The Transportation Climate Initiative Marches Forward; It’s Not Going to Be Easy.

On March 1, the Transportation Climate Initiative jurisdictions released a draft “model rule” that would provide a template for individual state rules governing the operation of the TCI Program.  Although only three states and the District of Columbia committed in December 2020 to implement TCI-P, the announcement on Monday indicated that the model rule “was developed by twelve” TCI jurisdictions.”  I guess that eight states like the model rule – just not enough at this point to commit to implementing it.

All of which emphasizes that getting TCI-P off the ground is not going to be easy.  Here’s just one piece of evidence.  The model rule contains two separate reserve prices.  The cost containment reserve price, or CCR, is intended to prevent price increases that are “too high.”  The reserve price for the initial year, 2023, is set at $12.00/ton in the model rule.  If you have followed recent debates over the social cost of carbon, you’ll be aware that $12.00/ton is a pretty low number when compared to the costs imposed by carbon emissions.

The second reserve price is the emissions containment reserve, or ECR.  The ECR pulls emissions out of the auction if the demand is too low.  The ECR trigger price in the initial year of 2023 is $6.50.

What these two numbers tell me is that state officials are much more worried about the political fallout from implementing TCI-P than about the program not being sufficiently stringent to get the transportation carbon emissions reductions that we need.  I totally get that approach.  Let’s get TCI-P up and running, show that it works, and then tighten down as necessary.  Of course, if that’s the approach, then TCI may want to avoid setting the CCR and ECR prices now for the out years.  It will be difficult to ratchet those prices up once they are written into regulation.

TCI has requested comments on the model rule by April 1.

Cost-Benefit Analysis Is Very Complicated — And Very Important

It’s only a slight rhetorical exaggeration to say that the limited bandwidth left to environmental issues other than climate change in recent years has been largely occupied by concerns about PFAS – Per-and polyfluoroalkyl substances, also known as “Forever chemicals.”  A fascinating story in Bloomberg Environment & Energy (subscription required) this week suggests that we may need a little more bandwidth for PFAS.

The Bloomberg story explained that fluoropolymers are integral to the rollout of 5G networks and are also critical to a number of advanced technologies, some of which may matter much more to society than just the ability to download movies very quickly.  For example, fluoropolymers are used in automatic crash prevention technologies in automobiles.  They are also critical in implantable medical devices. 

And thus we arrive at one of my favorite subjects, cost-benefit analysis.  At a certain level, the question of what to do about fluoropolymers seems tailor-made for cost-benefit analysis.  After all, the fundamental question is whether the benefits of fluoropolymers are worth the environmental risks.  And whether we acknowledge it or not, we are making implicit judgments about costs and benefits, even if we don’t explicitly recognize them as such.  If we ban fluoropolymers, we are making the judgment that the costs are greater than the benefits.  If we allow unfettered use, we are making the judgment that the benefits exceed the costs.  We might as well make these judgments explicitly, so we can be intentional about it and make certain that the cost-benefit analysis at least approximates something on which we can rely.

We all know that once the cat is out of the bag and the horse has left the barn, it’s difficult to put Humpty-Dumpty together again.  In short, once we start high-volume production of fluoropolymers, if it turns out that their production is associated with significant toxicity and environmental impacts, it’s going to be very difficult to avoid those impacts.  And yet, at this point, we don’t know the extent of those potential adverse impacts.  On the other side, we also don’t know the extent of their benefits, because we probably don’t know more than a tenth of their potential uses – they haven’t even been invented yet.

The only thing I do know is that these difficulties are no excuse for giving up.  As noted earlier, we don’t get to avoid making cost-benefit judgments just by pretending that we’re not doing so.

Is BlackRock Starting to Walk the Walk?

Climate risk is investment risk.

So says BlackRock.  And when you manage $8.7 trillion, people tend to listen to what you say.  I’ve been noting for some time that BlackRock’s statements seemed to presage increasing shareholder activism with respect to climate.  And yet there have been skeptics.  As noted in ClimateWire last week, BlackRock’s actions have not always seemed to match its rhetoric.

That’s why BlackRock’s recent release, “Climate risk and the transition to a low-carbon economy” is potentially so significant.  It starts with the proposition that:

There is no company whose business model won’t be profoundly affected by the transition to a net zero economy.

