Obama Administration Finalizes CEQ Guidance to Federal Agencies on Consideration of Climate Change Impacts

On August 2, 2016, President Obama’s Council on Environmental Quality (CEQ) issued final guidance (“Guidance”) on how federal agencies should consider greenhouse gas (GHG) emissions and the effects of climate change¹ when reviewing “Federal action” projects under the National Environmental Policy Act (NEPA).

The Guidance is similar to earlier draft guidance issued by CEQ in 2014, but there are a few changes that are worth highlighting. First, the Guidance replaced vague language in the draft guidance that recommended agencies consider an unclear amount regarding consideration of upstream and downstream GHG emissions. The final Guidance requires consideration of “indirect effects,” suggesting that some form of lifecycle GHG assessment, including upstream and downstream emissions, must be conducted. Second, the Guidance removes earlier suggestions that agencies use a minimum threshold of GHG emissions (25,000 tons per year) as a trigger for quantitative analysis. The final Guidance contains no lower threshold, thus subjecting a much broader array of Federal actions to GHG review.

The final CEQ Guidance is not legally binding, and a future administration could withdraw or simply ignore it. For now, at least, it will inform and affect federal NEPA reviews. It is also likely to inform evolving private sector efforts to standardize qualitative and quantitative GHG and climate risk reporting and assessment methodologies.

NEPA Background

In general, NEPA requires agencies to evaluate the reasonably foreseeable environmental impacts of, and assess potential alternatives to, proposed federal actions before final agency decisions are made. It is therefore best understood as a process statute that does not command a particular outcome, while ensuring that reasonable alternatives to a course of action have been considered.

The final Guidance applies to all Federal actions subject to NEPA review, including “site-specific actions, certain funding of site-specific projects, rulemaking actions, permitting decisions, and land and resource management decisions.” For years now, questions have been raised about whether and how agencies are to take into account a proposed action’s impact on climate change. The question has spawned litigation, and the answers have varied, largely based on the facts of a particular case.

The Guidance is intended to help agencies analyze “a proposed action’s GHG emissions and the effects of climate change relevant to a proposed action—particularly how climate change may change an action’s environmental effects….” It is primarily meant to ensure that agency analysis of GHG emissions and climate impacts in either a basic Environmental Assessment (EA) or a more involved Environmental Impact Statement (EIS) utilizes the “rule of reason,” in a manner “commensurate” with the effects of the proposed action. Agencies generally have discretion as to how they conduct NEPA reviews, yet CEQ also recommends that agencies review their procedures and propose any updates “they deem necessary or appropriate to facilitate their consideration of GHG emissions and climate change.”

While the new Guidance is at times overly complicated and ambiguous, it is nonetheless an important document that every company with operations requiring or involving permits or other approvals or funding from federal agencies should be familiar with.

CEQ Guidance on Analyzing Climate Impacts

When addressing GHG emissions and climate change impacts, the Guidance recommends that agencies consider (at project, tiered, or programmatic levels, as applicable): (1) the potential effects of a proposed action on climate by assessing GHG emissions (including, where applicable, carbon sinks and sequestration); and, (2) the reasonably foreseeable effects of climate change itself on a proposed action and its environmental impacts. Specifically, agencies should:

• Scope and quantify a proposed action’s projected direct and indirect GHG emissions, taking into account available data and GHG quantification tools that are suitable for the proposed agency action.
• Ensure that the level of assessment is “proportionate to the scale” of the emissions relevant to the project/action.
• Use projected GHG emissions as a proxy for assessing potential climate change effects, while taking into account emissions from indirect effects and “connected” actions having a “reasonably close causal relationship” to the proposed action under review.
• Where analytics are not reasonably available to support quantitative analysis, provide a qualitative analysis that explains why quantification is not reasonably available.
• Consider reasonable alternatives to a proposed action that address the short- and long-term effects and potential benefits and/or co-benefits (e.g. infrastructure resiliency), including mitigation measures such as enhanced energy efficiency, lower carbon-intensive technology implementation, carbon sinks or sequestration, sustainable land management practices, and the capture and beneficial use of GHG emissions.

The Guidance further recommends that agencies:

• Identify the affected environment.
• Analyze the impacts on the human environment likely to be caused both by the proposed action and by climate change.
• Rely on existing literature (i.e., no need to reinvent the wheel).
• Integrate the climate-change analysis of a proposed action into an agency’s existing planning process, such as an agency’s incorporation of environmental justice principals, with overall attention to the resiliency of the affected environment and communities, and their ability to adapt to a changing environment.

The overall gist is that given the dynamic nature of climate impacts, agencies should consider the extent to which a proposed action and its reasonable alternatives would contribute to climate change, and take into account the ways climate change itself may impact the proposed action and any alternative actions.

CEQ advises that agencies must assess whether or to what extent to consider climate change impacts under NEPA even if the proposed Federal action represents only a small fraction of global emissions.

Finally, CEQ suggests limits on the nature and use of EIS cumulative impacts analyses related to climate impacts. The Guidance interprets NEPA as not requiring agencies to monetize the costs and benefits of GHG and climate assessments. When costs and benefits are considered, the Guidance recommends that agencies use tools such as calculating the social cost of carbon.

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¹ The CEQ Guidance explains “...the effects of climate change observed to date and projected to occur in the future include more frequent and intense heat waves, longer fire seasons and more severe wildfires, degraded air quality, more heavy downpours and flooding, increased drought, greater sea-level rise, more intense storms, harm to water resources, harm to agriculture, ocean acidification, and harm to wildlife and ecosystems.”

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