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subsequent decade if faster-than-expected nuclear plant retirements and continued use of coal offsets reductions from the shift towards natural gas and renewables.

Federal policies and regulations

At the federal level, the National Security Strategy underlines that the United States is pursuing a balanced approach that aims at reducing local air pollution as well as GHGs while expanding the economy (White House, 2017b). Environmental and climate policies of the United States continue to face a lack of bipartisan support and frequent regulatory course changes, which increases the risk of legal challenges against regulatory action and can create uncertainty for states and industry alike.

The United States does not have national market-based carbon policy instruments such as a carbon tax or cap-and-trade programme. Past attempts at passing carbon pricing legislation have not garnered sufficient support in Congress. As a result, US federal policy on GHG emissions is directed mainly through regulation under existing environmental laws (primarily the Clean Air Act) rather than climate-specific legislation.

The administration’s energy policy emphasises the concept of “American energy dominance”. The policy is based on a strategy to maximise energy production, increase energy exports and be a global leader in energy technologies. As part of the effort to boost the competitiveness of US industry, the administration has undertaken a review of most of the emissions regulations applicable to broad segments of the energy sector, including the power, transport and upstream sectors.

Under Executive Order 13783 from March 2017, the White House directed the EPA to review all existing environmental rules, a process the agency is still undertaking. Federal agencies have revoked, or are in the process of revoking, 60 environmental regulations. The administration places a high priority on market-driven technological solutions to emissions reduction (White House, 2017c).

Power sector

In 2014, the EPA introduced the Clean Power Plan (CPP) aimed at combating anthropogenic climate change more broadly. The CPP proposed state-specific targets for power plant emissions that amount to a total of 32% reductions from 2005 levels by 2030 for the United States as a whole (EPA Archives, 2016). Meeting the targets allowed for so-called “beyond the fence line” measures such as switching to cleaner power sources and demand-side management. The CPP was suspended by a Supreme Court ruling, based on a legal challenge brought forward by several states and industry groups, and never took effect. However, several states have voluntarily implemented the CPP.

In August 2018, the administration introduced its proposal to replace the CPP with the Affordable Clean Energy (ACE) rule (EPA, 2017).2 Under Section 111 (d) of the Clean Air Act, the EPA is required to regulate emissions at existing power plants through the “best system of emissions reduction” (EPA, 2019a). The ACE rule focuses on emissions reduction actions at individual power plants rather than statewide, as under the CPP. The EPA’s latest rule offers states several options to cut emissions from power plants, though recommends heat-rate efficiency improvements at existing power plants as the best choice (EPA, 2018b). The EPA estimates that when states have fully implemented the

2 In October 2018, the US Supreme Court refused to consider any additional court challenges to the administration's decision to repeal the CPP.

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measures in the ACE rule, US power sector CO2 emissions could be 33% to 34% below 2005 levels (EPA, 2019b). The administration finalised the ACE rule in June 2019, though it could be subject to legal challenges by states and environmental groups, which might significantly delay its final adoption and future implementation.

In December 2018, the administration also announced a proposal to revise New Source Performance Standards (NSPS) for CO2, applied under Section 111 (b) of the Clean Air Act. Unlike the CPP, the NSPS rule was not suspended by the courts and has been in effect since it was finalised in 2015. The existing rule established Carbon Pollution Standards for new, modified and reconstructed power plants with a limit of 635 gCO2/kWh, which equals a highly efficient new supercritical pulverised coal utility boiler with partial carbon capture and storage (CCS) (EPA Archives, 2015). The new proposal calls for a standard of 860 gCO2/kWh for large generators, which can be met without CCS (EPA, 2018c). Nevertheless, market conditions already disadvantage new coal plant construction (given the relative low cost of shale gas) and no new coal plants are under consideration currently.

Beyond GHGs, the EPA is also in the process of reviewing existing regulations on the power sector for other pollutants, including nitrogen oxides (NOx), sulphur oxides (SOx) and mercury. Though these regulations are primarily designed to combat fine particulate matter that contribute to smog, mitigation technologies can have benefits for GHG reduction as well, and raise the costs for coal-fired generation relative to other sources. While the EPA decided not to revisit NOx and SOx regulations, it has launched a review of the Mercury and Air Toxics Standard.

In addition, the United States also has policies that support renewable power through tax credits at the federal level and renewable portfolio standards (RPS) at the state level (see Chapter 5, “Renewable Energy”). The government also has policies and standards to promote energy efficiency in buildings and industry that continue to contribute to emissions reductions (see Chapter 4, “Energy Efficiency”).

Transportation sector

The transportation sector is the second-largest energy consuming and CO2 emitting sector in the United States, according to IEA data.

In response to the 1973 Arab oil embargo, the United States has had Corporate Average Fuel Economy (CAFE) standards in place since 1975 to mitigate oil consumption growth. Since 2009, the administration has harmonised CAFE standards – administered by the National Highway Traffic Safety Administration (NHTSA) – with vehicle emissions standards established by the EPA, in an effort to address mobile sources of GHG emissions as required by the 2007 Massachusetts v. EPA case and the 2009 GHG endangerment finding. At the time, the agencies laid out standards for two periods, 2012-16 and 2017-25. The standards are supposed to reach 163 grammes of CO2 equivalent per mile (gCO2-eq/m) (around 101 grammes of CO2 per kilometre [gCO2/km]) for model year 2025 vehicles, which translates into fuel economy levels of around 49.6 miles per gallon (mpg) (US Department of Transportation, 2014; National Archives and Records Administration, 2015).