It then enumerates steps companies must take to prepare for the impacts of the transition.

Finally, it lists factors that BlackRock will consider in assessing how well companies are prepared for the investment risks posed by climate change and the transition to a net zero economy.  These include:

  • How the board and management are considering the physical and transition risks of climate change on the company, alongside opportunities for energy efficiencies and use of renewable resources
  • How the company is adjusting its strategy and/ or capital allocation plans to address the risks and opportunities identified
  • How the company is assessing the potential for changes in demand for goods or services due to climate change (including consumer preferences)
  • How the company has assessed its current emissions baseline, set rigorous targets, and evaluated whether it is aligned with net zero GHG emissions by 2050
  • Whether the company is stress-testing its assets and assessing the resilience of its strategy under a less than 2° C scenario; including the impacts of policies, such as a carbon tax, fuel selections, and/ or efficiency standards, on profitability
  • How the company may be harnessing sustainable solutions to take advantage of new investment opportunities, business lines, or products and access to capital
  • How the company is monitoring the regulatory landscape and whether it is participating in relevant policy discussions, including international, national, and local requirements and trends

What’s important, of course, is what BlackRock actually does with these assessments.  This is where the rubber meets the road and where corporate board members are wondering if BlackRock really means it.  In the last substantive section, headed “Holding Boards Accountable,” BlackRock states that:

Where corporate disclosures are insufficient to make a thorough assessment, or a company has not provided a credible plan to transition its business model to a low-carbon economy, including short- medium- and long-term targets, we may vote against the directors we consider responsible for climate risk oversight. We may also support shareholder proposals that we believe address gaps in a company’s approach to climate risk and the energy transition. We view this as the appropriate escalation where we see a lack of urgency and progress in a company’s actions around climate risk.

The whole (investment) world is watching.

More on the Social Cost of Carbon — Are We Doing It All Wrong?

Last month, I posted about the Biden administration’s effort to develop a new estimate of the social cost of carbon.  The EO requires a new interim SCC within 30 days and a new longer-term SCC by January 2022.  Earlier this week, Joseph Stiglitz and Nicholas Stern – it doesn’t get more impressive than a Nobel prize winner and an actual Lord – released a National Bureau of Economic Research Working Paper (non-academics can download up to three papers free per year) in which they argue that, not just is the value we’ve place on the SCC too low, but that the methods we have used to develop the SCC are fundamentally flawed.

Stiglitz and Stern identify a number of flaws in the “Integrated Assessment Models” currently used to set the SCC.  One key flaw I had not really considered previously is that:

It is a fundamental mistake to begin the analysis of climate change under the premise that, but for the mispricing of emissions, the economy is efficient. And there are limits on the ability of government to “correct” these market failures.

It’s a gross oversimplification, but the quick summary of their recommendation is that, rather than determining the marginal damage caused by climate change and setting the SCC based on that, we should instead determine what increase in global temperatures humanity and the planet can actually tolerate and set a carbon price that will get us there.  As they fairly point out, we have already done the first part; it’s called the Paris Agreement.  Similarly, many governments have now established goals of net carbon neutrality by 2050. So what should be the price of carbon that will ensure a temperature raise of no more than 2 degrees Celsius (and, we hope, closer to 1.5 degrees Celsius)?

The Working Paper is more about methodology than implementation, but it’s clear that we’re talking about a price above $100/ton, and fairly soon.  If I had to guess, I’d predict that the Biden administration will get to this result.  However, it is likely to do so, not by adopting the approach recommended by Stiglitz and Stern, but just by lowering the discount rate sufficiently to result in an SCC > $100/ton.

Either way, carbon is about to get much more expensive.

Have I Mentioned that PM2.5 Is Bad For You?

The evidence of the harm resulting from PM2.5 exposures keeps rolling in.  Earlier this month, Environmental Research published an article titled “Global mortality from outdoor fine particle pollution generated by fossil fuel combustion: Results from GEOS-Chem” (abstract available; full article requires purchase), which concluded that global annual mortality from PM2.5 exposure is roughly twice as high as previously estimated. 

Somehow, I don’t think that this is going to persuade those who believe that a causal relationship between PM2.5 levels below the current NAAQS and increased mortality has not been established, but I do expect the evidence to continue to pile up – and I don’t have any doubt that a decision by EPA to reduce the PM2.5 NAAQS would easily stand up to judicial review, even before our most conservative judges.

