Regulators are pursuing steep fines in response to widespread alleged noncompliance with an emissions rule still subject to potential reversal by the courts.

By Joshua T. Bledsoe, James Friedland, and Jennifer Garlock

Key Points:

  • The enforcement action alleges 1,400 warehouses are noncompliant.
  • Noncompliance can result in fines of up to $11,710 per day.
  • Litigation challenging this program remains pending, with no quick end in sight.

On September 20, 2023, the South Coast Air Quality Management District (SCAQMD or the District) announced an enforcement initiative for Rule 2305, also known as the Warehouse Indirect Source Rule (ISR), which is part of the Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program. As described in this June 2021 blog post, the WAIRE Program applies to warehouses in the South Coast Air Basin over 100,000 square feet, with a phased implementation based on warehouse size. The ISR imposes a compliance obligation based on the number of truck visits to that warehouse per year, which warehouse operators can meet through emissions-reducing actions, either from the “WAIRE Menu” or through a custom plan approved by the District.

The start of trading represents a significant opportunity for businesses able to achieve meaningful reductions.

By Paul A. Davies and R. Andrew Westgate

Nearly four years after China’s national emissions trading scheme (ETS) was announced in late 2017, trading of emissions quotas officially commenced on July 16. The start of trading represents a significant step in China’s adoption of market-based mechanisms for addressing climate change, while also signifying a major opportunity for businesses able to achieve meaningful reductions.

More than 4.1 million tonnes of Chinese Carbon Emission Allowances (CEAs) traded on the first day at a price of RMB52.78 (or US$7.42) per tonne — an amount that was in line with analysts’ expectations for launch. Although this price is significantly below the prices of allowances in the EU ETS (€52.89 per tonne on July 16) or California (US$18.80 per tonne at the May 2021 auction), it is close to the allowance price in the Regional Greenhouse Gas Initiative (RGGI) — a cap-and-trade program covering 11 states on the east coast of the United States (US$7.97 per tonne at the auction held on June 2, 2021). Like China’s ETS in its initial phase, the RGGI covers only power plants. Since the launch, prices have largely held steady, although volume fell significantly after the initial flurry of activity.

With increasing pressure to fight climate change, scientists, and leaders agree that carbon capture, use, and storage (CCUS) is a cost-effective solution to meet emissions goals made under the Paris Agreement. 

In his interview with Hart Energy, Latham partner JP Brisson discusses how aggressive efforts are needed to meet the net-zero goal, but oil and gas companies are making significant progress in deploying CCUS projects at scale.

Watch the video.

The Chinese Communist Party’s policy plans include an increased focus on climate change and a more open trade environment.

By Paul Davies, Ethan Prall and Andrew Westgate

The Central Committee, the top-level authority of the Chinese Communist Party (CCP), recently concluded its Fifth Plenary Session and created China’s 14th Five Year Plan (the Plan). The Five Year Plan is the primary policy document for the CCP, covering a variety of social, economic, and foreign policy topics, and effectively serving as the CCP’s political platform. The Fifth Plenary was attended by 198 members of the Central Committee, including President Xi Jinping in his role as General Secretary of the Central Committee (his most important title). The full text of the new Plan is not yet public, but a communique summarizing the discussions at the Plenary has been released (Chinese version only). The communique indicates that the CCP will continue its focus on developing environmental governance policies through 2025, and the party will also prioritize aggressive climate policies aimed at reaching the 2060 carbon neutrality target recently announced by President Xi.

A recent federal court decision in Utah renews the question of whether defeat device and tampering prohibitions constitute “an emission standard or limitation”.

By Arthur F. Foerster

A non-profit citizen group, Utah Physicians for a Healthy Environment, is seeking nearly US$1.5 million in costs and attorneys’ fees after successfully prosecuting a citizen action in Utah federal court for violations of the defeat device and tampering provisions of the Clean Air Act (CAA, or the Act).[i] Section 304 of the CAA authorizes persons to enforce compliance with “an emission standard or limitation” or an “order” issued by the US Environmental Protection Agency (EPA) or a state with respect thereto, after notice is provided and so long as the EPA or state is not already litigating an action to require compliance with the standard, limitation, or order.[ii]

EU will tax manufacturers for excess emissions and collect individual consumption data from vehicles in order to meet climate change goals.

By Jörn Kassow and Patrick Braasch

The EU is setting stricter CO2 emission standards for new passenger cars and light commercial vehicles (LCVs). A new regulation on CO2 emission standards (Regulation (EU) No 2019/631), replacing the past regulations (EC) No 443/2009 and (EU) No 510/2011, was published in the Official Journal on 25 April 2019 and will enter into force with effect from 1 January 2020. From 2025 onwards, the average CO2 emissions of new passenger cars and LCVs must be reduced by 15% compared to 2021 levels. By 2030, the average emissions must be reduced by 37.5% for passenger cars and 31% for LCVs, in each case compared to 2021 levels.

These average emissions targets apply to each manufacturer’s (or group of connected manufacturers’) EU-wide fleet of new passenger cars and LCVs. The regulation will reward manufacturers with less stringent CO2 targets if they meet benchmarks regarding their respective fleet’s share of zero- and low-emission vehicles (2025: 15% for both passenger cars and LCVs, 2030: 35% for passenger cars and 30% for LCVs). Furthermore, manufacturers may enter into pooling arrangements (subject to competition law restrictions) for meeting their emissions targets. These arrangements will allow leaders in zero- and low-emission vehicles to capitalise on their below-average emissions by pooling with, and effectively selling their emissions savings to, manufacturers of more traditional, i.e., CO2-intensive passenger cars and LCVs. Manufacturers can also apply to the Commission for consideration of CO2 savings achieved through the use of innovative technologies. The Commission may grant temporary derogations from their specific emissions targets to certain niche manufacturers.

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 public event marks CARB’s next step to promulgate new, lower NOx standards for heavy-duty engines and vehicles.

By: Arthur Foerster and Reed McCalib

Background

On Wednesday, January 23, 2019, the California Air Resources Board (CARB) will hold a public workshop in Sacramento focusing on potential regulatory changes that would lower oxides of nitrogen (NOx) emissions for new, on-highway heavy-duty vehicles and engines. Members of the public may attend the workshop in person or via webcast. (Event details are included at the end of this article.)

According to the agency’s public notice, CARB staff will discuss potential regulatory updates, challenges, and implementation strategies as the agency pushes for ever-lower emission standards. In particular, staff will discuss durability demonstration requirements, a supplemental certification test cycle for low-load operations, zero emission credits, in-use testing protocols, longer useful life and warranty periods, warranty claim reporting, lower particulate matter (PM) emissions, and NOx emissions tracking. Staff will also provide updates on ongoing low-NOx demonstration projects and will explain next steps in the rulemaking process.