Will California Climate Regulations Trump a Weak EPA?

President-elect Donald Trump is expected to announce his pick to lead the EPA any day now. And assuming Trump sticks to his campaign promises, the new EPA administrator will be spending more time dismantling all of President Obama’s climate rules — such as the Clean Power Plan and Clean Water Rules — than enforcing the nation’s air and water pollution regulations.

Meanwhile, California regulators are moving ahead with the most ambitious climate targets in North America.

On Friday, the California Air Resources Board (CARB) released its draft plan to reduce greenhouse gas emissions by 40 percent below 1990 levels by 2030. The state plans to achieve these steep carbon cuts through a series of actions including low- and zero-emissions vehicles, cap-and-trade regulations, waste diversion from landfills and water conservation, and possibly a carbon tax.

“Now more than ever, the nation — and the world — are looking to California for leadership on climate change and air quality,” said CARB chair Mary D. Nichols in a statement. “Denial is not an option. We must plan, invest and transform.”

Days earlier, CARB rolled out its revised draft of the state’s proposed short-lived climate pollutant strategy, aka the cow farts regulation. Senate Bill 1383, recently signed into law by Gov. Jerry Brown, requires the state to reduce super pollutants and targets a 40 percent methane emissions reduction below 2013 levels by 2030. The revised draft of the short-lived climate pollutant strategy outlines how regulators can work with the dairy industry and other stakeholders to make this happen.

Why should businesses outside of California care about any of this? The short answer is that many companies do business in California and other states so greenhouse gas emissions from their products and services sold outside of the golden state affect their overall carbon footprint. And despite a more lenient federal EPA under Trump, other states may follow California’s lead in enacting tougher climate rules.

“All the US EPA does is set a standard,” said attorney William Anaya, an officer in the environmental litigation group at Greensfelder, Hemker & Gale, in an interview. “States can be more stringent if they wish and they are — California being one of them — all up and down the West Coast. California will continue to be a leader, telling the rest of the world how to do that calculation: take less raw materials, create less waste and come up with more finished goods.”

Dairy farms and other agriculture interests outside of California may face tougher methane emissions reductions under the short-lived climate pollutant strategy, said Todd Palmer, practice group chair of the environmental & natural resources and energy law practices at Michael Best.

“California’s plan will likely culminate in a requirement that California dairies install anaerobic digestion systems [to reduce methane emissions,]” Palmer said in an interview. “Dairies located outside of the state may have installed anaerobic digestions systems on a voluntary basis to manage their manure and many of those non-California dairies have been participating in the California cap-and-trade program.”

Palmer’s clients include several of these non-California dairies. They participate in the state’s cap-and-trade program because they receive carbon credits for implementing CARB-approved emission reduction equipment such as anaerobic digesters.

“Anaerobic digesters that currently exist outside of California will likely be grandfathered in,” Palmer said. “But in other states when a dairy is looking at the capital expense and the operations and maintenance associated with an anaerobic digesters, one of the more significant revenue streams would be the credits from the cap and trade program. If those are no longer an option, that may affect whether or not those out-of-state digesters get built.”

But it is not all bad news, Palmer says. The California short-lived climate pollutant strategy also sets aside state money in the form of grants and incentives to develop anaerobic digestion systems as well as infrastructure to pipe biogas from methane — a valuable low-carbon transportation fuel — throughout the state.

“I’ve talked to companies that provide services and engineering and products in that space, and they’ve been watching the development of California and that program because they see it as a market opportunity, a growth plan,” he said.

Attorney Chris Carr, who chairs Morrison & Foerster’s environmental and energy group, said he expects to see greater interest in emissions regulations and clean energy development at the state level once Trump takes office.

“We also anticipate there will likely be a raucous battle in the federal courts over the legality of strict state requirements, particularly when those requirements implicate interstate commerce,” he said in an interview.

California’s low-carbon fuel standard, for example, which was created under California’s first-in-the-nation global warming law, AB 32, was previously challenged in court by big oil and out-of-state ethanol producers. The Ninth Circuit Court of Appeals in 2013 upheld the standard, which will reduce the amount of carbon pollution released from fuels sold in California by 10 percent by 2020. A year later, the US Supreme Court today denied petitions from these industry groups to review and reverse the appeals court’s decision.

“Ultimately, those who believe their interests adversely effected by California emissions regulation can be expected to try to mount court challenges, whether those regulations involve fuel supply mix, shipping and fleet requirements, or engine standards,” Carr said. “Once the vacancy is filled on the US Supreme Court, one should also expect renewed efforts to get the court to review the Ninth Circuit’s jurisprudence that has so far blessed California’s actions.

“On the flip side, companies that have helped shape California’s regulations — and those of other states — and relied on them for making business decisions can be expected to zealously guard and protect those regulations, including by intervening to defend them in lawsuits challenging them.”

Indeed many of these companies are already urging Trump to support renewable energy development and low-carbon technology investment.

Last month hundreds of major companies sent a letter to Trump calling on him to uphold the Paris climate agreement, which he has vowed to “cancel” once he’s in the White House. Signatories include DuPont, Gap, General Mills, Hewlett Packard Enterprises, Hilton, HP Inc., Kellogg, Levi’s, L’Oreal USA, Nike, Mars Incorporated, Schneider Electric, Starbucks, VF Corporation and Unilever.

And in June, 14 major brands including Levi’s, Nike, Seventh Generation and VF Corporation sent a letter supporting California’s SB 1383 and calling on CARB to implement a short-lived climate pollutant strategy.

“Our support is firmly grounded in economic reality,” the letter reads. “We know tackling climate change is one of America’s greatest economic opportunities of the 21st century and we applaud California’s leaders for taking steps to help the state seize that opportunity.”

Sustainable business group Ceres’ BICEP coalition — this stands for Business for Innovative Climate and Energy Policy — coordinated the SB 1383 letter.

Ceres senior manager of California policy and partnerships Kirsten James told Environmental Leader that despite Trump’s promises to dismantle environmental regulation, companies will continue to support the low-carbon economy because it’s a smart business decision.

“California has been a leader on climate policy for more than a decade, and at the same time, we are the fifth biggest economy in the world,” James said. “More and more the business community recognizes that tackling climate change is an economic opportunity.”