Colorado air quality regulators will soon decide whether to impose a cap-and-trade system for controlling greenhouse gas emissions. Environmental Defense Fund, one of the country’s most influential environmental advocacy organizations, asked the state’s Air Quality Control Commission Dec. 22 to adopt a regulation that would create the market-based mechanism for limiting atmosphere-warming pollution.
EDF’s petition aims to place Colorado in the vanguard of states wrestling with the question of how best to confront the planet’s climate crisis. The request also responds to two mandates enacted by the General Assembly in 2019.
Then, legislators commanded the AQCC in a Climate Action Plan established by House Bill 19-1261 to develop rules to achieve “statewide greenhouse gas pollution abatement,” established 2005 as the benchmark year for measuring reduction of greenhouse gas emissions, and set lowered GHG pollution targets of 26% below that gauge by 2025, 50% below it by 2030, and a 90% decrease from it by 2050. By means of Senate Bill 19-096, the AQCC was required to issue, by July 1, 2020, a notice of proposed rulemaking for regulations that will facilitate achievement of the House Bill 19-1261 goals. According to the Colorado Register, that notice has not yet been posted.
Pam Kiely, EDF’s senior director of regulatory strategy, said the organization’s proposal is designed to give polluters some flexibility in complying with a regulatory demand to reduce greenhouse gas emissions. “The proposal would essentially put an overall limit on the majority of Colorado’s major sources of greenhouse gases and would require any covered source … to hold a permit for every ton of greenhouse gas emission, every ton of carbon dioxide equivalent,” she said. “The state would only issue a finite amount of permits every year and that number of permits would decline consistently over time to meet the state’s 2025 and 2030 greenhouse gas reduction targets, putting an overall constraint on the allowable emissions from those sources on an annual basis.”
EDF also touts lowered levels of conventional air pollutant discharges that would follow adoption of its favored mechanism. According to its petition, the cap-and-trade proposal would result in 60% less sulfur dioxide emissions, 20% less nitrogen oxide emissions and a reduction of about 800-900 metric tons of particulate emissions by 2030. All of those reductions are “co-pollutants” with GHGs, Kiely said. EDF also projects health benefits in the amount of approximately $1.9 billion per year if its preferred policy is installed.
A system similar to that proposed by EDF has been in place in California since 2013 and applies to sources that are responsible for about 80% of that state’s GHG emissions. However, a November 2019 ProPublica investigation found that the Golden State’s renowned incentive-driven system for reaching climate policy objectives might not actually be working well. While California’s overall greenhouse gas emissions has fallen since the cap-and-trade system was implemented, emissions from the oil and gas sector and petroleum-fueled vehicles have risen since then, most polluting facilities increased emissions during the first three years of the program, and the nation’s most populated state is not on track to meet its 2030 greenhouse gas emission goals. “[W]hile the state’s program has helped it meet some initial, easily attained benchmarks, experts are increasingly worried that it is allowing California’s biggest polluters to conduct business as usual and even increase their emissions,” the report concluded.
Another criticism of the California approach is that it has left economically distressed communities, including many with highly diverse populations, at the mercy of polluters. A 2016 study commissioned by Occidental College, the University of California at Berkeley, and the University of Southern California found that “regulated GHG-emitting facilities are located in neighborhoods with higher proportions of residents of color and residents living in poverty. In addition, facilities that emit the highest levels of both GHGs and [particulates] are also more likely to be located in communities with higher proportions of residents of color and residents living in poverty.” Kathryn Phillips, executive director of Sierra Club California, said her group and others have opposed cap-and-trade programs for that reason. “What you end up doing is reducing an opportunity to cut localized air pollution,” she said, highlighting continued emission of conventional pollutants such as sulfur dioxide, nitrogen oxides and particulates at high levels by oil refineries in that state.
The leader of an ongoing effort by Gov. Jared Polis’ administration to develop a Greenhouse Gas Pollution Reduction Roadmap raised that concern when asked whether Polis’ energy policy advisors have considered recommending a cap-and-trade system. “I think we have all seen the concerns that have played out in California, and that played out around the selection of [an] EPA administrator by the Biden administration, [involving] environmental justice in the context of cap-and-trade,” said Will Toor, chief executive officer of the Colorado Energy Office. Toor was referring to recent controversy surrounding California’s chief air pollution regulator, Mary Nichols, being passed over for a nomination as EPA administrator in favor of the director of North Carolina’s Department of Environmental Quality, Michael Regan, after being criticized for paying too little attention to environmental justice concerns as she oversaw implementation of the California cap-and-trade program.
