htm.
    \199\ IPCC, Climate Change 2007--The Physical Science Basis, 
Contribution of Working Group I to the Fourth Assessment Report of 
the IPCC, Chapter 2, Changes in Atmospheric Constituents and in 
Radiative Forcing.
    \200\ EPA, Aircraft Contrails Factsheet, EPA430-F-00-005, 
September 2000, developed in conjunction with NASA, the National 
Oceanic and Atmospheric Administration (NOAA), and FAA, available at 
http://www.epa.gov/otaq/aviation.htm.
    \201\ IPCC, Climate Change 2007--The Physical Science Basis, 
Contribution of Working Group I to the Fourth Assessment Report of 
the IPCC, Chapter 2, Changes in Atmospheric Constituents and in 
Radiative Forcing, (page 202).
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b. Potential for GHG Reductions From Aircraft Operations
    There are both technological controls and operational measures 
potentially available to reduce GHG emissions from aircraft and 
aircraft operations. These are discussed below.
i. Reducing GHG Emissions Through Aircraft Engine Changes
    Fuel efficiency and therefore GHG emission rates are closely linked 
to jet aircraft engine type (e.g., high bypass ratio) and choice of 
engine thermodynamic cycles (e.g., pressure and temperature ratios), 
but modifications in the design of the engine's combustion system can 
also have a substantial effect on the composition of the exhaust.\202\ 
Turbofan engines, with their high bypass ratios and increased 
temperatures, introduced in the 1970s and 1980s reduced CO2, 
HC, and CO emissions, but in many cases put upward pressure on 
NOX emission rates. Also, a moderate increase in the engine 
bypass ratio (high bypass turbofan) decreases fuel burn (and 
CO2) by enhancing propulsive efficiency and reduces noise by 
decreasing exhaust velocity, but it may lead to increased engine 
pressure ratio and potentially higher NOX. \203\ There is no 
single relationship between NOX and CO2 that 
holds for all engine types. As the temperatures and pressures in the 
combustors are increased to obtain better efficiency, emissions of 
NOX increase, unless there is also a change in combustor 
technology.\204\ There are interrelationships among the different 
emissions and noise to be considered in engine design.
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    \202\ IPCC, Aviation and the Global Atmosphere, 1999, at 
Aircraft Technology and Its Relation to Emissions, at page 221, at 
section 7.1, available at http://www.grida.no/climate/ipcc/aviation/index.htm.
    \203\ ICCIA, Technical Design Interrelationships, Presentation 
by Dan Allyn, ICCAIA Chair, at Aviation and the Environment 
Conference, March 19, 2008, available at http://www.airlines.org/government/environment/Aviation+and+the+Environment+Conference+Presentations.htm.
    \204\ IPCC, Aviation and the Global Atmosphere, 1999, at 
Aircraft Technology and Its Relation to Emissions, at page 237, at 
section 7.5.6, available at http://www.grida.no/climate/ipcc/aviation/index.htm.
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    The three major jet engine manufacturers in the world are General 
Electric (GE), Pratt and Whitney, and Rolls-Royce. All of these 
manufacturers supply engines to both U.S. and non-U.S. aircraft 
manufacturers, and their engines are installed on aircraft that operate 
worldwide. These three manufacturers are now (or will be in the future) 
producing more fuel efficient (lower GHG) engines with improved 
NOX. The General Electric GEnx jet engine is being developed 
for the new Boeing 787, and GE's goal is to have the GEnx engine meet 
NOX levels 50 percent lower than the ICAO standards approved 
in 2005.\205\ The combustor technology GE is employing is called the 
Twin Annular, Pre-mixing Swirler (TAPS) combustor. In addition, the 
GEnx is expected to improve specific fuel consumption by 15 percent 
compared to the previous generation of engine technology (GE's CF6 
engine).\206\
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    \205\ The NOX standards adopted at the sixth meeting 
of ICAO's Committee on Aviation Environmental Protection (CAEP) in 
February 2004 were approved by ICAO in 2005.
    \206\ General Electric, Press Release, Driving GE Ecomagination 
with the Low-Emission GEnx Jet Engine, July 20, 2005, available at 
http://www.geae.com/aboutgeae/presscenter/genx/genx_20050720.html.
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    Pratt and Whitney has developed the geared turbofan technology that 
is expected to deliver 12 percent reduction in fuel burn while emitting 
half of the NOX emissions compared to today's engines. In 
addition to an advanced gear system, the new engine design includes the 
next generation technology for advanced low NOX (TALON). The 
rich-quench-lean TALON combustor utilizes advanced fuel/air atomizers 
and mixers, metallic liners, and advanced cooling management to 
decrease NOX emissions during the LTO and high-altitude 
cruise operations. Flight testing of the engine is expected this year, 
and introduction into service is expected in 2012.\207\ Mitsubishi 
Heavy Industries has chosen the engine for its regional 
jet.208 209
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    \207\ Engine Yearbook, Pratt & Whitney changing the game with 
geared turbofan engine, 2008, at page 96.
    \208\ Aviation, Japanese Airliner to Introduce PW's New Engine 
Technology, by Chris Kjelgaard, October 9, 2007, available at http://www.aviation.com/technology/071009-pw-geared-turbofan-powering-mrj.html.
    \209\ The New York Times, A Cleaner, Leaner Jet Age Has Arrived, 
by Matthew L. Wald, April 9, 2008, available at http://www.nytimes.com/2008/04/09/technology/techspecial/09jets.html?_r=1&ex=1208491200&en=6307ad7d1372acdf&ei=5070&emc=eta1&oref=slogin.
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    Rolls-Royce's Trent 1000 jet engine will power the Boeing 787s on 
order for Virgin Atlantic airlines. The Trent 1000 powered 787 is 
expected to improve fuel consumption by up to 15 percent compared to 
the previous generation of engines (Rolls-Royce's Trent 800 
engine).\210\ The technology in the Trent 1000 improves the operability 
of the compressors, and enables the engine to run more efficiently at 
lower speeds. This contributes to better fuel burn, especially in 
descent.\211\
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    \210\ Rolls-Royce, Trent and the environment, available at 
http://www.rolls-royce.com/community/downloads/trent_env.pdf and 
the Rolls-Royce environmental report, Powering a better world: 
Rolls-Royce and the environment, 2007, available at http://www.rolls-royce.com/community/environment/default.jsp.
    \211\ Green Car Congress, Rolls-Royce Wins $2.6B Trent 1000 
Order from Virgin Atlantic; The Two Launch Joint Environmental 
Initiative, March 3, 2008, available at http://www.greencarcongress.com/2008/03/rolls-royce-win.html.
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ii. Reducing GHG Emissions Through Aircraft Changes
    Aircraft (or airframe) efficiency gains are mainly achieved through 
aerodynamic drag and weight reduction.\212\ Most of the fuel used by 
aircraft is needed to overcome aerodynamic drag, since they fly at very 
high speeds. Reduction of aerodynamic drag can substantially improve 
the fuel efficiency of aircraft thus reducing GHG emissions. 
Aerodynamic drag can be decreased by installing add-on devices, such as 
film surface grooves, hybrid laminar flow technology, blended winglets, 
and spiroid tips, and GHG emissions can be reduced by each of these 
measures from 1.6 to 6 percent.

[[Page 44471]]

Further discussion of these devices is provided below.

    \212\ U.S. Department of Transportation, Best Practices 
Guidebook for Greenhouse Gas Reductions in Freight Transportation--
Final Report, Prepared for U.S. Department of Transportation via 
Center for Transportation and the Environment, Prepared by H. 
Christopher Frey and Po-Yao Kuo, Department of Civil, Construction, 
and Environmental Engineering, North Carolina State University, 
October 4, 2007, available at http://www4.ncsu.edu/~frey/Frey--Kuo--
071004.pdf.
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    --Film surface grooves: This technology is undergoing testing, and 
it is an adhesive-backed film with micro-grooves placed on the outer 
surfaces of the wings and the fuselage of the aircraft. Film surface 
grooves are estimated to reduce total aerodynamic drag and GHG 
emissions by up to 1.6 percent.
    --Hybrid laminar flow technology: Contamination on the airframe 
surface, such as the accumulation of ice, insects or other debris, 
degrades laminar flow. A newly developed concept, hybrid laminar flow 
technology (replace turbulent air flow), integrates approaches to 
maintain laminar flow. This technology can reduce fuel use by 6 to 10 
percent and potentially GHG emissions by 6 percent.
    --Blended winglets: A blended winglet is a commercially available 
wing-tip device that can decrease lift-induced drag. This technology is 
an extension mounted at the tip of a wing. The potential decreases in 
both GHG emissions and fuel use are estimated to be 2 percent.
    --Spiroid tip: A spiroid tip has been pilot tested and, similar to 
blended winglets, it is intended to reduce lift-induced drag. This 
technology is a spiral loop formed by joining vertical and horizontal 
winglets. Greenhouse gas emissions and fuel use are both potentially 
estimated to be decreased by 1.7 percent.

    Reductions in the weight of an aircraft by utilizing light-weight 
materials and weight reduction of non-essential components could lead 
to substantial decreases in fuel use. The weight of an airframe is 
about 50 percent of an aircraft's gross weight. The use of advanced 
lighter and stronger materials in the structural components of the 
airframe, such as aluminum alloy, titanium alloy, and composite 
materials for non-load-bearing structures, can decrease airframe 
weight. These materials can reduce structural weight by 4 percent. The 
potential reduction in greenhouse gas emissions and fuel use are 
estimated to both be 2 percent.
iii. Reducing GHG Emissions Through Operational Changes
    Rising jet fuel prices tend to drive the aviation industry to 
implement practices to decrease fuel usage and lower fuel usage reduces 
GHG emissions.\213\ Indeed this has occurred in the recent past where 
several airlines have reduced flights and announced plans to retire 
older aircraft. However, such practices are voluntary, and there is no 
assurance that such practices would continue or not be reversed in the 
future. Technology developments for lighter and more aerodynamic 
aircraft and more efficient engines which reduce aircraft fuel 
consumption and thus GHG emissions are expected to improve in the 
future. However, technology changes take time to find their way into 
the fleet. Aircraft and aircraft engines operate for about 25 to 30 
years.
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    \213\ According to the Energy Information Administration, jet 
fuel prices increased by about 140 percent from 2000 to 2007 (see 
http://tonto.eia.doe.gov/dnav/pet/hist/rjetnyhA.htm.).
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    Air traffic management and operational changes are governed by FAA. 
The FAA, in collaboration with other agencies, is in the process of 
developing the next generation air transportation system (NextGen), a 
key environmental goal of which is to decrease aviation's contribution 
to GHG emissions by reducing aviation system-induced congestion and 
delay and accelerating air traffic management improvements and 
efficiencies. As will be discussed below, measures of this type 
implemented together with technology changes may be a way to reduce GHG 
emissions in the near term. A few examples of the advanced systems/
procedures and operational measures are provided below.
    Reduced Vertical Separation Minimum (RSVM) allows air traffic 
controllers and pilots to reduce the standard required vertical 
separation from 2,000 feet to 1,000 feet for aircraft flying at 
altitudes between 29,000 and 41,000 feet. This increases the number of 
flight altitudes at which aircraft maximize fuel and time efficiency. 
RSVM has led to about a 2 percent decrease in fuel burn.\214\ 
Continuous Descent Approach is a procedure that enables continuous 
descent of the aircraft on a constant slope toward landing, as opposed 
to a staggered or staged approach, thus allowing for a more efficient 
speed requiring less fuel and reducing GHG emissions. Aircraft 
auxiliary power units (APUs) are engine-driven generators that supply 
electricity and pre-conditioned cabin air for use aboard the aircraft 
while at the gate. Ground-based electricity sources or electrified 
gates combined with preconditioned air supplies can reduce APU fuel use 
and thus CO2 emissions substantially. Single-engine taxiing, 
a practice already used by some airlines, could be utilized more 
broadly to reduce CO2 emissions.\215\ Fuel consumption, and 
thus GHG emissions, could be reduced by decreasing the aircraft weight 
by reducing the amount of excess fuel carried. More efficient routes 
and aircraft speeds would be directly beneficial to reducing full 
flight GHG emissions. Operational safety must be considered in the 
application of all of these measures.
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    \214\ PARTNER, Assessment of the impact of reduced vertical 
separation on aircraft-related fuel burn and emissions for the 
domestic United States, PARTNER-COE-2007-002, November 2007, 
available at web.mit.edu/aeroastro/partner/reports/rsvm-caep8.pdf.
    \215\ ICAO, Operational Opportunities to Minimize Fuel Use and 
Reduce Emissions, Circular 303 AN/176, February 2004, available at 
http://www.icao.int/icao/en/m_publications.html.
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    In regard to the above three sections, we request information on 
potentially available technological controls (technologies for 
airframes, main engines, and auxiliary power units) and operational 
measures to reduce GHG emissions from aircraft operations. Since FAA 
currently administers and implements air traffic management and 
operational procedures, EPA would share information on these items with 
FAA.
    Efforts are underway to potentially develop alternative fuels for 
aircraft in the future. Industry (manufacturers, operators and 
airports) and FAA established the Commercial Aviation Alternative Fuels 
Initiative (CAAFI) in 2006 to explore the potential use of alternative 
fuels for aircraft for energy security and possible environmental 
improvements. CAAFI's goals are to have available for certification in 
2008 a 50 percent Fischer-Tropsch synthetic kerosene fuel, 2010 for 100 
percent synthetic fuel, and as early as 2013 for other biofuels. 
However, any alternative fuel would need to be compatible with current 
jet fuel for commercial aircraft to prevent the need for tank and 
system flushing on re-fueling and to meet comprehensive performance and 
safety specifications. In February 2008, Boeing, General Electric, and 
Virgin Atlantic airlines tested a Boeing 747 that was partly powered by 
a biofuel made from babassu nuts and coconut oil, a first for a 
commercial aircraft.
    EPA requests information on decreasing aircraft emissions related 
to climate change through the use of alternative fuels, including what 
is feasible in the near-term and long-term and information regarding 
safety, distribution and storage of fuels at airports, life-cycle 
impacts, and cost information. Given the Agency's work to develop a 
lifecycle methodology for fuels as required by the Energy Independence 
and Security Act, EPA also is interested in information on the 
lifecycle impacts of alternative fuels.

[[Page 44472]]

c. Options To Address GHG Emissions From the Aviation Sector
    In the preceding nonroad sections, we have described a continuum of 
regulatory approaches that take us from traditional engine standards 
through a range of potential approaches for vehicle standards and even 
potential mechanisms to credit operational changes. For commercial 
aircraft, although the reasons to consider such continuum are just as 
valid, the means to accomplish these could be simpler. We see at least 
two potential basic approaches for regulating aircraft GHG emissions 
under the CAA, engine emission standards or a fleet average standard. 
These approaches are discussed further below.
    The first approach we can consider is setting emission standards as 
an extension of our current program. Under this approach we would 
establish, for example, CO2 exhaust emission standards and 
related requirements for all newly and previously certified engines 
applicable in some future year and later years. These standards could 
potentially cover all phases of flight. Depending on timing, this first 
set of standards could effectively be used to either establish baseline 
values and/or to require reductions.
    As described earlier, ICAO and EPA currently require measurement 
and reporting of CO2 emissions during engine exhaust gaseous 
emissions testing for the current certification cycle (although the 
current absence of this information for other GHGs does not rule out a 
similar approach for those GHGs).\216\ Although test procedures for 
measuring CO2 are in place already and LTO cycle 
CO2 data exists, test requirements to simulate full-flight 
emissions are a significant consideration. Further work is needed to 
determine how CO2 and other GHG emissions measured over the 
various modes of LTO cycle might be used to as a means to estimate or 
simulate cruise or full-flight emissions. A method has been developed 
by ICAO for determining NOX for climb/cruise operations 
(outside the LTO) based on LTO data, and this could be a good starting 
point.217 218 For CO2, and potentially 
NOX and other GHGs as well, the climb/cruise methods could 
then be codified as test procedures, and we could then establish 
emission standards for these GHGs. We request comments on the need to 
develop a new test procedure for aircraft engines and the best approach 
to developing such a procedure, including the viability and need for 
altitude simulation tests for emissions certification.
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    \216\ EPA's regulations at 40 CFR 87.62 require testing at each 
of the following operating modes in order to determine mass emission 
rates: taxi/idle, takeoff, climbout, descent and approach.
    \217\ ICAO, CAEP/7 Report, Working Paper 68, CAEP/7-WP/68, 
February 2007, see http://www.icao.int.
    \218\ ICAO has deferred work on using the NOX climb/
cruise method for a certification procedure and standards since 
future engines (potential new technologies) may behave in a 
different way. There may need to be future work to consider the 
aircraft mission, taking into account all phases of flight and the 
performance of the whole aircraft.
---------------------------------------------------------------------------

    Furthermore, to drive the development of engine technology, we 
could pursue near- and long-term GHG exhaust emission standards. Near-
term standards, which could for example apply 5 years from their 
promulgation, would encourage engine manufacturers to use the best 
currently available technology. Long-term standards could require more 
significant reductions in emissions beyond the near-term values. In 
both cases, new standards could potentially apply to both newly and 
previously certified engines, but possibly at different levels and 
implementation dates based on lead time considerations. Under this 
approach, we would expect that no engines would be able to be produced 
indefinitely if they did not meet the new standards, except possibly 
based on the inclusion of an emissions averaging program for GHG as 
discussed below.
    For emission standards applied to other mobile sources, EPA has 
often incorporated emission averaging, banking and trading (ABT) 
programs to provide manufacturers more flexibility in phasing-in and 
phasing-out engine models as they seek to comply with emission 
standards. In these types of programs, the average emissions within a 
manufacturer's current year product line are required to meet the 
applicable standard, which allows a manufacturer to produce some 
engines with emission levels above the standard provided they are 
offset with some below the standard. The calculation for average 
compliance is usually sales, activity, and power weighted. In addition, 
emissions credits and debits may be generated, banked and traded with 
other engine manufacturers. We request comment on the approaches to 
engine standards for reducing GHG emissions and an engine ABT program 
for new GHG emission standards, including whether certain GHGs, such as 
CO2, are more amenable than are other GHGs to being addressed by such a 
program.
    As part of this option, we could pursue new standards and test 
procedures for PM that would encompass LTO and climb/cruise operations 
(ICAO and EPA currently do not have test procedures or emission 
standards for PM from aircraft), if we find that aircraft PM emissions 
cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare.\219\ Work has been 
underway for several years under the auspices of the Society of 
Automotive Engineers E-31 Committee, and EPA/FAA are working actively 
with this committee to bring forth a draft recommended test procedure. 
In addition, requirements could potentially be proposed and adopted 
using the same approach as discussed above for GHGs for near- and long-
term standards and newly and already certified engines.
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    \219\ As mentioned earlier, PM modifies or creates cloud cover, 
which in turn can either amplify or dampen climate change. Aircraft 
are also a source of PM emissions that contribute to local air 
quality near the ground, and the public health and welfare effects 
from these emissions are an important consideration.
---------------------------------------------------------------------------

    In the preceding nonroad sections, we have discussed several 
approaches or variations on approaches to include vehicle and 
operational controls within a GHG emission control program for nonroad 
equipment. In doing so, we have not discussed direct regulation of 
equipment or fleet operators. Instead, we have focused on approaches 
that would credit fleet operators for improvements in operational 
controls within a vehicle or engine GHG standards program. Those 
approaches described in section VI.C.2 could apply to aircraft GHG 
emissions as well, and we request comments on the potential to apply 
those approaches to aircraft.
    As a second approach, in the case of aircraft, it may be more 
practical and flexible to directly regulate airline fleet average GHG 
emissions. Under such an approach we would set a declining fleet 
average GHG emission standard for each airline, based on the GHG 
emission characteristics of its entire fleet. This would require GHG 
certification emission information for all engines in the fleet from 
the aircraft engine manufacturers and information on hours flown and 
average power (e.g., thrust). Airlines would have GHG emission 
baselines for a given year based on the engine emission characteristics 
of their fleet, and beginning in a subsequent year, airlines would be 
required to reduce their emissions at some annual rate, at some rolling 
average rate, or perhaps to some prescribed lower level in a future 
year. This could be done as a fleet average GHG emission standard for 
each airline or through a surrogate measure of GHGs such as airline 
total fuel consumption, perhaps adjusted for flight activity in some 
way. This could

[[Page 44473]]

cover all domestic operations and international departures of domestic 
airlines. The fleet average program could potentially be implemented in 
the near term since it is not as reliant on lead times for technology 
change.
    Although we might develop such a declining fleet average emissions 
program based on engine emissions, an operational declining fleet 
average program could potentially be designed to consider the whole 
range of engine, aircraft and operational GHG control opportunities 
discussed above. Under this approach compliance with a declining fleet 
average standard would be based not only on parameters such as engine 
emission rates and activity, but could also consider efficiencies 
gained by use of improved operational controls. It is important to note 
that as part of this approach, a recordkeeping and reporting system 
would need to be established for airlines to measure and track their 
annual GHG emissions. Perhaps this could be accomplished through a 
surrogate measure of GHGs such as airline total fuel consumption. Today 
each airline reports its annual fuel consumption to the Department of 
Transportation. We request comment on the operational fleet average GHG 
emission standard concept, how it could be designed and implemented, 
what are important program design considerations, and what are 
potential metrics for establishing standards and determining 
compliance. While we have discussed two basic concepts above, we invite 
comment and information on any other approaches for regulating aircraft 
GHG emissions.
d. Other Considerations
    We are aware that the European Commission (EC) has proposed a 
program to cap aviation-related CO2 emissions (cap is 100% 
of sector's emissions during 2004-2006). They would by 2012 include 
CO2 emissions from all flights arriving at and departing 
from European airports, including U.S.-certified aircraft, in the 
European Union Emissions Trading Scheme (ETS).220, 221 If 
the proposal is adopted, airlines from all countries (EU and non-EU) 
will be required to submit allowances to cover emissions from all such 
aircraft flights over the compliance period (e.g., 5 years). The EU has 
expressed some interest in developing a program to waive this 
requirement for foreign-flagged carriers (non-EU carriers) whose 
nations develop ``equivalent'' measures. The petitioners discussed this 
program, and we invite comments on it.
---------------------------------------------------------------------------

    \220\ Commission Proposal for a Directive of the European 
Parliament and of the Council amending Directive 2003/87/EC so as to 
include aviation activities in the scheme for greenhouse gas 
emission allowance trading within the Community, 2006/0304 (COD), 
COM(2006) 818 final, December 20, 2006, available at http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&1g=en&type_doc=COMfinal&an_doc=2006ν_doc=818.
    \221\ Proposal for a Directive of the European Parliament and of 
the Council amending Directive 2003/87/EC so as to include aviation 
activities in the scheme for greenhouse gas emission allowance 
trading within the Community--Political agreement, December 21, 2007 
available at http://register.consilium.europa.eu/pdf/en/07/st16/st16855.en07.pdf.
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    The 36th Session of ICAO's Assembly met in September 2007 to focus 
on aviation emissions related to climate change, including the use of 
emissions trading.\222\ In response to the EC's proposed aviation 
program, the Assembly agreed to establish a high-level group through 
ICAO to develop a framework of action that nations could use to address 
these emissions. A report with recommendations is due to be completed 
before the next Assembly Session in 2010. In addition, the Assembly 
urged all countries to not apply an emissions trading system to other 
nations' air carriers except on the basis of mutual consent between 
those nations.\223\
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    \222\ ICAO, Assembly--36th Session, Report of the Executive 
Committee on Agenda Item 17, A36-WP/355, September 27, 2007.
    \223\ ICAO, Assembly--36th Session, Report of the Executive 
Committee on Agenda Item 17, A36-WP/355, September 27, 2007.
---------------------------------------------------------------------------

    To address greenhouse gas emissions, ICAO's focus currently appears 
to be on the continued development of guidance for market-based 
measures.\224\ These measures include emissions trading (for 
CO2), environmental levies, and voluntary measures. 
Emissions trading is when an overall target or cap is established and a 
market for carbon is set. This approach allows participants to buy and 
sell allowances, the price of which is established by the market. 
Environmental levies include taxes and charges with the objective of 
generating an economic incentive to decrease emissions. Voluntary 
measures are unilateral actions by industry or in an agreement between 
industry and government to decrease emissions beyond the base case. 
Note, for ICAO's efforts on CO2 emission charges, it 
evaluated an aircraft efficiency parameter, and in early 2004 ICAO 
decided that there was not enough information available at the time to 
create a parameter that correlated properly with aircraft/engine 
performance.\225\ However, it is important to note, that unlike EPA, 
ICAO has not been petitioned under applicable law to determine whether 
GHG emissions from aircraft may reasonably be anticipated to endanger 
public health or welfare or to take any action if such a finding is 
made. We invite information on reducing overall emissions that relate 
to climate change from aircraft through a cap-and-trade system or other 
market-based system.
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    \224\ ICAO, ICAO Environmental Report 2007, available at http://www.icao.int/env/.
    \225\ ICAO, CAEP/6 Report, February 2004, available at http:/
www.icao.int.
---------------------------------------------------------------------------

    Another consideration in the GHG program is the regulation of 
emissions from engines commonly used in general aviation aircraft. As 
indicated earlier, our current aircraft engine requirements apply to 
gas turbine engines that are mainly used by commercial aircraft, except 
in cases where general aviation aircraft sometimes use commercial 
engines. Our requirements do not currently apply to many engines used 
in business jets or to piston-engines used in aircraft that fall under 
the general aviation category, although our authority under the Clean 
Air Act extends to any aircraft emissions for which we make the 
prerequisite finding that those emissions cause or contribute to air 
pollution which may reasonably be anticipated to endanger public health 
or welfare.\226\ In 2006, general aviation made up about one percent of 
the CO2 emissions from U.S. domestic transportation sources, 
and about 8 percent of CO2 emissions from U.S. domestic 
aircraft operations.\227\ Regulating GHG emissions from this sector of 
aviation would require the development of test procedures and emission 
standards. EPA requests comment on this matter and on any elements we 
should consider in potentially establishing test procedures and 
emission standards for these currently unregulated engines.
---------------------------------------------------------------------------

    \226\ As specified in 40 CFR 87.10, our emission standards apply 
to different classes of aircraft gas turbine engines, which have a 
particular minimum rated output. The engine class and rated output 
specifications correspond to certain engine operational or use 
practices, but we do not, by the terms of the rule, exempt general 
aviation aircraft or engines as such.
    \227\ U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and 
Sinks: 1990-2006, April 2008, USEPA 430-R-08-005, available 
at http://www.epa.gov/climatechange/emissions/usinventoryreport.html.
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5. Nonroad Sector Summary
    There are a number of potential approaches for reducing GHG 
emissions from the nonroad sector within the regulatory structure of 
the CAA. In considering our next steps to address GHG emissions from 
this sector, we seek comment on all of the issues raised in this notice 
along with recommendations

[[Page 44474]]

on the most appropriate means to address the issues.

D. Fuels

1. Recent Actions Which Reduce GHG Impacts of Transportation Fuels
    Historically under Title II of the CAA, EPA has treated vehicles, 
engines and fuels as a system. The interactions between the designs of 
vehicles and the fuels they use must be considered to assure optimum 
emission performance at minimum cost. While EPA continues to view its 
treatment of vehicles, engines and fuels as a system as appropriate, we 
request comment on whether it would continue to be advantageous to take 
this approach for the purpose of controlling GHG emissions from the 
transportation sector. This section describes existing authorities 
under the CAA for regulating the GHG emissions contribution of fuels. 
In this discussion, we ask for comment on the combination of 
authorities that would suit the goal of GHG emission reductions from 
transportation fuel use.
    In response to CAA section 211(o) adopted as part of the Energy 
Policy Act of 2005 (Energy Act of 2005), EPA issued regulations 
implementing a Renewable Fuels Standard (RFS) program (72 FR 23900, May 
1, 2007). These regulations were designed to ensure that 4.0 billion 
gallons of renewable fuel were used in motor vehicles beginning in 
2006, gradually increasing to 7.5 billion gallons in 2012. While the 
primary purpose of this provision of the Energy Act of 2005 was to 
reduce U.S. dependence on petroleum-based fuel and promote domestic 
sources of energy, EPA analyzed the extent to which reductions in GHG 
emissions would also result from the new RFS program. Therefore, for 
the first time in a major rule, EPA presented estimates of the GHG 
impacts of replacing petroleum-based transportation fuel with fuel made 
from renewable feedstocks.
    In December 2007, EISA revised section 211(o) to set three specific 
volume standards for biomass-based diesel, cellulosic biofuel, and 
advanced biofuel as well as a total renewable fuel standard of 36 
billion gallons annually by 2022. Certain eligible fuels must also meet 
specific GHG performance thresholds based upon a lifecycle GHG 
assessment. In addition to being limited to renewable fuels, EISA puts 
constraints on what land sources can be used to produce the renewable 
fuel feedstock, requires assessment of both primary and significant 
secondary land use impacts as part of the required lifecycle GHG 
emissions assessment, and has a number of other specific provisions 
that affect both the design of the rule and the required analyses. EISA 
requires that EPA adopt rules implementing these provisions by January 
2009.
    The U.S. federal government is not alone in considering or pursuing 
fuel changes which can result in reductions of GHG emissions from the 
transportation sector California is moving toward adopting a low carbon 
fuel standard that it anticipates will result in significant reductions 
in GHG emissions through such actions as increasing the use of 
renewable fuel and requiring refiners to offset any emission increases 
that might result from changes in crude oil supply. Canada, the 
countries of the European Union, and a number of other nations are 
considering or in the process of requiring fuel changes as part of 
their strategy to reduce GHG emissions from the transportation sector.
2. GHG Reductions Under CAA Section 211(o)
    The two principal CAA authorities available to EPA to regulate 
fuels are sections 211(c) and 211(o). As explained in previously, 
section 211(o), added by the Energy Act of 2005 and amended by EISA, 
requires refiners and other obligated parties to assure that the 
mandated volumes of renewable fuel are used in the transportation 
sector. Section 211(o) only addresses renewable fuels; other 
alternative fuels such as natural gas are not included nor are any 
requirements imposed on the petroleum-based portion of our 
transportation fuel pool. EPA is authorized to waive or reduce required 
renewable fuel volumes specified in EISA under certain circumstances, 
and is also authorized to establish required renewable fuel volumes 
after the years for which volumes are specified in the Act (2012 for 
biomass-based diesel and 2022 for total renewable fuel, cellulosic 
biofuel and advanced biofuel). One of the factors EPA is to consider in 
setting standards is the impact of production and use of renewable 
fuels on climate change. In sum, EPA has limited discretion under 
211(o) to improve GHG performance of fuels.
    Changes in fuel feedstock sources (for example, petroleum versus 
biomass) and processing technologies can have a significant impact on 
GHG emissions when assessed on a lifecycle basis. As analyzed in 
support of the RFS rules, a lifecycle approach considers the GHG 
emissions associated with producing a fuel and bringing it to market 
and then attributes those emissions to the use of that fuel. In the 
case of petroleum, the lifecycle would account for emissions resulting 
from extraction of crude oil, shipping the oil to a refiner, refining 
the oil into a fuel, distributing the fuel to retail markets and 
finally the burning the gasoline or diesel fuel in an engine. This 
assessment is sometimes referred to as a ``well-to-wheels'' assessment. 
A comparable assessment for renewable fuel would include the process of 
growing a feedstock such as corn, harvesting the feedstock, 
transferring it to a fuel production facility, turning the feedstock 
into a fuel, getting the renewable fuel to market and then assessing 
its impact on vehicle emissions. EPA presented estimates of GHG impacts 
as part of the assessment for the Energy Act of 2005 RFS rulemaking 
that increasing renewable fuel use from approximately 4 billion gallons 
to 7.5 billion gallons by 2012. However, as noted below, the 
methodology used in that RFS rulemaking did not consider a number of 
relevant issues.
    The 7.5 billion gallons of renewable fuel required by the Energy 
Act of 2005 program represents a relatively small portion of the total 
transportation fuel pool projected to be used in 2012 (add figure as % 
of energy). The much larger 36 billion gallons of renewable fuel 
required by EISA for 2022 would be expected to displace a much larger 
portion of the petroleum-based fuel used in transportation and would 
similarly be expected to have a greater impact on GHG emissions. 
Comments on the RFS proposal suggested improvements to the lifecycle 
assessment used in that rule. For instance, the RFS analysis did not 
fully consider the impact of land use changes both domestically and 
abroad that would likely result from increased demand for corn and 
soybeans as feedstock for ethanol and biodiesel production in the U.S. 
EPA largely agreed with these comments but was not able to incorporate 
a more thorough assessment of land use impacts and other enhancements 
in its lifecycle emissions modeling in time. We are undertaking such a 
lifecycle assessment as we develop the proposal to implement EISA fuel 
mandates. Because this updated lifecycle assessment will incorporate 
more factors and the latest data, it will undoubtedly change the 
estimates of GHG reductions included in the Energy Act 2005 RFS 
package.
    EISA recognizes the importance of distinguishing between renewable 
fuels on the basis of their impact on lifecycle GHG emissions. 
Nevertheless, EISA stops short of directly comparing and crediting each 
fuel on the basis of its

[[Page 44475]]

estimated impact on GHG emissions. For example, while requiring a 
minimum of 60% GHG emission reduction for cellulosic biomass fuel 
compared to the petroleum-based fuel displaced, EISA does not 
distinguish among the multiple pathways for producing cellulosic 
biofuel even though these pathways might differ significantly in their 
lifecycle GHG emission performance. It may be that the least costly 
fuels meeting the cellulosic biofuel GHG performance threshold will be 
produced which may not be the fuels with the greatest GHG benefit or 
even the greatest GHG benefit when considering cost (e.g., GHG 
reduction per dollar cost). The same consideration applies to other 
fuels and pathways. Without further delineating fuels on the basis of 
their lifecycle GHG impact, no incentive is provided for production of 
particular fuels which would minimize lifecycle GHG emissions within 
the EISA fuel categories.
    We request comment on the importance of distinguishing fuels beyond 
the categories established in EISA and how an alternative program might 
further encourage the development and use of low GHG fuels. We also 
request comment on the ability (including considerations of uncertainty 
and the measurement of both direct and indirect emissions associated 
with the production of fuels) of lifecycle analysis to estimate the GHG 
emissions of a particular fuel produced and used for transportation and 
how EPA should delineate fuels (e.g., on the basis of feedstock, 
production technology, etc.). EPA notes that a certain level of 
aggregation in the delineation of fuels may be necessary, but that the 
greater the aggregation in the categories of fuels, the fewer 
incentives exist for changes in behavior that would result in 
reductions of GHG emissions. EPA asks for comment on this idea as well 
as how and whether methods for estimating lifecycle values for use in a 
regulatory program can take into account the dynamic nature of the 
market. EPA also requests comment on the relative efficacy of a 
lifecycle-based regulatory approach versus a price-based (e.g., carbon 
tax or cap and trade) approach to incentivize the multitude of actors 
whose decisions collectively determine the GHG emissions associated 
with the production, distribution and use of transportation fuels. 
Finally, we request comment on the ability to determine lifecycle GHG 
performance for fuels and fuel feedstocks that are produced outside the 
U.S.
    EISA addresses impacts of renewable fuels other than GHG impacts. 
Section 203 of EISA directs that the National Academy of Sciences be 
asked to consider the impacts on producers of feed grains, livestock, 
and food and food products, energy producers, individuals and entities 
interested in issues relating to conservation, the environment and 
nutrition, users and consumers of renewable fuels, and others 
potentially impacted. Section 204 directs EPA to lead a study on 
environmental issues, including air and water quality, resource 
conservation and the growth and use of cultivated invasive or noxious 
plants. We request comment on what impacts other than GHG impacts 
should be considered as part of a potential fuels GHG regulation and 
how such other impacts should be reflected in any policy decisions 
associated with the rule. These impacts could include the potential 
impacts on food prices and supplies.
    Programs under section 211(o) are subject to further limitations. 
Limited to renewable fuels, these programs do not consider other 
alternative fuels such as coal-to-liquids fuel that could be part of 
the transportation fuel pool and could impact the lifecycle GHG 
performance of the fuel pool. Additionally, EISA's GHG performance 
requirements are focused on the renewable fuels, not the petroleum-
based fuel being replaced. Under EISA, the GHG performance of renewable 
fuels is tied to a 2005 baseline for petroleum fuel. No provision is 
included for considering how the GHG impacts of the petroleum-based 
fuel pool might change over time, either for the purpose of determining 
the comparative performance for threshold compliance of renewable fuels 
or for assessing the impact of the petroleum fuel itself on 
transportation fuel GHG emissions. Thus, for example, there is no 
opportunity under EISA to recognize and credit improvements in refinery 
operation which might improve the lifecycle GHG performance of the 
petroleum-based portion of the transportation fuel pool. Comments are 
requested on the importance of lowering GHG emissions from 
transportation fuels via the inclusion of alternative, non-renewable 
fuels in a GHG regulatory program as well as the petroleum portion of 
the fuel pool, thus providing opportunity to reflect improvements in 
refinery practices.
    Finally while the current RFS and anticipated EISA programs will 
tend to improve the GHG performance of the transportation fuel pool 
compared to a business as usual case, they would not in any way cap the 
GHG emissions due to the use of fuels. In fact, under both programs, 
the total amount of fuel consumed and thus the total amount of GHG 
emissions from those fuels can both increase. We note that other 
lifecycle fuel standard programs being developed such as those in 
California, Canada, and Europe, while also taking into account the GHG 
emissions reduction potential from petroleum fuels, do not cap the 
emissions from the total fuel pool; the GHG per gallon of 
transportation fuel consumed may decrease but the total gallons 
consumed are not constrained such that the total GHG emissions from 
fuel may continue to grow. We request comment on setting a GHG control 
program covering all transportation fuels used in the United States 
which would also cap the total emissions from these transportation 
fuels.
    Elsewhere in this notice, comments are solicited on the potential 
for regulating GHG emissions from stationary sources which could 
include petroleum refineries and renewable and alternative fuel 
production facilities. EPA recognizes the potential for overlapping 
incentives to control emissions at fuel production facilities. We 
request comment on the implications of using a lifecycle approach in 
the regulation of GHG emissions from fuels which would include refinery 
and other fuel production facilities while potentially also directly 
regulating such stationary source emission under an additional control 
program. Recognizing that the use of biomass could also be a control 
option for stationary sources seeking to reduce their lifecycle GHG 
impacts, EPA requests comment on the implications of using biomass for 
transportation fuel in potential competition as an energy source in 
stationary source applications.
3. Option for Considering GHG Fuel Regulation Under CAA Section 211(c)
    Section 211(c)(1) of the CAA has historically been the primary 
authority used by EPA to regulate fuels. It provides EPA with authority 
to ``control or prohibit the manufacture, introduction into commerce, 
offering for sale, or sale of any fuel or fuel additive for use in a 
motor vehicle, motor vehicle engine, or nonroad engine of nonroad 
vehicle [(A)] if in the judgment of the Administrator any emission 
product of such fuel or fuel additive causes or contributes to air 
pollution or water pollution (including any degradation in the quality 
of groundwater) which may reasonably be anticipated to endanger public 
health or welfare.'' Section 211(c)(2) specifies that EPA must consider 
all available relevant medical and scientific information, including 
consideration of other technologically or economically feasible means 
of

[[Page 44476]]

achieving vehicle emission standards under CAA section 202 before 
controlling a fuel under section 211(c)(1)(A). A prerequisite to action 
under 211(c)(1) is an EPA finding that a fuel or fuel additive, or 
emission product of a fuel or fuel additive, causes or contributes to 
air or water pollution that may reasonably be anticipated to endanger 
public health or welfare. Issues related to an endangerment finding are 
discussed in section V of this advance notice.
    EPA asks for comment on whether section 211(c) could be read as 
providing EPA a broader scope of authority to establish a new GHG fuel 
program than section 211(o). Specifically, EPA asks for comment on 
whether section 211(c)(1)(A) could allow EPA to start the program as 
soon as appropriate in light of our analysis and similarly cover the 
time period most appropriate; whether it could allow a program that 
would encourage the use of both renewable and alternative fuels with 
beneficial GHG emissions impacts and discourage those fuels with 
relatively detrimental GHG impacts; and whether it could allow EPA to 
establish requirements for all fuels (gasoline, diesel, renewables, 
alternative and synthetic fuel, etc.) used in both highway and nonroad 
vehicles and engines. EPA requests comment on whether the flexibilities 
under section 211(c) allow it to consider a broad set of options for 
controlling GHG emissions through fuels, including those that solely 
regulate the final point of emissions such as tailpipe emissions rather 
than also controlling the emissions at the fuel production facility 
through a lifecycle approach.
    Typically EPA has acted through CAA section 211(c) to prohibit the 
use of certain additives (e.g., lead) in fuel, to control the level of 
a component of fuel to reduce harmful vehicle emissions (e.g., sulfur, 
benzene), or to place a limit on tailpipe emissions of a pollutant 
(e.g., the reformulated gasoline standards for volatile organic 
compounds and toxics emissions performance). While multiple approaches 
may be available to regulate GHG emissions under section 211(c), one 
option could require refiners and importers of gasoline and diesel meet 
a GHG performance standard based on reducing their lifecycle GHG 
emissions of the fuel they import or produce. They would comply with 
this performance standard by ensuring the use of alternative and/or 
renewable fuels that have lower lifecycle GHG emissions than the 
gasoline and diesel they displace and through selection of lower 
petroleum sources that also reduce the lifecycle GHG performance of 
petroleum-based fuel. EPA asks comment on whether section 211(c) could 
authorize such an approach because it would be a control on the sale or 
manufacture of a fuel that addresses the emissions of GHGs from the 
transportation fuels that would be the subject the endangerment finding 
discussed in section V. Comments are requested on this interpretation 
of 211(c) authority.
    As pointed out above, neither the Energy Act of 2005 RFS program 
nor the forthcoming program under EISA directly addresses the varying 
GHG emission reduction potential of each fuel type and production 
pathway. EPA asks comment on whether it could have the authority under 
CAA section 211(c) to design and implement a program that includes not 
only renewable fuels but other alternative fuels, considers the GHG 
emissions from the petroleum portion of the fuel pool and reflects 
differences in fuel production not captured by the GHG thresholds 
established under EISA, including differences in technology at the fuel 
production facility. We request comment on the factors EPA should 
consider in developing a GHG fuel control program under section 211(c) 
and how including such factors could serve to encourage the use of low 
GHG-emitting practices and technology.
    We note that the RFS and the forthcoming EISA programs require 
refiners and other obligated parties to meet specified volume standards 
and that these programs are anticipated to continue. We request comment 
on the impacts and opportunities of implementing both a GHG program 
under 211(c) and volume mandates under 211(o).
    EPA seeks comment on the potential for reducing GHG emissions from 
transportation fuel over and above those reductions that could be 
achieved by RFS and the anticipated EISA requirements. Although EPA has 
not completed its analysis of the GHG emission reductions expected 
under the combined RFS and EISA programs, EPA seeks comment on how it 
might structure a program that could reduce GHG emissions from 
transportation fuel over and above those reductions that could be 
achieved by the RFS and anticipated EISA requirements.