And I continue to have a vision of a really green future, when we’ve attained a pretty much carbon-free electricity grid in order to address climate change.  We’re then going to see how much “co-benefits” really do matter.  Asthma rates will have decreased.  Mortality related to PM2.5 exposure will have decreased.

There is reason to be optimistic.

When the Music’s Over, Turn Off the Dakota Access Pipeline

Last week, the District of Columbia Court of Appeals affirmed vacatur of the easement issued to the Dakota Access Pipeline by the Army Corps of Engineers.  As I noted last month in connection with the Biden Executive Order concerning Keystone XL, no one in the industry is rushing out to plan any new pipelines and no one in the financing business is rushing out to provide the cash to build any new pipelines. 

Although the DAPL decision does not break any new ground, it certainly adds to the sense that siting new pipelines may be an uphill battle at this point.  The Court’s opinion affirms the primacy of NEPA in ensuring that environmental impacts are addressed before major infrastructure projects are constructed.  Specifically, the Court stated that:

[I]f you can build first and consider environmental consequences later, NEPA’s action-forcing purpose loses its bite.

If, when an agency declined to prepare an EIS before approving a project, courts considered only whether the agency was likely to ultimately justify the approval, it would subvert NEPA’s purpose by giving substantial ammunition to agencies seeking to build first and conduct comprehensive reviews later. If an agency were reasonably confident that its EIS would ultimately counsel in favor of approval, there would be little reason to bear the economic consequences of additional delay.

The Court did reverse the District Court’s order to shut down the DAPL, finding that the Court had not made the findings required to support an injunction.  I fully expect that the District Court will make the required findings and issue an injunction requiring a shutdown.  Indeed, the opinion notes that an injunction motion has been fully briefed before the District Court.

I could still see such an injunction being reversed on appeal, though I’m not sure I’d bet on it.  I certainly wouldn’t bet on the successful licensing and financing of any pipelines not yet in the pipeline, as it were.

The music is almost over and it may be about time to turn out the lights on fossil fuel pipelines.

The Trump Administration Suffers Yet One More Judicial Defeat; The “Secret Science” Rule Is Vacated

Last month, I noted that the Trump administration had suffered “one final judicial defeat” – the rejection of its Affordable Clean Energy Rule.  Of course, I spoke too soon.  Last week, Judge Brian Morris rejected EPA’s rule “Strengthening Transparency in Pivotal Science Underlying Significant Regulatory Actions and Influential Scientific Information” – also known as the “Secret Science Rule.” 

The Secret Science Rule was promulgated on January 6, 2021, just before Andrew Wheeler’s exit as EPA administrator, and after more than two years of rulemaking.  EPA stated that the rule was not subject to the APA’s notice provisions, both because it was “housekeeping”, rather than substantive, and because – don’t laugh – the crisis of confidence in EPA rulemaking was so significant that the order couldn’t wait.  Of course, January 20 had nothing to do with it.

Judge Morris rejected both arguments.  And, like many other courts reviewing the Trump administration’s regulations, Judge Morris’s language could serve as a summary of the Trump administration’s deregulatory efforts as a whole.  First, he eviscerated EPA’s claim that the rule was procedural, rather than substantive:

The Final Rule instead makes a substantive determination of how the agency should weigh particular scientific information in future rulemakings. The Final Rule determines outcomes rather than process. The Final Rule’s status becomes particularly clear when one examines what it is missing—any kind of procedure. (My emphasis.)

Then Judge Morris eviscerated (such a good word, I had to use it twice) EPA’s argument that the lack of notice was justified because the rule was promulgated in response to an emergency:

Federal Defendants provide no argument on this justification. EPA failed to demonstrate how delayed implementation would cause real harm to life, property, or public safety. EPA failed to describe the crisis of “confidence” it sought to address. EPA failed to show a need for urgent implementation when it took more than two-and-one-half years to finalize this regulation. (My emphasis.)

Judge Morris initially simply delayed the effective date of the rule for 30 days following promulgation.  However, in response to a motion by the current EPA that the Court vacate the rule, because EPA had no authority to issue it pursuant to its housekeeping authority, Judge Morris agreed and vacated the rule.

