When President Joe Biden signed his Climate Change Executive Order on Tackling the Climate Crisis at Home and Abroad on January 27, he put the U.S. on the path toward an ambitious goal: achieving net-zero (GHG) emissions, economy-wide, no later than 2050. It states, “The Federal Government must drive assessment, disclosure, and mitigation of climate pollution and climate-related risks in every sector of our economy.” The Executive Order is focused on greenhouse gas (GHG) emissions, but it addresses strengthening clean air and water protections as well.
To ensure that objective is met, the Executive Order established the White House Office of Domestic Climate Policy. This office will coordinate policy making process on domestic climate policy issues and monitor the implementation of the President’s domestic climate agenda. The Executive Order also created the National Climate Task Force, comprising leaders from 21 federal agencies and departments, to encourage a whole-government approach to addressing climate change.
Several aspects of the Executive Order are already being litigated. The impact of the Executive Order will depend on the outcome of these litigations and the ability of Congress to pass legislations.
The question is, what will those marching orders mean for U.S. companies, particularly those in power industries, industrial, and manufacturing sectors? To help shed light on the subject, Edge Engineering & Science has answered some of the most frequent questions we have received about the executive order and environmental compliance. Our responses are listed below.
What does the executive order mean for the industry?
In the short term, the government probably will step up its enforcement of current regulations, strengthen current regulations, and likely initiate new rule making. It is also expected that environmental justice (EJ) may play a more significant role in air permitting than in the past. In addition to expansion of EJ areas, there may be an enhancement of EJ evaluations, leading to additional public outreach requirements.
What would that look like?
Because the order charges the federal government to “deploy the full capacity of its agencies to combat the climate crisis,” EDGE expects agencies’ to be more active in facility inspections and audits.
How can the industry prepare?
EDGE recommends a proactive approach to ensuring compliance with environmental requirements. A comprehensive accounting of facility-level emissions (including GHG) will be a good place to start in developing compliance strategies. In addition, internal audits and inspections can be essential elements of maintaining compliance and responding to potentially more active agencies.
What’s next?
In the longer term, new regulations are likely, with an emphasis on monitoring, reporting, energy efficiency, and reducing emissions.
It’s important to note that even before signing his climate policy executive order on Jan. 27, President Biden signed an order instructing the heads of all federal agencies to review the actions of the Trump administration and reverse policies that don’t comport with the Biden administration’s environmental policies.
Now that a single party controls both chambers of the legislature and the executive branch, the Congressional Review Act might be used to overturn recent Trump administration regulations.
For example, On Jan. 12, 2021, a new Trump EPA regulation determined that for a greenhouse gas (GHG) emissions source category to be considered significant enough to be regulated, it would need to contribute at least 3% of the nation’s GHG emissions. This eliminates all source categories except electric utility generating units (EGUs) from regulation. The Congressional Review Act could be used to overturn this.
What else? Well, in 2016, the EPA required oil and gas industry members to respond to a survey, referred to as an Information Collection Request (ICR), to help the agency determine how to reduce GHG emissions from existing sources. The EPA immediately withdrew the survey requirements in 2017, after President Trump took office. The Biden administration may revive this requirement.
What’s more, the workforce at EPA is currently at a historically low level. This is partly due to delegating programs to the state level, but budget cuts made during the Obama administration played a role in staff cuts, too. We wouldn’t be surprised to see EPA staff up in the near future. That could mean renewed EPA actions in collecting emission information, acting on proposed rules, and strengthening enforcement.
Should we anticipate other emission-reduction requirements?
Highly likely. We are also seeing increasing numbers of institutional investors adopting climate goals. We think companies can expect investors, as much as the federal government, to drive momentum toward a low-carbon economy going forward.
Multinational investment management corporation BlackRock Inc., for example, has made it clear that it is raising the bar for the companies and projects BlackRock will work with.
“BlackRock Investment Stewardship (BIS) expects companies to have clear policies and action plans to manage climate risks and to realize opportunities presented by the global energy transition,” a 2021 company statement announces. “Investors and other stakeholders will look at companies’ disclosures to analyze how climate risk is integrated into their long-term strategies and evaluate their preparedness for a transition to a low-carbon economy.”
The BlackRock statement specifically calls upon companies to address flaring, the controlled burning of natural gas during oil and gas exploration, production, and processing. Because flaring releases methane into the atmosphere, BlackRock notes, it contributes to climate change.
“In order to track a net-zero (GHG emissions) goal by 2050, a near elimination of flaring, with government policies and industry commitment, must occur by 2025,” BlackRock writes. “Accordingly, governments and the oil and gas industry will need to work together to support the development and deployment of existing and emerging flaring reduction technologies.”
EDGE, which works frequently with the energy sector, provides support and guidance to companies as they strive to respond to new institutional investor requirements, whether they call for strategies for GHG emissions accounting or reductions (e.g., minimize flaring in Oil & Gas industries).
What kind of long-term strategy do you recommend?
The industry should keep abreast of proposed regulatory policies and be prepared to evaluate and comment on those draft policies. The industry needs to maintain relationships with regulatory agencies, fostering trust and keeping lines of communication open to draft viable and common-sense regulations.
As the federal government works to move the U.S. closer to its net-zero (GHG) emissions objective, it will be prudent for the \industry to inventory, manage and develop options to decrease emissions. Companies should make it an ongoing priority to evaluate their operations, products, and vendors to proactively address energy efficiency, analyze their carbon footprint, develop options to minimize their GHG emissions, and explore how reductions can be made in a commercially viable way.
EDGE is tracking these important legislative and regulatory issues for our clients to help define their strategies for maintaining compliance without business interruptions.
For additional insights, call EDGE. We can provide guidance on developing a strategic approach to compliance.