VII. Stationary Source Authorities and Potential Options for Regulating 
Greenhouse Gases Under the Clean Air Act

    In this section, we explore three major pathways that the CAA 
provides for regulating stationary sources, as well as other stationary 
source authorities of the Act, and their potential applicability to 
GHGs. The three pathways include NAAQS and implementation plans 
(sections 107-110 and related provisions); performance standards for 
new and existing stationary sources (section 111); and hazardous air 
pollutant standards for stationary sources (section 112).\228\ Special 
provisions for regulating solid waste incinerators are contained in 
section 129.
---------------------------------------------------------------------------

    \228\ As explained in this section, the NAAQS pathway is not 
solely a stationary source regulatory authority; plans for 
implementating the NAAQS can involve regulation of stationary and 
mobile sources.
---------------------------------------------------------------------------

    We also review the implications of regulating GHGs under Act's 
programs for preconstruction permitting of new emissions sources, with 
emphasis on the PSD program under Part C of the Act. These programs 
require permits and emission controls for major new sources and 
modifications of existing major sources. The permitting discussion 
closes by examining the implications of requiring operating permits 
under Title V for major sources of GHGs. Finally, we describe four 
different types of market-oriented regulatory designs that (in addition 
to other forms of regulation) could be considered for programs to 
reduce GHG emissions from stationary sources to the extent permissible 
under the CAA: cap-and-trade, rate-based emissions trading, emissions 
fees, and a hybrid approach.
    For each potential pathway of stationary source regulation, this 
notice discusses the following basic questions:
     What does the section require?
     What sources would be affected if GHGs were regulated 
under this authority?
     What would be the key milestones and implementation 
timeline?
     What are key considerations regarding use of this 
authority for GHGs and how could potential issues be addressed?
     What possible implications would use of this authority for 
GHGs have for other CAA programs?
    In discussing these questions, EPA considers the President's core 
principles and other policy design principles enumerated in Section 
III.F.1. EPA seeks comment on the advantages and disadvantages of 
alternative regulatory authorities in light of those policy design 
principles. EPA further invites comments on the following aspects of 
each CAA stationary source authority:
     How much flexibility does the CAA section provide for 
implementing its requirements? For example, can EPA set compliance 
dates that reflect the global

[[Page 44477]]

and long-lived nature of GHGs and that allow time for technological 
advances and new technology deployment?
     To what extent would the section allow for consideration 
of the costs and economic impacts of regulating GHGs? For example, 
would the section provide opportunities for sending a price signal, 
such as through cap and trade programs (with or without cost 
containment mechanisms) and emission fees.
     To what extent can each section account for the 
international aspects of GHG emissions, atmospheric concentrations, and 
emission impacts, including ways for potentially addressing 
international pollutant transport and emission leakage?
     How does each section address the assessment of available 
technologies, and to what extent could the section promote or require 
the advancement of technology?
     To what extent does the section allow for the ability to 
prioritize regulation of significant emitting sectors and sources?
     To what extent could each authority be adapted to GHG 
regulation without compromising the Act's effectiveness in regulating 
traditional air pollutants?
    Finally, for each regulatory authority, EPA requests comment on a 
range of program-specific issues identified in the discussion below. 
EPA also requests comment on whether there are specific statutory 
limitations that would best be addressed by new legislation. Additional 
information concerning potential CAA regulation of stationary source 
GHGs may be found in the Stationary Source Technical Support Document 
(Stationary Source TSD) placed in the docket for this notice.

A. National Ambient Air Quality Standards (NAAQS)

1. What Are the Requirements for Setting and Implementing NAAQS?
a. Section 108: Listing Pollutant(s) and Issuing Air Quality Criteria
    Section 108(a)(1) establishes three criteria for listing air 
pollutants to be regulated through NAAQS. Specifically, section 
108(a)(1) states that: EPA ``shall from time to time * * * list * * * 
each air pollutant--
    (A) emissions of which, in [the Administrator's] judgment, cause or 
contribute to air pollution which may reasonably be anticipated to 
endanger public health or welfare;
    (B) the presence of which in the ambient air results from numerous 
or diverse mobile or stationary sources; and
    (C) for which air quality criteria had not been issued before the 
date of enactment of the Clean Air Amendments of 1970, but for which 
[the Administrator] plans to issue air quality criteria under this 
section.''
    In determining whether a pollutant meets these criteria, EPA must 
consider a number of issues, including many of those discussed in 
section IV above regarding an endangerment finding. As discussed there, 
in the context of the ICTA petition remand, EPA is considering defining 
the ``air pollution'' as the elevated current and future concentration 
of six GHGs (CO2, CH4, N2O, HFCs, 
PFCs, and SF6). Also in that context, EPA is considering 
alternative definitions of ``air pollutant'' as the group of GHGs or 
each individual GHG for purposes of the ``cause or contribute'' 
determination.
    In considering the potential listing of GHGs under section 108, EPA 
solicits input on appropriate definitions of both the ``air pollution'' 
and the ``air pollutants.'' With regard to section 108, it is important 
to note that EPA has clear precedents for listing related compounds as 
groups rather than as individual pollutants. For example, photochemical 
oxidants, oxides of nitrogen, and particulate matter all comprise 
multiple compounds, but the listing under section 108 is for the group 
of compounds, not the individual elements of the group. The Agency is 
soliciting comment on the relevance of these precedents for GHGs. In 
addition, as discussed later, there would be increased complexity in 
setting NAAQS for individual GHGs than for GHGs as a group. We are 
particularly interested in comments on how to apply the terms ``air 
pollution'' and/or ``air pollutants'' under sections 108 and 109 in the 
context of GHGs, and the implications of taking consistent or different 
approaches under other Titles or sections of the Act.
    A positive endangerment finding for GHGs under section 202(a) or 
other sections of the CAA could have significant and direct impacts on 
EPA's consideration of the first two criteria for listing the 
pollutant(s) under section 108, as explained in section IV.B.2 of this 
notice. The third criterion for listing under section 108, however, may 
be unrelated to the issues involved in any motor vehicle or other 
endangerment finding. Moreover, this third criterion could provide EPA 
discretion to decide whether to list those pollutants under section 108 
for purposes of regulating them via the NAAQS.\229\ EPA requests 
comment on the effect of a positive finding of endangerment for GHGs 
under section 202(a) of the Act on potential listing of the 
pollutant(s) under section 108.
---------------------------------------------------------------------------

    \229\ With respect to the third criterion, while there is a 
decision of U.S. Court of Appeals for the Second Circuit to the 
contrary, NRDC v. Train, 545 F.2d 320 (2nd Cir. 1978), EPA notes 
that that decision was rendered prior to the Supreme Court's 
decision in Chevron v. Natural Resources Defense Council, 467 U.S. 
837 (1984). Thus, a proper and reasonable question to ask is whether 
this criterion affords EPA discretion to decide whether it is 
appropriate to apply the NAAQS structure to a global air pollution 
problem like GHGs.
---------------------------------------------------------------------------

    Section 108 also requires that once a pollutant is listed, EPA 
issue ``air quality criteria'' encompassing ``all identifiable effects 
on public health or welfare,'' including interactions between the 
pollutant and other types of pollutants in the atmosphere. We are 
interested in commenters' views on whether and how developing air 
quality criteria for GHGs would differ from developing such criteria 
for other pollutants such as ozone and particular matter, given the 
long-lived nature of GHGs and the breadth of impacts and other special 
issues involved with global climate change. EPA also invites comment on 
the extent to which it would be appropriate to use the most recent IPCC 
reports, including the chapters focusing on North America, and the U.S. 
government Climate Change Science Program synthesis reports as 
scientific assessments that could serve as an important source or as 
the primary basis for the Agency's issuance of ``air quality 
criteria.''
    Finally, section 108 requires EPA to issue information on air 
pollution control techniques at the same time it issues air quality 
criteria. This would include information on the cost of installation 
and operation, energy requirements, emission reduction benefits, and 
environmental impacts of these techniques. Generally, the Agency defers 
this obligation until the time a standard is actually issued. As 
required under Executive Order 12866, EPA must issue a Regulatory 
Impact Analysis (RIA) for major rulemaking actions, and it is in this 
context that EPA has previously described the scope and effectiveness 
of available pollution control techniques. EPA requests comment on 
whether this approach is appropriate in the case of GHGs.
b. Section 109: Standard-Setting
    Section 109 requires that the Administrator establish NAAQS for any 
air pollutant for which air quality criteria are issued under section 
108. Both the air quality criteria and the standards are to be reviewed 
and, as appropriate, revised by the Administrator, every five years. 
These decisions are to be informed by an

[[Page 44478]]

independent scientific review committee, a role which has been 
fulfilled by the Clean Air Scientific Advisory Committee (CASAC) of 
EPA's Science Advisory Board. The committee is charged with reviewing 
both the air quality criteria for the pollutant(s) and the standards, 
and recommending any revisions deemed appropriate.
    The statute specifically provides that primary NAAQS ``shall be 
ambient air quality standards the attainment and maintenance of which 
in the judgment of the Administrator, based on such criteria and 
allowing an adequate margin of safety, are requisite to protect the 
public health,'' including the health of sensitive groups. The 
requirement that primary standards provide an adequate margin of safety 
was intended to address uncertainties associated with inconclusive 
scientific and technical information available at the time of standard 
setting. It was also intended to provide a reasonable degree of 
protection against hazards that research has not yet identified. Lead 
Industries Association v. EPA, 647 F.2d 1130, 1154 (DC Cir 1980), cert. 
denied, 449 U.S. 1042 (1980); American Petroleum Institute v. Costle, 
665 F.2d 1176, 1186 (DC Cir 1981), cert. denied, 455 U.S. 1034 (1982). 
The selection of any particular approach to providing an adequate 
margin of safety is a policy choice left specifically to the 
Administrator's judgment. Lead Industries Association v. EPA, 647 F.2d 
at 1161-62.
    With regard to secondary NAAQS, the statute provides that these 
standards ``specify a level of air quality the attainment and 
maintenance of which in the judgment of the Administrator * * * is 
requisite to protect the public welfare from any known or anticipated 
adverse effects associated with the presence of such air pollutant in 
the ambient air.'' Welfare effects as defined in CAA section 302(h) 
include, but are not limited to, ``effects on soils, water, crops, 
vegetation, manmade materials, animals, wildlife, weather, visibility 
and climate, damage to and deterioration of property, and hazards to 
transportation, as well as effects on economic values and on personal 
comfort and well-being.''
    One of the central issues posed by potential regulation of GHGs 
through the NAAQS is the nature of the health and environmental effects 
to be addressed by the standards and, thus, what effects should be 
addressed when considering a primary (public health) standard and what 
effects should be addressed when considering a secondary (public 
welfare) standard. This issue has implications for whether it would be 
appropriate to establish a primary standard as well as a secondary 
standard for these pollutants. As discussed above in section V, the 
direct effects of GHG emissions appear to be principally or exclusively 
welfare-related. GHGs are unlike other current NAAQS pollutants in that 
direct exposure to GHGs at current or projected ambient levels appears 
to have no known adverse effects on human health. Rather, the health 
impacts associated with ambient GHG concentrations are a result of the 
changes in climate at the global, regional, and local levels, which 
trigger myriad ecological and meteorological changes that can adversely 
affect public health (e.g., increased viability or altered geographical 
range of pests or diseases; increased frequency or severity of severe 
weather events including heat waves) (see section V above). The effects 
on human health are thus indirect impacts resulting from these 
ecological and meteorological changes, which are effects on welfare. 
This raises the question of whether it is more appropriate to address 
these health effects as part of our consideration of the welfare 
effects of GHGs when setting a secondary NAAQS rather than a primary 
NAAQS. Control of GHGs would then occur through implementation of the 
secondary NAAQS rather than the primary NAAQS. EPA invites comment on 
whether and how these indirect human health impacts should be addressed 
in the context of setting a primary or a secondary NAAQS.
    Past experience suggests EPA may have discretion to decline to set 
either a primary or a secondary standard for a pollutant if the 
evidence shows that there are no relevant adverse effects at or near 
current ambient concentrations, and therefore that no standard would be 
requisite to protect public health or welfare. In 1985, for example, 
EPA determined that it was appropriate to revoke the secondary standard 
for carbon monoxide (CO) after a review of the scientific evidence 
indicated that there was no evidence of known or anticipated adverse 
welfare effects associated with CO at or near ambient levels. 50 FR 
37484, 37494 (September 13, 1985). This decision was reaffirmed by the 
Agency in the 1994 CO NAAQS review, and there remains only a primary 
standard for this pollutant. EPA requests comment on whether it would 
be necessary and/or appropriate for the Agency to establish both 
primary and secondary NAAQS for GHGs if those pollutants were listed 
under section 108.
    It is also important to consider how a NAAQS for GHGs would 
interface with existing NAAQS for other pollutants, particularly oxides 
of nitrogen (NOX) and ozone (O3), as well as particulate 
matter. EPA's approach in other NAAQS reviews has been to consider 
climate impacts associated with any pollutant as part of the welfare 
impacts evaluated for that pollutant in setting secondary standards for 
the pollutant. If separate NAAQS were established for GHGs, EPA would 
likely address the climate impacts of each specific GHG in the NAAQS 
for GHGs, and would not need to address the climate impacts of that GHG 
when addressing other NAAQS, thus avoiding duplication of effort.
    In considering the application of section 109 to GHGs and whether 
it would be appropriate to regulate GHGs through the NAAQS, EPA must 
evaluate a number of other standard-setting issues, as discussed below.
i. Level
    For potential GHG standards, EPA would face special challenges in 
determining the level of the NAAQS. As noted above, the primary 
standard must be ``requisite to protect public health with an adequate 
margin of safety'' and the secondary standard ``requisite to protect 
public welfare against any known or anticipated adverse effects.'' 
EPA's task is to establish standards that are neither more nor less 
stringent than necessary for the purposes of protecting public health 
or welfare. Whitman v. American Trucking Associations, 531 U.S. 457, 
473. Under established legal interpretation, the costs of 
implementation associated with various potential levels cannot be 
factored into setting a primary or secondary standard.\230\ Any 
determinations by the EPA Administrator regarding the appropriate level 
(and other elements of) of a NAAQS for GHGs must based on the available 
scientific evidence of adverse public health and/or public welfare 
impacts, without consideration of the costs of implementation.
---------------------------------------------------------------------------

    \230\ The Supreme Court has confirmed EPA's long-standing 
interpretation and ruled that ``[t]he text of Sec.  109(b), 
interpreted in its statutory and historical context and with 
appreciation for its importance to the CAA as a whole, unambiguously 
bars cost considerations from the NAAQS-setting process.'' The court 
also noted that consideration of costs occurs in the state's 
formulation of the implementation plan with the aid of EPA cost 
data. Whitman v. American Trucking Associations, 531 U.S. at 472.
---------------------------------------------------------------------------

    EPA expects it would be difficult to determine what levels and 
other elements of NAAQS would meet these criteria for GHGs, given that 
the full effects associated with elevated atmospheric concentrations of 
these

[[Page 44479]]

pollutants occur over a long period of time and there are significant 
uncertainties associated with the health or welfare impacts at any 
given concentration. The delayed nature of effects and the complex 
feedback loops associated with global climate change would require EPA 
to consider both the current effects and the future effects associated 
with current ambient concentrations. In making a determination of what 
standard is sufficient but not more stringent than necessary, EPA would 
also have to grapple with significant scientific uncertainty. As with 
other NAAQS, however, the iterative nature of the 5-year review cycle 
means the standards could be revised as appropriate in light of new 
scientific information as it becomes available. EPA requests comment on 
the scientific, technical, and policy challenges of determining 
appropriate levels for NAAQS for GHG pollutants, for both primary and 
secondary standards.
    As with all pollutants for which EPA establishes NAAQS, EPA would 
need to evaluate what constitutes an ``adverse'' impact in the climate 
context. EPA notes that the 1992 UNFCCC calls for the avoidance of 
``dangerous anthropogenic interference with the climate system.'' 
However, it is possible that the criteria for setting a NAAQS may call 
for protection against risks and effects that are less egregious than 
``dangerous interference.'' Furthermore, international agreement has 
not been reached on either the metric (e.g., atmospheric concentrations 
of the six major directly emitted anthropogenic GHGs, radiative 
forcing, global average temperature increase) or the level at which 
dangerous interference would occur. EPA requests comment on whether it 
would be appropriate, given the unique attributes of GHGs and the 
significant contribution to total atmospheric GHG contributions from 
emissions emanating outside the United States, to establish a level for 
a GHG NAAQS based on an internationally agreed-upon target GHG level, 
considering legal and policy factors.
    Another key question is the geographical extent of the human health 
and welfare effects that should be taken into consideration in 
determining what level and other elements of a standard would provide 
the appropriate protection. The pollutants already subject to NAAQS are 
typically local and/or regional in nature, so the standards are 
designed to limit ambient concentrations of pollutants associated with 
emissions typically originating in and affecting various parts of the 
United States. In assessing what standard is requisite to protect 
either public health or welfare, EPA has focused in the past on 
analyzing and addressing the impacts in the United States. It may be 
appropriate to interpret the Act as requiring standards that are 
requisite for the protection of U.S. public health and welfare. 
However, atmospheric concentrations of GHGs are relatively uniform 
around the globe, the impacts of climate change are global in nature, 
and these effects, as described in section V, may be unequally 
distributed around the world. The severity of impacts in the U.S. might 
differ from the severity of impacts in the rest of the world. In light 
of these factors, EPA invites comment on whether it would be 
appropriate to consider adverse effects on human health and welfare 
occurring outside the U.S. Specifically, we invite comment on whether, 
and if so, on what legal basis, it would be appropriate for EPA to 
consider impacts occurring outside the U.S. when those impacts, either 
in the short or long term, may reasonably be anticipated to have an 
adverse effect on health or welfare in the U.S.
    As noted briefly above, if each GHG is listed as a separate 
pollutant under section 108, rather than as a group or category of 
pollutants, then EPA arguably would have to establish separate NAAQS 
for each listed GHG. This scenario raises significant challenges for 
determining which level of any particular standard is appropriate, 
especially as the science of global climate change is generally focused 
on the total radiative impact of the combined concentration of GHGs in 
the atmosphere. Since for any one pollutant, the standard that is 
requisite to protect public health with an adequate margin of safety or 
public welfare from known or anticipated adverse effects is highly 
dependent upon the concentration of other GHGs in the atmosphere, it 
would be difficult to establish independent standards for any of the 
six principal GHGs. EPA requests comments on possible approaches for 
determining appropriate levels for GHG NAAQS if these pollutants are 
listed individually under section 108.
ii. Indicator
    If each GHG is listed as an individual pollutant under section 108, 
the atmospheric concentration of each pollutant could be measured 
separately, and establishing an indicator for each pollutant would be 
straightforward. However, if GHGs are listed as a group, it would be 
more challenging to determine the appropriate indicator for use in 
measuring ambient air quality in comparison to a GHG NAAQS. One 
approach could be to measure the total atmospheric concentration of a 
group of GHGs on a CO2 equivalent basis, by assessing their 
total radiative forcing (measured in W/m2).\231\ Radiative 
forcing is a measure of the heating effect caused by the buildup of the 
GHGs in the atmosphere. Estimating CO2-equivalent 
atmospheric concentrations, however, would not be a simple matter of 
multiplying emissions times their respective GWP values. Rather, the 
heating effect (radiative forcing) due to concentrations of each 
individual GHG would have to be estimated to define CO2-
equivalent concentrations. EPA invites comment on the extent to which 
radiative forcing could be an effective metric for capturing the 
heating effect of all GHGs in a group (or for each GHG individually). 
For example, in the year 2005 global atmospheric CO2 
concentrations were 379 parts per million (ppm), but the 
CO2-equivalent concentration of all long-lived GHGs was 455 
ppm. This approach would not require EPA to specify the allowable level 
of any particular GHG, alone or in relation to the concentration of 
other GHGs present in the atmosphere.
---------------------------------------------------------------------------

    \231\ See footnote 13 for an explanation of CO2 
equivalency.
---------------------------------------------------------------------------

    A second option would be to select one GHG as the indicator for the 
larger group of pollutants intended to be controlled under the 
standard. This kind of indicator approach is currently used in 
regulating photochemical oxidants, for which ozone is the indicator, 
and oxides of nitrogen, for which NO2 has been used as an 
indicator. There are several reasons, however, that this approach may 
not be appropriate for GHGs. For example, in the instances noted above, 
the indicator species is directly related to the other pollutants in 
the group, either through common precursors or similar chemical 
composition, and there is a basis for expecting that control of the 
indicator compound will lead to the appropriate degree of control for 
the other compounds in the listed pollutant. In the case of GHGs, it 
would be more difficult to select one species as the indicator for the 
larger group, given that the GHGs are distinct in origin, chemical 
composition, and radiative forcing, and will require different control 
strategies. Furthermore, this approach raises an issue regarding 
whether states would have the appropriate incentive to address all 
pollutants within the group. For example, there could be a focus on 
controlling the single indicator species at the expense of other 
species also associated with the adverse effects from

[[Page 44480]]

which the standard(s) are designed to offer protection.
    EPA seeks comment on the merits and drawbacks of these various 
approaches, as well as suggestions for other possible approaches, to 
defining an indicator for measuring allowable concentrations of GHGs in 
the atmosphere.
c. Section 107: Area Designations
    After EPA establishes or revises a NAAQS, the CAA requires EPA and 
the states to begin taking steps to ensure that the new or revised 
NAAQS are met. The first step is to identify areas of the country that 
do not meet the new or revised NAAQS. This applies to both the primary 
and secondary NAAQS. EPA is required to identify each area of the 
country as ``attainment,'' ``nonattainment,'' or ``unclassifiable.'' 
\232\
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    \232\ CAA Section 107(d)(1) requires EPA to establish a deadline 
for states to submit recommendations for area designations that is 
no later than one year after promulgation of the new or revised 
NAAQS. Section 107(d)(1) also directs states to recommend 
appropriate area boundaries. A nonattainment area must consist of 
that area that does not meet the new or revised NAAQS, and the area 
that contributes to ambient air quality in a nearby area that does 
not meet the new or revised NAAQS. Thus, a key factor in setting 
boundaries for nonattainment areas is determining the geographic 
extent of nearby source areas contributing to the nonattainment 
problem. EPA then reviews the states' recommendations, collects and 
assesses additional information as appropriate, and issues final 
designations no later than 2 years following the date EPA 
promulgated the new or revised NAAQS. EPA may take one additional 
year (meaning final designations can be up to 3 years after 
promulgation of new or revised NAAQS) if the Administrator has 
insufficient information to promulgate the designations. Whether or 
not a state or a Tribe provides a recommendation, EPA must 
promulgate the designation that it deems appropriate.
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    For a GHG NAAQS, the designations given to areas would depend on 
the level of the NAAQS and the availability of ambient data to make 
informed decisions for each area. For GHGs, in contrast to current 
NAAQS pollutants, it would likely make sense to conduct the air quality 
assessment at the national scale rather than at a more localized scale. 
All of the potential indicators discussed above for measuring ambient 
concentrations of GHGs for purposes of a NAAQS involve globally 
averaged metrics. Therefore, the ambient concentrations measured across 
all locations within the U.S. for purposes of comparison to the level 
of the standard would not vary, and all areas of the country would have 
the same designation--that is, the entire U.S. would be designated 
either attainment or non-attainment, depending on the level of the 
NAAQS compared to observed GHG ambient concentrations.
    If, in making decisions about the appropriate level of the GHG 
NAAQS, EPA were to determine that current ambient concentrations are 
not sufficient to cause known or anticipated adverse impacts on human 
health or welfare now or in the future, then it is possible that the 
NAAQS would be set at some level higher than current ambient 
concentrations. In that case, the entire country would likely be 
designated nonattainment. If, on the other hand, EPA were to set the 
NAAQS at a level above current ambient concentrations, the entire 
country would likely be designated attainment.
d. Section 110: State and Federal Implementation Plans
i. State Implementation Plans
    The CAA assigns important roles to EPA, states, and tribal 
governments in implementing NAAQS and in ensuring visibility protection 
in Class I areas. States have the primary responsibility for developing 
and implementing state implementation plans (SIPs). A SIP is the 
compilation of authorities, regulations, control programs, and other 
measures that a state uses to carry out its responsibilities under the 
CAA to attain, maintain, and enforce the NAAQS and visibility 
protection goals, and to prevent significant deterioration of air 
quality in areas meeting the standard. Additional specifics on SIP 
requirements are contained in other parts of the CAA.
    EPA assists states and tribes in their efforts to clean the air by 
promulgating national emissions standards for mobile sources and 
selected categories of stationary sources. Also, EPA assists the states 
in developing their plans by providing technical tools, assistance, and 
guidance, including information on potentially applicable emissions 
control measures.
    Historically, the pollutants addressed by the SIP program have been 
local and regional pollutants rather than globally mixed pollutants 
like GHGs. The SIP development process, because it relies in large part 
on individual states, is not designed to result in a uniform national 
program of emissions controls.
(1) Generic Requirements for All SIPs
    This section discusses the specific CAA requirements states must 
address when implementing any new or revised NAAQS.\233\
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    \233\ The visibility protection program required by CAA sections 
169A and 169B, and as implemented through state compliance with 
EPA's 1999 Regional Haze Rule, will only be raised again here in 
this section of the ANPR in the context of a framework for 
implementing a secondary GHG NAAQS.
---------------------------------------------------------------------------

    Under section 110(a)(1) and (2) of the CAA, all states are required 
to submit plans to provide for the implementation, maintenance, and 
enforcement of any new or revised NAAQS. Section 110(a)(1) and (2) 
require states to address basic program elements, including 
requirements for emissions inventories, monitoring, and modeling, among 
other things. These requirements apply to all areas of the state 
regardless of whether those areas are designated nonattainment for the 
NAAQS.
    In general, every state is required to submit to EPA within 3 years 
of the promulgation of any new or revised NAAQS a SIP demonstrating 
that these basic program elements are properly addressed. Subsections 
(A) through (M) of section 110(a)(2) enumerate the elements that a 
state's program must contain. See the Stationary Source TSD for this 
list.
    Other statutory requirements for state implementation plans vary 
depending on whether an area is in nonattainment or attainment. There 
are four specific scenarios that could hypothetically apply, depending 
on whether a primary or a secondary standard, or both, are established, 
and on the level(s) set for those standards. Because we are proposing 
no scientific determinations in this notice, our discussion of NAAQS 
implementation addresses all four of these scenarios.
(2) Scenario 1: Primary GHG Standard With Country in Nonattainment
    If the entire country were designated nonattainment for a primary 
GHG NAAQS, each state would be required to develop and submit a SIP 
that provided for attainment and met the other specific requirements of 
Part D of Title I of the Act by the specified deadline.
    Requirements for the general contents of a nonattainment area plan 
are set forth in section 172 of the CAA. Section 172(c) specifies that 
SIPs must, among other things: \234\
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    \234\ For additional information about nonattainment area 
planning requirements, please see the Technical Support Document.
---------------------------------------------------------------------------

     Include all Reasonably Available Control Measures (RACM) 
(including, at a minimum, emissions reductions obtained through 
adoption of Reasonably Available Control Technology (RACT)) and provide 
for attainment of the NAAQS;
     Provide for Reasonable Further Progress (RFP), which means 
reasonable interim progress toward attainment;
     Include an emissions inventory;
     Require permits for the construction and operation of 
major new or modified stationary sources, known as

[[Page 44481]]

``nonattainment new source review'' (see also section 173 of the Act 
and section VII.E. of this notice);
     Contain contingency measures that are to be implemented in 
the event the air quality standard is not met by the area's attainment 
deadline; and
     Meet the applicable provisions of section 110(a)(2) of the 
CAA related to the general implementation of a new or revised NAAQS.
    In addition, all nonattainment areas must meet requirements of 
section 176(c) known as ``general conformity'' and ``transportation 
conformity.'' \235\ In brief, general conformity requires the federal 
government only to provide financial assistance, issue a permit or 
approve an activity that conforms to an approved SIP for a NAAQS. 
Transportation conformity requires metropolitan planning organizations 
and the U.S. Department of Transportation only to approve or fund 
transportation plans, programs and projects that conform to an approved 
SIP for a NAAQS. For the scenario of the country in nonattainment with 
a GHG NAAQS, these requirements would apply nationwide one year after 
the effective date of EPA's nonattainment designations.
---------------------------------------------------------------------------

    \235\ These requirements also apply to ``maintenance areas''--
former nonattainment areas that have met the standard and been 
redesignated according to a formal EPA determination.
---------------------------------------------------------------------------

    For nonattainment areas, SIPs must provide for attainment of the 
primary NAAQS as expeditiously as practicable, but no later than 5 
years from the effective date of the nonattainment designation for the 
area--or no later than 10 years if EPA finds additional time is needed 
considering the severity of nonattainment and the availability and 
feasibility of pollution control measures.
    At the outset, it would appear to be an inescapable conclusion that 
the maximum 10-year horizon for attaining the primary NAAQS would be 
ill-suited to GHGs. The long atmospheric lifetime of the six major 
emitted GHGs means that atmospheric concentrations will not quickly 
respond to emissions reduction measures (with the possible exception of 
methane, which has an atmospheric lifetime of approximately a decade). 
In addition, in the absence of substantial cuts in worldwide emissions, 
worldwide concentrations of GHGs would continue to increase despite any 
U.S. emission control efforts. Thus, despite active control efforts to 
meet a NAAQS, the entire U.S. would remain in nonattainment for an 
unknown number of years. If States were unable to develop plans 
demonstrating attainment by the required date, the result would be 
long-term application of sanctions, nationwide (e.g., more stringent 
offset requirements and restrictions on highway funding), as well as 
restrictions on approvals of transportation projects and programs 
related to transportation conformity. EPA is currently evaluating the 
extent to which section 179B might provide relief to states in this 
circumstance. As further explained below, section 179B is a waiver 
provision providing for SIP approval under certain circumstances when 
international emissions affect a U.S. nonattainment area.
    In addition to submitting plans providing for attainment within the 
state, each state would be required to submit, within 3 years of NAAQS 
promulgation, a plan under section 110(a)(2)(D) prohibiting emissions 
that would significantly contribute to nonattainment in another state. 
EPA requests comments on what approaches could be utilized for purposes 
of addressing this requirement as well as the general matter of 
controlling GHGs to meet a NAAQS.
    Impact of section 179B on nonattainment requirements: States may 
use section 179B of the CAA to acknowledge the impact of emissions from 
international sources that may contribute to violations of a NAAQS. 
Section 179B provides that EPA shall approve a SIP for a nonattainment 
area if: (1) The SIP meets all applicable requirements of the CAA; and 
(2) the submitting state can satisfactorily demonstrate that ``but for 
emissions emanating from outside of the United States,'' the area would 
attain and maintain the applicable NAAQS. EPA has historically 
evaluated these ``but for'' demonstrations on a case-by-case basis, 
based on the individual circumstances and the data provided by the 
submitting state. These data might include ambient air quality 
monitoring data, modeling scenarios, emissions inventory data, and 
meteorological or satellite data. In the case of GHGs, however, where 
global emissions impact all areas within the United States, the federal 
government may be best suited for establishing whether a ``but for'' 
demonstration can be made for the entire country.
    If a ``but for'' conclusion is affirmed, section 179B would allow 
EPA to approve a SIP that did not demonstrate attainment or maintenance 
of the relevant NAAQS. Section 179B does not provide authority to 
exclude monitoring data influenced by international transport from 
regulatory determinations related to an area's status as an attainment 
or nonattainment area. Thus, even if EPA approves a section 179B ``but 
for'' demonstration for an area, the area would continue to be 
designated as nonattainment and subject to certain applicable 
nonattainment area requirements, including nonattainment new source 
review, conformity, and other measures prescribed for nonattainment 
areas by the CAA. EPA requests comment on the practical effect of 
application of section 179B on the global problem of GHG emissions and 
on the potential for controls based on the attainment plan requirement 
and other requirements directly related to the attainment requirement, 
including the reasonable further progress requirement and the RACM 
requirement.\236\
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    \236\ EPA has interpreted RACM as emissions reducing measures 
that are technically and economically feasible, and considered 
collectively would advance the nonattainment area's attainment date 
by at least one year. RACT has been interpreted in two different 
ways, depending on the applicable statutory requirements. In the 
case of ozone, RACT consists of measures that are technically and 
economically feasible, without regard to whether the measures would 
result in earlier attainment. In recent rules on PM2.5, EPA 
interpreted RACT for PM2.5 as essentially the same as RACM, with 
RACT referring to the stationary source component of RACM, which 
applies to all types of sources.
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(3) Scenario 2: Secondary Standard With Country in Nonattainment (No 
Primary Standard)
    As noted above in the NAAQS standard-setting discussion, depending 
on the nature and bases of any endangerment finding under section 108, 
EPA may be able to consider setting only a secondary NAAQS for GHGs and 
not also a primary NAAQS.
    In general, the same nonattainment requirements that apply to SIPs 
for a primary standard apply for a secondary standard, including 
nonattainment new source review and the other programs listed under the 
Scenario 1 subsection above.
    A notable difference in nonattainment requirements for primary and 
secondary standards is the time allowed for attainment. Under a 
secondary standard, state plans must achieve attainment as 
expeditiously as practicable, but there is no statutory maximum date 
for attainment. The general requirement to attain as expeditiously as 
practicable includes consideration of required controls, including 
``reasonably available control measures.'' These requirements do allow 
for consideration of cost. What would constitute ``as expeditiously as 
practicable'' would be determined based on the entire set of facts and 
circumstances at issue. EPA requests comment on how to interpret