And thus the movement to end the use of “secret science” ends, not with a bang, but with a whimper.

It’s Fair to Say At This Point That Climate Change Is a Priority For This Administration

Yesterday, President Biden signed an Executive Order on Tackling the Climate Crisis at Home and Abroad.  It’s even more comprehensive than last week’s order.  Indeed, my main reaction to the order isn’t to any of the specific provisions.  It’s one simple realization – he really means it.  And I think that’s the point.  There is no question at this point that President Joseph Robinette Biden, Jr. really believes that climate change is an existential crisis.  When presidents near the end of their terms, commentators often talk about a president’s efforts to define their legacy.  Eight days into President Biden’s term, it’s clear that he is going to do everything possible to make the fight against climate change at least one very big part of his legacy. 

I also want to note the care and thought that went into this EO.  There really is no substitute for finding the right people and letting them use their intelligence, experience, skills, and judgment.  And President Biden has brought on a climate team with intelligence, experience, skills, and judgment and he’s letting them do their thing.

Indeed, one point about the substance of the order flows directly from my views about the thoughtful nature of the order.  This really is a structural approach to climate change.  It embeds climate change throughout the functioning of the federal government.

I’ll make just two further points about specifics in the EO.  First, as a follow-up to the concerns I expressed last week about ensuring that the environmental impact review process is able to distinguish between projects that have beneficial impacts on climate from those that don’t, it appears that the President and his team were way ahead of me.  Here’s section 213:

The Chair of the Council on Environmental Quality and the Director of the Office of Management and Budget shall take steps, consistent with applicable law, to ensure that Federal infrastructure investment reduces climate pollution, and to require that Federal permitting decisions consider the effects of greenhouse gas emissions and climate change.  In addition, they shall review, and report to the National Climate Advisor on, siting and permitting processes, including those in progress under the auspices of the Federal Permitting Improvement Steering Council, and identify steps that can be taken, consistent with applicable law, to accelerate the deployment of clean energy and transmission projects in an environmentally stable manner.

The second point is about politics – and here one can sense President Biden’s direct involvement.  He clearly cares about climate.  He also clearly understands the delicate political tightrope he’s walking.  That’s why the EO contains both far-reaching environmental justice provisions and provisions to address the economic impacts of the Government’s climate efforts on those working in areas dominated by fossil fuels.

On EJ, I’ll note two totally different provisions that help show the breadth given to this issue.  First, the Attorney General is directed:

to develop a comprehensive environmental justice enforcement strategy, which shall seek to provide timely remedies for systemic environmental violations and contaminations, and injury to natural resources.

Second, the EO establishes the “Justice40 Initiative”, aimed at attaining “a goal that 40 percent of the overall benefits flow to disadvantaged communities.”

Regarding the fossil fuel economy, an entire section of the EO is devoted this issue.  The EO creates an Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization.  Its first task is to prepare a report:

describing all mechanisms, consistent with applicable law, to prioritize grantmaking, Federal loan programs, technical assistance, financing, procurement, or other existing programs to support and revitalize the economies of coal and power plant communities.

Do you think that President had Senator Manchin in mind when this section was drafted?

Only time and history will tell us what President Biden’s real legacy will be, but this is a start.

It’s the Externalities, Stupid — Climate Edition

Among the important provisions of President Biden’s Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis is the requirement to review and revise estimates of the social cost of carbon (and nitrous oxide and methane).  The order establishes a working group, co-chaired by the Chair of the Council of Economic Advisers, the Director of OMB, and the Director of the Office of Science and Technology Policy.  The working group has been directed to provide interim updates within 30 days, and a revised SCC, SCN, and SCM by January 2022.

There’s little doubt that the SCC will be greater than $50/ton, and it could be substantially higher.  In fact, the Bloomberg Environmental and Energy Report (subscription required) published an interview last Friday with Michael Greenstone, who is now at the University of Chicago, but was one of the developers of the SCC in the Obama administration.  As of last year, that formula already showed a SCC greater than $50.  However, Greenstone has just co-authored a new paper arguing that the appropriate interim SCC for 2020 would be $125/ton.