As part of the rule making, the EPA and NHTSA agreed to perform a midterm evaluation of the standards for 2022-25. The EPA issued a finding in December 2016 that held that the standards were appropriate. In 2017, the administration reopened the review in

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conjunction with NHTSA, and in August 2018 announced a new proposal, the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks. The SAFE rule proposes to revise the standards on both economic and safety grounds, with the preferred option to freeze 2021 standards through 2026 at around 204 gCO2-eq/m (37 mpg and around 127 gCO2/km) for passenger cars and 284 gCO2-eq/m (31.3 mpg and 176.5 gCO2/km) for light-duty trucks (EPA, 2018d). The rule is expected to be finalised in 2019. By way of comparison, the EU requires new cars to achieve 95 gCO2/km by 2021 and Japan requires cars to achieve 122 gCO2/km by 2020 (though Japan already reached this target in 2013) (GIZ, 2017).

A complicating factor for the federal government in implementing the proposed changes will be a Clean Air Act waiver that California was granted in 2013 for vehicle standards, allowing the state to set emissions standards more stringent than those established by the federal government.3 California’s current standard is aligned with the administration’s federal standards, but freezing the federal standards at 2021 levels under the SAFE rule would create a discrepancy. Moreover, 13 other states also follow California’s standards, together accounting for over 40% of the automobile market. As such, automakers could encounter uneven standards across states.

Following its finalisation, the rule may face lawsuits from environmental groups and states. Moreover, California plans to launch a legal defence of its waiver, which the SAFE plan proposes to revoke. Ultimately, it is likely the final outcome will be decided by the courts.

Relatedly, in 2011, the United States also put in place the first-ever fuel efficiency and GHG emissions standards for heavy-duty vehicles. The standards applied to model years 2014-18 (Phase 1) and vary by type of vehicle, and require between 6% and 23% emissions reductions relative to a 2010 baseline. Phase 2 standards were finalised in 2016 and apply to model years 2021-27, and include targets of 16-25% CO2 reductions compared with Phase 1.

Beyond vehicle standards, federal financial incentives also attempt to boost the uptake of electric vehicles (EVs), which can also help lower transportation sector CO2 emissions – depending on how power generation emissions evolve – as well as help with local air pollution. The main policy tool offered by the federal government is a tax credit for purchases of EVs. As part of the Emergency Economic Stabilization Act of 2008, Congress authorised tax credits of USD 2 500 to USD 7 500 for each new EV purchased (depending on vehicle size and battery capacity), though it also imposed a manufacturerbased limit on the credit, as it applies to the first 200 000 vehicles sold by a given company (DOE, 2019a). GM and Tesla already reached this limit at the end of 2018, so purchases of their cars can no longer claim the full USD 7 500 credit. The United States also offers tax credits for EV charging stations. Moreover, the DOE offers loans under its Advanced Technology Vehicles Manufacturing programme to automakers including Ford, Nissan and Tesla for projects such as constructing advanced battery manufacturing plants in the United States or retooling existing plants to produce EVs. The DOE also offers up to USD 4.5 billion in loan guarantees for innovative renewable energy and energy efficiency projects, including EV charging infrastructure (DOE, 2019b). Lastly, German automaker Volkswagen (under a recently created unit, Electrify America), is also

3 The Clean Air Act gave California special authority to enact more stringent air pollution standards for automobiles, though the EPA is still required to approve such waivers. In July 2009, the EPA granted California a Clean Air Act pre-emption waiver for vehicle GHG standards.

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pursuing a sizeable buildout of EV charging stations throughout the United States as part of its USD 2 billion settlement with the EPA and California Air Resources Board over the company’s diesel emissions scandal.

Oil and gas sector methane emissions and natural gas flaring

Since the start of the light tight oil (LTO) revolution in the United States, in some new oilproducing regions without sufficient natural gas infrastructure, large volumes of associated gas as a by-product of oil production have been flared (Environmental Defense Fund, 2019). With the expansion of liquefied natural gas (LNG) exports from the United States and gas pipeline shipments to Mexico, flaring comes with increased economic loss, and additional pipeline infrastructure is becoming a greater necessity. State regulatory action to limit flaring will also require additional gas capture and transport capacity.

For example, flaring has been a particular challenge in the Bakken shale region, the nation’s second-largest LTO-producing area. In response, the state government of North Dakota imposed flaring restrictions on well operators, which has shown results in terms of reducing flaring. Regulations require oil producers to capture 91% of associated gas by November 2020 (from 88% in November 2018) (North Dakota Industrial Commission, 2015). More recently, flaring has experienced an uptick in the Permian Basin in Texas and New Mexico as gas takeaway capacity has not kept pace with a surge in oil and associated gas production (Oil & Gas Journal, 2018).

Nonetheless, over the past ten years, overall methane emissions have been in decline (Figure 3.9), led by reductions from coal mining activities and improved gathering in oil and gas operations (EPA, 2019c). The federal government has played an assisting role. The DOE has invested in methane emissions mitigation research to help quantify, record and mitigate methane emissions across the gas value chain, during production and gathering (which accounts for 66% of total emissions), processing and transmission, storage, and distribution.

Figure 3.9 US methane emissions

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Note: All emissions estimates from EPA (2018). These estimates use a global warming potential for methane of 25, based on reporting requirements under the UNFCCC.

Source: EPA (2018a), Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2016 [Table 2-1], www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2016.

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