Comments on Greenhouse Gas Emissions and Energy Management for Manufacturing Phase 2 Rulemaking
This comment to the Colorado Air Quality Control Commission covers proposed regulations to reduce greenhouse gas emissions from the industrial and manufacturing sector.
This comment from RFF Senior Fellow Dallas Burtraw covers Colorado’s proposed Regulation Number 27 – Greenhouse Gas and Energy Management for Manufacturing addressing the requirements of House Bill 21-1266, which directs the Air Quality Control Commission (Commission) to adopt rules that reduce greenhouse gas emissions from the industrial and manufacturing sector at least 20 percent below 2015 levels by 2030.
The comments draw on experience in other jurisdictions and scholarly research in order to inform the decisions that state regulators face in designing the emissions regulations for the Colorado industrial sector. The proposed regulation would introduce a hybrid system with intensity-based regulation of energy-intensive, trade-exposed manufacturing entities and a mass-based regulation of other large manufacturing sources, enabling greenhouse gas (GHG) credit trading within and between these two systems. The proposed design has many promising elements, but it also has drawbacks compared to an emissions cap-and-trade program, which would more effectively and simply achieve the sector specific emission target and align the sector with the state’s economy-wide emissions reduction targets established in HB 19-1261 and SB 23-016.
The comments address the following six topics.
- The advantages of an annual declining emissions cap with banking that covers all emissions from manufacturing sources.
- The disadvantages of baseline-and-credit systems compared to cap-and-allowance systems.
- The advantages of a consignment auction for the issuance of GHG credits (allowances) used for compliance with regulations.
- The disadvantages of trading between intensity-based credits generated by EITE facilities and mass-based credits generated by non-EITE facilities.
- Challenges associated with providing off-site emissions “offsets” (GHG credits) at unregulated sources without careful protocols in place.
- The advantages of facility-specific emissions limits on facilities in disproportionately impacted communities.