I like that Bloomberg asked Greenstone about that fact that he holds a chair at U. of C. named for Milton Friedman.  Given that Friedman was not the economics profession’s greatest fan of big government, there is a certain irony in Greenstone’s work, which almost inevitably would result in a significantly larger role for the government in regulating the economy.  And yet, I agree with Greenstone’s position that Friedman “would support [the SCC] as a means of setting the rules of the road for carbon markets.”

I have previously argued that it is reasonable shorthand to say that the very purpose of government is to address the problem of externalities.  And it would be difficult to find a more important externality today than the climate impacts caused by emissions of GHG by economic actors who aren’t forced to pay for the costs imposed by those emissions.

It’s also important to remember that the idea of externalities isn’t a wild left-wing plot.  It’s basic microeconomics, something that Republicans and conservatives used to believe in.  In any case, even if the SCC (and SCN and SCM) aren’t used as the basis of a carbon pricing bill that will sail through Congress in the next few months, it is going to become a core principle of how environmental impact reports will be prepared under NEPA for at least the next four years, and that by itself is going to have a profound impact on energy and broader infrastructure development.

The times, they are a-changin’.

President Biden Pulls the Plug on Keystone XL — Let’s Make Sure It Sets the Right Precedent

Yesterday, President Biden hit the ground running on environmental policy, issuing an Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.  There’s a lot in it, so I think I’m going to have to take it in blog-sized bites.  Let’s start with Section 6, in which he revoked the Presidential permit for the Keystone XL pipeline.

keystone pipeline protestors in silhouette with man holding ‘NO XL’ sign (XXXL)

Why start here?

Well, it’s a big deal, any way you look it.  It’s pretty much the end for large fossil fuel pipeline construction in the US.  According to Bloomberg (subscription required), here’s what Alan Armstrong, CEO of the Williams Companies, had to say about it:

I can’t imagine going to my board and saying, ‘we want to build a new greenfield pipeline’. “I do not think there will be any funding of any big cross-country greenfield pipelines, and I say that because of the amount of money that’s been wasted.

OK.  But there’s also another reason why this is important. Creating a new, renewable electricity grid is going to require substantial new transmission capacity.  In terms of direct impacts, there isn’t necessarily much difference between siting a pipeline and siting a transmission line.  They can both cause damage to wetlands and endangered species.

The difference between them is simple and stark.  Fossil fuel pipelines lead to greater GHG emissions, while new transmission is necessary to reduce GHG emissions.  And so much for the Trump administration’s efforts to minimize consideration of indirect impacts from infrastructure projects.  It’s all about the indirect impacts!

It can be a fine line between one person’s NIMBY and another person’s legitimate environmental concerns.  I sure hope we figure out how to assess environmental costs and benefits in infrastructure siting sooner rather than later, or that grid we’re all counting on to deliver zero-carbon electricity won’t be there when we need it.

Don’t Let the Door Hit You On Your Way Out: Trump EPA Suffers One Final Judicial Defeat.

Yesterday was the last full day of President Trump’s term.  On environmental issues, it closed on a fitting note – another major judicial defeat.  The District of Columbia Court of Appeals vacated EPA’s Affordable Clean Energy Rule.  In doing so, the Court – thanks to what appears to have been a misguided strategic decision by EPA – confirmed EPA’s authority to use a range of tools to regulate greenhouse gases under the Clean Air Act.

The crux of the case and the regulatory decisions made by the Obama administration in promulgating the Clean Power Plan and the Trump administration in promulgating the ACE Rule has always been whether EPA has authority to regulate “outside the fence line.”  In other words, can EPA require GHG emissions from power plants that would require generation switching?

The strategic decision that the Trump EPA made was that, rather than relying on its discretion to choose not to regulate outside the fence line, it instead concluded that it had no discretion and that the CAA unambiguously precludes regulation outside the fence line.  The Court rejected EPA’s conclusion, for three reasons.

First, the plain language of Section 7411(a)(1), the root of the EPA’s authority to determine the best system, announces its own limitations. Those limitations simply do not include the source-specific caveat that the EPA now interposes and casts as unambiguous.

Second, there is no basis—grammatical, contextual, or otherwise—for the EPA’s assertion that the source-specific language of subsection (d)(1) must be read upstream into subsection (a)(1) to equate the EPA’s “application of the best system” with the controls States eventually will apply “at and to” an individual source.

