Carbon Rationing By Other Means

After Congress fails to regulate greenhouse gasses, the president hands the job over to the EPA


Plan A was to get a massive cap-and-trade carbon rationing scheme adopted by Congress. The scheme aimed at imposing mandatory cuts on U.S. emissions of the greenhouse gases, chiefly carbon dioxide, that are thought to be warming the atmosphere. Six months after President Barack Obama's inauguration, a cap-and-trade bill managed squeak through the House of Representatives—once it was larded up with billions in pork barrel goodies. Attempts to get cap-and-trade through the Senate foundered in July 2010 when Democratic majority leader Sen. Harry Reid (D-Nev.) admitted that he could not muster the votes. The "shellacking" of the Democrats in the mid-term elections, in which the Republicans took control of the House and increased their membership in the Senate, has shoved Plan A off the table.

Now onto to Plan B. At his press conference after the election, President Obama declared, "Cap and trade was just one way of skinning the cat; it was not the only way. It was a means, not an end. And I'm going to be looking for other means to address this problem." The president has handed this particular cat skinning job over to the Environmental Protection Agency (EPA), which seeks to impose limits on greenhouse gas emissions by means of regulations under the Clean Air Act. Not surprisingly, this attempt at atmospheric central planning has engendered considerable opposition.

A bit of history: Back in 1999, a bunch of environmental advocacy groups filed a petition with the Clinton administration's EPA asking the agency to regulate greenhouse gas emissions under the Clean Air Act. The activists claimed that climate change endangers human health and the environment. The Clinton-era EPA issued a legal opinion asserting that the agency did have the authority to regulate carbon dioxide emissions. In 2003, the EPA under the Bush administration denied the activists' petition for a rulemaking on the grounds that the Clean Air Act does not give the agency the authority to regulate greenhouse gases. The activists pursued their case and were joined by several state attorneys general who managed to get the case before the U.S. Supreme Court. In 2007, in the case Massachusetts v. EPA, the high court ruled 5 to 4 that the agency did have the power to regulate greenhouse gases if the agency had reason to conclude under the Clean Air Act that they were a form of "air pollution which may reasonably be anticipated to endanger public health or welfare."

In 2009, the new EPA Administrator Lisa Jackson instituted an endangerment proceeding on greenhouse gases. In December 2009 the agency issued an endangerment finding [PDF] in which "the Administrator finds that greenhouse gases in the atmosphere may reasonably be anticipated both to endanger public health and to endanger public welfare." This finding triggered the EPA rulemaking process under the Clean Air Act. Traditionally, the EPA set national ambient air quality standards for a list of six criteria pollutants, including ozone, carbon monoxide, nitrogen oxides, sulfur oxides, particulates, and lead. Under the Clean Air Act, operating permits were required for any entity emitting more than 100 tons of these air pollutants per year or any new facility with the potential to emit more than 250 tons per year. Before obtaining their permits, new facilities would have to persuade regulators that they were installing the best available control technology before being allowed to operate. While the limits were set by the federal Clean Air Act, state environmental agencies generally administer the air pollution permitting programs.

The EPA acknowledged that millions of facilities emit as much as 100 tons of greenhouse gases, especially carbon dioxide annually, e.g., small dairy farms, large apartment buildings, hospitals, schools, or churches. The agency also recognized that it would be "absurd" to try to impose greenhouse gas permitting requirements on this many facilities because the effort would overwhelm state and federal regulators. The solution to this absurdity? Tailor the regulations to fit what the agency could handle.

So in May 2010 the EPA issued a "tailoring rule" which requires that as of January 2, 2011, all new projects must use the best available control technology if they would increase greenhouse gas emissions by the equivalent of 75,000 tons of carbon dioxide per year. Essentially any new industrial facility or one that plans to expand must show that they have reduced their proposed emissions by some amount that regulators deem to be acceptably cost effective and technically feasible before they can obtain an operating permit. This rule will likely make it very difficult to get a new coal-fired electric power plant or oil refinery approved unless it uses some kind of carbon capture and sequestration technology. By July, all industrial facilities that emit more than 100,000 tons of carbon dioxide must obtain operating permits. The EPA promises that no facilities that emit less than 50,000 tons will be regulated before 2016.

Over the summer, the EPA demanded that each state agree to adopt state implementation plans to meet the permitting requirements of its new greenhouse gas regulations. If they failed to do so, the EPA threatened that the agency would issue the permits itself. As the EPA regulatory juggernaut forged ahead, Sens. Lisa Murkowski (R-Alaska) and Jay Rockefeller (D-WV.) proposed a resolution that aimed to rescind the authority of the Environmental Protection Agency to regulate greenhouse gases under the Clean Air Act. It was defeated in June by a vote of 53 to 47. In August, Texas State Attorney General Greg Abbot sent a letter to EPA Administrator Lisa Jackson flat out refusing [PDF] to comply with the new EPA regulations. 

In September, a coalition of industry and farm groups, along with a number of state attorneys general filed a joint motion in the D.C. Circuit Court of Appeals asking the court to stay the implementation of the new EPA rules until a full court could assess their legality. On December 10, the D.C. Circuit declined to issue the stay [PDF]. On December 23, the EPA announced [PDF] that it was implementing its new greenhouse gas permitting plans. It accepted the state implementation plans of 42 states and gave itself the authority to issue permits in seven states until they can revise their regulations. The agency will issue permits in Texas until further notice.

Besides implementing these operating permit plans, on December 23, the EPA doubled down and announced under a settlement agreement [PDF] with a number of states and environmental lobbying groups that by the end of 2012 it would set actual limits on how much greenhouse gases electric power plants and oil refineries can emit. Emissions from these facilities constitute about 40 percent total U.S. greenhouse gas emissions. It is likely that the new EPA limits on carbon dioxide emissions in the power sector will lead to scrapping coal-fired plants and replacing them natural gas-powered plants because burning natural gas produces half the carbon dioxide that burning coal does.

The state and industry lawsuits against the EPA regulations are still wending their stately ways through the courts. The chief concern of critics is that the new regulations will boost the cost of energy and delay the construction of new factories and facilities.

The new Republican chair of the House Energy and Commerce Committee Fred Upton (R-Mich.) asserted in a joint Wall Street Journal op-ed with Americans for Prosperity President Tim Phillips on December 27 that the new EPA regulations represent "an unconstitutional power grab that will kill millions of jobs." Upton and Phillips argue, "The best solution is for Congress to overturn the EPA's proposed greenhouse gas regulations outright." If that can't be done, they suggest that the regulations be delayed until courts have sorted out the ongoing lawsuits against the agency's regulations. Nice suggestion, but just exactly why congressional Democrats or the Obama administration would accede to this kind of regulatory bipartisanship is unclear.

Most economists agree that this top-down scheme rife with uncertainty about what regulators will accept as the best available control technologies is less than ideal. It is an absurdly expensive way to address any greenhouse gas problem.

My suspicion is that the Obama administration is strategically rushing these EPA regulations as a way of ratcheting up the pressure on the Republicans in Congress to adopt the lesser of two evils—something like a cap-and-trade carbon rationing scheme that failed last summer. The real Plan B is to make Plan B look so odious that Plan A looks good by comparison. It might just work.

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.