Kiely said she is confident the Colorado proposal will avoid producing results that could be considered unjust to communities that face disproportionately large amounts of air pollution. The tools that will enable the balancing of these priorities include a removal of any flexible compliance options for emissions sources “affecting the pollution outcomes of disproportionately affected communities,” she said.
Acknowledging the shortcomings of California’s program, Kiely said she is convinced that cap-and-trade can be a “backstop” for any other pollution control programs Colorado implements, including those aimed at climate change-causing gases. “You definitely want a lot of different policy tools on the field, policy tools that are catalyzing the development of new technologies, that are helping to shape the GHG performance of particular sectors,” she said. “But you don’t want to put the climate policy team on the field without a goalie. The advantage of the California program, and what we see as a potential advantage of an emission limit program in Colorado, is to ensure that there’s a backstop limit that declines over time and that Colorado overall GHG emissions can’t exceed the allowance budget for that year.”
Despite Kiely’s optimism that EDF’s proposal can help Colorado reach the legislative greenhouse gas pollution targets can be reached, Toor does not see the Polis administration being enthusiastic about creating a system based on economic tools.
“The set of strategies that we lay out in the roadmap is very aggressive and is going to require all hands on deck, from state regulators and state agencies, to move forward over the next couple of years,” he said. “It’s hard for me to imagine there being the bandwidth to consider other major programs during that time.”
Toor was alluding to the likely direction of the state’s greenhouse gas pollution reduction roadmap, due to be finalized this month. Regulators, he said, should expect to be guided on the basis of sector-specific policies that will impact the electric utility, oil and gas and transportation sectors, as well as the use of energy in homes, businesses and factories. “[For] those four major areas, there are a set of policies with projected emissions reductions from each policy that add up to the level of emissions reductions required to achieve the 2025 and 2030 targets,” Toor said. “We’ve really tried to take a granular focus on where the emissions are coming from and what are the economic transformations that are possible in those sectors and that will both reduce emissions and are also good for consumers and businesses across the state of Colorado.”
Colorado has begun to adopt policies to reduce greenhouse gas pollution. In 2019, the state finalized the Colorado Low Emission Automobile Rule, and in 2020, AQCC put in place a Zero Emissions Vehicle rule. On the other hand, Polis’ administration has demonstrated reluctance to force the closure of coal-fired power plants. In December, AQCC backed off from a November decision to move up the planned mothballing of three such plants. Polis and his team have also shown some hesitance about cracking down on oil and gas, brokering a deal with advocates of more restrictive facility sighting limits to refrain from pushing a ballot initiative in 2020 in exchange for an effort by the state’s Oil and Gas Conservation Commission to address the issue. COGCC did so in November, adopting rules under a 2019 reform of Colorado’s principal statute governing the industry.
Whether Polis and his successors in the governor’s mansion meet the demanding greenhouse gas emission goals set by the legislature in 2019 depends on driving a lowering of climate-changing pollution from all of those sectors. While utilities contribute about 85% of the state’s greenhouse gas pollutants, according to the most recent version of Colorado’s greenhouse gas inventory, the oil and gas sector’s enhancement of the problem is growing. Emissions from the industry nearly doubled, largely due to increased fracking between 2005-2015, according to a report prepared for EDF and Boulder-based Western Resource Advocates in February 2020. That report also concluded that the Centennial State must see an average annual reduction of 4.9% in total greenhouse gas emissions between 2021-2030 to reach the 2019 Climate Action Plan objectives.
Western Resource Advocates, a Boulder-based environmental advocacy group, asked the AQCC in August to set sector-specific pollution limits. It released a statement lauding EDF’s proposal as an “important opportunity” for Colorado to create a policy to “ensure pollution is reduced at the pace and scale over the next decade that science demands.” EDF asked AQCC to consider its petition during the agency’s February 2018-2019 meeting.
— Hank Lacey