Audit, Compliance and Risk Blog

As governments worldwide consider expanding requirements to manage greenhouse gas (GHG) emissions and moderate climate change, private sector groups are mobilizing to craft voluntary reporting and management activities – which might shape or even avoid future governmental mandates. In May, the 32 international business leaders on the Financial Stability Board’s (FSB’s) Task Force on Climate-related Financial Disclosure issued recommendations for climate-related financial disclosures by public companies worldwide. The Task Force reported these recommendations to the Group of 20 (G-20) leaders at last month’s meeting in Hamburg – the G-20 finance ministers and central bankers had asked FSB in 2015 to commission the Task Force.

Since 2012, California has administered a “cap-and-trade” program, setting total greenhouse gas (GHG) emission limits from selected major emitting sectors and creating tradeable emission permits and offsets to provide flexibility and encourage innovation. The program was created under authority of the state’s 2006 “AB 32” legislation, which focuses on reducing statewide GHG emissions by 2020. This authority would have expired in 2020, but new legislation extends the program until 2030. In order to secure enough votes for the extension, legislative leaders and Governor Brown agreed to statutory changes in this program and related air quality programs.

EPA Administrator Scott Pruitt has been on a tour to publicize his efforts to get EPA “back-to-basics.” He launched the tour with a visit to a Pennsylvania coal mine in April. The agency issued a press release about that visit, which also summarized its “Back-to-Basics Agenda.” The press release summarizes the Agenda as “Protecting the environment; engaging with state, local and tribal partners; and creating sensible regulations that enhance economic growth.” The Agenda provides a convenient rhetorical framework for the new Administrator’s efforts to re-boot EPA’s activities.

The U.S. Environmental Protection Agency (EPA) administers rules governing the import and export of hazardous waste regulated by the Resource Conservation and Recovery Act (RCRA). These rules ensure that the U.S. meets its international responsibilities as a member of the Organization for Economic Cooperation and Development (OECD) by creating national rules that meet agreed-upon OECD standards.

Attempts to reduce greenhouse gas (GHG) emissions are more complex than they first appear. Reports in the mass media tend to focus on carbon dioxide (CO₂). The United Nations Framework Convention on Climate Change (Framework Convention) focuses primarily on six GHGs, including CO₂ as well as methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride (SF₆). Climate change scientists have identified hundreds of GHGs, with widely varying sources, relative contributions to climate change (numerical “global warming potential (GWP)”, where CO₂ is defined as 1.0), and total contribution based on emitted volumes.

In recent years, the United States and China have found a rare basis for cooperation in their joint efforts to accelerate international efforts to manage and reduce climate change. The first significant step in this cooperation was the two countries’ bilateral agreement in November 2014 to manage greenhouse gas (GHG) emissions within their boundaries (I blogged about it here). At the time, the two countries offered their commitments as a way to reinforce international climate change negotiations underway to replace the expiring Kyoto Protocol to the United Nations Framework Convention on Climate Change. In December 2015, those negotiations produced the Paris Agreement, which established global mechanisms for countries to declare self-enforcing national GHG management commitments (I blogged about the Paris Agreement here).

On August 2, the White House’s Council on Environmental Quality (CEQ) issued guidance to assist federal agencies in their consideration of the effects of greenhouse gas (GHG) emissions and climate change when evaluating proposed federal actions. I refer to this documents as “the Guidance” below.

The Clean Air Act (CAA) includes extensive regulatory requirements on “mobile sources,” which cover efficiency and emissions standards for a broad range of vehicles with internal combustion engines (automobiles, buses, aircraft), “nonroad engines and vehicles” (including lawnmowers, bulldozers and marine vessels), as well as motor fuel standards intended to promote cleaner burning fuels. The U.S. Environmental Protection Agency (EPA) uses CAA authority to set emission limits from engines, for CAA-regulated air pollutants, including carbon dioxide (CO2) regulated for its greenhouse gas (GHG) aspects.

The Montreal Protocol on Substances that Deplete the Ozone Layer provides the international framework for protecting the earth’s stratospheric ozone layer, by identifying and minimizing emissions of ozone depleting substances (ODSs). The original Montreal Protocol was initialed in September 1987 (I summarized it here). It is widely considered an effective example of international cooperation (I blogged about the healing of the “ozone hole” here), in contrast with ongoing struggles to reach binding international agreements to address climate change. In fact, during 2016 efforts are underway to build on the Montreal Protocol’s strengths by amending it to address additional chemicals that may harm ozone and contribute to climate change.

On July 25, the Environmental Protection Agency (EPA) issued a formal finding under the Clean Air Act (CAA), that greenhouse gas (GHG) emissions from aircraft “endanger public health or welfare.” This aircraft-specific finding builds on EPA’s 2009 finding that GHGs endanger public health, covering the same six GHGs: carbon dioxide (CO2), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. EPA calculates that aircraft produce 12 percent of all U.S. transportation GHG emissions and more than 3 percent of total U.S. GHG emissions, and that U.S. aircraft GHG emissions represent 29 percent of all global aircraft GHG emissions and 0.5 percent of total global GHG emissions.