Third, even if subsections (a)(1) and (d)(1) were read together in the way the EPA proposes, they would not confine the EPA to designating a best system consisting of at-the-source controls. The EPA’s entire theory hinges on the Agency’s unexplained replacement of the preposition “for” in “standards of performance for any existing source” with the prepositions “at” and “to.” Yet the statutory text calls for standards of performance “for” existing sources. Emission-reduction measures “for” sources may readily be understood to go beyond those that apply physically “at” and “to” the individual source. Emissions trading, for example, might be a way “for” a source to meet a standard of performance.

It is this last argument that I find most persuasive and is also, I think, the argument most likely to be persuasive to the conservative members of the Supreme Court, assuming that the Biden administration resurrects the Clean Power Plan or something like it.

And if that happens, the Biden administration may well thank the Trump administration for its hubris and for the judicial decision that was the consequence of that hubris.

And I hope that the Biden administration is not also infected by hubris; there’s still nothing close to a guarantee that SCOTUS will go along with this line of argument.  Legislation would still be preferable to reliance on a broad interpretation of section 111(d).

There’s a big difference between mostly dead and all dead.

Sometimes, “mostly dead” is just a pause before successfully storming the castle.  On January 14, Governor Baker vetoed the climate bill that passed the Massachusetts Legislature on January 4 with overwhelming support (see our posts herehere, and here).  I couldn’t resist the Princess Bride reference, but despite the veto, it is probably a stretch to refer to the bill as even “mostly dead.”

In his Veto Letter, the Governor  endorsed the broader goals of the bill – “The Commonwealth needs bold and urgent action on climate change” – and went out of his way to assert “agreement with many of its provisions.”  He justified his veto based on the timing at the end of the legislative session and a list of specific concerns.  First, he asserted that provisions in the bill would work against the intent of newly enacted Housing Choice legislation.  Specifically, he worried that a net zero energy stretch code could slow housing development.  Second, he criticized the lack of provisions on climate change adaptation.  Third, he criticized the approach to environmental justice as insufficient.  Fourth, he raised concerns that the bill could frustrate nascent regional clean energy procurement efforts.  Fifth, he criticized the specific interim reduction targets as “not supported by scientific and detailed analysis.”  His primary concern on this point appears to be that in setting a 5% more aggressive reduction target for 2030 (50% below 1990 emissions rather than the 45% below 1990 emissions) and in demanding sector-based limits, the Legislature was disregarding the effort and analysis that went into his administration’s recently released 2050 Decarbonization Roadmap.  Finally, he raised a general concern that the bill could negatively impact sectors of the economy affected by COVID-19.  Perhaps recognizing the legislative resolve behind the bill, the Governor expressed a willingness to work with the Legislature to quickly pass improved legislation.

Legislators (including the House Speaker and Senate President) have not been shy about announcing their intent to push the bill forward in the new session despite the veto.  There has been talk of refiling immediately and holding votes as early as this week.  And with a veto that carefully announces support for the bill’s goals and specifically expresses a desire to act  on the issues raised in the bill, it appears likely that something will move ahead quickly whether the Legislature sticks to its guns and pushes the bill forward largely unchanged or makes minor changes to address the Governor’s concerns.

Taking a step back, if the conversation is really about whether Massachusetts’s 2030 greenhouse gas emissions target should be set 45% below 1990 levels or 50% below 1990 levels based on the best assessments of achievability and cost, that is not a terrible place to be.

Incoming SEC Chairman Likely To Push For More ESG Disclosure

In a recent post, we examined the growing clash within the SEC over whether to mandate and standardize disclosure by public companies of business impacts and risks associated with Environmental, Social, and Governance (ESG) concerns.  Some at the SEC pushed for more standardized, comparable, and reliable disclosure of issuers’ exposure ESG risks.  Others, including former Chairman Jay Powell, pushed back, arguing that current disclosure rules, which  already require companies to disclose material risks, were sufficient to address ESG concerns.  It appears that the person President Biden will tap to lead the SEC going forward is likely to settle the debate in favor of additional regulations aimed at ESG reporting.

Biden is nominating Gary Gensler, former heard of the Commodity Futures Trading Commission (CFTC) under the Obama administration, to Chair the SEC.  In the wake of the 2008 financial crisis, President Obama tapped Gensler to push for new rules on the over-the-counter derivatives markets. Gensler forged new regulations governing derivatives, and oversaw a series of enforcement actions based on the new regime.

