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The public consultation on adjusting the GHG emission allowance auction process for 2021-2030 is open for comment until August 6.

By Joern Kassow and Alexander Wilhelm

In order to deepen cooperation in the energy sector and to build up a stronger Energy Union, the European Parliament and the Council revised Directive 2003/87/EC (ETS Directive) in March 2018 to implement the ambitious targets of the 2030 EU Climate and Energy Framework. The European Commission (EC) therefore plans to adjust the rules on auctioning greenhouse gas (GHG) emission allowances to maintain pace with these recent EU Emissions Trading System (EU ETS) developments. Prior to adopting a Delegated Regulation to amend Regulation (EU) No 1031/2010 (Auctioning Regulation), the EC is inviting comments on the draft until August 6, 2019.

California proposes phasing out the use of SF6 in GIE and further reducing allowable GHG emissions from such equipment.

By Aron Potash and Kimberly D. Farbota

California Air Resources Board (CARB) staff recently published a discussion draft (Draft Amendments) of potential changes to the current Regulation for Reducing Sulfur Hexafluoride Emissions from Gas Insulated Switchgear (SF6 Regulation).

Key proposed changes to the SF6 Regulation include:

  • Phasing out sulfur hexafluoride (SF6) gas-insulated equipment (GIE)
  • Further reducing allowable emissions from GIE
  • Expanding the regulation to encompass greenhouse gases (GHG) other than SF6

CARB held a workshop in Sacramento on February 25, 2019, during which staff presented an overview of changes proposed in the Draft Amendments and answered stakeholders’ questions. During the workshop, staff stated that CARB would like to hear any questions or concerns stakeholders may have about the Draft Amendments.

CARB continues to drive lower NOx emissions for heavy-duty engines and vehicles on the road.

By Arthur Foerster and Reed McCalib

On January 23, 2019, the California Air Resources Board (CARB) held a public workshop to discuss the agency’s ongoing regulatory emissions overhaul for on-highway, heavy-duty diesel engines and vehicles. Based on the agency’s position that reducing oxides of nitrogen (NOx) from heavy-duty vehicles is necessary to attain air quality standards, CARB staff made clear the agency’s intention to “dramatically lower emissions” and to ensure emissions remain low throughout the vehicles’ operational lives. CARB staff indicated that the agency will work collaboratively with the EPA and its “Cleaner Trucks Initiative” to develop harmonized national requirements. (For a more in-depth look at this initiative, please see Latham’s previous blog post.) Staff stressed, however, that CARB will adopt new, more stringent rules regardless of what EPA does and expects to do so on a more accelerated timeline than EPA. CARB is undertaking what it says is a necessary “multi-pronged holistic approach” and intends to release draft rules later this year on a number of regulatory fronts, including more stringent standards, greater durability, and more testing.

More Stringent Standards

CARB staff reiterated the agency’s intention to lower the NOx emissions standard for new, on-highway heavy-duty diesel engines by as much as 90% below the current standard of 0.2 grams per brake horsepower hour (g/bhp-hr). Although CARB staff have not settled on a specific number, they indicated a target range of 0.015 to 0.035 g/bhp-hr. According to staff, the CARB-funded research being performed by the Southwest Research Institute (SwRI) to assess the feasibility of lower NOx emissions is not complete. The SwRI research results, along with other data such as cost impacts, will determine the new NOx standard expected later this year.

The Newhall Ranch project in Los Angeles County was highlighted for its proactive and innovative strategy to reduce carbon emissions.

A strategy to gain approvals for the development of the Newhall Ranch community in Los Angeles County — built around the project’s net-zero impact on climate change — was recently featured in a report by the Financial Times that profiled proactive approaches to navigating environmental legal challenges.

The featured article was part of the FT’s annual North America Innovative Lawyers report, which ranks and analyzes creative legal work by law firms and in-house executives based on their originality, leadership, and impact.

Relief from the mandatory scheme will reduce the administrative burden on non-energy intensive companies.