[[Page 44482]]

the requirement that state plans demonstrate that attainment will be 
achieved ``as expeditiously as practicable'' in the context of a 
secondary NAAQS for GHGs.
    Potential implementation approach based on regional haze model: For 
a secondary GHG NAAQS with no prescribed attainment date, EPA requests 
comment on the concept of implementing a GHG secondary NAAQS standard 
in a way roughly analogous to an approach used in the long-term 
regional visibility program, known as the regional haze program. This 
program is based on a goal of achieving natural visibility conditions 
in our nation's parks and wilderness areas (Class I areas) by 2064. The 
program requires states to develop reasonable progress goals every 10 
years and implement emissions control programs to achieve those goals, 
ultimately achieving the 2064 natural condition goal in each Class I 
area. At the midpoint of every 10-year period, states must assess the 
progress being made and take corrective action if necessary to maintain 
reasonable progress toward the 10-year progress milestone.
    The regional haze program's model for goal planning, control 
strategy development, and control strategy implementation could offer a 
possible framework for achieving a GHG secondary NAAQS. This framework 
potentially could be designed to address the RACM, RACT and Reasonable 
Further Progress requirements, as well as the attainment planning 
requirement. This framework may also provide a mechanism for 
implementing a nationwide GHG emissions cap and trade program adopted 
and implemented through state plans. However, EPA recognizes that the 
global nature of GHGs and their persistence in the atmosphere make an 
approach based on ``reasonable'' progress more difficult to implement 
than in the case of regional haze. For example, despite domestic 
emissions reductions, it might not be possible to discern improvement 
in atmospheric concentrations of GHGs due to their relatively long 
atmospheric lifetimes or to growth in emissions from other countries 
which could eclipse reductions made in the U.S. We note that using this 
framework would not provide relief from any of the applicable 
nonattainment area requirements of the Act. EPA requests comment on 
whether, and if so how, the regional haze approach could be adapted for 
use in the GHG context.
(4) Scenarios 3 and 4: Primary and/or Secondary Standard With Country 
in Attainment
    If a primary or secondary GHG NAAQS were set at a level higher than 
ambient GHG levels at the time of designations, then the country would 
be in attainment. (See preceding section on NAAQS standard-setting for 
discussion of this issue.) In this case, a much shorter list of 
requirements would apply than if the country were in nonattainment.
    SIPs would be required to include PSD programs for GHGs, which 
would require preconstruction permitting of new major sources and 
significant modifications to existing major sources. (See section VII.D 
on PSD.)
    EPA has identified two other requirements that potentially could 
apply, both of which could provide authority for a nationwide cap-and-
trade program implemented at the state level. First, section 110(a)(1) 
requires states to submit a SIP providing for ``implementation, 
maintenance, and enforcement'' of primary and secondary NAAQS. Under 
the scenario of a GHG NAAQS with the country in attainment, where 
states may need more than PSD/NSR to maintain attainment, EPA could 
consider using this provision to require SIPs to provide for 
maintenance of air quality consistent with the GHG standard. This 
requirement could be implemented through a nationwide cap-and-trade 
program designed at the federal level and adopted by individual states 
in their SIPs, a program similar but broader in scope than existing 
programs such as the more limited NOX SIP Call regional cap-
and-trade system for EGUs and selected industrial source categories. If 
a state failed to submit an adequate maintenance SIP, EPA would be 
required to develop and implement a federal implementation plan for 
that state. EPA could design the FIP to enable the state to participate 
in a nationwide cap-and-trade system.
    Second, section 110(a)(2)(D) requires SIPs to prohibit emissions 
that would interfere with maintenance of the standard by other states. 
Because GHGs are globally well-mixed, it may be that GHGs emitted from 
any state could be found to interfere with maintenance of a GHG NAAQS 
in every other state. In the past, EPA has issued rules that have 
resulted in states adopting interstate cap-and-trade programs (e.g., 
the Clean Air Interstate Rule) implemented through SIPs to address the 
requirements of this provision. In the case of GHGs, this authority 
could potentially support a nationwide cap-and-trade program for GHGs, 
adopted through SIPs. If a state failed to submit its section 
110(a)(2)(D) SIP, EPA would be required to develop and implement a FIP 
for that state. EPA could design the FIP to enable the state to 
participate voluntarily in a nationwide cap-and-trade system. We 
request comment on the suitability of adopting either of these 
approaches under section 110(a).
ii. Additional CAA Provisions Affecting SIP Obligations and FIPs
(1) Section 179(a)
    The CAA requires states to submit SIPs to EPA for review, and EPA 
must approve or disapprove them based on whether the state plan or 
component meets the Act's requirements. An EPA finding that a state has 
failed to submit a nonattainment plan or plan component, or an EPA 
disapproval of such a plan because it does not meet the requirements of 
the Act, would start a ``sanctions clock'' under section 179(a). This 
means that sanctions would apply in the state if the deficiencies are 
not corrected within prescribed deadlines. These sanctions include 
additional requirements for major new sources (18 months after the 
finding of failure) and restrictions on federal highway funds (6 months 
after the offset sanction).\237\ EPA must promulgate a FIP for the 
deficient component of the SIP if the state's plan component is not 
approved within 2 years of EPA's finding or disapproval action. In the 
case of GHGs, it is possible that EPA could design the FIP to enable 
the state to participate in a nationwide cap-and-trade system.
---------------------------------------------------------------------------

    \237\ 40 CFR 52.31.
---------------------------------------------------------------------------

(2) Section 115
    CAA section 115 creates a mechanism through which EPA can require 
states to amend their SIPs to address international transport issues. 
It is designed to protect public health and welfare in another country 
from air pollution emitted in the U.S. provided the U.S. is given 
essentially reciprocal rights with respect to prevention and control of 
air pollution originating in the other country. The Administrator could 
exercise his authority under this provision if EPA were to promulgate a 
NAAQS for GHG.
    To act under section 115, the Administrator would need to make a 
finding that, based on information from any duly constituted 
international agency, he has reason to believe that air pollutants 
(GHGs) emitted in the U.S. causes or contributes to air pollution which 
may reasonably be anticipated to endanger public health or welfare in a 
foreign country. Upon making such a finding, the Administrator would 
give

[[Page 44483]]

formal notification to the Governor of the state (or in this case 
potentially all of the states) where GHGs originate. A finding under 
this section has the same regulatory consequences as a finding that the 
state's existing SIP is inadequate to attain the NAAQS or otherwise 
meet the requirements of the Act. This notification would require the 
notified states to modify their SIPs to prevent or eliminate the 
endangerment.
    Addressing GHGs under this authority could allow some flexibility 
in program design, subject to limitations of the SIP development 
process. Section 115 could not be used to require states to incorporate 
into their SIPs measures unrelated to attainment or maintenance of a 
NAAQS. A factor to consider is that this section of the Act only 
applies where countries that suffer possible endangerment give 
reciprocal rights to the U.S. However, reciprocity with one or more 
affected countries may be sufficient to trigger section 115. We request 
comment on the efficacy of using section 115 as a mechanism to 
facilitate more effective regulation of GHGs through a NAAQS.
2. What Sources Would Be Affected?
    Sections 108 and 109 impose no controls directly on sources, but 
instead establish the air quality benchmarks that control requirements 
would be designed to meet. The precise nature of these controls would 
be determined through federal and state programs, as established via 
SIPs and, for states failing to submit an approvable plan, FIPs. 
Considering that GHGs are emitted by a wide array of sources, it is 
likely that NAAQS implementation would result in controls on numerous 
stationary and mobile sources through sections 110 and 172.
    The federal government could have less flexibility under the NAAQS 
approach to target control efforts toward particular groups of existing 
stationary sources. Under the traditional SIP approach, emissions 
controls on specific source categories would flow from independent 
state-level decisions, and could result in a patchwork of regulations 
requiring different types and levels of controls in different states. 
However, the SIP approach could also be adapted for use in a more 
coordinated strategy. As mentioned above, EPA has in the past issued 
rules that have resulted in states adopting limited interstate cap-and-
trade programs (e.g., NOX SIP Call and the Clean Air 
Interstate Rule) implemented through state SIPs. Furthermore, the 
federal government would also have flexibility to design a national 
control program in the event that states did not adopt the required 
programs and EPA were required to promulgate a FIP.
    EPA requests comment on whether and how the different 
implementation provisions within the NAAQS program could be adapted to 
be most suitable for application to control GHGs.
3. What Would Be the Key Milestones and Implementation Timeline?
    The key milestones that would apply if EPA were to regulate GHGs as 
a NAAQS pollutant include: listing the pollutant(s); issuing air 
quality criteria; issuing information on air pollution control 
techniques; proposing primary and secondary NAAQS for the pollutants; 
issuing final standards; designating areas; development of SIPs/FIPs; 
and application of control measures.
    EPA has discretion with regard to the date of listing of a 
pollutant under section 108. The statute does not prescribe any 
specific deadline for listing, instead stating that EPA ``shall from 
time to time * * * list * * * each air pollutant'' that EPA judges 
meets the three criteria discussed above. This could provide the Agency 
some latitude in determining the precise timing of any listing.
    Once a pollutant is listed, the CAA specifies a very ambitious 
timeline for issuing the initial NAAQS for the pollutant. Section 108 
allows 12 months between date of listing and issuance of air quality 
criteria for the pollutant(s). Since these criteria are intended to 
encompass ``all identifiable effects on public health or welfare,'' it 
would be difficult to meet this timeline in the case of GHGs. In 1970, 
when the NAAQS program was first established under the CAA, air quality 
criteria either were in development or had already been issued for a 
variety of pollutants, and the process involved consideration of a much 
smaller body of science than is now available. Therefore, the 12-month 
period allotted for the initial issuance of air quality criteria 
appeared reasonable.\238\ However, based on recent NAAQS reviews for 
ozone, particulate matter, lead, and other pollutants, it now generally 
takes several years for the Agency to complete the thorough scientific 
assessment necessary to issue air quality criteria.
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    \238\ For each air pollutant for which air quality criteria had 
already been issued prior to enactment of the Clean Air Act 
Amendments of 1970, section 109(a)(1) actually required EPA to issue 
proposed NAAQS within 30 days of enactment and to finalize those 
standards within 90 days of publication of the proposal. This 
included carbon monoxide, ozone, particulate matter, hydrocarbons, 
and sulfur oxides.
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    Given the complexity of global climate change science, and the vast 
amount of research that would be relevant to the Agency's scientific 
assessment, EPA anticipates this task would be particularly time 
consuming in the case of GHGs, though relying on synthesis reports such 
as the Intergovernmental Panel on Climate Change's Fourth Assessment 
Report and various reports of the U.S. Climate Change Science Program 
could help expedite the process. The challenge of completing a thorough 
scientific assessment for GHGs could result in a significant delay in 
listing the pollutant(s) under section 108, since EPA would likely 
choose to list GHGs only when the scientific assessment had progressed 
sufficiently to enable the Agency to meet the statutory requirement to 
issue ``air quality criteria'' within one year of listing, and to meet 
the tight rulemaking timeframe, discussed below. To the extent that EPA 
addresses GHGs through this CAA mechanism, EPA requests comments on the 
issuance of ``air quality criteria'' following listing, as well as the 
adequacy of the available scientific literature.
    Under section 109, EPA must propose NAAQS for any newly listed 
pollutant at the same time it issues air quality criteria under section 
108, and must finalize those standards within 90 days after proposal. 
Thus, from the date of listing a pollutant(s) under section 108, the 
Agency has only 12 months to propose standards, and only 3 additional 
months to issue final NAAQS for the pollutant(s). This tight timeframe 
would be particularly challenging in the case of GHGs, for which review 
and synthesis of an enormous body of literature would be required 
before a proposal could be issued. Furthermore, it is important to note 
that while subsequent NAAQS reviews of existing standards are required 
on a revolving 5-year cycle, EPA has found it challenging to meet even 
this extended schedule, which generally allows 9-12 months between 
issuance of the air quality criteria and proposal and an additional 6 
months or more for issuance of final standards.
    Once a new standard has been established, the CAA allows EPA to 
establish a deadline for states to submit designation recommendations 
that is no later than one year after promulgation of the new or revised 
NAAQS. EPA then reviews the states' recommendations, collects and 
assesses additional information as appropriate, and issues final 
designations no later than 2 years following the date EPA promulgated 
the new or revised NAAQS. EPA may take up to one additional year if the 
Administrator has insufficient

[[Page 44484]]

information to promulgate the designations, which could push the date 
of final designations out to three years after promulgation of a new 
GHG NAAQS.
    The timeline for SIP submittal and implementation of control 
requirements depends an area's designation status (attainment, 
nonattainment, unclassifiable) and whether there is only a secondary 
NAAQS, or both a primary and a secondary standard. These various 
scenarios are described above. As a first step, regardless of 
attainment status of level of the standard, states must submit 
infrastructure SIPs to EPA within 3 years of the promulgation of any 
new or revised NAAQS. These SIPs demonstrate that certain basic program 
elements (including emissions inventories, monitoring, and modeling) 
are properly addressed. Areas that are designated attainment would face 
a much shorter list of requirements, which are discussed above in the 
context of, Scenarios 3 and 4.
    For areas designated nonattainment with a primary standard, states 
must submit nonattainment SIPs no more than 3 years after the effective 
date of designations, and must reach attainment no later than 5 years 
after the effective date designations. EPA can extend the attainment 
deadline by up to an additional 5 years--i.e., to no later than 10 
years after the effective date of designations, if EPA finds additional 
time is needed considering the severity of nonattainment and the 
availability and feasibility of pollution control measures.
    As noted above, the maximum 10-year horizon for attaining the 
primary NAAQS is ill-suited to pollutants such as GHGs with long 
atmospheric residence times. It is probable that, despite active 
control efforts, the entire U.S. would remain in nonattainment for an 
indefinite number of years if the level of a NAAQS were set at or below 
current atmospheric concentrations; whether attainment would ever be 
reached would depend on the timing and stringency of GHG control 
measures implemented on a global basis.
    For areas designated nonattainment with a secondary standard only, 
the attainment schedule could be significantly longer. The CAA requires 
that state plans under a secondary standard must provide for reaching 
attainment as expeditiously as practicable, but there is no statutory 
maximum date for attainment (e.g., up to 10 years). EPA requests 
comment on the suitability of adapting this approach for use in the GHG 
context, and specifically, on the schedule that could reasonably be 
considered as ``expeditious as practicable.'' We also request comment 
on how global emissions should be taken into consideration in this 
context.
    EPA requests comment on whether the avenues discussed in this 
notice, or alternative approaches, could facilitate schedule 
adjustments that would better enable use of the NAAQS approach for 
regulating GHGs.
4. What Are Key Considerations Regarding Use of This Authority for 
GHGs?
a. Possible Cost and Emissions Impacts
    Listing GHGs as pollutants under section 108 and setting NAAQS 
under section 109 would have no direct cost or emissions impacts. 
However, these actions would trigger further federal actions, including 
designations under section 107, and state or federal actions through 
SIPs or FIPs developed under section 110 and other provisions in title 
I of the CAA. Thus, the listing of GHGs as NAAQS pollutants would 
likely lead to the adoption of a substantial control program affecting 
sources across the nation.
    Because establishing NAAQS for a pollutant sets in motion a broad 
and prescriptive implementation process that could affect a wide array 
of stationary and mobile sources, it is likely to entail substantial 
costs. The magnitude of these costs would depend, in part, on the 
relative reliance on technologies which are not yet suitable for 
commercial application or which have not yet been developed. Though 
this problem affects other pollutants, it is more acute in the case of 
GHGs. The timing and nature of controls instituted, and thus the costs, 
would depend to a significant extent on an area's designation status 
and whether EPA set only a secondary NAAQS (with a longer 
implementation time horizon), or a primary standard as well (with a 
more rapid and rigid compliance schedule, allowing less time for 
technological advances and efficiency improvements). The standard set 
and the nature of GHGs could also determine whether it is feasible to 
attain a NAAQS in the near-term, or how costly attainment could be over 
a longer term.
    One important aspect of the NAAQS approach is that the standards 
themselves (both primary and secondary) are established without 
consideration of these costs. EPA requests comment on the suitability 
of establishing regulations to limit atmospheric concentrations of GHGs 
through a statutory mechanism that prohibits consideration of the costs 
such regulations might entail. EPA also requests comment on the extent 
to which various implementation mechanisms in Title I are available for 
addressing such costs.
    As mentioned above, CAA section 108 requires EPA to issue 
information on air pollution control techniques at the same time it 
issues air quality criteria. This would include information on the cost 
of installation and operation, energy requirements, emission reduction 
benefits, and environmental impacts. Generally, the Agency fulfills 
this obligation at the time a standard is issued; as required under 
Executive Order 12866, EPA must issue an RIA for major rulemaking 
actions. A NAAQS RIA provides an illustrative analysis of control 
options available to reduce emissions and ambient concentrations of the 
regulated pollutant(s); evaluates the costs of these controls; and 
estimates the human health and environmental benefits likely to accrue 
from the improved air quality resulting from the standards.
    As required by EO 12866 and guidance from OMB, the analysis 
generally compares control options and estimated costs and benefits of 
multiple, specific standard options under consideration. While EPA 
recognizes the cost estimates for future GHG control technologies would 
potentially place more reliance on yet-to-be-developed options, the 
precedent exists for consideration of future, unknown controls. EPA 
requests comment on whether there are important distinctions between 
GHGs and previously regulated criteria pollutants that would make it 
appropriate in the case of a new NAAQS for GHG(s) to issue a separate 
air pollution control techniques document earlier in the process, 
specifically in conjunction with the air quality criteria as required 
by section 108, or whether such information is more useful if tailored 
to specific standard options under consideration, as in the RIA.
b. Technology Development and Leakage
    Two of the policy design considerations noted in section III.F.1 
include the potential to promote technology development and to address 
potential concerns about shifting emissions to other countries. The 
NAAQS establish standards based on ambient concentrations that must be 
attained and maintained everywhere, and are implemented through SIPs 
that establish emissions budgets consistent with meeting the standards. 
The limited emissions budget encourages state and local areas and 
affected sources to work together to identify least-cost emissions

[[Page 44485]]

controls to meet their SIP obligations and reduce ambient 
concentrations of the regulated pollutant(s). The NAAQS requirements 
help create market demand for technologies that can assist in meeting 
air quality standards at the least cost. As discussed in Section III.C 
of this notice, this process has encouraged significant technological 
innovation. EPA requests comment on the extent to which the NAAQS can 
be an effective mechanism for encouraging technological innovation and 
development of least-cost controls for GHG emissions.
    The 10-year maximum timeline for attaining a primary NAAQS would 
allow some time for development and deployment of emerging 
technologies, but longer timelines available under other forms of the 
NAAQS would provide greater flexibility to provide continuous 
incentives over a longer time period for major technology advances, and 
more time to deploy new technologies that are developed. EPA requests 
comment on the extent to which a GHG NAAQS could reasonably be expected 
to advance new control technologies, and on what timeframe.
    With respect to the leakage issue, establishing a primary NAAQS 
could lead to high costs among affected industries unless a viable 
approach is identified to limit the control burden on U.S. sources. 
Because the standards themselves are set without consideration of cost 
or availability of control technologies, and because states would be 
required to adopt a plan to attain a primary standard within 10 years 
of designation, the NAAQS approach might offer less flexibility to 
delay emissions reductions in the absence of effective control 
technologies or when costs are prohibitive. This consideration may be 
particularly relevant in the case of GHGs, where highly efficient 
control technologies or mitigation options are currently limited, and 
where critical new control strategies, such as carbon capture and 
storage, are still in the early stages of development. In these 
instances, industries that are unable to locate cost-effective control 
strategies may consider relocating to non-regulated locations, 
resulting in significant emissions leakage.
    We request comment on the cost-effectiveness of utilizing a NAAQS 
approach to regulating GHGs, and on the extent to which this approach 
might be expected to result in emissions leakage, especially as 
compared to other potential regulatory approaches outlined in this 
notice.
c. Summary of Opportunities and Challenges Afforded by NAAQS Pathway
    Regulating GHGs through a NAAQS offers certain opportunities; 
however, there are also significant technological, legal and program 
design challenges that would tend to limit the appropriateness of the 
NAAQS program.
    NAAQS are based purely on preventing adverse health and 
environmental impacts, rather than on considerations of cost, 
feasibility, or availability of technology. Our expectation is that the 
NAAQS approach would establish a goal tied to actual ambient 
concentrations of GHGs. A NAAQS would call for assessment of potential 
control strategies for a broad array of sources, rather than focusing 
only on emissions reductions from a specified (but potentially limited) 
list of sources. The NAAQS approach would allow for some flexibility in 
the design of control strategies and requirements, including the 
possibility of a cap-and-trade approach, and might spur significant 
technological innovation. It would provide a mechanism for reducing GHG 
emissions from current sources and limiting the growth of emissions 
from new sources. If the facts supported adopting only a secondary 
standard, this would somewhat reduce the specific obligations on 
states, and would allow a suitably extended timeline for achieving the 
emissions reductions necessary to stabilize and then reduce ambient GHG 
concentrations.
    Though such an approach has the potential to be effective in 
reducing emissions, there would be a number of obstacles to overcome. 
Chief among these is that if worldwide (non-U.S.) emissons were to 
continue increasing, global concentrations of GHGs would continue to 
increase despite U.S. emission control efforts, and the NAAQS would be 
unachievable (depending on the level of the standards) even if U.S. 
emissions were reduced to zero. Unless viable legal approaches could be 
identified for limiting the control burden on U.S. sources, such as by 
defining a U.S. share of the emissions reductions needed to attain a 
NAAQS, the NAAQS approach would result in an expensive program. It 
would not achieve the adopted GHG NAAQS due to foreign emissions 
growth, although U.S. emissions reductions would be achieved. If the 
result of a NAAQS were stringent unilateral controls for vulnerable 
industries, this would encourage emissions leakage in the absence of 
comparable control efforts abroad.
    Especially if the Agency were to set a primary as well as a 
secondary standard, a NAAQS would trigger a relatively rigid 
implementation apparatus, limiting the Agency's flexibility to target 
cost-effective emissions reductions and to shift the burden of control 
requirements among different industries based on the availability of 
new technological approaches. The lack of flexibility allowed under the 
CAA for many of the NAAQS implementation requirements--especially those 
affecting areas designated nonattainment with a primary standard--makes 
them difficult to adapt effectively for application in the GHG context. 
For example, it would be challenging to apply requirements for 
transportation conformity under a GHG NAAQS, or for states to develop 
attainment demonstration SIPs. As discussed in section IV.E, a 
nonattainment new source review program requiring for GHGs would 
dramatically expand the scope of the preconstruction permitting program 
to include smaller sources and new types of sources such as apartment 
buildings with natural gas heat, unless EPA were successful in applying 
legal theories that justify deviating from statutory language. This 
would pose substantial administrative feasibility and cost issues. 
While implementation of an attainment-level NAAQS would involve fewer 
specific requirements, this avenue would only apply if the standard set 
by EPA under section 109 resulted in attainment designations. Section 
109 calls for standards to be set based on science-based criteria, 
which exclude consideration of the cost or efficiency of the 
implementation requirements in determining the level of the standard.
    We note that while the NAAQS implementation system is state-based, 
legislative proposals have focused on establishing federally 
administered national cap-and-trade strategies to address the global 
climate problem.
    In closing, we request comment on our assessment of NAAQS 
approaches, and on how the NAAQS approach compares to other potential 
CAA approaches in light of the policy principles enunciated in section 
III.F.1.
5. Possible Implications for Other CAA Provisions
    Listing a pollutant under section 108(a)(1) would preclude listing 
under section 112 or regulation under section 111(d), but would not 
preclude listing and regulation under section 111(a)-(c) New Source 
Performance Standards (NSPS) provisions as described below. Similarly, 
regulation of GHGs under section 111(a)-(c) NSPS provisions, as 
discussed further in other sections of

[[Page 44486]]

today's notice, would not preclude regulation of those pollutants 
through a NAAQS, although controls implemented through these provisions 
might influence the Agency's perspective on the appropriateness of 
establishing air quality criteria for GHGs. EPA requests comment on the 
extent to which regulatory action under section 111 could be considered 
in the context of exercising authority under section 108 relevant to 
GHGs.

B. Standards of Performance for New and Existing Sources

    CAA section 111 provides EPA with authority to set national 
performance standards for stationary sources. There are two alternative 
pathways for using section 111 to regulate GHGs--as part of an 
implementation program for a GHG NAAQS or as a freestanding program.
     In the event of a GHG NAAQS, section 111 authorizes EPA to 
set emissions performance standards for new and modified sources but 
not for unmodified existing sources.
     In the absence of a GHG NAAQS, section 111 offers the 
potential for an independent, comprehensive program for regulating most 
stationary sources of GHGs, except to the extent GHG emissions are 
regulated under section 112
    Section 111 provides for consideration of cost, and allows 
substantial discretion regarding the types and size of sources 
regulated. As with most other CAA authorities, however, establishment 
of a section 111 standard for any source category of GHGs would trigger 
preconstruction permitting requirements for all types of GHG major 
sources under the PSD program.
    The Stationary Source TSD for this ANPR identifies some specific 
industry sectors that EPA has evaluated for their emissions of multiple 
pollutants, including GHGs. EPA requests comment on this analysis. In 
addition, EPA requests comment on GHG emissions from these and all 
other categories and subcategories that have been subject to section 
111 standards and on the relative costs that could be associated with 
employing certain identified control technology or practices affecting 
GHG emissions, including any positive or negative impacts on the 
emissions of traditional pollutants.
1. What Does Section 111 Require?
    Section 111 establishes two distinct mechanisms for controlling 
emissions of air pollutants from stationary sources. Section 111(b) 
provides authority for EPA to promulgate New Source Performance 
Standards (NSPS) which may be issued regardless of whether there is a 
NAAQS for the pollutant being regulated, but apply only to new and 
modified sources. Once EPA has elected to set an NSPS for new and 
modified sources in a given source category, section 111(d) calls for 
regulation of existing sources with certain exceptions explained below. 
Taken together, the section 111 provisions could allow significant 
flexibility in regulation that may not be available under other CAA 
Title I provisions.
a. Section 111(b) New Source Performance Standards
    Section 111(b) of the CAA requires EPA to establish emission 
standards for any category of new and modified stationary 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.'' EPA has previously made 
endangerment findings under this section for more than 60 stationary 
source categories and subcategories that are now subject to NSPS.\239\ 
An endangerment finding would be a prerequisite for listing additional 
source categories under section 111(b), but is not required to regulate 
GHGs from source categories that have already been listed.
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    \239\ EPA has developed NSPS for more than 70 source categories 
and subcategories. However, endangerment findings apply to the 
categories as a whole, while subcategories within them have been 
established for purposes of creating standards that distinguish 
among sizes, types, and classes of sources.
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    For listed source categories, EPA must establish ``standards of 
performance'' that apply to sources that are constructed, modified or 
reconstructed after EPA proposes the NSPS for the relevant source 
category.\240\ However, EPA has significant discretion to define the 
source categories, determine the pollutants for which standards should 
be developed, identify the facilities within each source category to be 
covered, and set the level of the standards. In addition, EPA believes 
that the NSPS program is flexible enough to allow the use of certain 
market-oriented mechanisms to regulate emissions, as discussed below.
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    \240\ Specific statutory and regulatory provisions define what 
constitutes a modification or reconstruction of a facility. 40 CFR 
60.14 provides that an existing facility is modified, and therefore 
subject to an NSPS, if it undergoes ``any physical change in the 
method of operation . . . which increases the amount of any air 
pollutant emitted by such source or which results in the emission of 
any air pollutant not previously emitted.'' 40 CFR 60.15, in turn, 
provides that a facility is reconstructed if components are replaced 
at an existing facility to such an extent that the capital cost of 
the new equipment/components exceed 50 percent of what is believed 
to be the cost of a completely new facility.
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    As implemented over many years by EPA, the NSPS program has 
established standards that do not necessarily set emission limits for 
all pollutants or even all regulated pollutants emitted by sources 
within the relevant source category. Rather, the NSPS generally focus 
on specific pollutants of concern for a particular source category. Air 
pollutants currently regulated through section 111(b) include the 
criteria pollutants listed under section 108 and certain additional 
pollutants. These additional pollutants are acid mist, fluorides, 
hydrogen sulfide in acid gas, total reduced sulfur, and landfill gas. 
EPA has discretion to revise an existing NSPS to add standards for 
pollutants not currently regulated for that source category, but has 
interpreted the section to not require such a result when an NSPS is 
reviewed pursuant to section 111(b)(1)(B). That section requires EPA to 
review and, if appropriate, revise NSPS every eight years unless the 
Agency determines that such review is not appropriate in light of 
readily available information on the efficacy of the standard.
    Further, in contrast to other provisions in the CAA which require 
regulation of all sources above specific size thresholds, section 111 
gives EPA significant discretion to identify the facilities within a 
source category that should be regulated. To define the affected 
facilities, EPA can use size thresholds for regulation and create 
subcategories based on source type, class or size. Emission limits also 
may be established either for equipment within a facility or for an 
entire facility.
    EPA also has significant discretion to determine the appropriate 
level for the standards. Section 111(a)(1) provides that NSPS are to 
``reflect the degree of emission limitation achievable through the 
application of the best system of emission reduction which (taking into 
account the cost of achieving such reduction and any nonair quality 
health and environmental impact and energy requirements) the 
Administrator determines has been adequately demonstrated.'' This level 
of control is commonly referred to as best demonstrated technology 
(BDT). In determining BDT, we typically conduct a technology review 
that identifies what emission reduction systems exist and how much they 
reduce air pollution in practice. This allows us to identify potential 
emission limits. Next, we evaluate each limit in conjunction with 
costs, secondary air benefits (or disbenefits) resulting from energy

[[Page 44487]]

requirements, and non-air quality impacts such as solid waste 
generation. The resultant standard is commonly a numerical emissions 
limit, expressed as a performance level (i.e., a rate-based standard). 
While such standards are based on the effectiveness of one or more 
specific technological systems of emissions control, unless certain 
conditions are met, EPA may not prescribe a particular technological 
system that must be used to comply with a NSPS. Rather, sources remain 
free to elect whatever combination of measures will achieve equivalent 
or greater control of emissions.
    It is important to note that under section 111, the systems on 
which a standard is based need only be ``adequately demonstrated'' in 
EPA's view such that it would be reasonable to apply them to the 
regulated category. The systems, and corresponding emission rates, need 
not be actually in use or achieved in practice at potentially regulated 
sources or even at a commercial scale. Further, EPA believes that if a 
technology is ``adequately demonstrated'' for use at a date in the 
future, EPA could establish a future-year standard based on that 
technology. This would allow EPA to develop two- or multi-phased 
standards with more stringent limits in future years that take into 
account and promote the development of technology.
    Costs are also considered in evaluating the appropriate standard of 
performance for each category or subcategory. We generally compare 
control options and estimated costs and emission impacts of multiple, 
specific emission standard options under consideration. As part of this 
analysis, we consider numerous factors relating to the potential cost 
of the regulation, including industry organization and market 
structure; control options available to reduce emissions of the 
regulated pollutant(s); and costs of these controls. Frequently, much 
of this information is presented in the Regulatory Impact Analysis 
(RIA) that is required for all major rulemaking actions.
b. Section 111(d) Emissions Guidelines for Existing Sources
    Section 111(d) requires regulation of existing sources in specific 
circumstances. Specifically, where EPA establishes a NSPS for a 
pollutant, a section 111(d) standard is required for existing sources 
in the regulated source category except in two circumstances. First, 
section 111(d) prohibits regulation of a NAAQS pollutant under that 
section. Second, ``where a source category is being regulated under 
section 112, a section 111(d) standard of performance cannot be 
established to address any HAP listed under 112(b) that may be emitted 
from that particular source category.'' \241\
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    \241\ See 70 FR 15994, 16029-32 (Mar. 29, 2005).
---------------------------------------------------------------------------

    Section 111(d) also uses a different regulatory mechanism to 
regulate existing sources than section 111(b) uses for new and modified 
sources in a source category. Instead of giving EPA direct authority to 
set national standards applicable to existing sources in the source 
category, section 111(d) provides that EPA shall establish a procedure 
for states to issue performance standards for existing sources in that 
source category. Under the 111(d) mechanism, EPA first develops 
regulations known as ``emission guidelines.'' These may be issued at 
the same time or after an NSPS for the source category is promulgated. 
Although called ``guidelines,'' they establish binding requirements 
that states are required to address when they develop plans to regulate 
the existing sources in their jurisdictions. These state plans are 
similar to state implementation plans and must be submitted to EPA for 
approval. Historically, EPA has issued model standards for existing 
sources that could then be adopted by states. Under this approach, 
creating an interstate trading system would require adoption of 
compatible state rules promoted by EPA rules and guidance. In the event 
that a state does not adopt and submit a plan, EPA has authority to 
then issue a federal plan covering affected sources.
    Section 111(d) guidelines, like NSPS standards, must reflect the 
emission reduction achievable through the application of BDT. However, 
both the statute and EPA's regulations implementing section 111(d) 
recognize that existing sources may not always have the capability to 
achieve the same levels of control at reasonable cost as new sources. 
The statute and EPA's regulations in 40 CFR 60.24 permit states and EPA 
to set less stringent standards or longer compliance schedules for 
existing sources where warranted considering cost of control; useful 
life of the facilities; location or process design at a particular 
facility; physical impossibility of installing necessary control 
equipment; or other factors making less stringent limits or longer 
compliance schedules appropriate.
2. What Sources Could Be Affected?
    Section 111 has been used to regulate emissions of traditional and 
nontraditional air pollutants from a broad spectrum of stationary 
source categories. EPA has already promulgated NSPS for more than 70 
source categories and subcategoriesand we could add GHG emission 
standards, as appropriate, to the standards for existing source 
categories.\242\ EPA has begun a review of the existing NSPS source 
categories to determine whether it would be appropriate to regulate GHG 
emissions from sources in each category. In addition, EPA is in the 
process of responding to a remand from the D.C. Circuit requiring it to 
consider whether to add standards for GHGs to the NSPS for utility 
boilers, and EPA has received suggestions that it would be appropriate 
to add such standards to the NSPS for Portland cement kilns.\243\
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    \242\ Some of the existing source categories are very broad, 
comprising an entire industrial process such as steel making, while 
others are narrowly defined as a single piece of equipment within a 
broader production process. Examples of source categories subject to 
NSPS are fossil fuel-fired boilers, incinerators, sulfuric acid 
plants, petroleum refineries, lead smelters, and equipment leaks of 
VOCs in the synthetic organic chemicals manufacturing industry. A 
complete list of the NSPS source categories is found at 40 CFR part 
60.
    \243\ The NSPS for Petroleum Refineries were recently amended, 
resulting in the promulgation of new Subpart Ja. These performance 
standards include emission limitations and work practice standards 
for fluid catalytic cracking units, fluid coking units, delayed 
coking units, fuel gas combustion devices, and sulfur recovery 
plants. As such, they regulate criteria pollutant emissions from the 
processes that are also responsible for most of the refinery GHG 
emissions. During the public comment period for Subpart Ja, we 
received several comments in favor of developing new source 
performance standards to address GHG emissions from refineries. 
However, we declined to adopt standards for GHG emissions in that 
rulemaking, in part because while doing so was within our 
discretion, we believed that it was important to fully consider the 
implications for programs under other parts of the CAA before 
electing to regulate GHG under section 111. This is a fundamental 
purpose for today's notice and request for comments.
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    To determine whether regulation of GHGs is appropriate for existing 
categories, we must evaluate whether it is reasonable to do so given 
the magnitude of emissions and availability of controls, considering 
the costs of control. Decisions in this regard could be influenced by 
several factors, including the magnitude of the GHG emissions from a 
source category; the potency of the particular GHG emitted; whether 
emissions are continuous, seasonal or intermittent; the availability of 
information regarding the category's GHG emissions; and whether 
regulating GHG emissions from the source category would be beneficial. 
EPA requests comment on the extent to which these factors should, if at 
all, influence EPA's decisions whether to add standards to existing 
NSPS and what additional factors should be taken into consideration. 
EPA also requests

