Climate Change

Are Federal Greenhouse Gas Emission Regulations A Sensible Strategy for Climate Change?

If there is an urgent need for emission reductions, regulatory ossification and legal risks counsel the consideration of other approaches, such as a carbon tax.

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The Environmental Protection Agency is reportedly working on new regulations to control greenhouse gas emissions from power plants, according to newly confirmed Administrator Michael Regan. Such regulation would attempt to fill the void left by the repeal of the Obama Administration's Clean Power Plan and judicial invalidation of the Trump Administration's paltry replacement. The EPA is under pressure to move quickly in order to support the Administration's ambitious climate targets. Some expect the Administration to embrace the goal of reducing GHG emissions by 50 percent within a decade.

Coming anywhere close to such emission reductions requires immediate action. Thus it's curious that the EPA, environmentalist organizations, and Congressional Democrats are placing so much emphasis on federal regulations in their climate strategies. What they seem to ignore are the legal, administrative, and procedural constraints on using federal regulation as a rapid emission-reduction tool. If a 5-4 Supreme Court was willing to stay the Clean Power Plan, what are the chances a 6-3 Court would sustain a CPP 2.0 or (more ambitiously) an attempt to declare carbon dioxide a criteria air pollutant. (Briefs rejecting the latter move under UARG almost write themselves.)

The regulatory process is slow, and many regulatory strategies to reduce greenhouse gas emissions are highly vulnerable to legal challenge, as I explain in a just-released analysis authored for the Niskanen Center, "Legal and Administrative Pitfalls that May Confront Climate Regulation." If the goal is rapid decarbonization, fiscal tools such as a carbon tax, are a much more promising way to go.

From the paper's introduction:

There is a mismatch between the stated urgency of the problem and the focus on federal regulation as the dominant climate policy tool. Environmental advocates and the Biden administration are committed to urgent action on climate change, as dramatic and rapid reductions in greenhouse gases are necessary to meet the administration's long-term targets and to ultimately stabilize atmospheric concentrations of greenhouse gases (GHGs) at acceptable levels. Yet some potential paths forward entail significant practical obstacles and legal risks, particularly if the aim is to achieve emission reductions quickly.

Prioritizing regulatory measures over fiscal instruments may be a strategic mistake. Regulatory mandates, particularly if based upon existing statutory authority, will be vulnerable to legal attack, obstruction, and delay. Even in the best of times, the control of GHG emissions through federal regulation would be a long and cumbersome process, requiring dozens of complex rulemakings. Yet these are not the best of times. Federal agencies, the EPA in particular, are depleted of personnel and expertise. At the same time, a phalanx of economic and ideological interests stands ready to challenge every climate policy initiative. A potentially hostile judiciary will further complicate efforts to make federal regulation a central component of carbon control.

Enactment of climate legislation expressly authorizing federal regulation of GHG emissions and other regulatory efforts to reduce the carbon intensity of the American economy can reduce the legal risks and accelerate the rate at which such policies can be adopted and implemented, but only on the margin. Adopting regulatory controls, sector-by-sector, technology-by-technology will be immensely resource intensive for the EPA and other federal agencies. Even with authorizing legislation, federal regulatory strategies may remain more time-consuming, conflict-ridden, and legally vulnerable than fiscal measures. A carbon tax, in particular, would be more legally secure and administratively easier to implement than regulatory controls on energy use and GHG emissions. In all likelihood, a nationwide carbon tax could be implemented in less time, and with less legal and administrative wrangling, than a single, sector-specific GHG emission standard.

The full paper is available in PDF here.

Consider that a single major rulemaking takes at least two years. Really big rules take longer. Controlling greenhouse gas emissions through regulations will require many such rules, as they are adopted sector-by-sector, and there's only so much the EPA can be expected to do at one time. If the EPA finalizes seven major regulations in a single year, it's been productive.

Note also that it took the EPA several years to develop and implement the regulations governing the acid rain cap-and-trade program, even though the program had express statutory authorization. By comparison, British Columbia was able to implement an economy-wide carbon tax in a matter of months. If the goal is to create widespread incentives for emission reductions as quickly as possible, there is simply no comparison.

There are other reasons to prefer a carbon tax beyond those I discuss in the paper, including the fact that implementing such a tax requires less government involvement in discrete business decisions, such a policy does not presume which sorts of technologies or innovations are the best way to reduce emissions, such use taxes are less susceptible to rent-seeking than regulatory equivalents, and (perhaps most important given the structure of the Senate), A carbon tax could be adopted through reconciliation. I would like a carbon tax to be revenue neutral--what some call a "fee and dividend" approach--but others might see it as a way to fund the greening of infrastructure and early climate adaptation efforts.

My paper focuses on regulatory strategies. Similar considerations should inform reliance upon other fiscal tools, such as infrastructure spending. On the one hand, the rapid greening and upgrading of infrastructure can help lay the foundation for a low-carbon future. On the other hand, existing regulatory structures are not particularly conducive to fast action. As Vanderbilt's J.B. Ruhl has explained, the nation's "old green laws" may stand as obstacles to a "Green New Deal." This problem, however, should be easier to address than regulatory ossification, and federal spending on infrastructure and the like is less legally vulnerable than aggressive regulations.

The practical constraints I identify need to inform the development of climate policy if the goal is, in fact, to reduce emissions and ultimately stabilize atmospheric concentrations of greenhouse gases. As I write in the paper:

Any meaningful climate policy will face concerted opposition. If climate policy is to be effective, the fact of such opposition, and its potential to delay and derail implementation, must be taken into account. It is often said that the perfect policy should not be the enemy of the good. It is equally true that a good policy that cannot be implemented as planned is not so good after all. If the aim is to adopt climate policy measures that are capable of reducing GHG emissions quickly and sustainably, this analysis suggests a carbon tax and federal spending initiatives are more promising than federal regulatory measures.