It was two months before the Paris climate talks when White House officials met with an unusual collection of businesses to talk about their efforts to cut carbon emissions. These weren’t obvious visitors. They represented the industrial sector, one of the largest-emitting components of the economy, and one that isn’t governed by carbon rules.
At least not yet.
In attendance were members of some of the most challenging industries: oil refiners, cement makers, paper processers, chemical companies and other manufacturers. These are the kinds of facilities that many experts see as a key target of future climate policies under successors to President Obama. They are also among the most difficult to regulate. The sector has a mongrel membership of dissimilar factories and plants. And it is defended by entrenched political interests.
The sector accounts for about 25 percent of the nation’s greenhouse gas emissions, and analysts say it’s unlikely that President Obama’s Paris promise to shave carbon by up to 28 percent in 10 years can be fulfilled without reducing the release of greenhouse gases at these facilities. The administration hasn’t explained exactly how it will meet its Paris goal.
For all the attention being paid to Obama’s landmark rules on electric power plants, analysts predict it will account for only about a quarter of the CO2 reductions outlined in the administration’s 2025 goal. It calls for a 26 to 28 percent reduction from 2005 levels.
Other forces are also driving down emissions. Increased use of natural gas, more renewable energy, flat electricity demand and better fuel economy in cars are all having an effect. Proposed regulations that would clamp down on methane leaks at future oil and gas wells will also pitch in.
But there’s still a gap between the president’s promise and predicted reductions. When all the actions to cut carbon are added up, the shortfall is as large as a third of the goal, according to analyses by business groups and environmental organizations.
"You can’t even begin to fill the gap unless you address industrial emissions," said George David Banks, a former climate aide for President George W. Bush.
He argues in a recent paper that the next president will have to find untapped sources of emissions to fill in that hole. They’ll likely come from industrial sources in politically important states, like Ohio. And the groundwork for that controversial effort, he writes, is likely already underway, at least initially.
"After the conclusion of any Paris agreement, we can assume that the Obama White House would focus its efforts on this objective — in preparation for a possible Democratic victory in November 2016," the paper says.
If that’s the case, it would mark a large move toward decarbonizing the U.S. economy through a series of independent regulations affecting, first, the transportation and electric power sectors and, second, industrial manufacturers. And it would happen without approval from Congress.
‘We don’t need regulation’
The idea of reducing carbon in American industry was a key challenge during the cap-and-trade debate in 2010. Midwestern lawmakers, including moderate Democrats, were concerned that the legislation would hamstring manufacturers by increasing energy costs and requiring expensive equipment that’s more efficient.
Those concerns were one reason legislation failed, and they appear to still be alive.
"I’m not prepared to talk about that today," said Sen. Claire McCaskill (D-Mo.) when asked recently whether she could support industrial regulations.
The late-September meeting at the White House featured about 20 company officials. They gathered in the Indian Treaty Room with Rob Diamond, the administration’s director of private-sector engagement, to reveal their voluntary plans to help prevent global temperatures from rising more than 2 degrees Celsius. Also in attendance were about 10 aides from the departments of State and Energy.
Among the companies’ "deliverables," according to a slide presentation obtained by ClimateWire, is the deployment of four "game changer" technologies in the chemical industry, and ramping up the use of renewable energy and efficiency among cement makers. Carbon capture and sequestration also appear to be key needs for cement makers.
The companies present that day are climate leaders. They see their efforts as being financially beneficial. United Technologies Corp., for example, is a global corporation that owns Otis Elevator Co. It developed an elevator system that generates energy on its way down in order to offset the amount of electricity needed on the way up.
So these companies appear to be less focused on avoiding direct climate regulations than promoting new rules that would help them sell their products, like efficient elevators. Policies requiring more efficient buildings might benefit them.
"We understand it has sort of economic benefits that go along with it, and that’s why it’s important to us," said William Sisson, a sustainability official with UTC. "We don’t need [climate] regulation to tell us that."
Next target: refineries?
Among the companies at the White House were oil giant Shell; Lafarge North America, a cement maker; International Paper; and Monsanto, a chemical company. The meeting was organized by the World Business Council for Sustainable Development, a consortium of companies pushing for things like greater energy efficiency, more renewable energy, and carbon capture and sequestration.
To one person there that day, it seemed like the White House was laying the groundwork for future policies to restrict emissions on the industrial sector.
"It just confirmed for a lot of folks that this is something the administration is very much thinking about," the person said. "They did say that their agencies had been putting some thought into what those might look like, the framework, the regulations."
He added, "It’s not a question of whether the industrials are gonna be regulated, it’s when and what does it look like."
The White House didn’t comment for this story, and a spokesperson for U.S. EPA didn’t respond directly to questions about whether it had begun exploring carbon regulations for industrial sources. Opponents of those potential rules note that the agency requested funding in 2015 for work related to regulating a host of manufacturing subsectors, including refineries, cement and paper.
When asked whether that funding had been used to develop carbon rules, EPA noted only that Congress appropriated $8 million less than what the president requested for work related to climate change.
Environmentalists began pressing for climate regulations on industrial sources during the latest Bush administration. During a revision of the New Source Performance Standards for oil refineries, Bush officials declined to regulate carbon dioxide, and environmentalists sued. A settlement was reached in 2010 in which the Obama EPA agreed to someday regulate carbon at refineries.
That hasn’t happened yet. But many observers believe that decision puts refineries at the front of the line for climate regulations.
"The EPA’s doing a lot," said David Doniger, a senior climate lawyer with the Natural Resources Defense Council. "But I would think that in the next administration you’d want to start dealing with some of the other large-emitting industrial categories. Refineries, chemical plants, cement are among the leading emitters. So we’ll be looking for strategies to move those forward. It doesn’t necessarily immediately mean lawsuits. It might mean lawsuits."
Until then, he said, environmentalists will press for new regulations to pinch off methane leaks at existing oil and gas operations. They see that as the extent of what Obama can accomplish before leaving office.