[[Page 44488]]

comment on which of the previously regulated categories might be 
appropriate for GHG regulation and on the information on which such 
judgments might be based.
    To inform the public of EPA's analytical work to date, we have 
provided descriptions of key industrial sectors, their GHG emissions, 
and information that we have collected to date on GHG control options 
for those sectors in the Stationary Source TSD in the docket for 
today's notice. It is important to note that, as described further in 
the technical support materials, many near-term technologies or 
techniques for reducing GHG, e.g., energy efficiency or process 
efficiency improvements, are relatively cost effective and achieve 
modest emission reductions when compared with the potential of some 
add-on control techniques. Other controls may become available in the 
future whose costs and emission reduction effectiveness may differ 
substantially from what is discussed here today. The Stationary Source 
TSD also discusses various mechanisms, such as cap-and-trade programs 
or emissions averaging approaches across facilities or industries, that 
can help reduce costs of reducing emissions. EPA requests comment on 
the availability and extent of its legal authority for such mechanisms.
    In addition to regulating GHGs from previously listed source 
categories, section 111 provides discretionary authority to list new 
source categories, or reformulate listed source categories, for 
purposes of regulating of GHG emissions. For example, such categories 
could include sources of emissions covered by existing NSPS source 
categories as well as sources not currently covered by any NSPS. One 
option available to EPA is the reorganization of source categories for 
purposes of GHG regulation. In creating new categories to be used for 
regulation of GHGs, EPA could consider factors unique to GHG emissions. 
For example, EPA could take into account concerns about emissions 
leakage (discussed in section III.F.5 of this notice), and structure 
categories to minimize opportunities for shifting emissions to other 
source categories. EPA could also explore how the rearrangement of 
source categories could facilitate netting arrangements through which a 
more broadly defined ``source'' could avoid triggering an GHG NSPS by 
off-setting its increased GHG emissions.\244\ In addition, EPA could 
structure categories to take into account possible reductions from 
improvements at non-emitting parts of the plants, for example, by 
creating source categories that cover all equipment at particular 
plants, instead of using categories that cover only specific types of 
equipment at a plant. EPA invites comment on whether such rearrangement 
would be appropriate and what type of rearrangement would be desirable. 
We also solicit information on how rearrangement could facilitate 
netting and how we might structure such netting.
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    \244\ We recognize that the Court in Asarco Inc. v. EPA, 578 
F.2d 326 (D.C. Cir. 1978) struck down an NSPS provision that allowed 
netting. The provision at issue there, however, permitted netting 
between sources, not within a source. See Alabama Power v. EPA, 636 
F.2d 323, 401-02 (D.C. Cir. 1980).
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    An alternative, or complementary, scenario would be to create 
larger ``super-categories'' covering major groupings of stationary 
sources of GHG emissions. For example, it might be possible to create 
process-based categories (i.e., all sources emitting CO2 through a 
stack as a result of combustion processes) or vertically integrated 
categories which take more of a life-cycle approach to the control of 
GHG emissions and reduce the possibility of leakage of GHG reductions 
to other parts of the economy or other geographic regions.\245\ The 
creation of such ``super-categories'' might provide additional 
opportunities for the development of innovative control mechanisms such 
as cap-and-trade programs covering multiple industry sectors. In light 
of these considerations, EPA requests comment on whether the creation 
of such ``super categories'' would be appropriate and what categories 
would be most useful for regulating GHGs.
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    \245\ For instance, a ``super-category'' could be created 
encompassing all aspects of the production, processing, and 
consumption of petroleum fuels, or to regulate the production and 
consumption of fossil fuels for heat and power, addressing all 
aspects of emissions-producing activity within a sector, including 
fuel production, consumption, and energy conservation.
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    Under either option, EPA possesses authority to distinguish among 
classes, types and sizes of sources within existing categories for 
purposes of regulating GHG emissions. For example, we have at times 
distinguished between new and modified/reconstructed sources when 
setting the standards. This may be appropriate, for instance, when a 
particular new technology may readily be incorporated into a new 
installation, but it may be technically infeasible or unreasonably 
costly to retrofit this technology to an existing facility undergoing 
modification or reconstruction. Alternatively, we have distinguished 
among sources within a category, for instance fossil fuel-fired 
boilers, for which we have subcategorized on the basis of fuel types 
(e.g., coal, oil, natural gas). EPA requests comment on what 
considerations are relevant to determining whether it is appropriate 
and reasonable to establish subcategories for regulation under section 
111.
3. What Are Possible Key Milestones and Implementation Timelines?
a. Priority Setting Among Source Categories
    If EPA were to pursue section 111 regulation of GHGs, timetables 
for regulation would depend upon how EPA prioritized among source 
categories to determine which categories should be regulated first. In 
the near term, it may be possible to address GHGs under section 111 in 
a limited fashion by establishing control requirements for new and 
existing sources in some number of existing source categories, while 
information is developed on other source categories. Actions under 
other portions of the CAA may involve longer lead times to develop and 
implement, so that standards under section 111 for certain source 
categories could provide for emission reductions in the interim. We 
have begun to examine source categories subject to existing NSPS and 
other standards to consider how we might determine priorities among 
them for review and revisions, and whether GHGs could be addressed for 
specific sectors in a more coordinated, multi-pollutant fashion. EPA 
requests comment on the availability of its legal authority, if any, to 
prioritize among source categories in the event that regulation under 
section 111 was pursued.
    Under a ``prioritization'' approach, EPA could seek to revise 
standards earliest for those categories offering the greatest potential 
for significant reductions in the emissions of covered pollutants, and 
either deferring action or determining that no further action is 
necessary or appropriate at this time for other categories. This 
conclusion could be based, for example, on the lack of significant 
improvements in technology since the last NSPS review or the fact that 
no new sources are considered to be likely in the foreseeable future.
    Another possibility might be to schedule and structure the review 
and revision of standards for source categories to account for the fact 
that, in addition to the need to address GHG emissions, they may be 
subject to multiple standards for different pollutants under several 
sections of the CAA. Such standards may often be subject currently to 
different review

[[Page 44489]]

timetables resulting from when these standards were last established or 
revised. In addition, as discussed in section III.D of today's notice, 
they may have the potential for positive or negative interactions with 
one another and with opportunities for the control of GHG emissions.
    Still another approach might consider the impacts of future 
reduction opportunities or enacted legislation so that standards under 
section 111 might focus initially on source categories for which near-
term benefits might result largely from efficiency improvements which 
do not result in ``stranded capital,'' or investment in systems that 
will be superseded by more effective systems that we determine will be 
available at some specific future date. Alternatively, standards could 
focus on those sectors of the economy which will not likely be subject 
to controls being addressed in enacted legislation.
    We request comment on EPA's available legal authority, if any, to 
defer action with respect to any ``class'' of section 111 source 
categories or subcategories as well as how and under what circumstances 
EPA could also consider such approaches to the identification of source 
categories for standards to address GHGs. Assuming the existence of 
adequate authority, what, if any, additional criteria should be 
considered in our priority-setting analysis efforts? In considering 
such sector- or multi-pollutant-based approaches, we further request 
comment on the extent to which we could establish new or revised source 
categories which better accommodate these approaches, or whether we are 
bound by existing source categories and their definitions.
b. Timetables for Promulgation and Implementation
    In our experience, collecting and analyzing information regarding 
available control technologies, resulting emission reductions, and cost 
effectiveness can take up to several years for a source category. 
However, this time period can be shortened to 1\1/2\ to 2 years when 
information is readily available or is presented to the Agency in a 
form that facilitates efficient consideration. With respect to GHGs, 
there has been significant effort devoted to identifying and evaluating 
ways to reduce emissions within sectors such as the electricity 
generating industry, and we are aware of the potential for GHG 
reductions through energy efficiency and other means within other 
industries. However, for many others, technologies for reducing GHG 
emissions have not yet been identified or evaluated by EPA. EPA 
requests comment on whether and how the availability of current 
information should be considered when considering regulation under 
section 111.
    As is the case with traditional pollutants, any new or revised NSPS 
for new and modified sources of GHGs under section 111(b) would be 
developed through a notice and comment rulemaking process and would be 
effective upon promulgation. As noted previously, EPA is also required 
to review, and if appropriate revise, existing NSPS every 8 years 
unless the Administrator determines that ``such review is not 
appropriate in light of readily available information on the efficacy 
of such standard.'' Standards for pollutants not regulated by the 
existing NSPS may be added concurrent with the 8-year review, but such 
additions are not part of that review process.
    Any section 111(d) emission guidelines associated with the revised 
NSPS standards would be promulgated either along with or after the 
NSPS. States are generally required to submit the required state plans 
containing the standards of performance applicable to existing sources 
in their jurisdictions within 9 months of EPA's promulgation of the 
guidelines.
    In the case of existing sources regulated under section 111(d), 
affected sources are typically provided up to 3 years to comply with 
any resulting requirements; however, states have flexibility to provide 
longer or shorter compliance timeframes based on a number of source-
specific factors. In addition, where we determine that a technology has 
been adequately demonstrated to be available for use by some particular 
future date, we believe it is possible to establish timeframes for 
compliance that reflect this finding.\246\
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    \246\ See Portland Cement Association v. EPA, 486 F.2d 275 (D.C. 
Cir. 1973).
---------------------------------------------------------------------------

    No explicit 8-year review requirement exists with regard to section 
111(d) standards for existing sources. Nonetheless, it also may be 
appropriate to require existing source plans to periodically revise 
their control strategies to reflect changes in available technologies 
and standards over time, particularly where the existing limitations 
were based on more limited controls at the time they were established. 
EPA requests comment on its authority and the advisability of such 
periodic updating with respect to the possible control of GHG.
    The CAA and EPA's regulations implementing section 111(d) permit 
states to consider a number of factors when determining the level of 
stringency of controls, but do not establish a bright line test when 
stricter requirements for existing sources are warranted. Many of these 
sources may also be subject to requirements for the control of other 
non-section 111(d) pollutants as part of implementation plans to attain 
and maintain NAAQS for one or more pollutants, and in some cases, these 
provisions may result in more stringent coincidental control of section 
111(d) pollutants. We request comment on how and when we should 
evaluate, review, and revise as appropriate any section 111(d) 
standards that might be established in the future for GHGs.
4. What Are the Key Considerations Regarding Use of This Authority To 
Regulate GHGs?
a. Key Attributes and Limitations of Section 111
    As noted above, section 111 possesses certain flexible attributes 
that may be useful in tailoring emissions standards to address GHG 
emissions. Yet, regulation under this section also has important 
limitations. This section of today's notice briefly summarizes these 
attributes and limitations. We request comment on how these attributes 
and limitations relate to the policy design considerations set forth in 
section III.F.1.
    Program scope: Section 111 provides EPA with authority to regulate 
GHG emissions from stationary source categories, but does not require 
EPA to regulate GHGs emitted by all source categories or even all 
listed source categories. EPA has flexibility to identify the source 
categories for which it is appropriate to establish GHG limits. For 
example, EPA could decide to set GHG limits for those source categories 
with the largest GHG emissions and reduction opportunities. EPA could 
postpone or decline to set GHG limits for source categories for which 
emissions contributions may be small or for which no effective means of 
reducing emissions exist, currently or within the reasonably 
foreseeable future. EPA also could consider traditional air pollutants 
as well as GHGs in setting its overall priorities for the NSPS program.
    Source size: Section 111 does not require regulation of all sources 
above a certain size. Instead, EPA has discretion to use rational 
emission thresholds to identify which facilities within a source 
category are covered by NSPS standards.
    Consideration of cost: Section 111 explicitly directs EPA to take 
``into account the cost of achieving'' emission

[[Page 44490]]

reductions, as well as other nonair quality, health and environmental 
impact and energy requirements.'' This gives EPA significant 
flexibility to determine of appropriate levels of control, and can be 
an important source of distinctions between requirements for new 
sources and those for modified or reconstructed sources.
    Potential for emissions trading: As EPA has interpreted the NSPS 
requirements in the past with respect to certain air pollutants, we 
believe that the NSPS program could use emissions trading, including 
cap-and-trade programs and rate-based regulations that allow emissions 
trading, to achieve GHG emission reductions. EPA believes such programs 
are consistent with the statutory requirements because they satisfy the 
three substantive components of the section 111(a)(1) definition of 
``standard of performance''--(1) a standard for emissions of air 
pollutants; that (2) reflects that degree of emission limitation 
available''; and (3) ``constitutes the best system of emission 
reduction.'' A cap-and-trade program can constitute a ``standard for 
emissions of air pollutants'' because it is a system created by EPA for 
control of emissions. The use of emissions budgets does not make the 
system less of a ``standard'' since the budgets must be met regardless 
of the methodology used to allocate allowances to specific sources. 
Further, any such system would be based on our assessment of the 
overall degree of emission reduction available for the source category 
and our analysis of the available systems of emission reductions. EPA 
could select a market-oriented mechanism as the ``standard of 
performance'' if these analyses (including cost analyses) indicate that 
the system would ``reflect the degree of emission limitation 
achievable'' and ``constitute the best system of emission reduction.'' 
EPA also believes that trading among new and existing sources could be 
permitted, and could offer, at least in some cases, cost 
efficiencies.\247\ EPA also believes that because of the potential cost 
savings, it might be possible for the Agency to consider deeper 
reductions through a cap-and-trade program that allowed trading among 
sources in various source categories relative to other systems of 
emission reduction. We request comment on the extent of EPA's available 
legal authority in this area as well as the attributes such a program 
must possess to qualify as a standard of performance under section 111.
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    \247\ In the Clean Air Mercury Rule we concluded that new 
sources needed to comply with a unit specific control requirement in 
addition to participating in the trading program. We solicit comment 
on whether section 111 requires such controls for new sources or if 
it would be sufficient for them to participate in a trading program 
or other market based mechanism without this restriction. While not 
ensuring an equally stringent level of control at each new source, 
the latter approach would be expected to achieve the same total 
emissions reductions at a lower overall compliance cost.
---------------------------------------------------------------------------

    Potential for declining performance standards: EPA believes that 
section 111 authority may be used to set both single-phase performance 
standards based upon current technology and to set two-phased or multi-
phased standards with more stringent limits in future years. Future-
year limits may permissibly be based on technologies that, at the time 
of the rulemaking, we find adequately demonstrated to be available for 
use at some specified future date. Alternatively, it may be possible to 
establish a goal based on future availability of a technology and to 
revise the standard to reflect technological advancements at 
appropriate intervals, such as the 8-year review cycles. We believe 
these concepts could be applied to standards for new and modified 
sources, as well as to standards for existing sources under section 
111(d). In addition, this concept could be coupled with emissions 
trading.
    We recognize that various legal issues and questions concerning 
legal authority may be involved in setting standards based on 
technology only adequately demonstrated for use at a future date. For 
example, there might be greater uncertainty regarding the cost of 
technology for such standards than for standards based only on 
technology that is already commercially demonstrated at the time of 
promulgation. In the Clean Air Mercury Rule (CAMR), which was vacated 
by the D.C. Circuit on other grounds, EPA interpreted section 111 to 
allow a two-phased ``standard of performance'' to reduce mercury 
emissions from existing sources. The compliance date for the more 
stringent second phase was 2018. EPA believed that it had greater 
flexibility to set such a standard for existing sources under section 
111(d) because these standards, in contrast to section 111(b) standards 
for new sources, are not subject to the requirements of section 111(e). 
Section 111(e) makes unlawful to operate any new source in violation of 
a standard of performance after its effective date. EPA requests 
comment on this interpretation. We also request comment on the 
circumstances under which the requirements of section 111(e) would be 
satisfied by a standard requiring compliance with the initial 
requirements of a multi-phase standard. More generally, EPA seeks 
comment on its legal authority in this matter as well as the legal and 
factual conditions that must be satisfied to support a multi-phase 
standard with future-year standards based on technology adequately 
demonstrated for use by that future date. EPA also seeks comment on how 
far into the future multi-phase standards could extend and the degree 
of certainty with which EPA must make its determinations of 
availability for future use, considering the section 111 standard 
setting language.
    Technology development: Section 111 also contains a waiver 
provision that can be used to encourage the development of innovative 
technologies, as described below.
    Standards tied to available technology: The fact that section 111 
requirements are based upon a demonstration of the availability of 
control technology could limit the amount of reductions achievable 
through section 111 regulations to demonstrably feasible and cost-
effective levels. If a given level of overall emission reduction is 
determined to be necessary and that level exceeds what is currently 
demonstrated to be feasible now or by some future date, then section 
111 may not provide adequate authority by itself to achieve needed 
reductions. Although section 111 provides certain opportunities and 
incentives for technology development, this feature may make it more 
difficult to set ``stretch goals'' without other companion mechanisms.
    In light of these considerations, we request comment on whether and 
to what extent section 111 provides an appropriate means for regulating 
GHG emissions.
b. Additional Considerations
    We also request comment on the questions presented below which 
relate to the manner in which EPA could or should exercise its 
authority under this section to regulate GHGs.
i. What Regulatory Mechanisms Are Available?
    As noted above, NSPS standards and 111(d) emission guidelines most 
commonly establish numerical emission standards expressed as a 
performance level. Such rate-based limits, however, are not the only 
mechanisms that could be used to regulate GHGs.
    Efficiency Standards: We believe that most reductions in stationary 
GHG emissions may occur initially as the result of increased energy 
efficiency, process efficiency improvements, recovery and beneficial 
use of process gases, and certain raw material and product changes that 
could reduce inputs of carbon or other GHG-

[[Page 44491]]

generating materials. Such emission reductions may range in the near 
term (e.g., 5-10 years) from 1 to 10%. Thus, it could be possible to 
utilize NSPS standards to ensure reductions from efficiency 
improvements are obtained. For such standards to be effective, they 
likely would generally need to apply to the entire facility, not just 
specific equipment at the facility. EPA requests comment on the 
availability of its legal authority in this area and whether and when 
it might be appropriate to establish efficiency standards for source 
categories as a way of reducing GHG emissions.
    Plant-wide standards: EPA also believes there may be benefits to 
developing plant-wide or company-wide standards for GHG emissions. 
Section 111, however, requires each affected facility to comply with 
the standard. EPA believes that it could redefine the affected facility 
for certain categories, for purposes of GHG regulation only, to include 
an entire plant. EPA also requests comment on whether it would be 
consistent with the statutory requirements to establish company-wide 
limits.
    Work practice standards: In some circumstances, it may not be 
possible to identify a specific performance level for sources in a 
particular category; however, section 111(h) permits promulgation of 
design, equipment, work practice, or operational standards but allows 
such standards to be established only in specific circumstances. 
Specifically, it provides that where we determine ``that (A) a 
pollutant or pollutants cannot be emitted through a conveyance designed 
and constructed to emit or capture such pollutant, or that any 
requirement for, or use of, such a conveyance would be inconsistent 
with any Federal, State, or local law, or (B) the application of 
measurement methodology to a particular class of sources is not 
practicable due to technological or economic limitations,'' we may 
establish a ``design, equipment, work practice, or operational 
standard, or combination thereof, which reflects the best technological 
system of continuous mission reduction which . . . has been adequately 
demonstrated.'' EPA requests comment on the circumstances under which 
the section 111(h) criteria would be satisfied and when, and for which 
source categories, work practice standards could be appropriate 
standards to control GHGs.
    Market-oriented regulatory mechanisms: As mentioned above, EPA 
believes that market-oriented regulatory approaches including emissions 
trading are worthy of consideration for applying NSPS to GHG emissions. 
Several market-oriented regulatory mechanisms are discussed in section 
VII.G of today's notice. EPA requests comment on which of these 
mechanisms are consistent with the section 111 definition of a 
``standard of performance.''
ii. Request for Comment on Section 111 Regulatory Approaches
    This notice and the Stationary Source TSD describe possible 
approaches for using section 111 to reduce GHG emissions, in general 
and in regard to particular source categories. We request comment on 
the following specific questions regarding potential regulatory 
approaches under section 111:
     What are the overall advantages and disadvantages of the 
regulatory approaches discussed above, in light of the policy design 
considerations in section III.F.1? Please describe in detail any 
approaches not discussed in today's notice that you think we should 
consider.
     What are the industry-specific advantages and 
disadvantages of the regulatory approaches discussed above and in the 
TSD?
    In developing section 111 standards for a particular source 
category (e.g., refineries, cement plants, industrial commercial 
boilers, electric generating plants, etc.) we are requesting source 
category-specific comments on the following additional issues:
     What data are available, or would need to be collected, to 
support the development of performance standards, either by process, 
subcategory, or for the facility?
     Should the standards be different for new and existing 
sources, either in terms of the systems for emission reductions on 
which they should be based and/or on the regulatory structure and 
implementing mechanisms for such standards?
     To what extent, if any, should the standards be 
technology-forcing for existing sources?
     Should the standards require additional reductions over 
time? To what extent would such reductions be consistent with the 
authority and purpose of section 111, and how should they be designed 
and carried out to ensure consistency?
iii. What Reductions Could Be Achieved From Efficiency Improvements at 
Existing Sources?
    Recognizing that existing sources do not have as much flexibility 
in the levels of control that may realistically be achieved at a new 
source, a section 111(d) standard regulating GHG from existing sources 
would at this time most likely focus on currently available measures to 
increase the energy efficiency at the facility, thereby reducing GHG 
emissions. Examples of typical measures that promote energy efficiency 
include the use of cleaner fuels and equipment replacement or process 
improvements which reduce energy consumption. How well a measure, or 
combination of measures, will reduce GHG emissions at an individual 
facility will vary. A review of available literature suggests a range 
of improvements for various industry sectors that may be achievable 
through energy and process efficiency improvements, and some 
representative examples are summarized below. This information is 
illustrative, and does not represent any final technical determination 
by the agency as to what emission reduction requirements might be 
appropriate to require from the source categories discussed below.
    For example, reductions in emissions of GHG from cement plants 
would most likely occur from fuel efficiency and electric energy 
efficiency measures as well as raw material and product changes that 
reduce the amount of CO2 generated per ton of cement 
produced. There are numerous efficiency measures generally accepted by 
much of the U.S. industry, and many of these measures have been adopted 
in recent cement plant improvements. Such measures may directly reduce 
GHG emissions by cement plants, or they may indirectly reduce GHG 
emissions at sources of power generation due to reduced electrical 
energy requirements. The range of effectiveness of the individual 
measures in reducing GHG is from less than 1% to 10%.\248\ Benchmarking 
and other studies have demonstrated a technical potential for up to 40% 
improvement in energy efficiency for a new cement plant using the most 
efficient technologies compared to older plants using wet kilns.
---------------------------------------------------------------------------

    \248\ U.S. EPA (2008), Air Pollution Controls and Efficiency 
Improvement Measures for Cement Kiln. Final Report.
---------------------------------------------------------------------------

    A number of opportunities may exist within refineries to increase 
energy efficiency by optimizing utilities, fired heaters, heat 
exchangers, motors, and process designs. Competitive benchmarking data 
indicate that most petroleum refineries can economically improve energy 
efficiency by 10 to 20%.\249\ Therefore, we would expect that a new 
refinery could be designed to be at least 20% more efficient than an 
existing one.
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    \249\ Energy Efficiency Improvement and Cost Saving 
Opportunities for Petroleum Refineries, LBNL, 2005.

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[[Page 44492]]

    In the case of industrial boilers, measures applied to individual 
facilities could result in energy savings and GHG reductions on the 
order of 1% to 10%. Replacing an existing boiler with a combined heat 
and power plant could improve the energy efficiently of an existing 
plant by 10% to 33%.
    Existing coal-fired power plants can reduce their fuel consumption 
(reduce heat rate) and reduce CO2 emissions by performing 
well known modifications and upgrades to plant systems. Heat rate 
reductions of up to 10% may be feasible through various efficiency 
improvements at individual coal units, depending on site specific 
conditions. Because of plant age and other physical limitations, the 
potential average heat rate reduction for the coal fleet would likely 
not exceed about 5%. The existing fleet operates at an average net 
efficiency of about 33%. If the corresponding coal fleet average net 
heat rate were reduced by 5% via efficiency improvements, a potential 
5% reduction in CO2 emissions could be obtained as well.
    As older, less efficient coal power plants are retired, their 
capacity may be replaced with new, more efficient coal-fired units. A 
new, fully proven supercritical coal plant design can operate at a heat 
rate 10-15% below the current coal fleet average, and therefore produce 
10-15% less GHG than the average existing coal plant. Future more 
advanced ultra-supercritical plant designs with efficiencies above 40% 
would have heat rates that are 20-25% or more below the current coal 
fleet average, and therefore produce that much less GHG than the 
average existing coal plant.
    Technology to capture and geologically sequester CO2 is 
the subject of ongoing projects in the U.S. and other countries and is 
a promising technology.\250\ The electric power sector will most likely 
be the largest potential market for carbon capture and sequestration 
(CCS) technologies, with the potential to reduce CO2 by 
approximately 80-90% at an individual plant.\251\ It may become 
possible to apply CCS to some portion of the existing coal-fired fleet 
by retrofit to achieve significant CO2 reductions. Other 
facilities that might be able to use CCS include refineries, chemical 
manufacturing plants, ethanol production facilities, cement kilns and 
steel mills. As advances in GHG reduction technologies continue, 
section 111(d) standards would be expected to consider and reflect 
those advances over time. We solicit comment on the criteria EPA should 
use to evaluate whether CCS technology is adequately demonstrated to be 
available for the electric power and other industrial sectors, 
including the key milestones and timelines associated with the wide-
spread use of the technology.
---------------------------------------------------------------------------

    \250\ See http://www.netl.doe.gov/technologies/carbon_seq/partnerships/partnerships.html for more information about the 
Regional Carbon Sequestration Partnerships in the United States.
    \251\ IPCC Special Report on Carbon Dixoide Capture and Storage, 
2005, pp.3, 22.
---------------------------------------------------------------------------

    iv. What Are the Possible Effects of Section 111 With Respect to 
Innovation?
    As noted previously, whatever path may be pursued with respect to 
the control of GHG through the CAA or other authority, we believe it is 
likely that most early reductions in stationary GHG emissions may occur 
as the result of increased energy efficiency, process efficiency 
improvements, recovery and beneficial use of process gases, and certain 
raw material and product changes that could reduce inputs of carbon or 
other GHG-generating materials. Clearly, more fundamental technological 
changes will be needed to achieve deeper reductions in stationary 
source GHG emissions over time. We request general comments on how to 
create an environment in which new, more innovative approaches may be 
encouraged pursuant to section 111, or other CAA or non-CAA authority.
    Waiver authority under section 111(j) would be useful as one 
element of broader policies to encourage development of innovative 
technologies. Section 111(j) authorizes the Administrator to waive the 
NSPS requirements applicable to a source if he determines that the 
innovative technology the source proposes to use will operate 
effectively and is likely to achieve greater emission reductions, or at 
least equivalent reductions but at lower cost. Also, the Administrator 
must determine that the proposed system has not yet been adequately 
demonstrated (i.e. it is still an innovative technology), but that it 
will not cause or contribute to an unreasonable risk to public health, 
welfare, or safety in its operation, function, or malfunction. These 
waivers can be given for up to 7 years, or 4 years from the date that a 
source commences operation, whichever is earlier.
    We believe that effective GHG reduction techniques for many source 
categories potentially subject to NSPS may at this time be limited and 
that additional research and development will be necessary before these 
controls are demonstrated to be effective. We ask for comment on how 
the use of innovative technology waivers could conceivably be used to 
foster the development of additional approaches for GHG reductions.
5. Possible Implications for Other CAA Provisions
    Regulation of GHGs under a section 111 standard for any industry 
would trigger preconstruction permitting requirements for all types of 
GHG sources under the PSD program. NSPS are also incorporated into 
operating permits issued under Title V of the CAA. The consequences of 
triggering and the options for addressing these permitting requirements 
are addressed in detail in section VII.D of this notice.
    Whether GHGs were regulated individually or as a group in NSPS 
standards would affect the definition of regulated pollutant for 
stationary sources subject to preconstruction permitting under the PSD 
program. Conversely, while the section 111 mechanisms are relatively 
independent of other CAA programs, NSPS decision-making as a practical 
matter would need to consider the pollutant definitions adopted under 
other CAA authorities. It would be advantageous to maintain consistency 
regarding the GHG pollutants subject to regulation elsewhere in the Act 
to avoid the potential for PSD review requirements for individual GHGs 
as well as for groups of the same GHGs.
    In considering the impact that decisions to list pollutants under 
other authorities of the CAA might have on our use of section 111 
authority, we note that some industries have processes that emit more 
than one GHG and a potential may exist among some of these industries 
to control emissions of one GHG in ways that may increase emissions of 
others (e.g., collecting methane emissions and combusting them to 
produce heat and/or energy, resulting in emissions of CO2.) 
While an overall reduction in GHGs may occur, as well as a reduction in 
global warming potential, whether GHGs are regulated as a class of 
compounds or as individual constituents could have implications for the 
degree of flexibility and for the outcome of any regulatory decisions. 
More specifically, if we were to regulate GHGs as a group, then 
standards under section 111 might establish an overall level of 
performance that could accommodate increases in emissions of some gases 
together with reductions in others, so long as the overall performance 
target was met. If we were to regulate individual GHGs, then we may be 
less able to establish less stringent requirements for the control of 
some gases, while setting more stringent requirements for others. The 
extent to which we may be able to do so depends

[[Page 44493]]

on the significance of the emissions of each gas from the source 
category in question as well as the feasibility and cost-effectiveness 
of controlling each. One result of this lessened flexibility may be the 
preclusion of certain approaches that could yield greater net reduction 
in GHG emissions. For this reason, we request comments on (1) the 
extent to which we are limited in our flexibility to regulate GHG as a 
class if listed individually under other CAA authorities, and (2) 
whether regulation under section 111 should treat GHG emissions as a 
class for determining the appropriate systems for emissions reduction 
and resulting standards.
    Finally, we note that our authority to promulgate 111(d) standards 
for existing sources depends on the two restrictions noted above. 
First, section 111(d) prohibits regulation of a NAAQS pollutant under 
that section. Second, ``where a source category is being regulated 
under section 112, a section 111(d) standard of performance cannot be 
established to address any HAP listed under 112(b) that may be emitted 
from that particular source category.'' If we were to promulgate a 
section 111(d) emission standard and then subsequently take action 
under sections 108 or 112 such that we could not promulgate a section 
111(d) standard had we not already done so, the continued validity of 
the section 111(d) regulations might become unclear. We request comment 
on the extent, if any, to which the requirements of section 111(d) 
plans would, or could, remain in force under such circumstances.

C. National Emission Standards for Hazardous Air Pollutants

    Along with the NAAQS system and section 111 standards, section 112 
is one of the three main regulatory pathways under the CAA for 
stationary sources. Section 112 is the portion of the Act that Congress 
designed for controlling hazardous air pollutant emissions from these 
sources, including toxic pollutants with localized or more 
geographically widespread effects. This focus is reflected in the 
statutory provisions, which, for example, require EPA to regulate 
sources with relatively small amounts of emissions. In comparison to 
section 111, section 112 provides substantially less discretion to EPA 
concerning the size and types of sources to regulate, and is specific 
about when EPA may and may not consider cost.
    This section explores the implications if EPA were to list GHGs as 
hazardous air pollutants under section 112.

1. What Does Section 112 Require?

a. Overview
    Section 112 contains a list of hazardous air pollutants (HAPs) for 
regulation. EPA can add or delete pollutants from the list consistent 
with certain criteria described below.
    EPA must list for regulation all categories of major sources that 
emit one or more of the HAPs listed in the statute or added to the list 
by EPA. A major source is defined as a source that emits or has the 
potential to emit 10 tons per year or more of any one HAP or 25 tons 
per year of any combination of HAPs.
    For each major source category, EPA must develop national emission 
standards for hazardous air pollutants (NESHAP). Standards are required 
for existing and new major sources. The statute requires the standards 
to reflect ``the maximum degree of reduction in HAP emissions that is 
achievable, taking into consideration the cost of achieving the 
emission reduction, any nonair quality health and environmental 
impacts, and energy requirements.'' This level of control is commonly 
referred to as maximum achievable control technology, or MACT.
    The statute also provides authority for EPA to list and regulate 
smaller ``area'' sources of HAPs. For those sources EPA can establish 
either MACT or less stringent ``generally available control 
technologies or management practices''.
    Section 112(d)(6), requires a review of these technology-based 
standards every 8 years and requires that they be revised ``as 
necessary taking into account developments in practices, processes and 
control technologies.'' Additionally, EPA under section 112(f)(2)(C) 
must reevaluate MACT standards within 8 years of their issuance to 
determine whether MACT is sufficient to protect public health with an 
ample margin of safety and prevent adverse environmental effects. If 
not, EPA must promulgate more stringent regulations to address any such 
``residual risk''.
b. How Are Pollutants and Source Categories Listed for Regulation Under 
Section 112?
    Section 112(b)(1) includes an initial list of more than 180 HAPs. 
Section 112(b)(2) requires EPA to periodically review the initial HAP 
list and outlines criteria to be applied in deciding whether to add or 
delete particular pollutants.
    A pollutant may be added to the list because of either human health 
effects or adverse environmental effects. With regard to adverse human 
health effects, the provision allows listing of pollutants ``including, 
but not limited to, substances which are known to be, or may reasonably 
be anticipated to be, carcinogenic, mutagenic, teratogenic, neurotoxic, 
which cause reproductive dysfunction, or which are acutely or 
chronically toxic.'' An adverse environmental effect is defined as 
``any significant and widespread adverse effect, which may reasonably 
be anticipated, to wildlife, aquatic life, or other natural resources, 
including adverse impacts on populations of endangered or threatened 
species or significant degradation of environmental quality over broad 
areas.'' Section 112(b)(2) provides that ``no substance, practice, 
process or activity regulated under [the Clean Air Act's stratospheric 
ozone protection program] shall be subject to regulation under this 
section solely due to its adverse effects on the environment.'' Thus, 
section 112 may not be used to regulate certain chlorofluorocarbons and 
other ozone-depleting substances, their sources, or activities related 
to their production and use to address climate change unless we 
establish that such regulations are necessary to address human health 
effects in addition to any adverse environmental impacts. See section 
602 of the Clean Air Act for a partial list of these substances.
    Section 112(b)(3) of the Act establishes general requirements for 
petitioning EPA to modify the HAP list by adding or deleting a 
substance. Although the Administrator may add or delete a substance on 
his own initiative, if a party petitions the Agency to add or delete a 
substance, the burden historically has been on the petitioner to 
include sufficient information to support the requested addition or 
deletion under the substantive criteria set forth in CAA section 
112(b)(3)(B) and (C). The Administrator must either grant or deny a 
petition within 18 months of receipt of a complete petition.
    The effects and findings described in section 112 are different 
from other sections of the CAA addressing endangerment of public health 
discussed in previous sections of today's notice. Given the nature of 
the effects identified in section 112(b)(2), we request comment on 
whether the health and environmental effects attributable to GHG fall 
within the scope of this section. We also request comment on direct and 
indirect GHG emissions from existing source categories currently 
subject to regulation under section 112, any assessment of the relative 
costs of regulating GHG under the authority of section 112, and any co-
benefits or co-detriments with regard to controlling GHG and the 
emissions of HAP.

