The U.S. Congress is considering whether to enact a “cap and trade” program that would enable the federal government to regulate greenhouse gas emissions (GHG). Policymakers are seeking to enact a comprehensive energy and climate change bill that aims to increase energy efficiency, address the risk of global warming, and transition the economy to the carbon-constrained future that many have come to expect.
AGC is concerned that new federal legislation and/or regulations intended to control GHG emissions could deter new construction and directly affect contractors’ operations.
Obstacles to Construction
1. Using the Clean Air Act (CAA) to regulate GHGs could halt building construction and renovation and jeopardize funding for highway projects. Once EPA controls a GHG under almost any section of the Act, most buildings that emit that “pollutant” would become subject to costly permitting and construction requirements. The NAAQ program also would be triggered under the CAA, which could deter new building construction as well as threaten federal funding for highway projects.
2. The threshold for the monitoring, measurement, and reporting requirements under EPA’s reporting rule is set too low and will have thousands of facilities scrambling to comply within a short time frame. The new EPA reporting rule would affect facilities emitting 25,000 tons/year CO2e (carbon dioxide equivalent) or more. During the rule drafting process, EPA’s analysis of the reporting requirements reveals that the costs and burdens of federal regulation increase dramatically as the threshold drops. As such, the reporting rule, and any future control requirements, could directly affect AGC members’ daily operations, their ability to secure future construction work, and the costs of materials, equipment, and fuel used in their construction projects.
3. “Cap and trade” to regulate GHG emissions could increase the cost of construction and make U.S. investments in commercial, manufacturing, and industrial facilities less economically attractive. Potential increases in the cost of electricity and fuel used in the commercial sector would affect the cost of materials (e.g. cement, steel) and products (e.g. HVAC, plumbing supplies) used in construction, thereby reducing the demand for new construction and major upgrades and/or renovations.
4. Authority to EPA to regulate small emitters puts burden on the section of the business community too small to participate in the cap-and-trade scheme.
5. New transportation planning requirements would lead to more federal decision-making authority over local land use planning. Both bills add substantive changes to the state and metropolitan transportation planning process by requiring states and municipalities to submit plans that meet goals for GHG reductions from the transportation sector based on federal regulations, models, and methodologies developed by EPA.
6. The price of fuel would increase, which would deter efforts to raise the gas tax to fund highway and transit infrastructure. According to the petroleum industry, the House-passed bill would increase the cost of a gallon of gasoline by an estimated 77 cents over the next 10 years through additional refinery costs imposed by the legislation.
7. Setting arbitrary energy efficiency targets through a government run process rather than relying on the existing consensus process to develop building energy codes would result in greater uncertainty for the building industry and likely result in unnecessary delays in the development of such codes.
Threats to Equipment Operations
8. New standards for construction equipment would increase costs, uncertainty. Both bills direct EPA to set new GHG emission standards for sources not controlled by the allowance system, pointing to a variety of mobile sources used in construction—including new heavy duty trucks and off-road equipment.
9. New emissions reduction standards for black carbon would impact equipment currently in use. Both bills create special programs to aggressively reduce emissions of black carbon—which is emitted by construction equipment—specifically directing EPA to make an inventory of sources, to outline strategies to “retrofit” on-road and off-road sources currently in use and to use its existing authority under the CAA to promulgate final regulations on black carbon within two years.
Opportunities for Contractors
10. Transitioning to a carbon-constrained economy may present new opportunities for building design and construction to meet growing needs for energy efficient infrastructure. Tax or other incentives in any GHG legislation to reduce energy consumption in the U.S. could provide opportunities for the real estate, design and construction industries to provide new and/or upgrade existing infrastructure to meet the needs of a carbon-constrained economy, including renewable energy generating facilities (e.g. wind, solar, biomass), energy-efficient buildings; efficient electrical transmission and distribution networks (i.e., Smart Grid), and other facilities required to support this transition.