Mandatory Regulation of Nontraditional Greenhouse Gases: Policy Options for Industrial Process Emissions and Non-CO2 Gases

Mandatory Regulation of Nontraditional Greenhouse Gases: Policy Options for Industrial Process Emissions and Non-CO2 Gases

Daniel S. Hall

Summary

Traditional economic theory suggests that the most efficient and least-cost approach for regulating greenhouse gas (GHG) emissions will be as broad as possible - covering as many emissions from as many sources as possible under a single pricing policy designed to elicit the cheapest abatement options. Applying this concept is relatively straightforward for the dominant GHG, carbon dioxide (CO2). CO2 emissions from the use of fossil fuels account for around 80 percent of U.S. GHG emissions¹ and are well-suited to regulation through either an emissions tax or cap-and-trade program.² A wide variety of other emissions sources and gases account for the other approximately 20 percent of U.S. GHG emissions.³ Some of the cheapest mitigation options are likely to involve these "non-traditional" GHGs,⁴ making it desirable to include them in a regulatory program. Given the diversity of activities and sources that give rise to these emissions, however, creative policy approaches may be needed to effectively tap associated abatement opportunities.

Mandatory Regulation of Nontraditional Greenhouse Gases: Policy Options for Industrial Process Emissions and Non-CO2 Gases

This issue brief surveys options for regulating those non-traditional GHG emissions that lend themselves most readily to a mandatory approach, including methane emissions from coal mines, nitrous oxide and process CO2 emissions from large stationary sources, and emissions of high global-warming potential (GWP) fluorinated gases. Together this group of emissions and sources accounted for about 5.5 percent of the overall U.S. GHG inventory in 2005. As discussed in more detail in Issue Brief #1, many other non-traditional GHG emissions originate from fugitive sources that would be difficult to include in a mandatory program. These emissions are likely best addressed through a project-based program to recognize offset activities as part of a broader tax or cap-and-trade program.⁵

Among the gases covered in this issue brief as potential candidates for inclusion in a mandatory program, some could be integrated relatively easily in a cap-and-trade (or tax) program; others could be included, but special considerations or provisions may need to apply; and others still may need to be addressed through sector-specific policies or through efficiency or technology standards.

The fluorinated gases could be included in a mandatory program by regulating production sources rather than actual emissions, which are widely dispersed and difficult to measure. The number of entities engaged in producing or importing these gases, however, is comparatively small. Fluorinated gases could be included in an economy-wide tax or cap-and-trade program; alternatively, they could be addressed in a separate, standalone cap-and-trade (or price-based) program.
Industrial process emissions from large stationary point sources - where measurement is straightforward - can generally be included in broad tax or cap-and-trade programs. This category of emissions includes process-related CO2 emissions from industrial sources and nitrous oxide (N2O) emissions from stationary combustion and nitric and adipic acid production.
Methane (CH4) emissions from underground coal mines could generally be included in broad tax or cap-and-trade programs, as methane is typically vented from underground mines at a limited number of defined points. By contrast, methane emissions from surface coal mines, which occur as the coal is exposed, and from abandoned mines are fugitive in nature and probably could not be included in a mandatory price-based program. These emissions would likely be best addressed through offset programs.

Remaining sections of this issue brief describe major sources of emissions in each of these categories and outline potential policy options for addressing them.

1. All emissions data in this issue brief are from 2005 and are taken from a report issued by the U.S. Environmental Protection Agency. U.S. EPA, 2007. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990 - 2005, EPA 430-R-07-002, EPA: Washington, DC. Available at http://epa.gov/climatechange/emissions/usinventoryreport.html. Accessed August 21, 2007. Fossil fuel combustion accounted for 79 percent of U.S. GHG emissions in 2005; the non-energy use of fossil fuels - as lubricants or feedstocks, for example - accounted for another 2 percent.

2. See Issue Brief #5 on taxes, trading schemes, and standards for further discussion of these regulatory approaches.

3. See Issue Brief #1 on U.S. GHG emissions for a detailed breakdown of these emissions.

4. For example, an EIA analysis from March 2006 that considered a range of cap-and-trade proposals found that with modest near-term GHG permit prices ($8 to $24 (2004 dollars) per metric ton of CO2e in 2020), reductions in other GHGs (i.e., those besides energy-related CO2) would account for 25-55 percent of total emissions reductions in 2020, despite composing only about 6 percent of regulated emissions in the reference scenario. (EIA, 2006. Energy Market Impacts of Alternative Greenhouse Gas Intensity Reduction Goals, SR/ OAIF/2006-01, EIA: Washington, DC.)

5. Offset programs are discussed in Issue Brief #15. Such programs could be used to recognize GHG reductions that involve fugitive emissions, such as methane and nitrous oxide emissions from agricultural activities (over 7 percent of U.S. emissions) and from landfill and wastewater treatment (over 2 percent). (See Issue Brief #13 for further information on specific GHG-reduction opportunities in the agricultural sector.) Some non-traditional GHG emissions may be difficult to regulate under any policy, such as methane emitted during the transmission, storage, and distribution of natural gas (around 1 percent of U.S. GHG emissions) or nitrous oxide from mobile combustion (around 0.5 percent of U.S. GHG emissions).