U.S.: What the USEPA's Findings Could Mean for Business
- The endangerment finding is that current and projected concentrations of six key well-mixed greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride) in the atmosphere threaten the public health and welfare of current and future generations.
- The cause finding is that the combined emissions of these gases from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas pollution which threatens public health and welfare.
The findings alone do not impose any requirements on business but are the next step in finalizing USEPA’s greenhouse gas emission standards for light-duty vehicles proposed on September 15, 2009. While the findings apply only to these vehicle emissions, even if Congress fails to act, the precedent will almost certainly result in regulation for other sources since vehicles are not major sources of all of these greenhouse gases.
The USEPA actions will pressure Congress to act, which could provide more certainty for business as to source category priorities, timing, minimum emission and other requirements. It could also provide tax incentives and create a revenue opportunity (cap and trade) as well as a cost burden. Source categories such as coal power facilities will likely be targeted first, but other sources will likely follow. The treatment of natural gas will also be important since many utilities and other businesses have moved to this lower cost, more scalable source of power.
How will business finance these requirements?
At the utility level, the costs will be borne either directly by rate payers in new or reconstructed utility-owned power plants using cleaner power, or indirectly by renewable energy generated power purchased at a feed in tariff (FIT) under PPAs.
Compliance will require balance sheet financings in many cases, but some businesses with power plants may have the opportunity for project finance of renewable energy facilities depending on the creditworthiness of the offtaker. It is unlikely that renewable energy facilities can scale fast enough for compliance purposes even with a meaningful FIT. For example, to replace one central coal fired plant may require a GW of electricity.
While the USEPA regulations may be slowed by legal challenges, it seems clear the US will act in some way to reduce greenhouse gas emissions.
