Weekly Climate Change Policy Update - November 23, 2009

Article by Kyle Danish, Shelley Fidler, Kevin Gallagher, Megan Ceronsky and Tomás Carbonell

To receive the Weekly Update via email, visit our Sign Up/Subscribe page http://www.vnf.com/news-signup.html

Commentary President Obama left China with a raft of agreements for cooperation on clean energy . . . After a meeting with the chairmen of committees of jurisdiction, Majority Leader Reid made it official: the Senate will not vote on climate legislation until Spring . . . With the further slide of the legislative timetable, the bite of Clean Air Act regulation could become more pronounced. Within industry, the disruption that will be caused by the EPA regulatory program – even with the "tailoring rule" – is slowly sinking in. Major infrastructure activities, in particular, could slow substantially or grind to a halt as companies have to queue up with delegated state agencies to obtain permits and install currently unknown "Best Available Control Technology." . . . Senators Alexander (R-TN) and Webb (D-VA) introduced the Clean Energy Act of 2009 (S. 2776) with the goal of doubling nuclear energy production in 20 years.

Executive Branch CFTC Chairman Calls for Tight Regulation of GHG Markets. Gary Gensler, Chairman of the Commodity Futures Trading Commission (CFTC), backed stringent regulation of over-the-counter (OTC) derivatives – including derivatives based on GHG allowances and offset credits – in testimony before the Senate Agriculture Committee. Gensler said that all derivatives that use standardized terms should be traded on regulated exchanges, and that all derivative contracts should be mediated through transaction insurance organizations known as clearinghouses wherever possible. He also urged that transactions not cleared through a clearinghouse be reported to federal regulators. Although Gensler stated that GHG markets should have the same regulatory protections as other commodity markets, he acknowledged that the GHG market "would be a far larger market and might present new issues." Under the Waxman-Markey climate change bill, CFTC would exercise regulatory authority over derivative and cash markets for GHG allowances and offset credits. EPA Holds Public Hearing on Tailoring Rule. The Environmental Protection Agency (EPA) held a public hearing in Alexandria, Virginia, to take comment on its proposed "tailoring rule," which was published in the Federal Register in late October. The "tailoring rule" would establish an emission threshold of 25,000 tons CO2-equivalent per year for the Clean Air Act's New Source Review and Title V programs, which is an increase over the statutory threshold of 100-250 tons per year. Both programs are expected to apply to greenhouse gas (GHG) emissions once EPA finalizes its motor vehicle GHG standards in...