[[Page 44494]]

    The source categories to be regulated under section 112 are 
determined based on the list of HAP. Section 112(c) requires EPA to 
publish a list of all categories and subcategories of major sources of 
one or more of the listed pollutants, and to periodically review and 
update that list. In doing this, EPA also is required to list each 
category or subcategory of area sources which the Administrator finds 
presents a threat of adverse effects to human health or the environment 
(by such sources individually or in the aggregate) warranting 
regulation under section 112.
c. How Is MACT Determined?
    In essence, MACT standards are intended to ensure that all major 
sources of HAP emissions achieve the level of control already being 
achieved by the better controlled and lower emitting sources in each 
category. This approach provides assurance to citizens that each major 
source of toxic air pollution will be required to effectively control 
its emissions. At the same time, this approach provides assurances that 
facilities that employ cleaner processes and good emissions controls 
are not disadvantaged relative to competitors with poorer controls.
    MACT is determined separately for new and existing sources. For 
existing sources, MACT standards must be at least as stringent as the 
average emissions limitation achieved by the best performing 12 percent 
of sources in the category or subcategory (or the best performing five 
sources for source categories with less than 30 sources). This level is 
called the ``MACT floor.'' For new or reconstructed sources, MACT 
standards must be at least as stringent as the control level achieved 
in practice by the best controlled similar source.\252\ EPA also must 
consider more stringent ``beyond-the-floor'' control options for MACT. 
When considering beyond-the-floor options, EPA must consider not only 
the maximum degree of reduction in emissions of the HAP, but also 
costs, energy requirements and non-air quality health environmental 
impacts of imposing such requirements.
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    \252\ See CAA section 112(d)(3).
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    MACT standards may require the application of measures, processes, 
methods, systems, or techniques including, but not limited to, (1) 
reducing the volume of, or eliminating emissions of, such pollutants 
through process changes, substitution of materials, or other 
modifications; (2) enclosing systems or processes to eliminate 
emissions; (3) collecting, capturing, or treating such pollutants when 
released from a process, stack, storage or fugitive emissions point; 
(4) design, equipment, work practice, or operational standards 
(including requirements for operator training or certification) as 
provided in subsection (h); or (5) a combination of the above. (See 
section 112(d)(2) of the Act.)
    For area sources, CAA section 112(d)(5) provides that the standards 
may reflect generally available control technology or management 
practices (GACT) in lieu of MACT.
d. What Is Required To Address Any Residual Risk?
    Section 112(f)(2) of the CAA requires us to determine for each 
section 112(d) source category whether the MACT standards protect 
public health with an ample margin of safety. If the MACT standards for 
a HAP ``classified as a known, probable, or possible human carcinogen 
do not reduce lifetime excess cancer risks to the individual most 
exposed to emissions from a source in the category or subcategory to 
less than 1-in-1-million,'' EPA must promulgate residual risk standards 
for the source category (or subcategory) as necessary to protect public 
health with an ample margin of safety. EPA must also adopt more 
stringent standards if needed to prevent an adverse environmental 
effect, but must consider cost, energy, safety, and other relevant 
factors in doing so. EPA solicits comments on the extent to which these 
programs could apply with respect to the possible regulation of sources 
of GHG under section 112, including the relevance of any carcinogenic 
effects of individual GHG.
2. What Sources Would Be Affected if GHGs Were Regulated Under This 
Authority?
    If GHGs were listed as HAP, EPA would be required to regulate a 
very large number of new and existing stationary sources, including 
smaller sources than if alternative CAA authorities were used to 
regulate GHG. This is the result of three key requirements. First, the 
section 112(a) major sources thresholds of 10 tons for a single HAP and 
25 for any combination of HAPs would mean that very small GHG emitters 
would be considered major sources. Second, section 112(c) requires EPA 
to list all categories of major sources. Third, section 112(d) requires 
EPA to issue MACT standards for all listed categories.
    We believe that most significant stationary source categories of 
GHG emissions have already been listed under section 112 (although the 
10-ton threshold in the case of GHGs would be expected to bring in 
additional categories such as furnaces in buildings, as explained 
below). To date we have adopted standards for over 170 categories and 
subcategories of major and area sources. This is a significantly 
greater number than the categories for which we have adopted NSPS 
because under section 112 we must establish standards for all listed 
categories, whereas section 111 requires that we identify and regulate 
only those source categories that contribute ``significantly'' to air 
pollution endangering public health and welfare.
3. What Are the Key Milestones and Expected Timeline if Section 112 
Were Used for GHG Controls?
    One possible timetable for addressing GHG under this part of the 
Act would be to incorporate GHG emission control requirements 
concurrent with the mandatory 8-year technology reviews for each 
category, collecting information on emissions and control technologies 
at the time the existing MACT standards are reviewed to determine 
whether revisions are needed. If we were to list new source categories 
under section 112, EPA would be required to adopt MACT standards for 
those categories within 2 years of the date of category listing.
    EPA must require existing sources to comply within 3 years of a 
standard's promulgation, although states and EPA are authorized in 
certain circumstances to extend the period of compliance by one 
additional year. Most new sources must comply as soon as a section 112 
standard is issued; however, there is an exception where the final rule 
is more stringent than the proposal.
    Because of the more detailed requirements for identifying 
appropriate levels of control to establish a level for MACT, 
significantly more information on the best performing sources is needed 
under section 112 than under section 111, making the development of 
such standards within 2 years after listing a source category 
difficult. We request comment on this and other approaches for 
addressing GHG under section 112, both for categories already listed 
for regulation and for any that might appropriately be added to the 
section 112 source category list if we were to elect to regulate GHGs 
under this section.
4. What Are the Key Considerations Regarding Use of This Authority for 
GHGs (and How Could Potential Issues Be Addressed)?
    A key consideration in evaluating use of section 112 for GHG 
regulation is that

[[Page 44495]]

the statutory provisions appear to allow EPA little flexibility 
regarding either the source categories to be regulated or the size of 
sources to regulate. As described above, EPA would be required to 
regulate a very large number of new and existing stationary sources, 
including smaller sources than if alternative CAA authorities were used 
to regulate GHG. For example, in calculating CO2 emissions based on 
fossil-fuel consumption, we believe that small commercial or 
institutional establishments and facilities with natural gas-fired 
furnaces would exceed this major source threshold; indeed, a large 
single-family residence could exceed this threshold if all appliances 
consumed natural gas. EPA requests comment on the requirement to 
establish standards for all sources under section 112 relevant to GHG 
emissions and whether any statutory flexibility is or is not available 
with respect to this requirement and GHGs.
    A section 112 approach for GHGs would require EPA to issue a large 
number of standards based on assessments for each source category. 
Determining MACT based on the best-controlled 12 percent of similar 
sources for each category would present a difficult challenge, owing to 
our current lack of information about GHG control by such sources and 
the effort required to obtain sufficient information to establish a 
permissible level of performance.
    GHG regulation under section 112 would likely be less cost 
effective than under some CAA authorities, in part because section 112 
was designed to ensure a MACT level of control by each major source, 
and thus provides little flexibility for market-oriented approaches. 
Given the structure and past implementation of section 112, this 
section may not provide EPA with authority to allow emissions trading 
among facilities or averaging across emitting equipment in different 
source categories. This is because the statutory terms of section 112 
provide that emission standards must be established for sources within 
``each category'' and those standards must be no less stringent than 
the ``floor,'' or the level of performance achieved by the best-
performing sources within that category. Each source in the category 
must then achieve control at least to this floor level. Trading would 
allow sources to emit above the floor. In addition, it may not be 
possible to assess individual source fence line risk for section 112(f) 
residual risk purposes if the sources did not each have fixed limits. 
Finally, the section 112 program is in part designed to protect the 
population in the vicinity of each facility, which trading could 
undermine (in contrast to an ambient standard). Given the global nature 
of GHGs and the lack of direct health effects from such emissions at 
ambient levels, EPA requests comments on the extent to which the CAA 
could be interpreted to grant flexibility to consider such alternative 
implementation mechanisms, and what, if any, limitations should be 
considered appropriate in conjunction with them.
    Another reason that section 112 regulation of GHGs would be 
expected to be less cost effective than other approaches is that the 
statute limits consideration of cost in setting MACT standards. As 
described above, the statute sets minimum stringency levels, or 
``floors,'' for new and existing source standards. Cost can only be 
considered in determining whether to require standards to be more 
stringent than the floor level.
    A further consideration is that the short compliance timetables--
immediate for most new sources, and within 3-4 years for existing 
sources--appear to preclude setting longer compliance timeframes to 
allow for emerging GHG technologies to be further developed or 
commercialized.
5. What Are the Possible Implications for Other Provisions of the Clean 
Air Act?
    As provided under section 112(b)(6), pollutants regulated under 
section 112 of the Act are exempt from regulation under the PSD 
program. Also, a section 111(d) standard of performance for existing 
sources cannot be established to address any HAP listed under section 
112(b) that that is emitted from a source category regulated under 
section 112.\253\
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    \253\ It is important to note that many sources may be subject 
to standards under both section 111 and 112; however these standards 
establish requirements for the control of different pollutants.
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    If EPA were to list GHGs under section 108 of the CAA for purposes 
of establishing NAAQS, we would be prevented by section 112(b)(2) from 
listing and regulating them as HAPs under this section of the Act. 
However, it is less clear that the reverse is true; that is, if a 
pollutant were first listed under section 112 and then EPA decided to 
list and regulate it under section 108, the statute does not clearly 
say whether that is permissible, or whether EPA would then have to 
remove the pollutant from the section 112 pollutant list. We request 
comment on the extent to which this apparent ambiguity in the Act poses 
an issue regarding possible avenues for regulating GHG and if so, how 
it should be addressed.
    In light of the foregoing, we request comment on the 
appropriateness of section 112 as a mechanism for regulating stationary 
source emissions of GHGs under the CAA. If commenters believe use of 
section 112 would be appropriate, we further request comments on which 
GHGs should be considered, what additional sources of emissions should 
be listed and regulated, and how MACT should be determined for GHG 
emission sources.

D. Solid Waste Combustion Standards

1. What Does Section 129 Require?
    Section 129 of the CAA requires EPA to set performance standards 
under section 111 to control emissions from solid waste incineration 
units of at least 9 specific air pollutants. It directs EPA to develop 
standards which include emission limitations and other requirements for 
new units and guidelines and other requirements applicable to existing 
units.
    Section 129 directs EPA to set standards for ``each category'' of 
such units, including those that combust municipal, hospital, medical, 
infectious, commercial, or industrial waste, and ``other categories'' 
of solid waste incineration units, irrespective of size. The pollutants 
to be addressed by these standards include the NAAQS pollutants 
particulate matter (total and fine), sulfur dioxide, oxides of 
nitrogen, carbon monoxide, and lead; and the hazardous air pollutants 
hydrogen chloride, cadmium, mercury, and dioxins and dibenzofurans. EPA 
is authorized to regulate additional pollutants under these provisions, 
but section 129 includes no endangerment test or other criteria for 
determining when it is appropriate to do so.
    Although the emission standards called for by section 129 are to be 
established pursuant to section 111, the degree of control required 
under those standards more closely resembles that of section 112(d). 
For new sources the level of control is required to be no less 
stringent than that of the best performing similar source, while for 
existing sources the level of control is to be no less stringent than 
the average of the top 12% of best-performing sources. For both new and 
existing source standards, beyond these ``floor'' levels EPA must 
consider the cost of achieving resulting emission reductions and any 
non-air quality health and environmental impacts and energy 
requirements in determining what is achievable for units within each 
category. The performance standards must be reviewed every 5 years. 
Additionally, for those pollutants that

[[Page 44496]]

are listed under section 112 as a HAP, EPA must reevaluate the 
standards in accordance with section 112(f) to determine whether they 
are sufficient to protect public health with an ample margin of safety 
and prevent adverse environmental effects, and must promulgate more 
stringent regulations if necessary to address any such ``residual 
risk.'' Thus, for this particular class of source categories, section 
129 merges important elements of both sections 111 and 112.
    EPA has established standards for a variety of solid waste 
incinerator categories and is in the process of developing additional 
standards and revising others.\254\ In the absence of statutory 
criteria for determining whether and under what circumstances EPA 
should regulate additional pollutants under this section of the CAA, we 
request comment on whether emissions of GHG could fall within the scope 
of this section. We also request comment on direct and indirect GHG 
emissions from existing source categories currently subject to 
regulation under section 129, any assessment of the relative costs of 
regulating GHGs under the authority of section 129, and any co-benefits 
or co-detriments with regard to controlling GHG and the emissions of 
pollutants specifically listed for regulation under section 129.
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    \254\ Rules have been promulgated for large and small municipal 
waste combustors; medical waste incinerators; other solid waste 
incinerators; and commercial, institutional, and industrial solid 
waste incinerators. EPA is also currently reevaluating and revising 
certain standards under section 129 in response to decisions by the 
U.S. Court of Appeals for the D.C. Circuit.
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2. What Sources Would Be Affected if GHGs Were Regulated Under This 
Authority?
    Standards required by section 129 are applicable to ``any facility 
which combusts any solid waste material from commercial or industrial 
establishments or the general public (including single and multiple 
residences, hotels, and motels).'' Thus the provisions of this section 
are limited to a specific type of emission source, although there are 
many such units in existence that are subject to regulation. To date we 
have adopted standards for five categories of incinerators and are 
currently in the process of developing revised standards on remand for 
several of these categories, which may involve the inclusion of several 
additional subcategories of incineration units. We anticipate that when 
completed these rules will establish standards of performance for as 
many as five hundred or more units.
    Because section 129 does not require, but authorizes EPA to 
establish requirements for other air pollutants, we request comment on 
whether and for what categories or subcategories of incinerators EPA 
could address GHG emissions control requirements.
a. How Are Control Requirements Determined?
    As noted above, the control requirements for sources regulated 
under section 129 are similar to the MACT standards mandated under 
section 112(d). However, whereas section 112(d)(3) provides that 
standards are to be based on the best performing sources ``for which 
the Administrator has emissions information,'' section 129 contains no 
such limitation. Consequently, it appears that EPA is obligated to 
obtain information from all potentially affected sources in order to 
determine the appropriate level of control.
    Section 129(a)(2) provides authority for EPA to distinguish among 
classes, types, and sizes of units within a category in establishing 
standards. This provision is similar to authorities provided in 
sections 111( b)(2) and 112(b)(2). Because section 129 directs that EPA 
establish standards for affected source categories under sections 
111(b) and (d), we believe that the provisions governing the creation 
of design, equipment, work practice, or operational standards are also 
available for standards required by section 129. For existing sources, 
we believe that provisions for consideration of remaining useful life 
and other related factors are relevant to EPA and States when 
determining the requirements and schedules for compliance for 
individual affected sources.
b. What Is Required To Address Any Residual Risk?
    For each of the air pollutants named in section 129 that are listed 
as HAP under section 112, section 129 requires EPA to evaluate and 
address any residual risk remaining after controls established under 
the initial emission standards.\255\ In so doing, it requires EPA to 
determine for each affected source category whether the performance 
standards protect public health with an ample margin of safety. EPA 
must also adopt more stringent standards if needed to prevent an 
adverse environmental effect, but must consider cost, energy, safety, 
and other relevant factors in doing so.
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    \255\ Section 129(h)(3) provides that for purposes of 
considering residual risk the standards under section 129(a) and 
section 111 applicable to categories of solid waste incineration 
units are to be ``deemed standards under section 112(d)(2).''
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    Section 129(h)(3) limits residual risk assessments and any 
subsequent resulting regulations to ``the pollutants listed under 
subsection (a)(4) of this section and no others.'' Consequently, if EPA 
were to regulated GHG emissions from incineration units under section 
129, we would not be required to conduct additional residual risk 
determinations.
3. What Are the Key Milestones and Expected Timeline if Section 129 
Were Used for GHG Controls?
    As stated above, we have adopted rules governing emissions from 
certain categories of solid waste incineration units and are in the 
process of revising or establishing new standards for others. Thus if 
we were to elect to regulate GHG emissions under section 129, a 
question arises concerning how to incorporate new requirements for 
those categories for which standards have already been established. One 
possible timetable for addressing GHG under this part of the Act would 
be to incorporate GHG emission control requirements concurrent with the 
mandatory 5-year reviews for each previously-regulated category, 
collecting information on emissions and control technologies at the 
time the existing standards are reviewed to determine whether revisions 
are needed. Because of the more detailed requirements for identifying 
appropriate levels of control to establish a level for these categories 
of sources, significantly more information on the best performing 
sources is needed under section 129 than even under section 112 
(because of the absence of limitations for this analysis to those 
sources ``for which the Administrator has information''), making the 
development of such standards a more time-consuming effort. In the 
event that we were to elect to regulate GHGd under this section, we 
request comment on this and other approaches for addressing GHGd under 
section 129, both for categories already regulated and for any for 
which standards are currently under development.
4. What Are the Key Considerations Regarding Use of This Authority for 
GHGs (and How Could Potential Issues Be Addressed)?
    If we were to elect to regulate GHG emissions from solid waste 
incinerators under section 129, then we would need to establish 
standards for at least some number of categories of such sources. We 
request comment on the availability of authority to establish 
requirements

[[Page 44497]]

for controlling GHG emissions from subcategories of incineration units 
based on size, type or class, as provided under section 111, and to 
exclude from regulation other categories or subcategories.
    Given the structure of section 129 and its hybrid approach to the 
use of authorities under sections 111 and 112, we question whether this 
section provides EPA with available authority to establish alternative 
compliance approaches, such as emissions trading or averaging across 
sources within a category. This is because the statutory terms of 
section 129 provide that emission standards must be established for 
sources within ``each category'' and those standards must be no less 
stringent than the level of performance achieved by the best-performing 
sources within that category. Each source in the category must then 
achieve control at least to this level. Trading would allow sources to 
emit above the floor. As a practical matter, given that requirements 
for control of specifically-listed pollutants may preclude trading for 
those pollutants, and given that many of the controls applicable to 
those pollutants would be the same as or similar to those that would be 
applicable to GHGs, we believe that trading options would likely be 
infeasible with respect to GHG control requirements. However, EPA 
requests comments on the extent to which the CAA could be interpreted 
to grant flexibility to consider such alternative implementation 
mechanisms, to what extent, and what, if any, limitations should be 
considered appropriate in conjunction with them.
5. What Are the Possible Implications for Other Provisions of the Clean 
Air Act?
    Section 129 recognizes that many incineration units may also be 
subject to prevention of significant deterioration or nonattainment new 
source review requirements. It addresses potentially conflicting 
outcomes of control determinations under those programs by providing 
that ``no requirement of an applicable implementation plan . . . may be 
used to weaken the standards in effect under this section.''
    If EPA were to list GHGs under section 108 for purposes of 
establishing NAAQS, we would not be prevented from regulating them 
under this section of the Act as well. If EPA were to list GHG under 
section 112, a potential conflict arises in that section 112 
establishes major and area source emissions thresholds, providing for 
standards of different stringency for each, and requires analysis of 
residual risk for major sources regulated under that section of the 
Act. We request comments on how such apparent conflicts could be 
reconciled if we were to elect to regulate emissions of GHGs from solid 
waste incineration units under section 129.
    In light of the foregoing, we request comment on the 
appropriateness of section 129 as a mechanism for regulating 
incineration unit emissions of GHGs under the CAA. If commenters 
believe that use of section 129 would be appropriate, we further 
request comments on which GHGs should be considered, what source 
categories or subcategories should be regulated, and how appropriate 
control requirements should be determined for new and existing GHG 
emission sources.

E. Preconstruction Permits Under the New Source Review (NSR) Program

1. What Are the Clean Air Act Provisions Describing the NSR Program?
    Under what is known as the New Source Review (NSR) program, the CAA 
requires the owners and operators of large stationary sources of air 
pollution to obtain construction permits prior to building or modifying 
such a facility. The program is subdivided into the Prevention of 
Significant Deterioration (PSD) and nonattainment NSR (NNSR) programs, 
either of which may be applicable depending on the air quality for a 
particular pollutant in the location of the source subject to 
permitting.
    The PSD program, set forth in Part C of Title I of the CAA, applies 
in areas that are in attainment with the NAAQS (or are unclassifiable) 
and has the following five goals and purposes:
     To protect public health and welfare from air pollution 
beyond that which is addressed by the attainment and maintenance of 
NAAQS;
     To protect specially designated areas such as national 
parks and wilderness areas from the effects of air pollution;
     To assure that economic growth will occur in a manner 
consistent with the preservation of existing clean air resources;
     To assure emissions in one state will not interfere with 
another state's PSD plan; and
     To assure that any decision to permit increased air 
pollution is made only after evaluating the consequences of the 
decision and after opportunities for informed public participation.
    The main element of the PSD program is the requirement that a PSD 
permit be obtained prior to construction of any new ``major emitting 
facility'' or any new ``major modification.'' Before a source can 
receive approval to construct under PSD, the source and its permitting 
authority (usually a state or local air pollution control agency, but 
sometimes EPA) must follow certain procedural steps, and the permit 
must contain certain substantive requirements. The most important 
procedural step is providing an opportunity for the public to comment 
when a permitting authority proposes to issue a permit.
    The PSD program primarily applies to all pollutants for which a 
NAAQS is promulgated, but some of the substantive requirements of the 
PSD program also apply to regulated pollutants for which there is no 
NAAQS (except that there is an explicit statutory exemption from PSD 
for HAPs).\256\ Since there is currently no NAAQS for GHGs and GHGs are 
not otherwise subject to regulation under the CAA, the PSD program is 
not currently applicable to GHGs.\257\ However, as discussed in section 
IV of this notice, it is possible that EPA actions under other parts of 
the CAA could make GHGs pollutants subject to regulation under the Act 
and thus subject to one or more parts of the PSD program.
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    \256\ CAA section 112(b)(6).
    \257\ In the Energy Independence and Security Act of 2007 
(EISA), Congress provided that regulation of GHGs under CAA section 
211(o) would not automatically result in regulation of GHGs under 
other CAA provisions. Because of this provision, EISA does not 
impact the interrelationship of other provisions of the CAA, and we 
only reference the HAP exception in the text.
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    If EPA were to promulgate a rule establishing limitations on GHG 
emissions from mobile sources or stationary sources without 
promulgating a NAAQS for GHGs, the PSD requirement of greatest 
relevance would be the requirement that a permit contain emissions 
limits that reflect the Best Available Control Technology (BACT). BACT 
is defined as the maximum achievable degree of emissions reduction for 
a given pollutant (determined by the permitting authority on a case-by-
case basis), taking into account energy, environmental, and economic 
impacts. BACT may include add-on controls, but also includes 
application of inherently lower-polluting production processes and 
other available methods and techniques for control. BACT cannot be less 
stringent than any applicable NSPS.
    Since emission control requirements will likely have the most 
direct impact on new or modified stationary sources subject to PSD, our 
focus in this notice is on the BACT requirement. However, we are also 
interested in stakeholder input on the extent to which we should

[[Page 44498]]

evaluate other substantive PSD program elements which would be affected 
by any possible EPA action to regulate GHGs under other parts of the 
Act. These include the requirements to evaluate, in consultation with 
the appropriate Federal Land Manager (FLM), the potential impact of 
proposed construction on the Air Quality Related Values of any affected 
``Class I area'' (national parks, wilderness areas, etc.) and 
additional impacts analysis.\258\
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    \258\ As codified at 40 CFR 51.166(o), the owner or operator 
shall provide an analysis of the impairment to visibility, soils, 
and vegetation that would occur as a result of the source or 
modification and general commercial, residential, industrial, and 
other growth associated with the source or modification.
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    If EPA were to promulgate a NAAQS for GHGs, because of the 
relatively uniform concentration of GHGs, we expect that the entire 
country would be in nonattainment or attainment of the NAAQS. The 
preconstruction permitting requirements that apply would depend on 
whether the country is designated as nonattainment or attainment for 
the GHG emissions that would increase as a result of a project being 
constructed.
    If the entire country is designated attainment, and PSD applies, 
the adoption of a NAAQS would trigger air quality analysis requirements 
that are in addition to all the requirements described above. For 
example, under CAA section 165(a)(3), permit applicants have to conduct 
modeling to determine whether they cause or contribute to a NAAQS 
violation. Following promulgation of a NAAQS, EPA may also promulgate a 
PSD increment for GHGs, which would require additional analysis for 
each new and modified source subject to PSD.\259\ However, this notice 
does not address in detail the PSD elements that relate to increments.
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    \259\ PSD increments are air quality levels which represent an 
allowable deterioration in air quality as compared to the existing 
air quality level on a certain baseline date for a given area.
---------------------------------------------------------------------------

    Under a GHG NAAQS with the country in nonattainment, the 
nonattainment NSR permitting program would be triggered nationally. The 
nonattainment NSR program requirements are contained in section 173 of 
the Act. Like PSD, they apply to new and modified major stationary 
sources, but they contain significantly different requirements from the 
PSD program. A key difference is the requirement that the emissions 
increases from the new or modified source in a nonattainment area must 
be offset by reductions in existing emissions from the same 
nonattainment area or a contributing upwind nonattainment area of equal 
or higher nonattainment classification. The offsetting emissions 
reductions must be at least equal to the proposed increase and must be 
consistent with a SIP that assures the nonattainment area is making 
reasonable progress toward attainment.\260\ Another key difference is 
that instead of BACT, sources subject to nonattainment NSR must comply 
with the Lowest Achievable Emission Rate (LAER), which is the most 
stringent emission limitation that is (1) contained in any SIP for that 
type of source, or (2) achieved in practice for sources of the same 
type as the proposed source.\261\ Notably, if the rate is achievable, 
LAER does not allow for consideration of costs or of the other factors 
that BACT does. While LAER and offsets are likely of greatest 
significance for GHG regulation under nonattainment NSR, there are 
additional requirements for nonattainment NSR that would also apply. 
The additional requirements include the alternatives analysis 
requirement; the requirement that source owners and operators 
demonstrate statewide compliance with the Act; and the prohibition 
against permit issuance if the SIP is not being adequately implemented.
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    \260\ CAA section 173(a)(1); limitations on offsets are set 
forth in section 173(c).
    \261\ CAA section 173(a); LAER is defined in section 171(3)(A).
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    For simplicity, the remainder of this notice describing affected 
sources, impacts, and possible tailoring generally focuses on PSD, 
raising issues specific to nonattainment NSR where applicable.
2. What Sources Would Be Affected if GHGs Were Regulated Under NSR?
    A PSD permit is required for the construction or modification of 
``major emitting facilities,'' which are commonly referred to as 
``major sources.'' A ``major emitting facility'' is generally any 
source that emits or has the potential to emit 250 tons per year (tpy) 
of a regulated NSR pollutant.\262\ \263\ A source that belongs to one 
of several specifically identified source categories is considered a 
major source if it emits or has the potential to emit 100 tpy of a 
regulated NSR pollutant.\264\ Also, for nonattainment NSR, the major 
source threshold is at most 100 tpy, and is less in some nonattainment 
areas, depending on the pollutant and the nonattainment classification.
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    \262\ 42 U.S.C. 7569(1). The PSD regulations use the term 
``major stationary source.'' 40 CFR 51.166(b)(1) The definition of 
``regulated NSR pollutant'' is at 40 CFR 51.166(b)(49).
    \263\ ``Potential-to-emit'', or PTE, is defined as the maximum 
capacity of a source to emit any air pollutant under its physical 
and operational design.
    \264\ These specific sources include major industrial categories 
such as petroleum refining, fossil-fuel fired steam electric plants, 
chemical process plants, and 24 other categories. The full list of 
100 tpy major sources is promulgated at 40 CFR 51.166(b)(1)(i)(a).
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    A ``major modification'' is any physical change or change in the 
method of operation of a major source which significantly increases the 
amount of emissions of any regulated NSR pollutant. EPA defines what 
emissions levels of a pollutant are ``significant'' through regulation, 
and the defined significance levels range from 0.3 tpy for lead to 100 
tpy for CO. Currently there is no defined significance level for GHGs 
(either individually or as a group) because they are not regulated NSR 
pollutants, and thus, were GHGs to become regulated, the significance 
threshold would be zero. Note that, when determining whether a facility 
is ``major,'' a source need not count fugitive emissions (i.e., 
emissions which may not reasonably be vented through stacks, vents, 
etc.) unless it is in a listed category.
    As noted in section IV, GHGs are not currently subject to 
regulation under the Act, and therefore are not regulated NSR 
pollutants. However, if GHG emissions become subject to regulation 
under any of the stationary or mobile source authorities discussed 
above (except sections 112 and 211(o)), GHGs could become regulated NSR 
pollutants. Many types of new GHG sources and GHG-increasing 
modifications that have not heretofore been subject to PSD would become 
subject to PSD permitting requirements. This is particularly true for 
CO2 because, as noted in section III, the mass 
CO2 emissions from many source types are orders of magnitude 
greater than for currently regulated pollutants. Thus, many types of 
new small fuel-combusting equipment could become newly subject to the 
PSD program if CO2 becomes a regulated NSR pollutant. As 
discussed below in the section on potential to emit, the extent to 
which such equipment would become subject to PSD would depend upon 
whether, for each type of equipment, its maximum capacity considering 
its physical and operational design would involve constant year-round 
operation or some lesser amount of operation. For example, the 
calculated size of a natural gas-fired furnace that has a potential to 
emit 250 tpy of CO2, if year-round operation (8760 hours per 
year) were assumed--would be only 0.49 MMBTU/hr, which is comparable to 
the size of a very small commercial furnace. In practice, a furnace 
like this would likely operate far less than year round and its actual 
emissions would be well below 250 tpy. For example, such a furnace, if 
used for

[[Page 44499]]

space heating, might only be burning gas for about 1000 hours per year, 
meaning that it would need to be sized at over 4 MMBTU/hr--a size more 
comparable to a small industrial furnace--to actually emit 250 tons of 
CO2. For sources such as these, the interpretation of the 
term ``potential to emit'' and the availability of streamlined 
mechanisms for smaller sources to limit their potential to emit would 
determine whether they would be considered ``major'' for GHG emissions 
under PSD.
    For sources already major for other pollutants, it is likely that 
many more changes made by the source would also qualify as major 
modifications and become subject to PSD as well, unless potential 
approaches (including those discussed below) for raising applicability 
thresholds were implemented. Relatively small changes in energy use 
that cause criteria pollutant emissions too small to trigger PSD would 
newly trigger PSD at such facilities because such changes would likely 
result in greater CO2 increases. For example, consider a 
hypothetical 500 MW electric utility boiler firing a bituminous coal 
that is well-controlled for traditional pollutants. Such a boiler, 
operating more than 7000 hours per year (out of a possible 8760), can 
emit approximately 4 million tons of CO2 per year, or more 
than 580 tons per hour. Assuming a 100 tpy significance level (rather 
than the current zero level for GHGs), any change resulting in just 10 
additional minutes of utilization over the course of a year at such a 
source would be enough to result in an increase of 100 tons and 
potentially subject the change to PSD. By contrast, to be considered a 
modification for NOX, the same change would require 
approximately 36 additional hours of operation assuming that the 
hypothetical source had a low-NOX burner, and 90 additional 
hours of operation assuming that the source also employed a selective 
catalytic reduction add-on control device.
    Once a source is major for any NSR regulated pollutant, PSD applies 
to significant increases of any other regulated pollutant, so 
significant increases of GHGs would become newly subject to PSD at 
sources that are now major for other regulated pollutants. Similarly, 
significant increases of other pollutants would become subject to PSD 
if they occur at sources previously considered minor, but which become 
classified as major sources for GHG emissions.
    Currently, EPA estimates that EPA, state, and local permitting 
authorities issue approximately 200-300 PSD permits nationally each 
year for construction of new major sources and major modifications at 
existing major sources. Under existing major source thresholds, we 
estimate that if CO2 becomes a regulated NSR pollutant 
(either as an individual GHG or as a group of GHGs), the number of PSD 
permits required to be issued each year would increase by more than a 
factor of 10 (i.e. more than 2000-3000 permits per year), unless action 
were taken to limit the scope of the PSD program under one or more of 
the legal theories described below. The additional permits would 
generally be issued to smaller industrial sources, as well as large 
office and residential buildings, hotels, large retail establishments, 
and similar facilities. These facilities consist primarily of equipment 
that combusts fuels of various kinds and release their exhaust gases 
through a stack or vent. Few of these additional permits would be for 
source categories (such as agriculture) where emissions are 
``fugitive,'' because, as noted above, fugitive emissions do not count 
toward determining if a source is a major source except in a limited 
number of categories of large sources.
    Because EPA and states have generally not collected emissions 
information on sources this small, our estimate of the number of 
additional permits relies on limited available information and 
engineering judgment, and is uncertain. Our estimate of the number of 
additional permits is also not comprehensive. First, it does not 
include permits that would be required for modifications to existing 
major GHG sources because the number of these is more difficult to 
estimate.\265\ Nonetheless, we anticipate that, for modifications, 
coverage of GHGs would increase because the larger universe of major 
sources will bring in additional sources at which modifications could 
occur and because for ``traditional'' major sources, many more types of 
small modifications that were minor for traditional pollutants could 
become major due to increases in GHG emissions that exceed the 
significance levels. Second, EPA's estimate is uncertain because it is 
based on actual emissions, and thus excludes a potentially very large 
number of sources that would be major if they operated at their full 
potential-to-emit (PTE) (i.e. they emitted at a level that reflects the 
maximum capacity to emit under their physical and operational design), 
but which in practice do not. Such sources could be defined as major 
sources without an enforceable limitation on their PTE, but for the 
purposes of this estimate, we assume they have options for limiting 
their PTE and avoiding classification as a major source. (Nonetheless, 
there are important considerations in creating such PTE limits, as 
discussed below). Third, this estimate does not specifically account 
for CO2 from sources other than combustion sources. While we 
know there are sources with significant non-combustion emissions of 
GHGs, there are relatively few of these compared to the sources with 
major amounts of combustion CO2. These non-combustion 
sources would likely be major for combustion CO2 in any 
event, and many of these are likely already major for other pollutants, 
though GHG regulation would likely mean increases in the number of 
major modifications at such sources.
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    \265\ Among other things, any estimate of modifications must 
take into account the netting provisions of NSR, in which sources 
can avoid NSR if the increase of pollutant emissions from a project 
is below the significance level for that pollutant, after taking 
into account other increases and decreases of emissions that are 
contemporaneous with the project.
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    We request any available information that would allow us to better 
characterize the number and types of sources and modifications that 
would become subject to the PSD program if CO2 becomes a 
regulated NSR pollutant. As discussed below, we are particularly 
interested in information that would allow us to analyze the effects of 
different major source thresholds and significance levels.
    Finally, we note that our estimates above are for CO2. 
As described above in section IV, there are implications to regulating 
additional GHGs as pollutants, or GHGs in the aggregate. Our estimates 
of PSD program impacts do not include consideration of GHGs other than 
CO2 because we expect that at the vast majority of these 
sources CO2 will be the dominant pollutant. We ask for 
comment on whether there are large categories of potentially newly 
regulated PSD sources for individual GHGs besides CO2. We 
also ask for comment on the effects of aggregating GHGs for PSD 
applicability. Aggregating GHGs could bring additional sources into PSD 
to the extent that other GHGs are present and would add enough to a 
source's PTE to make it a major source. On the other hand, under the 
netting provisions of the CAA, it may be easier to facilitate 
interpollutant netting if GHGs are aggregated (e.g., a source using 
netting to avoid PSD for a CO2 increase based on methane 
decreases at the same source).

[[Page 44500]]

3. What Are the Key Milestones and Expected Timeline if the PSD Program 
Were Used for GHG Controls?
    Because PSD applies to all regulated pollutants except HAP, EPA's 
interpretation of the Act is that PSD program requirements would become 
applicable immediately upon the effective date of the first regulation 
requiring GHG control under the Act.\266\ While existing PSD permits 
would remain unaffected, from that point forward, each new major source 
of GHGs and each major modification at an existing major source that 
significantly increases GHGs would need to get a PSD permit before 
beginning construction. Control requirements could take effect as the 
first new and modified sources obtain their permits and complete 
construction of the permitted projects. Because of the case-by-case 
nature of the PSD permitting decisions, the complexity of the PSD 
permitting requirements, and the time needed to complete the PSD 
permitting process, it can take several months to receive a simple PSD 
permit, and more than a year to receive a permit for a complex 
facility. We ask for comment on whether there are additional timeline 
considerations not noted here.
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    \266\ Because PSD is implemented in many areas by states under 
EPA-approved state regulations, there may be a lag time in a small 
number of states if their PSD regulations are written in such a way 
that revision of the regulations (and EPA approval) would be 
required to give the state authority to issue permits for GHGs. 
However this would not be the case for EPA's own regulations or for 
any state delegated to implement EPA regulations on our behalf.
---------------------------------------------------------------------------

4. What Are Key Considerations Regarding Application of the PSD Program 
to GHGs (and How Could Potential Issues Be Addressed?)
a. Program Scope
    As noted above, regulating GHGs under the PSD program has the 
potential to dramatically expand the number of sources required to 
obtain PSD permits, unless action is taken to limit the scope of the 
program, as described below. Since major source thresholds were enacted 
before this assessment of the application of the PSD program to GHGs, 
it is reasonable to expect that Congress could consider legislative 
alterations to account for the different aspects of GHGs versus 
traditional air pollutants noted above (e.g., the relatively uniform 
atmospheric concentrations of GHGs versus more localized effects of 
traditional pollutants.) Possible ways to limit the scope of the 
program without legislation are described later in this section.
    In the absence of such action, we would expect (assuming a 250 tpy 
major source threshold, or 100 tpy for statutorily specified source 
categories) at least an order-of-magnitude increase in the number of 
new sources required to obtain PSD permits, and an expansion of the 
program to numerous smaller sources not previously subject to it. While 
such sources may emit amounts of GHGs that exceed statutory thresholds, 
they have relatively small emissions of non-GHG pollutants (such that 
they have not been regulated under PSD, and many have not been 
regulated under any CAA program).\267\ Regulating GHGs under the PSD 
program would also cause a large increase in the number of 
modifications at existing sources that would be required to obtain PSD 
permits. Such modifications may occur at existing sources that have 
been long regulated as major for other pollutants, or at existing 
sources that become classified as major solely due to their GHG 
emissions.
---------------------------------------------------------------------------

    \267\ Some fraction of these small sources are regulated, at 
least in some areas, by SIPs and state minor source permit programs 
under section 110 of the CAA.
---------------------------------------------------------------------------

    Permitting smaller sources and modifications is generally less 
effective due to the fact that, while there are still administrative 
costs borne by the source and permitting authority, the environmental 
benefit of each permit is generally less than what results from 
permitting a larger source. Congress excluded smaller sources from PSD 
by adopting 100 and 250 tpy major source cutoffs in 1977 when PSD was 
enacted, and EPA rules have long excluded smaller sources and 
modifications from the program. This cutoff would not exclude many 
smaller sources of GHGs because the mass emissions (i.e., tons per 
year) of the relevant GHG may be substantially higher than the mass 
emissions of traditional pollutants for the same process or activity. 
Thus, while existing cutoffs for traditional pollutants capture a 
relatively modest number of new and modified sources per year, applying 
those same major source levels to CO2, and possibly for 
other GHG, would capture a very large number of sources, many of which 
are comparatively smaller in size when compared to ``traditional'' 
sources. Similarly, for modifications, the current absence of a 
significance level, or the future adoption of a significance level that 
is below the current major source thresholds, would subject numerous 
small changes to PSD permitting requirements.
b. Potential Program Benefits
    In the past, EPA has recognized that the PSD program can achieve 
significant emissions benefits over time as emissions increases from 
new major sources and major modifications are minimized through 
application of state-of-the-art technology.\268\ As a result, other 
programs designed to reduce emissions are not compromised by growth in 
new emissions from PSD sources. Further emissions benefits are achieved 
when sources limit or reduce emissions to avoid PSD applicability.
---------------------------------------------------------------------------

    \268\ See, for example, Section II of ``NSR Improvements: 
Supplemental Analysis of the Environmental Impact of the 2002 Final 
NSR Improvement Rules,'' U.S. EPA, November 21, 2002.
---------------------------------------------------------------------------

    A rationale for new source review since its inception has been that 
it is generally more effective and less expensive to engineer and 
install controls at the time a source (or major modification) is being 
designed and built, as BACT does, rather than retrofitting controls 
absent other construction.\269\ In addition, the BACT determination 
process requires consideration of new emissions reduction technologies, 
which provides an ongoing incentive to developers of these 
technologies. There is the potential for avoiding or reducing GHG 
emissions if ``traditional'' sources begin to install abatement 
technologies for GHGs as they do for traditional pollutants. On the 
other hand, as discussed in section III,F, some suggest that 
regulations that apply stringent requirements to new sources and 
``grandfather'' existing sources may create incentives to keep older 
and inefficient sources in use longer than otherwise would occur, 
diminishing the incentive for technological innovation and diffusion 
and reducing the environmental effectiveness and cost effectiveness of 
the regulation. Others believe that economic factors other than these 
regulatory differences tend to drive business decisions on when to 
build new capacity. EPA examined the effect of new source review on 
utilities and refineries in a 2002 report, as described in section 
III.F.4 of this notice.\270\
---------------------------------------------------------------------------

    \269\ Critics of this rationale suggest that under a market-
oriented system covering both new and existing sources, source 
owners would be best placed to decide whether it is economic to 
place state-of-the-art controls on new sources.
    \270\ See U.S. EPA, ``New Source Review: Report to the 
President, June 2002.'' As noted in section III.F of this notice, 
the report concluded (pp. 30-31) that, for existing sources, 
``[c]redible examples were presented of cases in which uncertainty 
about the exemption for routine activities has resulted in delay or 
resulted in the cancellation of projects which sources say are done 
for purposes of maintaining and improving the reliability, 
efficiency and safety of existing energy capacity. Such 
discouragement results in lost capacity, as well as lost 
opportunities to improve energy efficiency and reduce air 
pollution.'' With respect to new facilities, the report said, 
``there appears to be little incremental impact of the program on 
the construction of new electricity generation and refinery 
facilities.''