If past is prologue, we should expect Gensler to push for regulations in other emerging areas of growing importance to the markets, including ESG disclosures, as the New York Times and others have reported. Indeed, many believe “Gensler would likely be the most active, pro-regulatory SEC chairman” in decades.

In Case You Were Wondering, EPA’s PM2.5 Decision Really Was Horrible

Last month, I posted that EPA’s decision to retain the current PM2.5 NAAQS of 12 ug/m3 was the single worst decision by Trump’s EPA.  Since then, I have not received any comments suggesting that my ranking was incorrect.  In case anyone was still in doubt, Environmental Research recently released an on-line Pre-proof of A National Difference in Differences Analysis of the Effect of PM2.5 on Annual Death Rates.  The “difference in differences” approach is intended to address critics’ arguments that prior studies may have demonstrated an association between PM2.5 concentrations and mortality, but could not be used to demonstrate causality.

The study looked at excess mortality in the US Medicare population.  The results aren’t pretty.  For each 1 ug/m3 increase in PM2.5 concentrations, there are roughly an additional 14,000 deaths per year in the United States.  With my typical gift for understatement, I’ll note that it’s difficult to review this work and conclude that the current standard of 12 ug/m3 protects the public with “with an adequate margin of safety.”

On the plus side, I can only suggest that everyone undertake a visualization exercise, and try to imagine what the world will look like when it is powered almost entirely by non-polluting electricity.  How much cleaner the air will be.  How many fewer asthma cases there will be.  How much lower mortality will be.  How much greater the quality of life will be.

It won’t be easy to get there, but we’ve got to start somewhere.

Massachusetts Starts 2021 With a Bang on Climate

Over the past four years, while the Trump Administration did everything possible to ignore climate change, optimists continued to find progress at the state level.  And while President-elect Biden has put together an A-team on climate, Massachusetts, at least, seems determined to show that the states will continue to lead – even if they now have a partner at the federal level.

Two weeks ago, I noted that Massachusetts was one of three New England states committing to implement a cap and invest program to limit GHG emissions from the transportation sector.  Last week, I was tempted to call the Baker administration’s 2050 Decarbonization Roadmap a “tour de force.”  Not to be outdone, a legislative conference committee reached agreement last night on “An Act creating a next-generation roadmap for Massachusetts climate policy.”  Assuming that both houses adopt the conference report, the act will be one of the most important pieces of legislation in a generation.  It’s going to have a profound impact on the Massachusetts environment and the Massachusetts economy.  And while no legislation is perfect, I am comfortable in saying that that impact will be for the better – for the environment and the economy.

The conference report is 57 pages and has 114 sections, so this post will most certainly stick to the highlights:

  • A net-zero limit by 2050 (with no less than an 85% reduction in actual GHG emissions).
  • A 50% reduction by 2030 (The Governor’s Roadmap last week required a 45% reduction by 2030).
  • A requirement that EOEEA adopt GHG limits on six economic sectors:  electric power, transportation, commercial and industrial heating and cooling, residential heating and cooling, industrial processes, and natural gas distribution and service.
  • A 2,400 megawatt increase in the required procurement of offshore wind, to a total of 5,600 MW.
  • An increase in the renewable portfolio standard of 3% per year beginning in 2025, resulting in a minimum of 40% renewable generation by 2030.
  • A mandated net-zero stretch energy code, available to municipalities as a local option.
  • Adoption of a number of provisions intended to address environmental justice concerns, including:
    • Enacting basic EJ concerns into law for the first time
    • Requiring that environmental assessments for new projects under MEPA address EJ concerns in very specific ways
    • Incentives for solar development that particularly benefit EJ communities.

As I indicated last week in discussing the Administration’s 2050 roadmap, the concern about getting to net-zero isn’t technological or economic feasibility; it’s whether we have the political will to implement the necessary programs.  This legislation doesn’t fully answer the question, but it is a strong indication that, at least for now, at least in the Commonwealth of Massachusetts, the political will seems to be present.  Let’s hope it’s true and let’s hope that Massachusetts helps lead the way for the rest of the nation.

At the very least, if things don’t get unstuck in Washington, residents of Massachusetts can resurrect their slogan from 1972 – “Don’t Blame Me, I’m From Massachusetts”!