By Paul A. Davies and Michael D. Green

The Carbon Reduction Commitment (CRC) — which first came into operation on 1 April 2010 — will be abolished at the end of the 2018-19 compliance year, pursuant to the CRC Energy Efficiency Scheme (Revocation and Savings) Order 2018 (SI 2018/841) (the Order). The CRC is a mandatory carbon emissions trading scheme that applies to large UK business and public organisations.

The CRC was aimed at increasing energy efficiency and reducing carbon emissions from large non-intensive energy users. These emissions are thought to constitute around 10% of greenhouse gases (GHGs) in the UK. The scheme applied to organisations that, over the course of a year, used more than 6,000 megawatt-hours (MWh) of certain electricity and had at least one half-hourly meter settled on the half-hourly electricity market.

Updates underscore China’s commitment to reducing carbon emissions despite government agency reshuffling.

By Paul A. Davies and R. Andrew Westgate

The Climate Change Department (CCD) of the newly formed Ministry of Ecology and Environment (MEE) has announced its official updates in relation to China’s low carbon-development strategy generally and the National Emissions Trading System (ETS) in particular. This announcement took place at the sixth Low Carbon Day celebration (13 June, 2018) and marked the CCD’s first public event since it was transferred to the MEE from the National Development and Reform Commission (NDRC), the state agency originally tasked with developing the ETS.

President Xi recently took the opportunity at the National Ecology and Environmental Protection Conference to stress the importance of a national climate change strategy through a governance system, in order to demonstrate China’s commitment to the cause.

The Innovation Fund will promote advanced low-carbon technologies to reduce greenhouse gas emissions and promote decarbonisation.

By Paul A. Davies and Michael D. Green

By the end of 2018, the European Commission will set up an Innovation Fund (the Fund) to aid decarbonisation. To achieve this, the European Commission will amend the EU Emissions Trading System (EU ETS) Directive via a delegated act. The EU ETS was created to reduce carbon emissions and incentivise companies to reduce their output, and covers around 45% of the EU’s greenhouse gas (GHG) emissions. Entities with access to the Fund from 2021 to 2030 (phase 4 of EU ETS) will include power and energy-intensive industrial sectors.

The Fund will build on support from the NER300 initiative — a large funding programme for innovative low-carbon projects. This support led to €2.1 billion being awarded to 38 innovative renewable energy projects and a carbon capture and geological storage (CCS) project. Money from the Fund will be used to help finance low-carbon technologies such as CCS, and will extend to both small and large-scale projects.

Increased manufacturing offshoring and industrial activity may prevent China from reaching its commitments, despite a booming renewable energy sector.

By Paul A. Davies, Kimberly Leefatt, and R. Andrew Westgate

China’s carbon emissions increased by 4% in the first quarter of 2018 — marking the biggest hike in carbon emissions in the last seven years, according to an article published by China Economic Review. Increased industrial activity is due in large part to the government’s financial support of furnaces and kilns meant to stimulate the economy. However, industrial growth could prevent China from achieving its Paris Agreement targets, despite the country’s reduction in coal use and commitment to promoting renewable forms of energy.

Increasing Carbon Emissions

China is responsible for approximately 30% of global carbon emissions. In fact, China emits twice the amount of CO2 per dollar of gross domestic product compared with the United States, and more than in the European Union.

As China begins to implement its emissions trading system, the country may look around the globe for regulatory guidance.

By Paul A. Davies and R. Andrew Westgate

China established its national emissions trading system (ETS) as a key component of the plan to meet its commitments under the Paris Agreement. The country’s participation in the Paris Agreement is significant not only because it contributes 15% toward total global carbon emissions, but because China was a key proponent of the agreement during its negotiation.

China’s initial hurdle was how to systematically collect the emissions data necessary to design and implement the emissions trading scheme. Accurate and comprehensive emissions data is critical not only for setting the level of the overall cap, but also in determining how free allowances will be allocated to regulated companies. Determining the rate at which the emissions cap declines also requires predicting future emission rates and market demand levels.