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[[Page 44501]]

    EPA has not performed an analysis of the GHG emissions that might 
be avoided or reduced under PSD preconstruction permitting, nor of 
possible increases through unintended incentives. Such an analysis 
would necessarily involve new analysis of potential BACT technologies, 
considering costs and other factors, for GHGs emitted by numerous 
sectors. The PSD program, through the BACT requirement, might result in 
installation of such technologies as CCS, or the incorporation of other 
CO2 reducing technologies, such as more efficient combustion 
processes.\271\ However, it is not possible at this time to estimate 
these effects in light of the uncertainty surrounding the future trends 
in construction at new and modified sources, demonstration of 
commercial availability of various GHG control technology options, 
their control effectiveness, costs, and the aforementioned incentives 
to keep existing sources in operation and avoid modifying them. We ask 
for comment on the nature (and to the extent possible, the magnitude) 
of the potential effects of PSD on GHG emissions, and whether these 
effects vary between new and existing sources.
---------------------------------------------------------------------------

    \271\ However, EPA notes that the BACT requirement does not 
require consideration of technologies that would fundamentally 
redefine a proposed source into a different type of source (e.g., 
BACT for a proposed coal-fired power plant need not reflect emission 
limitations based on building a gas-fired power plant instead). See, 
for example, In re: Prairie State Generating Company, PSD Appeal No. 
05-05, slip op. at 19-37 (EAB 2006).
---------------------------------------------------------------------------

    Regarding the potentially large universe of smaller sources and 
modifications that could become newly subject to BACT, as described 
above, there are large uncertainties about the potential benefits of 
applying BACT requirements to GHG emissions from such sources. 
Individual emission reduction benefits from such sources would be 
smaller; however, the cumulative effect could theoretically be large 
because the requirement would cover many more sources. However, unless 
there are ways to effectively streamline BACT determinations and 
permitting for smaller sources (as discussed below), BACT would not 
appear to be an efficient regulatory approach for many other types of 
sources. We request comment on the potential overall benefit of 
applying the BACT requirement to GHG emissions, and how this potential 
benefit is distributed among categories of potentially regulated 
sources and modifications. Below, we discuss and ask for comment on 
possible tailoring of BACT for GHGs.
    Finally, in considering the potential for emissions reductions from 
the PSD program, it is important to note that, historically, sources 
generally have taken action to avoid PSD rather than seeking a permit, 
where possible. Companies can reduce their PTE, for example, by 
artificially capping production or forgoing efficiency improvements. 
While these PSD avoidance strategies can sometimes reduce emissions 
(e.g., limiting operating hours or installing other controls to net 
out), they can sometimes result in forgone environmental benefits 
(e.g., postponing an efficiency project). These effects are very 
difficult to quantify. For example, the developer of a large apartment 
building that would be a major source for CO2 might elect to 
provide electric space heat if it were determined that the direct and 
indirect costs of PSD made installation of gas heat uneconomical. From 
a lifecycle analysis standpoint, PSD could--depending upon the source 
of the electricity--lead to either a better or a worse outcome for 
overall emissions of GHGs. Similarly, because PSD is triggered based on 
increases over a past baseline, a source considering a potential 
modification may have an incentive to increase emissions (to the extent 
that can be done without a modification) for the 2-year period before 
the modification to artificially inflate the baseline. Similarly, in 
the electricity sector, a desire to avoid PSD review could be a 
disincentive for some projects to improve efficiency, because a small 
increase in utilization of the more-efficient EGU would raise 
CO2 emissions sufficiently to trigger review. We solicit 
comments on the potential indirect effects, adverse or beneficial, that 
may arise from the incentive to avoid triggering PSD.
c. Administrative Considerations and Implications of Regulating 
Numerous Smaller Sources
    The PSD program is designed to provide a detailed case-by-case 
review for the sources it covers, and that review is customized to 
account for the individual characteristics of each source and the air 
quality in the particular area where the source will be located. 
Although this case-by-case approach has effectively protected the 
environment from emissions increases of traditional criteria 
pollutants, there have been significant and broad-based concerns about 
PSD implementation over the years due to the program's complexity and 
the costs, uncertainty, and construction delays that can sometimes 
result from the PSD permitting process. Expanding the program by an 
order of magnitude through application of the 100/250-ton thresholds to 
GHGs, and requiring PSD permits for numerous smaller GHG sources and 
modifications not previously included in the program, would magnify 
these concerns. EPA is aware of serious concerns being expressed by 
sources and permitting authorities concerning the possible impacts of a 
PSD program for GHGs.
    While the program would provide a process for reviewing and 
potentially reducing GHG emissions through the BACT requirement as it 
has done for other pollutants, we are concerned that without 
significant tailoring (and possibly even with significant tailoring), 
application of the existing PSD permitting program to these new smaller 
sources would be a very inefficient way to address the challenges of 
climate change. We ask for comment on how we should approach a 
determination of (1) whether PSD permit requirements could be 
appropriate and effective for regulating GHGs from the sources that 
would be covered under the statutory thresholds, (2) whether PSD 
requirements could at least be effective for particular groups of 
sources (and if so, which ones), and (3) what tailoring of program 
requirements (options for which are described in more detail below) is 
necessary to maximize the program's effectiveness while minimizing 
administrative burden and permitting delays. We are particularly 
interested in how we might make such judgments in light of the 
limitations on our ability to quantify the costs and emissions 
reduction benefits of the PSD program, and whether there are specific 
examples or other data that would help us with such an analysis.
    For example, if 100- and 250-ton thresholds were applied to GHGs, 
the BACT requirement would need to be newly implemented for numerous 
small sources and modifications that permitting authorities have little 
experience with permitting. It would also likely involve, for both 
large and small sources, consideration of new pollutants for which 
there are limited add-on control options available at this time. Thus, 
as with setting NSPS, a BACT determination for GHGs would likely 
involve decisions on how proposed installations of equipment and 
processes for a specific source category can be redesigned to make 
those sources more energy efficient while taking cost considerations 
into account. However,

[[Page 44502]]

unlike NSPS, because BACT is typically determined on a case-by-case 
basis for each facility and changes as technology improves, these 
decisions would have to take into account case-specific factors and 
constantly evolving technical information \272\. Due to the more-than-
tenfold increase in the number of PSD permits that would be required if 
the 100- and 250-ton thresholds were applied to GHGs, and the potential 
complexity of those permitting decisions, state, local, federal, and 
tribal permitting authorities would likely face significant new costs 
and other administrative burdens in implementing the BACT requirement 
for GHGs. Large investments of resources would be required by 
permitting authorities, sources, EPA, and members of the public 
interested in commenting on these decisions. Also under this scenario, 
sources would likely face new costs, uncertainty, and delay in 
obtaining their permits to construct.
---------------------------------------------------------------------------

    \272\ The NSPS program does take into account improvements in 
technology, but does so during the 8-year review of the NSPS under 
111(b)(1)(B) rather than on a permit-by-permit basis.
---------------------------------------------------------------------------

d. Definition of Regulated Pollutant for GHGs
    We also note, as described above, that decisions on the definition 
of regulated pollutant for GHGs--whether GHGs would be regulated as 
individual gases or as a class--has implications for BACT 
determinations under the PSD program. If GHGs are regulated separately, 
it is possible that a control project for one GHG could trigger PSD for 
another (e.g., controlling methane in a way that increases 
CO2). In addition, the economic and other impacts for BACT 
would need to be evaluated on a pollutant-by-pollutant basis. While 
regulating GHGs as a class would provide additional flexibility in this 
area, each BACT analysis would be more extensive because it would have 
to include combined consideration of all GHGs in the class. We ask for 
comment on the relative strengths and weaknesses of the various ways to 
define the regulated pollutant for GHGs as related to the BACT 
requirement.
e. Other PSD Program Requirements
    Other parts of the CAA PSD provisions and EPA regulations that 
could be affected by bringing GHGs into the program include the 
requirement to evaluate, in consultation with the Federal Land Manager 
(FLM), impacts on Air Quality Related Values (AQRVs) in any affected 
``Class I area'' (national parks, wilderness areas, etc.), and the need 
to conduct additional analysis of the proposed source's impacts on 
ambient air quality, climate and meteorology, terrain, soils and 
vegetation, and visibility, as provided for in section 165(e) of the 
Act. These requirements can result in adjustments to the permit (for 
example, permit conditions may be added if a FLM demonstrates to a 
permitting authority that additional mitigation is necessary to address 
the impacts of GHG emissions on the AQRVs of a Class I area). Due to 
the increase in number of permits, permitting authorities may have to 
make significant programmatic changes to deal with the increased 
workload to conduct these analytical requirements of the PSD program, 
and many additional applicants will have to devote resources to 
satisfying these requirements. In addition, given the uneven geographic 
distribution of new source growth, some permitting authorities may be 
required to conduct more permit analyses than others.
f. GHG NAAQS Nonattainment Scenario
    If nonattainment NSR were triggered under a GHG NAAQS, the most 
significant requirement would be the LAER requirement. Because LAER 
does not allow consideration of costs, energy, and environmental 
impacts of the emissions reduction technology, the LAER requirement 
would have the potential to act as a strong technology forcing 
mechanism in GHG nonattainment areas. On the other hand, once a 
technology is demonstrated, this mechanism does not allow consideration 
of the costs, competitiveness effects, or other related factors 
associated with the new technology. As with PSD requirements, the 
application of LAER to numerous smaller sources nationwide would raise 
new issues on which we request comment. For example, with LAER, any 
demonstrated technology for reducing CO2 emissions, such as 
a new efficient furnace or boiler design, could become mandated as LAER 
for all future construction or modification involving furnaces or 
boilers. Manufacturers would have to supply technologies that could 
meet LAER or face regulatory barriers to the market, and could face a 
constantly changing regulatory level that may result in newly designed 
products being noncompliant shortly after, or even before, they are 
produced and sold. New and modified sources would be required to apply 
the new technology even if it is a very expensive technology that may 
not necessarily have been developed for widespread application at 
numerous smaller sources, and even if a relatively small emissions 
improvement came with significant additional cost. We request comment 
on how EPA should evaluate the LAER requirement under a NAAQS approach 
for GHGs. In particular, we ask for information about whether the 
relatively inflexible nature of the LAER requirement would lead to 
economic disruption for certain types of sources (and if so which 
ones), and whether the benefits of a NAAQS approach including LAER 
would warrant further evaluation and possible tailoring of LAER to 
address GHGs.
    We also ask for comment on any other NSR program issues particular 
to a NAAQS approach, should EPA decide to establish a NAAQS for GHGs. 
Although we have not provided a comprehensive discussion of such 
issues, a number of questions arise that are particular to the NSR 
requirements that flow from a NAAQS approach. For example, if the 
entire country were designated nonattainment for GHGs, would the offset 
requirement function as a national cap-and-trade program for GHG 
emissions for all major sources? If so, how would such a program be 
administered, and would the numerous small sources described above be 
covered? Would the offset requirement argue for regulating GHGs as a 
group, rather than individually, to facilitate offset trading? What 
would be an appropriate offset ratio to ensure progress toward 
attainment? Similarly, for the air quality analysis requirements of 
PSD, how would a single source determine whether its contribution to 
nonattainment is significant? When must such a source mitigate its 
emissions impact, and what options are available to do so? Should EPA 
set a PSD increment for GHGs if a NAAQS is established? Are there 
additional issues of interest that we have not raised in this notice?
5. What Are the Possible Implications on Other Provisions of the Clean 
Air Act?
    If PSD for GHGs applied to the same sources as a new market-
oriented program to regulate GHGs under the Act, the interaction of the 
two programs would be a key issue. PSD would ensure that new and 
modified sources were built with the best available technology to 
minimize GHG emissions. A traditional argument for NSR is that it 
ensures that new sources are built with state-of-the-art technology 
that will reduce emissions throughout the lifetime of that source, 
which can be several decades. However if the market-oriented program is 
a cap-and-trade system with sufficiently stringent caps, PSD would not 
result in more stringent control of new GHG sources than the

[[Page 44503]]

cap-and-trade system alone. In addition, the potential would exist for 
PSD to interfere with the efficient operation of the GHG cap-and-trade 
program. Although PSD would neither reduce nor increase the overall 
emission reductions achieved under the cap, it would force different 
choices about the stringency and location of controls than if control 
choices were based solely on market factors. Under this scenario, the 
result would be to increase costs without achieving additional GHG 
emissions reductions. For example, assume that a company undertakes a 
change that triggers PSD at a location where controls are expensive to 
retrofit but are required as BACT for that location. Without PSD, the 
company could have increased emissions and still complied with the cap 
by purchasing less expensive emissions reductions from another source, 
and the same total GHG emissions reductions would have been achieved. 
Notably, for GHGs, which have relatively uniform global concentrations, 
the location of GHG emissions does not matter to global climate 
impacts, so the policy reasons for the spatial component of PSD control 
requirement would not apply to GHG controls.
    PSD program requirements also affect numerous CAA programs that 
require stationary source controls that may increase emissions of 
pollutants other than the pollutant targeted for control (i.e. 
``collateral increases''), such as the increased NOX 
emissions that result when a thermal oxidizer is installed to control 
VOC. Because there is no exemption from PSD requirements for such 
pollution control projects, the collateral increase must be reviewed, 
which can result in added costs and delay of those pollution control 
projects. Regulation of GHGs would exacerbate these concerns because 
the energy demands of many controls for criteria pollutants, HAP, and 
other pollutants have the potential to result in increased 
CO2 emissions.
6. What Are Some Possible Tailoring Approaches to Address 
Administrative Concerns for GHG NSR?
    The cost and potential broad applicability of PSD requirements 
raises questions about whether GHG regulation through PSD would be more 
effective in minimizing GHG increases if it operates as a broad program 
targeting numerous smaller sources and modifications, or as a narrow 
program targeting smaller numbers of large sources and modifications. 
We ask for comment on how these cost/benefit considerations for 
permitting small sources and modifications under PSD, as well as any 
other factors, should be considered in EPA's deliberations regarding 
the major source cutoffs and significance levels for GHGs as well as 
EPA's available legal authority in this area.
    EPA believes that whether or not PSD is workable for GHGs may 
depend on our ability to craft the program to deal with the unique 
issues posed by GHG regulation.
    This section discusses several options, including:
     Reducing the potential universe of sources based on 
``potential to emit'' approaches;
     Increasing the major source thresholds and significance 
levels for GHGs, to permanently restrict the program to larger sources;
     Phasing in the applicability of PSD for GHGs;
     Developing streamlined approaches to implementing the BACT 
requirement; and
     Issuing general permits for numerous similar sources.

The options are not necessarily exclusive. Many are complementary, and 
we note that some combination of these options may be most effective. 
We also ask for suggestions on additional tailoring options not 
described below, and more generally on which options, if any, present 
an appropriately balanced means of addressing the administrative 
concerns.
    Before discussing each option in detail, we present an overarching 
legal discussion that lays out possible rationales for such 
flexibility. For at least one of the options identified (e.g., the 
option of adopting higher major source sizes than those contained in 
the Act), the principal legal constraint is the ``plain meaning'' of 
the applicable PSD provisions, such as the major source levels. 
Nonetheless, we have identified two legal doctrines that may provide 
EPA with discretion to tailor the PSD program to GHGs: Absurd results 
and administrative necessity.
    The Supreme Court has stated that the plain meaning of legislation 
is not conclusive ``in the `rare cases [in which] the literal 
application of a statute will produce a result demonstrably at odds 
with the intentions of the drafters' * * * [in which case] the 
intention of the drafters, rather than the strict language, controls.'' 
U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242 (1989). To 
determine whether ``the intentions of the drafters'' differs from the 
result produced from ``literal application'' of the statutory 
provisions in question, the courts may examine whether there is a 
related statutory provision that conflicts, whether there is 
legislative history of the provisions in question that exposes what the 
legislature meant by those terms, and whether a literal application of 
the provisions produces a result that the courts characterize variously 
as absurd, futile, strange, or indeterminate. See, e.g., id., Nixon v. 
Missouri Municipal League, 541 U.S. 125 (2004); United States v. 
American Trucking Association, Inc. 310 U.S. 534 (1940); Rector of Holy 
Trinity Church v. U.S., 143 U.S. 457 (1892).
    Further, the administrative burdens that would result for the 
federal and state permitting authorities, as well as the sources, from 
a literal application of the PSD provisions give rise to consideration 
of whether EPA can craft relief from a strict interpretation based on 
the judicial doctrine of administrative necessity. In Alabama Power, 
the D.C. Circuit addressed various instances of claimed administrative 
burdens resulting from the application of the PSD statutory provisions 
and efforts by EPA to provide regulatory relief. Alabama Power Co. v. 
Costle, 636 F.2d at 357-60 (D.C. Cir. 1980). In a section of its 
opinion titled ``Exemptions Born of Administrative Necessity,'' the 
Court stated,

    Certain limited grounds for the creation of exemptions are 
inherent in the administrative process, and their unavailability 
under a statutory scheme should not be presumed, save in the face of 
the most unambiguous demonstration of congressional intent to 
foreclose them.

Id. at 357. The Court identified several types of administrative 
relief. One is ``[c]ategorical exemptions from the clear commands of a 
regulatory statute,'' which the court stated are ``sometimes 
permitted,'' but emphasized that they ``are not favored.'' Id. at 358. 
A second is ``an administrative approach not explicitly provided in the 
statute,'' such as ``streamlined agency approaches or procedures where 
the conventional course, typically case-by-case determinations, would, 
as a practical matter, prevent the agency from carrying out the mission 
assigned to it by Congress.'' Id. A third is a delay of deadlines upon 
`` `a showing by [the agency] that publication of some of the 
guidelines by that date is infeasible.' '' Id. at 359 (quoting NRDC v. 
Train, 510 F.2d 692, 712 (D.C. Cir. 1974). The Court indicated it would 
evaluate these choices based on the ``administrative need to adjust to 
available resources * * * where the constraint was imposed * * * by a 
shortage of funds * * *, by a shortage of time, or of the

[[Page 44504]]

technical personnel needed to administer a program.'' Id. at 358.
a. Potential-to-Emit: Reducing the Number of Sources Potentially 
Covered
    Applicability of PSD is based in part on a source's ``potential to 
emit'' or PTE. The PTE concept also is used for applicability of 
nonattainment NSR, Title V, and the air toxics requirements of section 
112. We discuss PTE in detail here, but the issues and questions we 
discuss in this section apply equally to these other programs. As noted 
above, PTE is defined as the maximum capacity of a source to emit any 
air pollutant under its physical and operational design. In the case of 
sources that are not operating for part of the year, the PTE for many 
types of sources counts the emissions that would be possible if those 
sources did emit year round.
    EPA believes that an important threshold question is how to 
interpret ``maximum capacity * * * to emit * * * under its physical and 
operational design'' for commercial and residential buildings, and 
other types of source categories that might be subject to PSD and Title 
V solely due to GHG emissions. For example, in the case of a furnace at 
a residence, is it appropriate, in calculating the furnace's PTE, to 
assume that a homeowner would set the thermostat at a level that would 
require the furnace to operate continuously throughout the year? Even 
on a cold winter day, a furnace typically turns on and off throughout 
the day, and as the weather warms, the number of operating hours 
decreases until the weather warms to the point where the furnace is not 
needed at all and is shut off for an extended time.
    The EPA has in a few instances provided guidance on PTE calculation 
methodologies to account for category-specific considerations. For 
example, we issued technical guidance for calculating PTE from grain 
elevators that took into account inherent limitations on the amount of 
grain that could be handled due to the fact that grain is only 
available for handling during a relatively short harvest period, and is 
further limited by the amount of grain capable of being grown (as 
represented by a record crop year adjusted for future increases in crop 
yield) on the land that would ever reasonably be served by the 
elevator.\273\ We ask for comment on whether, for smaller GHG sources 
like these, there could be appropriate methodologies for defining PTE 
in ways that consider these common-sense limitations on a source's 
operation, but still reflect the maximum capacity to emit of a source.
---------------------------------------------------------------------------

    \273\ Calculating Potential to Emit (PTE) and Other Guidance for 
Grain Handling Facilities: November 14, 1995 memorandum from John S. 
Seitz, Director, U.S. EPA Office of Air Quality Planning and 
Standards, to EPA Regional Offices.
---------------------------------------------------------------------------

    Sources with PTE exceeding the major source threshold can become 
minor sources by taking legally and practically enforceable limits on 
their PTE, by, for example, agreeing to operate only part of the year, 
or only so many hours per day, or by employing control devices.\274\ 
Many sources are able to avoid classification as ``major'' by taking 
such limits.
---------------------------------------------------------------------------

    \274\ Current regulatory language allows consideration of such 
limits in calculating PTE only if they are federally enforceable, 
but this definition was vacated or remanded in three separate 
cases--one for PSD/NSR (Chemical Manufacturers Assn v. EPA, No. 89-
1514 (D.C. Cir. Sept. 15, 1995), one for Title V (Clean Air 
Implementation Project v. EPA, No. 96-1224 (D.C. Cir. June 28, 
1996), and one for section 112 (National Mining Association v. EPA, 
59 F. 3d 1351 (D.C. Cir. 1995). EPA is developing a rule to respond 
to these cases and in the meantime is following a transition policy 
that does not require federal enforceability.
---------------------------------------------------------------------------

    The estimates provided for potential new permits for GHG sources 
outlined in section VII.D.2 above are based on actual emissions. Were 
they based on PTE, and if year-round operation were assumed to 
represent PTE for all source categories, the estimates would likely be 
an order of magnitude higher (in the absence of actions to limit the 
scope of the programs). This emphasizes the significance of the 
interpretation of ``potential to emit'' for buildings and other 
categories not traditionally subject to PSD, as well as the importance 
of streamlined mechanisms for obtaining limits on PTE.
    For traditional PSD and Title V permitting, the PTE limit is 
typically a source specific limit that is crafted in a facility's minor 
source permit and tailored to the source's individual circumstances. If 
it were necessary to create PTE limits for very large numbers of GHG-
emitting sources nationwide, this would certainly require a more 
efficient approach than creating them through individual minor source 
permits. Not only would the sheer volume of permits and the process 
required for each one severely strain permitting authority resources, 
but some state and local agencies may lack the authority to establish 
minor source permit limits for non-NAAQS pollutants. In addition, while 
sources may not seek PTE limits for PSD until they have planned 
modifications that could otherwise trigger PSD, sources may seek PTE 
limits for Title V purposes as soon as the program is effective, 
meaning that the approach would need to deal with a large number of 
sources at essentially the same time.
    We ask for comment on whether we should also therefore consider 
streamlined regulatory approaches for creating the legally and 
practically enforceable limits sources need without requiring a huge 
number of individual minor source permits. A possible mechanism could 
involve adopting a regulation that sets forth operational restrictions 
that limit PTE for a broad class of sources. We may wish to consider 
adopting--or encouraging state permitting authorities to adopt--rules 
for numerous categories where we expect there to be large numbers of 
sources whose actual emissions are not major but who have major PTE 
(unless addressed through interpreting maximum capacity as described 
above). Such a rule could, for example, limit a source's natural gas 
usage to 1700 MM BTU (17,000 therms) per year, which would keep it 
below the 100 tpy cutoff for Title V.\275\ Typically, the rule would 
also build in some operating margin so that the limit is not right at 
the major source cutoff. The rule would have to include recordkeeping 
and reporting, which would be simple here since fuel use is metered. 
This approach may be a streamlined effective way to limit PTE for many 
sources with fuel combustion equipment, provided they can agree to 
comply with the limits in the rule, even in an abnormally long, cold 
winter. We ask for comment on stakeholders' experience with limiting 
PTE by rule rather than through individual permits, possible 
considerations in tailoring this approach to GHG sources, and 
identification of categories that might benefit from the use of rules 
limiting PTE.
---------------------------------------------------------------------------

    \275\ Although the PSD cutoff may in some cases be 250 tpy, 
sources will generally adopt PTE limits below 100 tpy to avoid both 
PSD and Title V applicability where they have the option to do so. 
For this reason, this example uses a 100 tpy cutoff, though in some 
cases PTE limits are taken to stay below a 250 tpy cutoff.
---------------------------------------------------------------------------

    Finally, where the establishment of a rule-based PTE limit for an 
entire source category is not recommended or is infeasible, the EPA 
requests comment on whether general permitting approaches might be 
useful. A general permit is a permit that the permitting authority 
drafts one time, and then applies essentially identically (except for 
some source-specific identifying information) to each source of the 
appropriate type that requests coverage under the general permit. 
Similar to the type of rules limiting PTE described above, a general 
permit could also limit PTE by setting out the operational restrictions 
(e.g., fuel combusted per

[[Page 44505]]

year) necessary to assure the GHG emissions stay below major source 
thresholds, and would also spell out records the source would have to 
keep to assure it met these restrictions. To be most useful, the permit 
would need to address large numbers of similar sources. This approach 
may also work well for many types of GHG sources as well. We request 
comment on the use of a general permit approach to limiting PTE, and 
whether it would offer additional benefit over the approach of 
establishing operational restrictions directly by rule.
b. Options for Setting Higher GHG Major Source Cutoffs and Significance 
Levels
    If the EPA ultimately determines that subjecting numerous small 
sources and modifications to PSD is not an effective way to address GHG 
emissions, one possible option for tailoring the program would be to 
raise the major source cutoffs (e.g., raise the threshold only for GHGs 
as a class, or perhaps only for certain individual GHGs) and establish 
a significance level for GHGs at a level high enough to assure that the 
program applies to larger sources and modifications, but excludes 
smaller sources and modifications. Since the existing major source 
thresholds are set forth in the CAA itself, EPA would need to find the 
legal flexibility to raise these thresholds above 250 and 100 tons per 
year. We present for discussion below several policy and legal options 
for higher major source cutoffs and significance levels.
i. Higher GHG major source cutoffs--possible approaches and legal basis
    Regardless of how PTE is calculated, the major source size 
threshold will be a critical consideration in tailoring the PSD program 
for GHGs. There are a number of factors one might consider in choosing 
an appropriate cutoff for GHGs and whether to establish the cutoff for 
individual gases such as CO2 or for GHGs as a class. One 
conceptual approach might be to identify the number of sources and 
modifications affected by various cutoffs, calculate the costs and 
benefits of a PSD program for that universe of affected sources, and 
select a cutoff that optimizes the benefit-cost ratio. Unfortunately, 
we presently have the ability to quantify in dollar terms only a subset 
of the climate impacts identified by the IPCC. Also, we have very 
limited data on the number of sources expected at various major source 
cutoffs, and even more limited data on the number of modifications at 
various significance levels. More importantly, it is very difficult to 
project the future number of permits or the incremental impact of any 
additional GHG reductions that would result from the control technology 
decisions therein. For these reasons, EPA cannot quantitatively 
determine an optimal major source size or significance level.
    We could, however, consider other means of setting levels. One 
example is an emissions scaling approach. This approach would compare 
the emissions of other existing NSR pollutants for sources that are 
major and would calculate the corresponding GHG emissions that the same 
source would emit. This would be an appropriate approach if the goal 
were to tailor PSD applicability for GHGs to cover a similar universe 
of source sizes and types to the universe now regulated for other 
pollutants. A second option would be to base the major source size on a 
scientific determination of a level below which an individual source 
would have a de minimis contribution to any particular adverse climate-
related impact on a relevant health, societal, or environmental 
endpoint. Although it may be possible to generally estimate such a 
level, we are not currently aware of any scientific literature that 
establishes a specific numeric threshold below which GHG emissions are 
de minimis, either in terms of their impact on climate, or on these 
endpoints. By the same token, aside from an ability to use currently 
available models to project temperature effects, the Agency does not 
have the ability to project specific climatic impacts or endpoints 
resulting from individual sources. Alternatively, we could potentially 
choose a GHG major source size that is selected to harmonize with GHG 
cutoffs from other regulatory programs. For example, the DOE's 1605(b) 
program has a threshold of 10,000 metric tons of CO2-
equivalent, California's AB32 regulation for mandatory reporting of 
GHGs has a threshold of 25,000 metric tons of CO2-
equivalent, and the Wisconsin emission inventory reporting requirements 
has a CO2 threshold of 100,000 short tons. Notably, these 
examples are thresholds for reporting requirements only. PSD would 
involve much more than simply reporting emissions, so under a 
harmonizing approach we may need to evaluate whether it is feasible to 
require not only reporting, but also the other PSD elements for the 
sources that would be covered. We ask for comment on the range of 
approaches EPA could take in selecting a major source cutoff if we 
decide it is appropriate under existing legal authority, if available, 
to develop a higher cutoff for GHGs. In addition, we request data that 
may be useful for conducting necessary analysis to support such 
approaches.
    A related issue to the establishment of the major source thresholds 
and significance levels for GHGs is the selection of the metric against 
which these levels are evaluated. Emissions of GHGs are typically 
expressed in a common metric, usually the metric called CO2-
equivalent, although the measure known as Carbon Equivalent (CE) is 
also used. The use of either metric allows the impact of emissions of 
different GHGs to be directly compared, as some gases have a higher 
global warming potential or GWP than others. Since both units are 
measured in weight--usually tons--either could be used for purposes of 
PSD applicability. The use of either metric has the advantage of 
linking emissions of a GHG directly to its ability to impact climate, 
appropriately regulating more potent GHGs more stringently. The use of 
CO2-equivalent would solve the problem of leaving unreviewed 
significant GHG emissions of some chemicals, such as 
hydrofluorocarbons, but it would leave many small CO2 
sources with less climate impact still subject to PSD. However, the use 
of Carbon Equivalent (CE) addresses both concerns. The attached table 
demonstrates the possible effect of using CE in making PSD 
applicability decisions:

------------------------------------------------------------------------
                                                 Emissions equal to 250
                                         GWP            tons CE
------------------------------------------------------------------------
Carbon dioxide (CO2).................       1  917 tons.
Methane (CH4)........................      21  44 tons.
Nitrous oxide (N2O)..................     310  3 tons.
Hydrofluorocarbon (HFC)-134a.........    1300  1410 lbs.
------------------------------------------------------------------------

    As the table shows, it would take more CO2 emissions to 
reach the major source size for CE. However. it would take 
substantially less of several other GHGs. Such an approach would likely 
result in fewer sources being added to the PSD program for GHGs in 
total. While more sources for several GHGs would be considered major, 
the major source population is, as noted above, dominated by 
CO2, and there would be fewer sources classified as major 
due to CO2 emissions. This approach arguably would regulate 
significant sources of potent GHG while also reducing the burden on 
relatively small sources of CO2, focusing efforts on the 
sources with the most important climate impacts. EPA seeks comments on 
the potential use of the CE measure as the means to determine PSD 
applicability. Specifically we ask for comment on the appropriateness 
of the metric (considering that CO2, rather than

[[Page 44506]]

carbon, is the air pollutant), data regarding its effect on PSD 
applicability, and views concerning whether such an approach fits 
within the language of the CAA.
    Whether, and the extent to which, EPA has flexibility to limit the 
application of the PSD permitting requirements (and, by extension, the 
nonattainment NSR permitting requirements if a NAAQS is set for GHGs) 
to sources that emit larger amounts of CO2 and other GHGs 
than the 100/250 tpy thresholds depends on the interpretation of the 
key PSD definitional term, ``major emitting facility.'' Under CAA 
section 165(a), the basic PSD applicability requirement is that a 
``major emitting facility'' may not construct unless it has received a 
permit that covers specified requirements.\276\ As defined by CAA 
section 169(1), a ``major emitting facility'' is defined to include (i) 
``any * * * stationary source[]'' that emits or has the potential to 
emit 100 tpy or more of any air pollutant and that falls into one of 28 
specified industrial source categories; and (ii) ``any other source 
with the potential to emit 250 tons per year or more of any air 
pollutant.'' However, the last sentence of this definition allows 
states to exempt ``new or modified facilities which are nonprofit 
health or educational institutions'' from the PSD program. EPA's 
regulations, promulgated in 1980 and revised several times since then, 
make clear that emissions count toward the 100/250 tpy thresholds only 
if they are ``regulated NSR pollutant[s]'' (e.g., 40 CFR 
52.21(b)(1)(i)(a)), the specific meaning of which is discussed 
elsewhere in this notice.
---------------------------------------------------------------------------

    \276\ The requirement to obtain a permit applies to a source 
that commences construction after the effective date of the 1977 
Clean Air Act Amendments (August 7, 1977), and that does so ``in any 
area to which [the PSD provisions] appl[y].'' All parts of the 
United States and its possessions are covered (see CAA sections 161, 
302(d) and (q), and 110(a)(1)), but if EPA promulgates a NAAQS for 
GHGs and designates certain areas as nonattainment, then those areas 
would not be covered.
---------------------------------------------------------------------------

    Once GHGs are regulated, these PSD provisions, by their terms, 
would apply to sweep into the PSD program new sources that emit 100 or 
250 tpy of CO2 or other GHGs. As indicated above, the courts 
have held that the plain meaning of statutory provisions is generally 
controlling. Even so, we solicit comment on whether these PSD threshold 
requirements may present one of those rare cases in which congressional 
intent differs, based on the legislative history.
    The legislative history indicates that Congress was aware of the 
range of stationary sources that emitted pollution and did not envision 
that PSD would cover the large numbers of smaller sources within that 
inventory. As the D.C. Circuit stated in Alabama Power, the seminal 
court decision regarding PSD that reviewed numerous challenges to EPA's 
initial set of PSD regulations,

    Congress's intention was to identify facilities which, due to 
their size, are financially able to bear the substantial regulatory 
costs imposed by the PSD provisions and which, as a group, are 
primarily responsible for emissions of the deleterious pollutants 
that befoul our nation's air.

636 F.2d. 323, 353 (D.C. Cir. 1980) (emphasis added). In addition, 
Congress also sought to protect permitting authorities from undue 
administrative burdens. See S. Rep. 95-127 at 97; Alabama Power, 636 
F.2d at 354.
    One important indication that Congress viewed PSD as limited in 
scope may be found in information provided by EPA in 1976 and included 
in the Congressional Record: A comprehensive list of industrial and 
commercial source categories, which included the amounts of certain 
pollutants emitted by ``typical'' sources in those categories and the 
number of new plants in those categories constructed each year. 122 
Cong. Rec. S 24548-50 (July 29, 1976) (statement of Sen. McClure). The 
pollutants included particulate matter (PM), sulfur dioxide 
(SO2), carbon monoxide (CO), and hydrocarbons. The two 
largest of these source categories consisted of--
     Small boilers, those that generate between 10 MMbtu/hr and 
250 MMbtu/hr. EPA estimated that 1,446 new plants with boilers of this 
size were, at that time, constructed each year, and that the amount of 
PM emissions with controls from a ``typical'' such boiler were 53 tpy.
     Very small ``boilers,'' those that generate between 0.3 
MMBtu/hr and 10 MMBtu/hr. EPA estimated that 11,215 new plants with 
boilers of this size were, at that time, constructed each year, and 
that the amount PM emissions with controls would be 2 tpy.
    The D.C. Circuit indicated, in Alabama Power, that Congress did not 
believe sources with boilers of these small sizes should be covered by 
PSD: ``[With respect to] the heating plant operating in a large high 
school or in a small community college * * * [w]e have no reason to 
believe that Congress intended to define such obviously minor sources 
as `major' for the purposes of the PSD provision.'' \277\ 636 F.2d at 
354. To support this proposition, the Court cited a statement in the 
Congressional Record by Sen. Bartlett arguing that the PSD provisions 
should not cover ``[s]chool buildings, shopping malls, and similar-
sized facilities with heating plants of 250 million BTUs.'' Id. at 354 
(citing 122 Cong. Rec. S. 12775, 12812 (statement of Sen. Bartlett)). 
Yet, boilers of even this small size could well emit at least 250 tpy 
of CO2 and therefore could fall into PSD permitting 
requirements if the definition of ``major emitting facility'' is read 
to include emitters of CO2 of that size or more.
---------------------------------------------------------------------------

    \277\ Although Congress specifically authorized the States to 
exempt ``nonprofit health or education institutions'' from the 
definition of ``major emitting facility'' this statement by the D.C. 
Circuit should be taken as the Court's view that Congress did not 
design PSD to cover sources of the small size described.
---------------------------------------------------------------------------

    Thus, it is clear that Congress's construct of PSD--specifically, 
the 100/250 tpy thresholds--was based on Congress's focus on 
conventional pollutants at that time and its understanding that sources 
emitting conventional pollutants above those levels should be subject 
to PSD, with its attendant cost burdens, both because such sources have 
the financial resources and because they have the responsibility to 
reduce their large share of the convention pollution problems. Limited 
administrative resources were also part of this equation. But the 
equation is scrambled when CO2 is the pollutant because many 
smaller sources, with limited resources, and whose share of the GHG 
emissions problem is no greater than their share of the conventional 
pollution problem, get swept into PSD at those threshold levels. 
Further, administrative resources become greatly stretched. Juxtaposing 
the limited scope of the universe of PSD sources that Congress had in 
mind against the broad terms that Congress used in defining ``major 
emitting facility,'' which determines PSD applicability, raises the 
question of whether a narrower interpretation of those terms may be 
permissible under various judicial doctrines.
    We solicit comment on whether the case law cited above, concerning 
narrowing the application of statutory provisions in light of other 
indications of congressional intent or in light of administrative 
necessity, support interpreting the term, ``major emitting facility'' 
in a manner that is narrower than the literal meaning of the phrase, 
``any other source'' in the case of sources that emit amounts of 
CO2 that are more than 250 tpy but less than the levels 
discussed above.

[[Page 44507]]

ii. Modifications: Options and Legal Basis for Higher GHG Significance 
Levels
    Regarding the selection of a significance level for GHG emissions, 
we could follow a de minimis approach, as we have done in setting the 
existing PSD significance levels. We could base the significance level 
on the level below which an individual modification has a de minimis 
contribution to climate change. A scaling approach similar to that 
discussed above for the major source threshold is also an option for 
setting the significance level. We could set the significance level to 
a level of GHG emissions that corresponds to the same activity level as 
the significance levels for other pollutants, so as to roughly maintain 
the same permitting burden for GHGs as for ``traditional'' pollutants. 
We ask for comment on the merits of these approaches and invite 
suggestions on other approaches. We are also interested in specific 
information that would help us analyze how the selection of various 
significance levels would affect the number and types of modifications 
affected.
    The legal rationale for establishing a significance level is found 
in the D.C. Circuit's Alabama Power decision, 636 F.2d at 405, where 
the Court authorized EPA to establish ``a de minimis standard 
rationally designed to alleviate severe administrative burdens.'' The 
Court elaborated:

    A rational approach would consider the administrative burden 
with respect to each statutory context: what level of emission is de 
minimis for modification, what level de minimis for application of 
BACT. Concerning the application of BACT, a rational approach would 
consider whether the de minimis threshold should vary depending on 
the specific pollutant and the danger posed by increases in its 
emission. The Agency should look at the degree of administrative 
burden posed by enforcement at various de minimis threshold levels.* 
* * It may * * * be relevant * * * that Congress made a judgment in 
the Act that new facilities emitting less than 100 or 250 tons per 
year are not sizeable enough to warrant PSD review.

    Id. (emphasis added). We believe that this approach entails broad 
discretion in fashioning a de minimis level, consistent with the 
overarching principle of obviating administrative burdens that are not 
commensurate with the contribution of the amount of emissions to the 
pollution problem. We consider the Court's emphasized statement to 
leave the door open to setting significance levels at the same level as 
the applicability threshold levels. We solicit comment on appropriate 
GHG significance levels, and on the relationship of significance levels 
to the GHG applicability thresholds discussed above.
c. Phase-In of PSD Permitting Requirements
    Absent higher major source cutoffs and significance levels, it 
would be necessary to formulate a strategy for dealing with the tenfold 
increase in required permits that EPA projects permitting authorities 
will experience if GHGs become regulated for PSD purposes. Even with 
advance notice, an increase of this magnitude over a very short time 
could overwhelm permitting authorities. They would likely need to fund 
and hire new permit writers, and staff would need to develop expertise 
necessary to identify sources, review permits, assess control 
technology options for a new group of pollutants (and for a mix of 
familiar and unfamiliar source categories), and carry out the various 
procedural requirements necessary to issue permits. Sources would also 
face transition issues. Many new source owners and operators would need 
to become familiar with the PSD regulations, control technology 
options, and procedural requirements for many different types of 
equipment. If the transition were not effectively managed, an 
overwhelmed permit system would not be able to keep up with the demand 
for new pre-construction permits, and construction could be delayed on 
a large number of projects under this scenario.
    The size of the increase in workload that must be accommodated and 
the potentially serious consequences of an overly abrupt transition 
demonstrate that a phase-in approach may have merit. Under one concept 
of a phase-in approach, EPA could phase-in PSD applicability beginning 
with the largest sources of GHGs and gradually include smaller sources. 
This could be accomplished by initially adopting a relatively high 
major source size and significance level, and then periodically 
lowering the level until the full coverage level is reached. We ask for 
comment on what an appropriate transition time would be, what the 
appropriate starting, middle, and end points would be in terms of 
coverage, and what requirements, if any, should be put into place for 
sources prior to their being phased in. For example, if the ultimate 
goal is to reach a 250 tpy major source cutoff, what would be the 
appropriate starting cutoff (e.g., 10,000 tpy) and how should it be 
determined? Would the phase-in need to be complete by a certain date, 
and if so how long should the phase-in take? Alternatively, could the 
phase-in of the smaller sources proceed by setting up periodic EPA 
evaluations of the administrative necessity for deferring applicability 
for such sources, and applying PSD only after we determine that it is 
feasible to do so? We also ask for comment on what activities occurring 
over this time we should consider in structuring a phase-in.
    As noted elsewhere, in its broad review of the initial PSD program 
promulgated under the 1977 Clean Air Act Amendments, the D.C. Circuit 
set out a range of mechanisms through which an agency can, at least 
under ``limited'' circumstances, provide relief on grounds of 
``administrative necessity'' from even clear statutory mandates, as 
long as those mandates do not unambiguously foreclose such relief. 
Alabama Power, 636 F.2d at 357. The Court noted that an agency could 
establish the need for such relief based on ``a shortage of funds[,] * 
* * time, or * * * technical personnel.'' Id. at 358.
    As described above, the large number of sources that would become 
subject to the PSD requirements at the 100/250 tpy levels would strain 
the administrative resources of the State permitting authorities and 
perhaps also of the EPA regional offices that issue PSD permits. Each 
of the constraints noted by the Court in Alabama Power--funds, time, 
and technical personnel--would arise.
    Elsewhere in this notice, we solicit comment on whether 
``administrative necessity'' authorizes EPA to exempt categories of 
smaller GHG emitters. Here, we solicit comment on phasing-in the 
applicability of the permit program over a multi-year period, with 
successively smaller sources becoming subject. This method could allow 
an orderly ramp-up in funding and in essential human capital. Under 
such an approach, we also seek comment on whether it would be necessary 
to set a firm schedule for phase-in, or whether it is sufficient for 
the agency to select a future date to assess the level of program 
coverage and the associated administrative burden, and determine at 
that time whether it is appropriate to add them to the program, and if 
not, to set an additional future date to revisit the issue. We request 
information that would help us determine the appropriate timeframe for 
such assessments, including the current and anticipated state resources 
for processing PSD permits, including numbers of permitting personnel, 
and the time period and person-hours needed to issue a typical permit.
d. Streamlining Determinations of Required Controls
    As previously noted, one of the most significant aspects of the PSD 
program

[[Page 44508]]

for GHGs is the BACT requirement. While permitting authorities are 
accustomed to making BACT determinations on a case-by-case basis for 
major sources and modifications under the current PSD program, BACT for 
GHGs (particularly CO2) presents significant additional permitting 
challenges. The primary challenge is the dramatic increase in the 
number of sources and modifications that under the 100/250-ton 
thresholds would be subject to BACT review and the new source 
categories that would be brought into the PSD program, which could 
exceed the capacity of the permitting system and have negative effects 
described above in section VII.D.4. An additional challenge stems from 
the fact that for some GHG-emitting activities, primarily CO2 from 
combustion sources, permitting authorities will need to look at 
alternative approaches to determining BACT such as setting efficiency 
targets, if add-on controls are not viewed as adequately demonstrated. 
While there is much information available on efficiency for some of the 
various kinds of equipment used by these newly applicable sources, 
permit engineers will need to understand this information for a very 
wide range of source categories.
    This section seeks comment on approaches for streamlining the BACT 
process for many new smaller sources that could be brought into the PSD 
program based on their GHG emissions. Under PSD, BACT is a case-by-case 
decision that reflects the state-of-the-art demonstrated control 
technology at the time of the permit action. Thus, BACT changes over 
time and requires continual updating. Determining BACT is also a 
decision that affords permitting authorities flexibility to consider a 
range of case-specific factors such as cost, energy, and environmental 
impacts. However, full case-by-case consideration of those factors 
requires significant data and analysis in order for permitting 
authorities to arrive at a permitting decision that is appropriate for 
each individual source or modification
    EPA is interested in whether there would be ways to move from a PSD 
permit system in which BACT limits are set on an individual case-by-
case basis to a system in which BACT determinations could be made for 
common types of equipment and sources, and those determinations could 
be applied to individual permits with little to no additional tailoring 
or analysis. EPA has previously introduced this concept, known as 
``presumptive BACT,'' as an aid to streamlining permitting for 
desulfurization projects at refineries as well as in other 
instances,\278\ and some state permitting authorities have adopted 
similar approaches in their air permitting programs.\279\ Based on our 
understanding of the types of sources that will become subject to PSD 
if GHGs are regulated with a major source size of 250 tpy of emissions, 
we believe the presumptive BACT process could offer significant 
streamlining benefits. These benefits arise because many of these 
smaller sources will likely have very similar emissions producing 
equipment, and there will be little variation across sources with 
respect to the cost, energy, and environmental considerations in the 
BACT decision.
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    \278\ See January 19, 2001 memo from John S. Seitz, Director, 
Office of Air Quality Planning and Standards to the Regional Air 
Division Directors entitled, ``BACT and LAER for Emissions of 
Nitrogen Oxides and Volatile Organic Compounds at Tier 2/Gasoline 
Sulfur Refinery Projects.''
    \279\ For example, Wyoming has a minor source permitting program 
that includes a BACT analysis, and they use a presumptive BACT 
process for issuing minor source permits to a particular source 
category--oil and gas production facilities. See Permitting Guidance 
for Oil and Gas Production Facilities, Wyoming Dept. of 
Environmental Quality, Air Quality Division (August 2007 revision).
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    While the CAA states that PSD permits shall be issued with BACT 
determinations made for each pollutant on a ``case-by-case basis,'' the 
court in Alabama Power recognized that exceptions may be appropriate 
where ``case-by-case determinations, would, as a practical matter, 
prevent the agency from carrying out the mission assigned to it by 
Congress.'' 636 F.2d at 358 (emphasis added). The court recognized that 
such streamlining measures may be needed when time or personnel 
constraints or other practical considerations ``would make it 
impossible for the agency to carry out its mandate.'' See id. at 359. 
Given the more-than-tenfold increase in new sources that would likely 
be brought into the PSD program once GHGs are regulated and the other 
challenges described above, maintaining a traditional PSD permitting 
program with individual case-by-case BACT determinations may be 
impractical, warranting streamlined regulatory approaches as allowed 
under the Act. A presumptive BACT permitting program would allow EPA, 
state and local permitting authorities to carry out the PSD program in 
a timely and efficient manner necessary to promote (rather than hinder) 
control of GHG emissions from the many new, small source categories 
that would be required to have PSD permits based on their GHG 
emissions, while still preserving opportunities for public 
participation.
    In considering a change from case-by-case BACT determinations to a 
presumptive BACT process for some specific source categories within the 
PSD program, EPA is considering how such presumptive BACT limits should 
be established and used, and what provisions in the CAA would set 
requirements or limits on their establishment and use. In particular, 
EPA recognizes the statutory requirement to set BACT limits on a case-
by-case basis after taking into account site-specific energy, economic, 
and environmental impacts (otherwise known as collateral impacts). One 
option would be to allow permitting authorities to adjust any BACT 
limit that was based on presumptive BACT, as necessary, upon 
identifying significant collateral impacts applicable to a specific 
source. EPA also recognizes the requirement to subject proposed PSD 
permits, and the BACT limits contained within them, to public notice 
and comment before such permits become final. A presumptive BACT 
program could be designed to establish presumptive emissions limits for 
a particular category of sources through guidance that would be issued 
only after public notice and comment procedures. Another approach could 
be to allow presumptive BACT limits in each permit to become final only 
if public comments fail to establish that significant case-specific 
energy, economic, and/or environmental impacts require adjustment of 
the presumed limit for that particular source.
    In addition, while case-by-case BACT determinations allow for the 
continual evolution of BACT requirements over time (as controls applied 
in prior permits are considered in each subsequent case-by-case BACT 
determination), EPA recognizes that application of presumptive BACT to 
a category of sources over many permitting decisions may somewhat 
diminish PSD's incentives for improved technology. EPA is interested in 
options that would help maintain advances in control technologies, such 
as a requirement to update and/or strengthen the presumptive BACT at 
set intervals (such as after 3 years). EPA seeks comment on all aspects 
of the use of presumptive BACT limits within the PSD program, including 
EPA's authority to do so, whether there is need for and value to such 
an approach, and suggestions for how such limits could be established, 
updated, and used consistent with the requirements of the CAA.

[[Page 44509]]

    The central component of a presumptive BACT approach would be the 
recurring technical determination, subject to notice and comment, of 
the presumptive BACT levels for various categories. Because of the 
limited data we currently have about the number and types of sources 
that would become subject to the BACT requirement for GHGs, we cannot 
at this time predict how many or which source categories might benefit 
from such an approach if we opt to pursue it. We seek comment on the 
basis we could use in setting the presumptive BACT level. Considerable 
work will be needed to determine what options exist for controlling GHG 
emissions from these categories of smaller sources and the various 
emitting equipment they use. Even if a determination is made that add-
on controls for CO2 from combustion sources are adequately 
demonstrated, it is unlikely that the application of these controls 
would be cost-effective at these small sources in the relatively near 
future. Thus the focus of presumptive BACT for CO2 would 
likely be on energy efficiency standards for the installed equipment.
    While PSD permitting staff generally would not possess specialized 
knowledge in the area of energy efficiency for categories of small 
sources, there is experience within EPA and other agencies that could 
help inform the establishment of presumptive BACT. Both EPA and DOE, 
for example, have extensive experience in deploying cost effective 
technologies and practices to reduce greenhouse gases from a wide range 
of emissions sources in support of the President's GHG intensity goal. 
For example the Energy Star program promotes efficient technologies 
through a labeling program that establishes performance-based 
specifications for determining the most efficient products in a 
particular category, which then qualify for the Energy Star label. To 
develop these specifications, EPA and DOE use a systematic process that 
relies on rigorous market, engineering, and pollution savings analyses 
as well as input from stakeholders. While Energy Star specifications 
generally cover electrical appliances or fuel combusting appliances 
that would be smaller than those triggering the BACT requirement, the 
types of analyses conducted for Energy Star could inform the 
presumptive BACT process. In addition, DOE's Energy Efficiency and 
Renewable Energy program sets standards for several types of equipment, 
some of which may be affected by the BACT requirement if GHGs are 
regulated, including furnaces, boilers, and water heaters. The DOE 
standards are similar to the concept of presumptive BACT in that they 
take cost into consideration and are updated over time.\280\ They also 
take into account effects on competitiveness among equipment 
manufacturers, which could be a significant concern if left unaddressed 
in determining presumptive BACT. We ask for comment on whether these or 
other similar programs could serve as a basis for the setting of 
presumptive BACT where applicable.
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    \280\ See, e.g., 42 U.S.C. 6295(o).
---------------------------------------------------------------------------

    Regarding LAER, we note that, as previously discussed, if a NAAQS 
were established for GHG at levels lower than current concentrations, 
the relevant technology requirement would be LAER, not BACT. We ask for 
comment on whether the presumptive BACT approach would have utility for 
LAER and whether the particular statutory language of the LAER 
requirement would allow a presumptive approach under the same legal 
principles laid out for BACT.
    Finally, while presumptive BACT or LAER may have the potential to 
help address the problem of numerous small but similar types of 
sources, it is likely of less value in making BACT or LAER 
determinations at the types of large sources that have generally been 
subject to PSD for traditional pollutants. This is because there is 
generally less similarity among these traditional sources. Nonetheless, 
as noted above, there may be numerous modifications that will be newly 
subject to PSD for GHGs at such sources, and there may also be issues 
unique to establishing control technology requirements for GHGs that do 
not presently exist for such sources. We ask for comment on whether 
there are issues at traditional PSD major sources that arise for GHGs 
and that would not be addressed by a presumptive BACT approach. If so, 
we ask for comment on additional options for tailoring the BACT 
requirement to address these issues.
e. General Permits for Streamlined Permitting of Numerous Similar 
Sources
    An approach closely linked with the presumptive BACT concept is the 
concept of a general permit for PSD. A general permit is a permit that 
the permitting authority drafts one time, and then applies essentially 
identically (except for some source specific identifying information) 
to each source of the appropriate type that requests coverage under the 
general permit. Congress expressly codified the concept of general 
permits when it enacted the Title V program (discussed below) and 
states have been using general permits and similar process for years in 
their own permit programs, particularly for minor source NSR \281\ and 
operating permits. Due to the case-by-case nature of PSD permitting for 
``traditional'' major sources and the differences among individual PSD 
sources, there has not been much interest or activity in general 
permitting for PSD. However, if one or more GHGs (particularly 
CO2) become regulated pollutants, this approach merits 
strong consideration due to the large number of sources that EPA 
expects will become newly subject to PSD for their GHG emissions and 
the similar characteristics of many of these sources.
---------------------------------------------------------------------------

    \281\ The minor NSR is a NAAQS-based program for review of minor 
sources that is distinct from the PSD program. It is not discussed 
here.
---------------------------------------------------------------------------

    Although there is no provision in the CAA that expressly authorizes 
the use of general permits in the PSD program, the D.C. Circuit, in the 
Alabama Power case described above, recognized that ``[c]onsiderations 
of administrative necessity may be a basis for finding implied 
authority for an administrative approach not explicitly provided in the 
statute'' and expressly identified general permits as an alternative to 
the exemptions that were at issue in that case. See 636 F.2d at 360. 
Further, courts have recognized EPA's authority to use general permits 
under section 402 of the Clean Water Act without an express provision 
authorizing such general permits. Environmental Defense Center v. EPA, 
344 F.3d 832, 853 (9th Cir. 2003) (``General permitting has long been 
recognized as a lawful means of authorizing discharges.'') (citing 
NRDC. v. Costle., 568 F.2d 1369, 1381 (D.C. Cir. 1977)); NRDC v. 
Train., 396 F. Supp. 1393, 1402 (D.D.C. 1975) (EPA has ``substantial 
discretion to use administrative devices, such as area permits, to make 
EPA's burden manageable.'').
    In considering the use of general permits within the PSD program, 
EPA is considering how such general permits would be established and 
used, and what provisions in the CAA might limit their establishment 
and use. One consideration in establishing PSD general permits is the 
requirement in CAA section 165(a)(2) that permits be issued after ``a 
public hearing has been held with opportunity for interested persons 
including representatives of the Administrator to appear and submit 
written or oral presentations.'' One possible approach for fulfilling 
the public participation requirement is the approach followed for Title 
V general

[[Page 44510]]

permits in 40 CFR 70.6(d), which provide that permitting authorities 
may establish general permits after following notice and comment 
procedures required under 40 CFR 70.7(h) and then grant a source's 
request to operate under a general permit without repeating the public 
participation procedures. Other considerations for establishing general 
permits under the PSD program include determining BACT on a case-by-
case basis (as discussed in the previous section), and the other 
requirements referred to earlier in this section concerning the 
evaluation of impacts on AQRVs in Class I areas and the analysis of air 
quality and other potential impacts under CAA section 165(e).
    EPA seeks comment on the use of general permits within the PSD 
program, including both EPA's authority to do so and suggestions for 
how general permits would be established and used consistent with the 
requirements of the CAA and identification of source categories that 
could benefit from such an approach. We also ask for comment on whether 
a general permit program approach could also work for nonattainment NSR 
in the event the EPA promulgates a NAAQS for GHGs and designates areas 
as nonattainment.
f. Coordinating Timing of PSD Streamlining With GHG Regulation Under 
the Act
    Regardless of how EPA might tailor the NSR program for GHGs, the 
timing of these approaches must be coordinated with other GHG actions 
under the CAA. As described above, the applicability of PSD is tied to 
whether a pollutant is subject to a control program under the Act. EPA 
strongly believes that we should be prepared the first time we regulate 
one or more GHGs under any part of the CAA to explain our approach to 
permitting, including full consideration of the ideas presented above 
for responding to the PSD implementation challenges. Coordination of 
the timing of tailoring strategies for PSD or nonattainment NSR to 
match with the effective date of the first GHG regulation is necessary 
to minimize confusion on the part of sources, permitting authorities, 
and the public, to provide for as effective a transition as possible, 
and to ensure that the strategies intended to avoid problems can be in 
place in time to prevent those problems. We seek comment on timing 
issues in general, and particularly on the coordination of the timing 
of permitting requirements with the timing of GHG regulation under 
other parts of the Act.

F. Title V Operating Permits Program

1. What Are the Clean Air Act Requirements Describing the Operating 
Permits Program?
    The Title V operating permits program was enacted in 1990 to 
improve sources' compliance with the requirements of the CAA.\282\ In 
summary, it provides for facility operating permits that consolidate 
all Act requirements into a single document, provides for review of 
these documents by EPA, States, and the public, and requires permit 
holders to track, report, and certify annually to their compliance 
status with respect to their permit requirements. Through these 
measures, it is more likely that compliance status will be known, any 
noncompliance will be discovered and corrected, and emissions 
reductions will result. Title V generally does not add new substantive 
requirements for pollution control, but it does require that each 
permit contain all a facility's ``applicable requirements'' under the 
Act, and that certain procedural requirements be followed, especially 
with respect to compliance with these requirements. ``Applicable 
requirements'' for Title V purposes generally include all stationary 
source requirements, but mobile source requirements are excluded.
---------------------------------------------------------------------------

    \282\ The operating permits program requirements are contained 
in title V of the CAA, and are codified in EPA regulations at 40 CFR 
parts 70 and 71.
---------------------------------------------------------------------------

    Presently there are generally not any applicable requirements for 
control of GHGs that would be included in Title V permits, but 
regulation of GHGs under any of the approaches described above, 
including PSD, could give rise to applicable requirements that would be 
included. Even if a particular source emitting 100 tpy of a GHG is not 
subject to GHG regulations that are ``applicable requirements,'' under 
a literal reading of Title V, the Title V permit for that source must 
include any other applicable requirements for other pollutants. For 
example, while a 100 tpy CO2 source would usually have 
relatively small criteria pollutant emissions that would not by 
themselves have subjected the source to title V, once subjected to 
title V for CO2 emissions, the source would then need to 
include any SIP rules (e.g., generally applicable opacity limitations 
that exist in several SIPs) that apply to the source.
    When a source becomes subject to Title V, it must apply for a 
permit within one year of the date it became subject.\283\ The 
application must include identifying information, description of 
emissions and other information necessary to determine applicability of 
CAA requirements, identification and certification of the source's 
compliance status with these requirements (including a schedule to come 
into compliance for any requirements for which the source is currently 
out of compliance), a statement of the methods for determining 
compliance, and other information. The permitting authority then uses 
this information to issue the source a permit to operate, as 
appropriate. A Title V source may not operate without a permit, except 
that if it has submitted a complete application, it can operate under 
an ``application shield'' while awaiting issuance of its permit.
---------------------------------------------------------------------------

    \283\ The deadline may be earlier if the permitting authority 
(usually an approved state or local air pollution control agency, 
but in some cases the EPA) sets an earlier date.
---------------------------------------------------------------------------

    Title V permits must contain the following main elements: (1) 
Emissions standards to assure compliance with all applicable 
requirements; (2) a duration of no more than 5 years, after which the 
permit must be renewed; (3) monitoring, recordkeeping, and reporting 
requirements necessary to assure compliance, including a semiannual 
report of all required monitoring and a prompt report of each deviation 
from a permit term; (4) provisions for payment of permit fees as 
established by the permitting authority such that total fees collected 
are adequate to cover the costs of running the program; and (5) a 
requirement for an annual compliance certification by a responsible 
official at the source. An additional specific monitoring requirement, 
compliance assurance monitoring (CAM), also applies to some emissions 
units operating at major sources with Title V permits.\284\ The CAM 
rule requires source owners to design and conduct monitoring of the 
operation of add-on control devices used to control emissions from 
moderately large emissions units. Source owners use the monitoring data 
to evaluate, verify, and certify the compliance status for applicable 
emissions limits.\285\ The CAM rule is implemented in conjunction with 
the schedule of the operating permits program.
---------------------------------------------------------------------------

    \284\ Specifically, CAM applies to units with add-on control 
devices whose pre-control emissions exceed the applicable major 
source threshold for the regulated pollutant.
    \285\ CAM requirements are codified in 40 CFR part 64.
---------------------------------------------------------------------------

    While these are the main elements relevant to a discussion of GHGs, 
there are numerous other permit content requirements and optional 
elements, as set forth in the Title V implementing regulations at 40 
CFR 70.6. One of these

[[Page 44511]]

optional elements is of particular interest when considering the 
implications of GHG permitting: The provisions for general permits, 
which, as discussed in more detail below, can allow for more 
streamlined permitting of numerous similar sources.
    In addition to the permit content requirements, there are 
procedural requirements that the permitting authority must follow in 
issuing Title V permits, including (1) determining and notifying the 
applicant that its application is complete; (2) public notice and a 30-
day public comment period on the draft permit, as well as the 
opportunity for a public hearing; (3) notice to EPA and affected 
states, and (4) preparing and providing to anyone who requests it a 
statement of the legal and factual basis of the draft permit. The 
permitting authority must take final action on permit applications 
within 18 months of receipt. EPA also has 45 days from receipt of a 
proposed permit to object to its issuance, and citizens have 60 days to 
petition EPA to object. Permits may also need to be revised or reopened 
if new requirements come into effect or if the source makes changes 
that conflict with, or necessitate changes to, the current permit. 
Permit revisions and reopenings follow procedural requirements which 
vary depending on the nature of the necessary changes to the permit.
2. What Sources Would Be Affected If GHGs Were Regulated Under Title V?
    Title V requires permitting for several types of sources subject to 
CAA requirements including all sources that are required to have PSD 
permits. However, it also applies to all sources that emit or have the 
potential to emit 100 tpy of an air pollutant.\286\ As discussed above 
for the PSD program, the addition of GHG sources to the program would 
trigger permitting requirements for numerous sources that are not 
currently subject to Title V because their emissions of other 
pollutants are too small. The Title V cutoff would bring in even more 
sources than PSD because the 100 tpy (rather than 250 tpy) cutoff 
applies to all source categories, not just the ones specified in the 
Act's PSD provisions.
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    \286\ Other sources required to obtain Title V permits are 
``affected sources'' under the acid rain program, and sources 
subject to NSPS or MACT standards (though non-major sources under 
these programs can be exempted by rule). It does not apply to mobile 
sources.
---------------------------------------------------------------------------

    Using available data, which we acknowledge are limited, and 
engineering judgment in a manner similar to what was done for PSD, EPA 
estimates that more than 550,000 additional sources would require Title 
V permits, as compared to the current universe of about 15,000-16,000 
Title V sources. If actually implemented, this would be more than a 
tenfold increase, and many of the newly subject sources would be in 
categories not traditionally regulated by Title V, such as large 
residential and commercial buildings. However, as described below, EPA 
believes that, if appropriate, there may be grounds to exclude most of 
these sources from Title V coverage, either temporarily or permanently, 
under legal theories similar to those for PSD.
    The CAM requirement also applies to major sources that require 
Title V permits, meaning that a number of smaller sources are 
potentially newly subject to CAM as well. Under the current CAM 
requirements, applicability is limited to the monitoring of add-on 
control devices (e.g., scrubbers, ESPs). Presently there are few known 
add-on control devices for CO2, and for many smaller 
sources, it is unlikely that there will be cost effective add-on 
controls for CO2 for many years. Thus, we generally expect 
source owners to comply with any applicable GHG limits through the use 
of improved energy efficiency and other process operational changes 
rather than the use of add-on emissions reduction devices. As a result, 
even with the large number of sources that will exceed the 
applicability cutoffs, the CAM rule will have very limited application 
for sources subject to GHG rules. We ask for comment on this assessment 
of CAM applicability, and whether there may be CAM impacts that we have 
not described here.
    As an additional note, if GHGs were regulated under section 112 
authority, Title V could apply at an even smaller threshold. This 
consideration adds to the list of difficulties with using section 112 
to regulate GHGs that were identified in section VII.C. Although HAPs 
are excluded from the definition of ``regulated NSR pollutant,'' Title 
V explicitly includes major sources as defined in section 112 on the 
list of sources required to obtain an operating permit. While minor 
sources of HAP can be excluded by rule, major sources of HAP cannot. 
For HAPs, the major source cutoffs are (as noted previously) 25 tons 
for any combination of HAPs, and 10 tons for any single HAP. Thus, if 
GHGs were regulated as HAPs, a 10 ton CO2 source would 
require an operating permit under Title V. Under this approach, the 
number of new Title V sources would easily number in the millions 
absent a means to limit PTE. In addition the major source definition 
under section 112 does not exclude fugitive emissions, as it does under 
PSD for unlisted categories. Thus, if GHGs were designated as HAPs, an 
uncertain number of additional new kinds of sources (e.g., agriculture, 
mining), would become newly subject to Title V due to fugitive 
emissions of GHGs. We ask for comment on whether there are factors EPA 
should consider in its description of the universe of potentially 
affected sources.
3. What Are the Key Milestones and Implementation Timeline if Title V 
Were Applicable for GHGs?
    Under an interpretation of the Act parallel to that for PSD, Title 
V would become applicable for GHGs as soon as GHGs become subject to 
any actual control requirement. This timing is perhaps even more 
important for Title V than for PSD because of the potential for an 
extremely large number of new sources (unless EPA administratively 
reduced coverage) combined with the fact that Title V applications 
would all be due at the same time (unless a phase-in approach were 
adopted). This is because Title V requires permit applications within 
one year of a source becoming subject to the program, in contrast to 
the PSD program, where permitting authorities would receive 
applications over time as sources construct or modify.
    Permitting authorities generally must act on Title V applications 
within 18 months. However, Congress addressed the burden imposed by the 
initial influx of (what turned out to be less than 20,000) initial 
Title V permits when it enacted Title V in 1990 by providing for a 3-
year phased permit issuance timeline. Although the initial phase-in 
period is over, we discuss below the possibility of interpreting Title 
V provisions to authorize a phase-in period for GHG sources becoming 
newly subject to Title V as well. We ask for comment on whether there 
are factors EPA should consider in its description of these timelines.
4. What Are Possible Cost and Emission Impacts of Title V for GHGs?
    Title V generally does not impose additional applicable 
requirements on a source. However, sources, permitting authorities, 
EPA, and the public (to the extent that they participate in the 
permitting process) all may incur administrative burden due to numerous 
activities associated with applying for, reviewing, commenting on, and 
complying with Title V permits. There are significant challenges that 
would arise if GHG sources become subject to Title V. The sheer volume 
of new permits would heavily strain the

[[Page 44512]]

resources of state and local Title V programs. These programs may have 
to tailor their fee requirements or other program elements to address 
the strain caused by the influx of numerous smaller sources, even if 
the permits for each individual source are relatively straightforward. 
Many new types of sources would need to understand and comply with a 
new and unfamiliar program. Even under streamlined approaches like 
general permits (discussed below), there would be administrative burden 
imposed as sources would have to determine whether they are covered 
and, if so, would need to submit annual reports and certifications. EPA 
would see additional burden as well, both because we are the permitting 
authority in some areas and because we would probably see an increase 
in the number of Title V petitions. Because Title V does not create new 
applicable requirements, the new costs of Title V would be mainly 
attributable to administrative burden. Nonetheless, this overall 
administrative burden is likely to be unreasonable unless EPA reduces 
the number of covered sources as discussed below.
    Title V of the CAA also contains a self-funding mechanism requiring 
that permitting authorities collect permit fees adequate to support the 
costs of running a Title V program. Title V fees must be used solely to 
run the permit program. For GHGs, the possibility of a huge influx of 
smaller sources raises questions about how permitting authorities 
should adjust their fee schedules to ensure that they have adequate 
resources to permit these sources without causing undue financial 
hardship to the sources. The most common approach, a cost per ton fee 
that is equal for all pollutants, would likely result in excessive 
costs to GHG-emitting sources because of the large mass emissions of 
GHGs compared to other pollutants. This is particularly true for the 
universe of small sources brought into Title V solely for their GHG 
emissions, because those permits are expected to be relatively simple 
and may even be addressed through general permits (which would not 
require as many resources or as high a fee). Although it may be 
permissible for permitting authorities to adopt lower fees specifically 
for GHGs, they would have to assess the new resources needed for 
permitting these sources and determine some basis for an appropriate 
fee and a workable mechanism for collecting it.
    As noted above, the benefits of Title V stem primarily from the way 
its various provisions contribute to improved compliance with CAA 
requirements. However, for the particular sources that would be added 
to the program solely due to their GHG emissions, it is unclear whether 
there would be much benefit from these provisions given the small size 
of most of these new sources, the uniform design and operation of many 
of their emissions points, the anticipated lack of add-on control 
devices, and the relatively small number of applicable requirements 
that would be included in the permit. We ask for comment on the 
expected overall costs and benefits of running a Title V program for 
small GHG sources and for larger GHG sources (e.g., those emitting more 
than 10,000 tons per year).
5. What Possible Implications Would Use of This Authority for GHGs Have 
for Other CAA Programs?
    Because Title V is designed to work in concert with other CAA 
requirements and is self-funding, we have not identified any impacts it 
would have on other programs.
6. What Are Possible Tailoring Approaches To Address Administrative 
Concerns for Title V for GHGs?
    As we did in section VII.D regarding NSR, we present here for 
comment some possible tailoring options to address concerns about 
implementing Title V for GHGs. As was previously noted for NSR, we must 
consider how the Act's language may constrain these options. 
Nonetheless, we see at least two possible legal theories for reducing 
administrative concerns through limiting the scope of coverage of Title 
V that would otherwise result from regulating GHGs. First, case law 
indicates that in rare cases, the courts will interpret or apply 
statutory provisions in a manner other than what is indicated by their 
plain meaning. Courts will do so when Congress's intent differs from 
the plain meaning, as indicated by other statutory provisions, 
legislative history, or the absurd, futile, strange, or indeterminate 
results produced by literal application. Second, the administrative 
burden of literal application of the Title V provisions may also 
provide a basis for EPA, based on the judicial doctrine of 
administrative necessity, to craft relief in the form of narrowed 
source coverage, exemptions, streamlined approaches or procedures, or a 
delay of deadlines. Some specific options are discussed in the 
remainder of this section, and we invite comment on these and other 
suggested approaches.
a. Potential for Higher Major Source Cutoffs
    As discussed above in section VII.A.5, Title V applies to several 
types of sources under the Act, including, among others, all PSD 
sources, as well as 100 tpy sources that are not subject to PSD. In 
section VII.D, we described the reasons why a higher major source 
cutoff for PSD might make sense to improve the effectiveness of the 
program by focusing resources away from numerous small sources for 
which the environmental benefits gained from permitting may not justify 
the associated administrative burdens. We believe such an approach 
might be even more important for Title V because many small sources 
that could become subject to the program solely because of their GHG 
emissions may have few or no applicable requirements. Unless GHG 
emissions from these small sources are regulated elsewhere under the 
Act, the only GHG-related applicable requirements for these sources 
would come from PSD permitting. Thus, if EPA adopts a higher major 
source size for PSD, it would arguably be incongruous to require 100 
tpy GHG sources to obtain permits under Title V. In that case, adopting 
a higher applicability threshold for GHGs under Title V in parallel 
with, and at the same level as for PSD, would make even more sense. 
Similarly, if EPA were to regulate GHGs for certain source categories 
under CAA section 111 or 112, and were to include size cutoffs in those 
regulations, then it could make sense for the size-cutoffs for Title V 
purposes to reflect the cutoffs for those source categories under those 
regulations. Indeed, it could make sense to apply Title V only to those 
sources of GHGs that are themselves subject to regulation for GHG 
emissions.
    We have found several indications of congressional intent that 
could serve as a basis for interpreting the Title V applicability 
provisions to implement the above-described size-cutoffs or other 
limitations, instead of interpreting them literally. First, other 
provisions in Title V and the legislative history indicate that the 
purpose of Title V is to promote compliance and facilitate enforcement 
by gathering into one document the requirements that apply to a 
particular source. See section 504(a) (each Title V permit must contain 
terms ``necessary to assure compliance with applicable requirements'' 
of the CAA), H.R. Rep. No. 101-490, at 351 (1990) (``It should be 
emphasized that the operating permit to be issued under this title is 
intended by the Administration to be the single document or source of 
all of the requirements under the Act applicable

[[Page 44513]]

to the source.''). Limiting the applicability of Title V to sources 
that emit GHGs in the same quantity as sources that would be subject to 
GHG limits under PSD (or other CAA requirements) for GHGs--and 
excluding sources that emit GHGs in lower quantities and therefore are 
not subject to CAA requirements for GHGs--would be consistent with that 
purpose. Second, the legislative history of Title V indicates that 
Congress expected the provisions to apply to a much smaller set of 
sources than would become subject at 100 tpy GHG levels. See S. Rep. 
101-228, at 353 (``[T]he additional workload in managing the air 
pollution permit system is estimated to be roughly comparable to the 
burden that States and EPA have successfully managed under the Clean 
Water Act[,]'' under which ``some 70,000 sources receive permits, 
including more than 16,000 major sources'').
    We ask for comment on whether we should consider higher GHG 
applicability cutoffs for Title V, what the appropriate cutoffs might 
be, and whether there are additional policy reasons and legal 
justifications for doing so or concerns about such an approach.
b. Potential for Phase-In of Title V Requirements
    Due to the severe administrative burden that would result if 
hundreds of thousands of sources were all to become subject to Title V 
at the same time, as could be the case if EPA regulates GHGs elsewhere 
under the Act, and because many of the sources could become subject 
before the development of any stationary source controls for GHGs, it 
may make sense to defer Title V applicability for GHG sources that are 
subject to Title V solely due to GHG emissions. One deferral approach 
would be to defer Title V for such sources until such time as they 
become subject to applicable requirements for GHGs. Alternatively, it 
may make sense to phase in Title V applicability with the largest 
sources applying soonest, similar to what was discussed above for PSD 
permitting.
    Legal support for some type of deferral may be found in the case 
law, described above, that identifies deferral as one of the tools in 
the ``administrative necessity'' toolbox. In the case of Title V, 
deferral may find further legal support by reference to provisions of 
Title V itself: Congress addressed the burden imposed by the initial 
influx of tens of thousands of Title V permits when it originally 
enacted Title V in 1990 by providing for a 3-year phased permit 
issuance timeline.\287\ A similar phased approach may have even greater 
merit here due to the even greater number of permits. We ask for 
comment on the legal and policy arguments for or against a phase-in 
approach, and request suggestions for workable permit application and 
issuance timelines for Title V permits for small GHG sources.
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    \287\ CAA section 503(c).
---------------------------------------------------------------------------

c. General Permits
    The use of general permits is an additional option for addressing 
the potentially large numbers of GHG sources that could become subject 
to Title V. While general permits would not completely eliminate the 
resource burden, and may not work for every type of source, they 
clearly offer an option for meeting the Title V requirements in a more 
efficient way. Congress expressly provided for general permits for 
Title V and many states have experience issuing them. They appear to be 
a good fit for the numerous similar small sources we are primarily 
concerned about. Nonetheless, we still expect that the sheer volume of 
sources and number of different types of sources affected will present 
challenges. Further, any Title V general permit must comply with all 
requirements applicable to permits under Title V, and no source covered 
by a general permit may be relieved from the obligation to file a 
permit application under section 503 of the Act. We seek comment on 
whether source characteristics and applicable requirements are similar 
enough for a general permit approach to be helpful, for what categories 
it would provide the greatest benefit, and the degree to which it would 
or would not ease the expected difficulties with implementing a GHG 
Title V program.
d. Fees
    Title V contains a self-funding mechanism requiring that permitting 
authorities collect permit fees adequate to support the costs of 
running a Title V program. Title V fees must be used solely to run the 
permit program. For GHGs, the possibility of a huge influx of new 
sources raises questions about how permitting authorities should adjust 
their fee schedules to ensure that they have adequate resources to 
permit these sources. Title V provides significant flexibility to 
permitting authorities in setting their fee schedules so long as they 
can demonstrate that fees are adequate to cover all reasonable costs 
required to develop and administer the Title V program 
requirements.\288\ The additional resource burden imposed by GHG 
sources will depend heavily on what approaches EPA and states 
ultimately adopt for tailoring the program for these sources, but EPA 
does expect that some additional resources will be necessary under 
virtually any scenario.
---------------------------------------------------------------------------

    \288\ See CAA section 502(b)(3), which also lists specific 
activities whose costs must be covered.
---------------------------------------------------------------------------

    Most states charge Title V fees on a dollar/ton basis, and actual 
amounts vary from state to state. For 2008, EPA charges $43.40 per ton, 
but only for regulated pollutants for the fee calculation (which 
generally includes all regulated pollutants but excludes carbon 
monoxide and some other pollutants). Because of the large mass 
emissions of GHGs and especially of CO2 compared to other 
pollutants, if EPA and states charge fees for GHG emissions based on 
cost/ton numbers for criteria pollutants or HAPs, we expect that the 
fee revenues would be grossly excessive for what is needed to process 
permits for GHG sources. This is particularly true for the universe of 
small sources brought into Title V solely for their GHG emissions 
because those permits are expected to be relatively simple and may be 
addressed through general permits. Therefore we believe that it is 
appropriate for permitting authorities to consider other available 
options for covering their GHG source permitting costs, including: 
substantially lower cost per ton fees for GHGs, fixed fees (e.g., one 
time or annual processing fee that is the same for all applicants below 
a certain size), and/or charging no fees for smaller GHG sources. We 
ask for comment on these and other suggestions for permitting 
authorities to use on structuring their fee provisions. We also request 
comment on the expected resource burden resulting from new GHG 
permitting, and how EPA should determine the adequacy of fees. EPA 
rules contain an optional method for permitting authorities to use in 
calculating a presumptively adequate fee. These regulations do not 
include GHGs as a regulated pollutant for this calculation but could in 
the future if GHGs were regulated under certain parts of the Act. For 
permitting authorities that still use this presumptive calculation, we 
ask for comment on whether, for the reasons described above, EPA should 
specifically exclude GHGs from this calculation or address it in a 
different manner. Finally, because EPA itself is the permitting 
authority for some sources, we are also interested in comments on 
whether and how EPA should change its fee structure in its part 71 
permitting regulations to meet

[[Page 44514]]

its own increased resource needs from GHG permitting.\289\
---------------------------------------------------------------------------

    \289\ Technically these increased resources would need to be 
provided to EPA through increased appropriation, as the EPA fee 
revenues would go to the general treasury.
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e. Coordinating Timing With Other Actions
    Like PSD, the timing of any approach to streamline Title V must be 
coordinated with other GHG actions under the CAA. We believe that any 
EPA determination about the applicability of the Title V program to 
GHGs should be accompanied by an explanation of how EPA plans to 
address--and how we recommend that State and local permitting 
authorities address--the numerous implementation challenges such a 
determination would pose. This timing is perhaps even more important 
for Title V than for PSD because of the potential for an extremely 
large number of new sources and the fact that Title V applications 
would (unless a phase-in approach is adopted) all be due at the same 
time, whereas PSD applications would come in over time as sources 
construct or modify. We seek comment on timing issues in general, and 
particularly on the coordination of the timing of Title V applicability 
with the timing of GHG regulation under other parts of the Act.
    We specifically request comment on the timing of the applicability 
of Title V permit requirements in relation to the applicability of GHG 
control requirements. Consider the scenario where EPA issues a rule 
regulating GHGs from mobile sources, and then issues a series of rules 
regulating GHGs from categories of stationary sources. One possible 
interpretation of the Act and EPA's regulations is that the mobile 
source rule would trigger the applicability of Title V, at which point 
the hundreds of thousands of 100-ton and above sources would become 
subject toTtitle V and would have one year to apply for Title V 
permits. Generally, however, these permits would initially contain no 
applicable requirements for control of GHGs (mobile source requirements 
are not included in Title V permits), and would likely contain no 
applicable requirements for other pollutants, or only some generally 
applicable SIP rules that apply to sources which had previously not 
needed Title V permits. We have discussed the challenges of issuing 
even these minimal permits in such large numbers. However, as EPA 
proceeded to issue stationary source rules, each permit with three or 
more years remaining on its term would, under current rules, have to be 
reopened within 18 months of promulgation of each new rule to 
incorporate any applicable requirements from the new rule that would 
apply to the permitee. For permits with less than 3 years remaining, 
the applicable requirements would be incorporated at permit renewal. 
This scenario would result in duplicative effort as permitting 
authorities issued hundreds of thousands of minimal Title V permits 
with no GHG requirements, followed by a period of numerous reopenings 
for some GHG source categories, while the requirements for other GHG 
source categories would remain off-permit until renewal, at which point 
they would need to be included in the renewal permit. We ask for 
comment on how best to tailor the options above to minimize duplicative 
effort and maximize administrative efficiency in light of these timing 
concerns, and on whether additional options may be needed.

G. Alternative Designs for Market-Oriented Regulatory Mechanisms for 
Stationary Sources

    EPA believes that market-oriented regulatory approaches merit 
consideration under section 111 or other CAA authorities for regulating 
stationary source emissions, along with other forms of regulation. 
Economic efficiency advantages of market-oriented approaches that have 
the effect of establishing a price for emissions were discussed in 
section III. This section discusses four types of market-oriented 
approaches:
     A cap-and-trade program, which caps total emissions from 
covered sources, providing certainty regarding their future emission 
levels, but not their costs.
     A rate-based emission credit program (also called a 
tradable performance standard), which imposes an average mass-based 
emission rate across covered sources but does not cap total emissions, 
so emissions could rise with increased production.
     An emissions fee, which sets a price for emissions but 
doesn't limit total emissions from covered sources.
     A hybrid approach, which could combine some attributes of 
a rate-based emissions trading system and some attributes of a tax. A 
variety of hybrid approaches are possible; the best-known is the 
combination of a cap-and-trade system with a ``price ceiling.'' With a 
price ceiling, if the price of allowances exceeds a certain level, the 
government makes allowances available to the market at the ceiling 
price.
    For a local pollutant, a regulatory approach that provides 
certainty concerning future emissions can provide a predictable level 
of protection, within modeling uncertainties. In the GHG context, 
certainty concerning the amount of emission reduction to be achieved by 
a U.S. program can make possible an estimated change in predicted 
warming, but does not provide certainty that the U.S. will achieve a 
desired level of climate protection. This is because GHGs are global 
pollutants and the level of climate protection provided depends on the 
actions of other countries as well as the U.S.
    There is a robust debate about the respective merits of policies 
that provide price certainty, but not emissions certainty, and policies 
that provide emissions certainty, but not price certainty. A variety of 
cost-containment mechanisms have been proposed for GHG cap-and-trade 
systems; these mechanisms offer different tradeoffs between emissions 
certainty and price certainty.
    EPA requests comment on the extent to which CAA legal authorities 
would accommodate each of these regulatory approaches. In the section 
111 context, we note that these market-oriented approaches could be 
used in lieu of, or in addition to, other options including emission 
rate standards, technology-based standards, or work practices. With 
respect to section 111, EPA recognizes that these market-oriented 
approaches may differ in significant ways from the manner in which we 
have historically designed emission standards and required compliance 
with those standards. For this reason, we request comment on the extent 
to which each of these approaches could meet the statutory definition 
of a ``standard of performance'' and on what additional criteria or 
conditions could be considered to ensure that they do so. We also seek 
comment on how these options compare based on the policy design 
considerations listed in section III.F.1, including effectiveness of 
risk reduction, certainty and transparency of results, economic 
efficiency, incentives for technology development, and enforceability.
1. Emissions Cap-and-Trade
    A cap-and-trade system limits GHG emissions by placing a cap on 
aggregate emissions from covered sources. Authorizations to emit, known 
as emissions allowances, are distributed to companies or other entities 
consistent with the level of the cap. Each allowance gives the holder 
an authorization to emit a fixed amount of

[[Page 44515]]

emissions (e.g., one ton) during a given compliance period. At the 
close of the compliance period, sources must surrender allowances equal 
to their emissions during that period. Such a system does not impose 
limits on emissions from individual sources; rather, it caps emissions 
across a group of sources (e.g., an industry sector) and allows 
entities to buy and sell those allowances with few restrictions. Key 
features of a well-designed cap-and-trade program include accurate 
tracking and reporting of all emissions, compliance flexibility, and 
certainty (provided by the cap) in achieving emission reductions. While 
the cap provides certainty in future emissions, cap-and-trade does not 
provide certainty of the price, which is determined by the market 
(price uncertainty diminishes as certainty regarding control costs 
increases).
    EPA has previously authorized emissions trading under section 111. 
For instance, EPA promulgated standards of performance for new and 
existing electric utility steam generating units on May 18, 2005 (70 FR 
28606), establishing a mercury emissions cap-and-trade program for 
coal-fired electric generating units that states could use to meet 
their section 111 obligations to control mercury for coal-fired 
electric generating units. While the court subsequently vacated this 
action, the ruling did not address the legality of trading under 
section 111.
    If EPA designed a cap-and-trade program that could cover certain 
source categories covered by section 111, such a program could be 
modeled after similar trading programs the Agency has developed under 
sections 110 and 111 of the Act, such as the NOX Budget 
Trading Program, the Clean Air Interstate Rule NOX and 
SO2 Trading Programs, and the Clean Air Mercury Rule Trading 
Program. Under this model, EPA would establish appropriate state GHG 
emissions budgets covering emissions of GHG for each covered source 
category. EPA would establish consistent rules related to subjects such 
as monitoring, applicability and timing of allocations that states 
would be required to meet. EPA would develop and administer a GHG 
allowance tracking system, similar to tracking systems the Agency 
administers for SO2, and NOX. EPA would determine 
provisions for monitoring, reporting, and enforcement. If states 
promulgated rules consistent with the requirements set forth by EPA, 
sources in their State could participate in the trading program. 
Alternatively, states could develop alternative regulatory mechanisms 
to meet the emissions budgets.
    A key component of an emissions cap-and-trade program is the 
ability to accurately monitor emissions.\290\ For many, but possibly 
not all, large stationary sources, there are methods to monitor 
CO2 that may provide enough accuracy for a cap-and-trade 
program. Most large utility boilers are already required to monitor and 
report CO2 emissions under the Acid Rain Program. Utility 
and industrial boilers are well suited to cap-and-trade; many 
participate in SO2 and NOX trading under the Acid 
Rain and NOX SIP Call programs. At refineries, some emission 
sources could be well suited to cap-and-trade, while for others, 
accurate monitoring methods or other ways to track and verify emissions 
may not be available. More analysis is needed to determine availability 
of monitoring methods for all refinery emission sources. The cement 
industry is another that may be well suited to emissions cap-and-trade, 
since monitoring is available and a number of facilities currently 
participate in NOX trading under the NOX SIP 
Call. Cap-and-trade may not be an appropriate mechanism for the 
landfills, except for potential use of landfill gas projects for 
offsets. The quantity of landfill methane captured and combusted (i.e., 
the emission reduction) can be measured directly; however, total 
emissions are difficult to measure.
---------------------------------------------------------------------------

    \290\ While monitoring is important for determining compli,ance 
in all regulatory emission reduction approaches, in a cap-and-trade 
system monitoring is also important for functioning of the allowance 
market.
---------------------------------------------------------------------------

    We request comments generally 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 emission 
reduction 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-and-trade 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 (i.e., 
obtaining emission reductions from sources outside of the capped 
sector) to meet the requirements of section 111.
2. Rate-Based Emissions Credit Program
    A rate-based emissions credit program--also called a tradable 
credit standard or intensity target program--is an emissions trading 
mechanism. Unlike cap-and-trade, however, a rate-based credit program 
does not impose a cap on aggregate emissions from covered sources. 
Rather, a rate-based emissions credit program establishes a regulatory 
standard based on emissions intensity (e.g., emissions per unit of 
input, emissions per unit of product produced, emissions per revenue/
value-added generated). To the extent that a covered source has an 
emission rate below the regulatory intensity standard, the source 
generates credits that it can sell to sources with emission rates 
higher than the regulatory intensity standard. The price of credits 
would be determined by the market.\291\ The regulatory intensity 
standard might be set below the recent average intensity for a given 
industry.\292\ Once in place, the standard would determine the average 
emissions intensity (or rate) of the regulated industry.
---------------------------------------------------------------------------

    \291\ Credits are generated by a source with emissions below the 
regulatory intensity (or rate). Credits are measured in a fixed unit 
of emissions, e.g., a ton. A source that emits at an intensity 
higher than the regulatory intensity must surrender credits--
purchased from a source with emissions below the regulatory 
intensity or other entity holding credits--equivalent to the 
difference between their actual emissions and the allowable 
emissions.
    \292\ The average intensity could be set using any of a number 
of metrics and baselines. For example, the metric might be tons of 
CO2 emitted per ton of cement produced. The baseline year 
for calculating average intensity might be the same as the 
compliance year, i.e., after the close of the compliance year, the 
average tons CO2 emitted per ton of cement produced would 
be calculated across the industry and a source that produced with 
emissions above the average would need to buy credits while a source 
that produced with emissions below the average could sell credits. 
Alternatively, the average intensity could be based on a year prior 
to the initial compliance year.
---------------------------------------------------------------------------

    Like a cap-and-trade approach, a rate-based trading approach can 
reduce the cost of reducing emissions from a group of sources, relative 
to the cost of requiring every source to reach the same emission rate. 
A drawback of the rate-based approach is that it provides an incentive 
to increase whatever is used in the denominator of the rate (e.g., the 
output of a good or the amount of a particular input). Therefore, rate-
based policies can encourage increased production because production 
can be rewarded with additional credits. This in turn has the potential 
to encourage increased emissions and thus to raise the overall cost of 
achieving a given level of emissions.
    Many of the considerations described above for cap-and-trade 
program design

[[Page 44516]]

would also apply to design of a rate-based credit program. Measuring 
outputs to determine the regulatory intensity may present some 
difficulty. In particular, determining the intensity for facilities 
that generate multiple products would be challenging. Sectors that use 
multiple inputs (e.g., different fuels) might require use of a common 
metric (e.g., Btu combusted) to support a rate-based approach based on 
inputs.
    Rate-based trading programs are most easily applied in a specific 
sector where facilities have similar emissions characteristics. For 
utility and industrial boilers, a rate-based credit standard could be 
established for GHG emissions. For refineries, rate-based credit 
standards could be established for individual processes or equipment 
but would be difficult to set at the facility level. A GHG emissions 
rate-based tradable credit standard could be developed for the Portland 
cement industry. This mechanism may not be appropriate for landfills 
(see discussion of monitoring above).
    We request comments on the use of emission rate trading programs 
under section 111 or other CAA authorities. Similar to cap-and-trade 
programs, we are seeking comment on whether sector-specific programs or 
inter-sector programs might be more appropriate. We also request 
comment on issues related to defining emission rates for facilities 
producing multiple types of products.
3. Emissions Fee
    A GHG fee would limit GHG emissions by placing a price on those 
emissions. The price is fixed up front (unlike cap-and-trade where the 
price depends on the market), and a source covered by the tax would pay 
to the government the fixed price for every ton of GHG that it emits. A 
GHG fee permits the aggregate amount of emissions to adjust in response 
to the tax, in contrast to a cap-and-trade system where the quantity of 
emissions is fixed. Some key features of a GHG fee include accurate 
tracking and reporting of all emissions from covered sources, 
compliance flexibility, and certainty in the price of emissions (but 
not certainty in future emissions because there is no cap). As noted in 
the cap-and-trade subsection above, the emissions of CO2 from most 
large utility boilers are already accurately monitored; this attribute 
would facilitate application of an emissions tax (as well as 
facilitating application of a cap-and-trade system).
    Depending on the specific authority granted by Congress with 
respect to the disposition of revenue, the revenue generated by the fee 
(as with potential auction revenues under a cap-and-trade approach) 
could theoretically be used for any number of public purposes. Note 
that depending on how the money was spent, the use of the revenues 
would have the potential either to reduce or to increase market 
distortions that reduce economic welfare.
    The issue of whether the CAA authorizes emissions fees is discussed 
above in section III.F.2.
4. Hybrid Market Based Approach
    A hybrid, market-oriented approach that could be used to regulate 
GHG borrows from pollution control options that are based on setting 
emissions rates, emissions credit trading, and emissions fees. This 
approach starts with a rate-based emissions credit program in which an 
average emission rate (e.g., tons of GHGs emitted per unit of output or 
input) would be established for a given industry. As with a typical 
rate-based policy, a source in the given industry would need to buy 
credits to the extent it produces with emissions over the average 
intensity, and could sell credits to the extent it produces with 
emissions below the average. An element of an emissions fee approach 
would then be added to this policy in which the government would also 
buy and sell credits. The government could set a price for credits 
based on selected policy criteria, and offer credits to sources at that 
predetermined price. Sources could then buy credits from the government 
as well as other regulated sources. Therefore, the government-set price 
would act as a price ceiling (or ``safety-valve''), and the potential 
for price fluctuations in emissions credits would be diminished 
(because the government's predetermined price would act as a ceiling 
price). As long as relatively cost-effective GHG emissions reductions 
could occur within a covered sector over time, the average emissions 
intensity may decline and total reductions in emissions would occur in 
a relatively cost-effective manner without significant government 
handling of emissions fee revenues. In addition to being a seller, the 
government could also act as a buyer (so the government sales of 
credits would not result in an excess supply). A similar approach 
without the government's role in selling credits at a ceiling price and 
with a fixed schedule of allowable average annual rate of allowable 
emissions was actually successfully used in the phase down of lead in 
gasoline in the 1980s by EPA.
    Some have suggested that the government could set a price for GHG 
credits or allowances based on its assessment of those benefits to be 
gained from the GHG emissions reduction per unit of output or input. In 
theory, under this approach the marginal compliance costs would never 
exceed the marginal benefits of reducing emissions. Note, however, that 
there are serious issues to be resolved regarding whether and how a 
defensible single estimate of marginal GHG reduction benefits can be 
developed for this purpose (see section III.G). First, whether the 
scope of benefits counted is global or domestic could significantly 
affect the marginal benefits estimate. Second, for benefits categories 
that can be quantified and monetized, there are many uncertainties that 
result in a range of legitimate estimates, making it difficult to 
pinpoint an appropriate number. Third, there is a bias toward 
underestimating benefits of GHG reductions because many impacts 
categories identified by the IPCC are not quantified and 
monetized.\293\ As a result, the price might be set too low to achieve 
the amount of emissions reductions that would be warranted considering 
all benefits and policy goals.
---------------------------------------------------------------------------

    \293\ There also are policy considerations that would be 
neglected by an approach attempting to find a point at which 
marginal costs equal marginal benefits. Examples include 
irreversibility of changes in climate with adverse impacts affecting 
future generations who cannot take part in today's decision-making, 
and unequal geographic distribution of adverse climate change 
impacts.
---------------------------------------------------------------------------

    By including this discussion, EPA is not taking a position on 
whether it has legal authority to pursue a hybrid market-oriented 
approach. (See section III.F.2 above.) However, the agency seeks 
comment on the general matter of how the pricing of credits within an 
emissions intensity approach might be designed and established, what 
legal authority would be necessary for this action, and what impact 
different price-setting approaches would have on aggregate emissions 
reductions, costs and benefits.

VIII. Stratospheric Ozone Protection Authorities, Background, and 
Potential Regulation

A. Ozone Depleting Substances and Title VI of the Clean Air Act

    Title VI of the CAA provides authority to protect stratospheric 
ozone, a layer high in the atmosphere that protects the Earth from 
harmful UVB radiation. Added to the CAA in 1990, Title VI establishes a 
number of regulatory programs to phase out and otherwise control 
substances that deplete stratospheric ozone. These ozone-depleting 
substances (ODS) are used in many consumer and industrial applications, 
such as refrigeration,

[[Page 44517]]

building and vehicle air conditioning, solvent cleaning, civil 
aviation, foam blowing, and fire extinguishing, and even in small but 
important uses such as metered dose inhalers.
    Many ODS and some of the substances developed to replace them 
(e.g., HFCs) are also potent GHGs. As described below, Title VI 
programs have already achieved significant reductions in emissions of 
ODS and thus in emissions of GHGs. However, the ODS being phased out 
are not among the six major GHGs addressed by this notice. Because 
these ODS are already being addressed by international and national 
requirements for protecting stratospheric ozone, they are not covered 
by UNFCCC requirements, the President's May 2007 directive or many 
other efforts to address climate change. Similarly, the discussion in 
this notice of a potential endangerment finding for GHGs does not 
include in its analysis the ODS being phased out.
    In this section of the notice, we briefly describe Title VI 
regulatory programs as they relate to ODS because of the GHG emission 
reductions they achieve. We also consider the Title VI program for 
regulating ODS substitutes, since some substitutes are also GHGs. Since 
our focus in this notice is on potential use of the CAA to control the 
six major GHGs, we also examine the general authority in section 615 as 
it might be used to control those GHGs. However, as further explained 
below, section 615 would be available for that purpose only to the 
extent that EPA finds that emissions of the major GHGs are known or 
reasonably anticipated to cause or contribute to harmful effects on 
stratospheric ozone or otherwise affect the stratosphere in a way that 
may reasonably be anticipated to endanger public health or welfare. 
Unlike other CAA provisions examined in this notice, section 615 would 
not be triggered by a finding that one or more GHGs cause or contribute 
to air pollution that may reasonably be anticipated to endanger public 
health or welfare. The potential applicability of section 615 to the 
major GHGs depends on whether specified findings related to the 
stratosphere or ozone in the stratosphere could be made. In this way, 
Title VI is significantly different from other CAA titles that provide 
more general regulatory authority to address air pollutants that meet 
an endangerment test.
1. Title VI Regulatory Programs
    Existing Title VI programs are largely focused on reducing and 
otherwise controlling ODS to protect stratospheric ozone. The 
cornerstone Title VI program is a graduated phaseout of ODS that 
implements similar requirements in the Montreal Protocol on Substances 
that Deplete the Ozone Layer, an international treaty to which the U.S. 
is a party. The Title VI phaseout program relies on a system of 
marketable allowances to control overall U.S. consumption (defined as 
production + imports-exports) consistent with the Protocol's 
requirements. EPA tracks production, export, and import of ODS, as well 
as transactions in ODS allowances reflecting the flexibility inherent 
in the program's market-oriented approach. This ensures compliance with 
U.S. consumption caps established under the Protocol. The program also 
allows exemptions from the phaseout to ensure that supplies of ODS 
critical to certain sectors, like the agricultural fumigant methyl 
bromide, are available until alternatives adequately penetrate the 
marketplace.
    Other Title VI provisions supplement the phaseout program in a 
variety of ways that enhance ozone layer protection. Under these 
provisions, EPA has established a national ODS recycling and emission 
reduction program, bans on nonessential ODS uses, a program for 
labeling ODS-containing products, and the Significant New Alternatives 
Policy (SNAP). Under the SNAP program, EPA reviews and approves 
substitutes for ODS to help spur the development and uptake of safer 
alternatives. Finally, Title VI authorizes EPA to accelerate the 
schedule for phasing out ODS as warranted by scientific information, 
the availability of substitutes, or the evolution of the treaty's 
requirements pursuant to international negotiations among Parties to 
the Montreal Protocol.
    Title VI has achieved large reductions in ODS consumption and 
emissions, and consequently has reduced GHG emissions and slowed 
climate change. According to a recent study, by 2010 ozone layer 
protection will have done more to mitigate climate change than the 
initial reduction target under the Kyoto Protocol, amounting to avoided 
emissions of 11 billion metric tons of CO2 equivalent per 
year, or a delay in climate impacts by about 10 years.\294\
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    \294\ Velders, G.J. et al., The Importance of the Montreal 
Protocol in Protecting Climate, Proceedings of the National Academy 
of Sciences, March 2007.
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    Because some ODS substitutes are GHGs, some have asked whether the 
net effect of the Protocol on climate has been beneficial. Recent 
research has demonstrated that the climate impact of ODS (e.g., 
chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs)), compared 
to CO2 emissions from fossil fuel combustion, fell from 
about 33 percent in 1990 to about 10 percent in 2000. The following 
graph shows how the shift over time toward ODS alternatives under Title 
VI has created a marked downward trend for GHG consumption in sectors 
that use ODS and their substitutes, even while these uses have grown 
with the U.S. economy and population. As can be seen below, consumption 
of the ODS (CFCs, HCFCs, etc.) in 2004, although significantly lower 
than peak ODS emissions in 1990, were actually greater than consumption 
of HFCs, which are substitutes for CFCs and HCFCs.
    In view of the GHG emission reduction benefits of existing Title VI 
programs, EPA seeks public comment on how elements of the existing 
Title VI program could be used to provide further climate protection 
while assuring a successful completion of the ODS phaseout, including a 
smooth transition to alternatives.

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[[Page 44518]]

[GRAPHIC] [TIFF OMITTED] TP30JY08.033

2. Further Action Under the Montreal Protocol
    The Montreal Protocol has been and will continue to be an 
important, if limited, step in addressing climate change. At the 19th 
Meeting of the Parties in September 2007, the Parties agreed to more 
aggressively phase out a class of ODS, the hydrochlorofluorocarbons 
(HCFCs). The agreement to adjust the phase-out schedule for HCFCs is 
expected to reduce emissions of HCFCs to the atmosphere by 47 percent, 
compared to the prior commitments under the treaty over the 30-year 
period of 2010 to 2040. For the developing countries, the agreement 
means there will be about a 58 percent reduction in HCFC emissions over 
the same period.
    The climate benefits of the faster phase-out of HCFCs will depend 
to some extent on technology choices in the transition from HCFCs. The 
estimated climate benefit of the new, stronger HCFC phase-out may be 
approximately 9,000 million metric tons of CO2e. A byproduct 
of the manufacture of HCFC-22 is hydrofluorocarbon-23 (HFC-23), a gas 
that does not damage ozone in the stratosphere but has a very high GWP. 
Because this gas is produced in higher quantities in lower efficiency 
production, to the extent that HCFC-22 production in the developing 
world remains uncontrolled, additional HFC-23 would be created. Thus, 
the agreement to sharply limit future developing world production of 
ODS represents an important opportunity for climate protection, as well 
as ozone layer recovery, as the President recognized in his April 16, 
2008 speech on climate change.

B. Title VI Authorities Potentially Applicable to the Major GHGs

    As mentioned previously, the framework created by Title VI could be 
effective in achieving GHG reductions by reducing and controlling ODS 
and ODS substitutes through existing mechanisms for tracking 
production, evaluating new safer alternatives, and addressing the needs 
of the major contributing subsector, refrigeration and air 
conditioning, through technician training, emission reduction and 
recycling. In this section we review Title VI provisions that could 
potentially apply to efforts to reduce the major GHGs that are not also 
ODS or ODS substitutes.
    Title VI mostly includes provisions specific to individual ODS and 
programs. The provisions generally apply to ``class I'' or ``class II'' 
ODS. Title VI requires EPA to list specified substances as class I and 
class II ODS, and authorizes EPA to add other substances to either 
category if the Agency makes certain findings regarding the substance's 
effect on stratospheric ozone (see sections 602(a) and (b)). One 
important difference between class I and class II ODS is that class I 
substances include the most potent ODS; section 602(a) requires EPA to 
list as class I substances all substances with an ozone depletion 
potential of more than 0.2.\295\
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    \295\ The ozone depletion potential (ODP) of a chemical measures 
its ability to reduce stratospheric ozone compared to a common ODS 
known as CFC-11. While this and another common ODS have ODPs of 1.0, 
the ODPs of class I and class II ODSs known to be in use range from 
0.02 to 10.
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    Title VI also requires EPA to publish the global warming potential 
(GWP) of each listed ODS. Section 602(e) further provides that the 
requirement to publish

[[Page 44519]]

GWP for a listed substance ``shall not be construed to be the basis of 
any additional regulation under'' the CAA.
    Since the major GHGs being addressed in this notice have no ozone 
depletion potential, it appears that the Title VI provisions that 
authorize regulation of listed ODS are of limited potential use for 
regulating those GHGs. EPA requests comment on the potential 
applicability of ODS-specific Title VI authorities, and the 
significance of the section 602(e) language quoted above for regulation 
of GHGs under Title VI.
1. Section 615
    In addition to the specific provisions that authorize regulation of 
listed ODS and in some cases ODS substitutes, Title VI also includes 
general authority in section 615 to protect the stratosphere, 
especially stratospheric ozone. Section 615 states:

    If, in the Administrator's judgment, any substance, practice, 
process, or activity may reasonably be anticipated to affect the 
stratosphere, especially ozone in the stratosphere, and such effect 
may reasonably be anticipated to endanger public health or welfare, 
the Administrator shall promptly promulgate regulations respecting 
the control of such substance, practice, process or activity, and 
shall submit notice of the proposal and promulgation of such 
regulation to the Congress.

While Title VI was added to the CAA in 1990, a provision largely 
identical to section 615 was added to the Act in 1977, soon after 
concerns about the effects of some substances on the stratosphere were 
initially raised. In 1988, EPA promulgated regulations implementing the 
first round of requirements of the Montreal Protocol through a system 
of tradable allowances under section 157(b) of the CAA as amended in 
1977. Section 157(b) was subsequently modified by the 1990 Amendments 
and became section 615.
    Since 1990, EPA has rarely relied on the authority in section 615 
to support rulemaking activity, since the activities that the Agency 
regulates to protect stratospheric ozone have generally been addressed 
under the more specific Title VI authorities. However, in 1993 EPA did 
rely on section 615 to promulgate trade restrictions in order to 
conform EPA regulations to Montreal Protocol provisions on trade with 
countries that were not Parties to the Protocol. (March 18, 1993, 58 FR 
15014, 15039 and December 10, 1993, 58 FR 65018, 65044). These trade 
restrictions prevented shipments of ODS from the U.S. to countries with 
no regulatory infrastructure to control their use. Promulgating these 
restrictions reduced the release of ODS into the atmosphere, thereby 
reducing harmful effects on public health and welfare. The restrictions 
also resulted in eliminating the U.S. as a potential market for ODS 
produced in non-Parties, thereby discouraging shifts of production to 
non-Parties and limiting the potential for undermining the phaseout.
    Section 615 authority remains available when other CAA authorities 
are not sufficient to address effects on the stratosphere, especially 
ozone in the stratosphere. For example, in the late 1990s, EPA, the 
National Aeronautics and Space Administration (NASA), and the Federal 
Aviation Administration (FAA) considered options for addressing 
potential ozone depletion resulting from supersonic commercial 
aircraft. EPA and NASA analyzed the impacts from a theoretical fleet of 
supersonic commercial aircraft, known as High Speed Civil Transport 
(HSCT), and in an October 1998 Memorandum of Agreement between the two 
agencies (signed by Spence M. Armstrong, Associate Administrator for 
Aeronautics and Space Transportation Technology (NASA) and Robert 
Perciasepe, Assistant Administrator for Air and Radiation (EPA)) noted 
the potential to rely on section 615 in conjunction with other 
regulatory authorities.\296\
    While section 615 sets forth the authority and responsibility of 
the Administrator to address effects on the stratosphere in order to 
protect public health and welfare, EPA recognizes that this authority 
was intended to augment other authorities and responsibilities 
established by Title VI. EPA does not believe this authority is a basis 
for prohibiting practices, processes, or activities that Congress 
specifically exempted elsewhere. For example, EPA does not intend to 
promulgate regulations eliminating the exceptions from the ODS phaseout 
for essential uses as established by section 604.
    For section 615 authority to be used, a two-part endangerment test 
unique to that section must be met. First, the Administrator must find, 
in his judgment, that ``a substance, practice, process or activity may 
reasonably be anticipated to affect the stratosphere, especially ozone 
in the stratosphere.'' Second, he must determine that ``such effect may 
reasonably be anticipated to endanger health or welfare.'' To determine 
the potential applicability of section 615 to major GHGs, EPA thus 
would have to consider whether available scientific information 
supports making the requisite findings.
    The effect on the stratosphere of GHG emissions and of climate 
change generally is a topic of ongoing scientific study.\297\ Recent 
science suggests that feedback mechanisms exist that allow temperatures 
in the stratosphere and troposphere to be mutually reinforcing or 
mutually antagonistic depending on a number of factors, including the 
latitude at which the ozone loss occurs. Further research is underway 
to better understand these interactions. While it is beyond the scope 
of this notice to assess and analyze the available scientific 
information on the effect of GHGs on the stratosphere, EPA requests 
comment on how evolving science might be relevant to the Agency's 
potential use of section 615. More specifically, EPA requests comment 
on how scientific research might help resolve areas of ambiguity in the 
relationship between GHGs, effects on the stratosphere, and climate 
change, and how this might help the Administrator make appropriate 
judgments in applying the two-part test of section 615.
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    \297\ See, e.g., World Meteorological Organization, Global Ozone 
Research and Monitoring Project--Report No. 50, Scientific 
Assessment of Ozone Depletion: 2006, Ch. 5, Climate-Ozone 
Connections.
---------------------------------------------------------------------------

    If the requisite endangerment finding is made, the regulatory 
authority provided by section 615 is broad. While most Title VI 
authorities are applicable to class I or class II substances or their 
substitutes, section 615 authorizes regulation of ``any substance, 
practice, process, or activity'' which EPA finds meets the two-part 
endangerment test. As noted elsewhere in this notice, depending on the 
nature of any finding made, section 615 authority may be broad enough 
to establish a cap-and-trade program for the substance, practice, 
process or activity covered by the finding, if appropriate. Title VI 
provisions provide other examples of possible regulatory approaches, 
such as maximizing recapture and recycling and requiring product 
labeling. EPA requests comment on possible regulatory approaches under 
section 615 and how those approaches would be affected by the 
particular endangerment finding that is a prerequisite to the use of 
section 615 authority.
2. Section 612
    Section 612 is also relevant to today's notice to the extent a GHG 
may be used as a substitute for an ODS. CAA section 612 provides for 
the review of alternatives to ODS and the approval of substitutes that 
do not present a risk more significant than other alternatives that are 
available. Under that authority, the SNAP program has worked 
collaboratively for many years with industries, user groups, and other

[[Page 44520]]

stakeholders to create a menu of alternatives that can be substituted 
for the ODS as they are phased out of production in the U.S.
    In recent years, industry partners in the motor vehicle air 
conditioning (MVAC) sector have urged EPA to identify and approve 
appropriate new substitutes to allow for the implementation of a world-
wide platform that will satisfy the needs of the U.S. market while also 
meeting new requirements in the European Union, which call for a 
transition over approximately six years beginning with the 2011 model 
year into non-ODS alternatives with Global Warming Potentials (GWPs) of 
less than 150.
    To address these concerns, EPA proposed in September 2006 a SNAP 
rulemaking that provided for the use of CO2 and HFC-152a in MVACs (71 
FR 55140 docket no. EPA-HQ-OAR-2004-0488). In a separate action (INSERT 
FR CITE), EPA has made final the portion of the rulemaking related to 
HFC-152a. This substitute meets the EU requirements, while also 
providing a new avenue for automakers to replace ODS. We believe we 
should issue guidance on the use of CO2 as an MVAC alternative in the 
context of the broader considerations of regulating GHGs set forth in 
this notice. We have included in the docket cited above a summary of 
our proposal regarding CO2 as an alternative from MVACs. This summary 
reflects our latest thinking on the safe use of CO2 in those systems.

List of Subjects in 40 CFR Chapter I

    Environmental protection, Air pollution control.

    Dated: July 11, 2008.
Stephen L. Johnson,
Administrator.
[FR Doc. E8-16432 Filed 7-29-08; 8:45 am]
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