Bring it on, EPA

There has been a flurry of activity in the past few weeks over EPA’s threat to regulate green house gas emissions through the Clean Air Act. Two weeks ago, a group of eight Democratic senators lead by Sen. Jay Rockefeller (D-W.Va.) sent a letter to EPA Administrator Lisa Jackson pleading that they slow the pace on any regulatory program that would cap carbon emissions. In response, Jackson expressed little sympathy for both the senators’ concerns and the potential economic harm to their constituents by outlining an enforcement effort that she claims will begin in 2011.

It has been clear since Obama first took office that a key component to the White House strategy in passing a cap-and-trade bill is the threat that, if a bill is not passed, EPA will cap emissions through the CAA. The theory goes that because any regulatory scheme based on the CAA would be burdensome, expensive and unfair, Congress would be motivated by fear to pass what the administration wants. This is the preverbal “stick” to club both moderate Democrats and Republicans into action. The other element to their strategy (the “carrot”) is the president’s support for more nuclear power generation and clean coal production, as seen by his pronouncements both in the past and further comments last week during a business roundtable meeting. While the carrot is good energy policy and should be supported, should Republicans really fear this threatened EPA action, or should they call the president’s bluff?

First, a short history lesson. How EPA first came to be used as a threat can be traced back to the April 2007 Supreme Court ruling in the case Massachusetts v. Environmental Protection Agency. This case stated that the EPA violated the Clean Air act by not regulating greenhouse gas emissions. In the ruling, the Court said that the EPA Administrator must determine whether or not there is sufficient scientific evidence to support the statement that “emissions of greenhouse gases from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.” The Supreme Court decision resulted from a petition for rulemaking filed by more than a dozen environmental, renewable energy, and other organizations that would benefit by such a determination. On April 17, 2009 the EPA issued a “proposed endangerment finding” and a related proposed “cause or contribute finding” regarding greenhouse gases under Clean Air Act which was mandated by the Supreme Court. On Dec. 15, 2009, the final findings were published in the Federal Register and the rule became effective Jan. 14, 2010.

For those who are not familiar with the CAA, it is a painfully complicated and unwieldy statute. It is not unheard of, however, to propose a market based trading system to regulate air pollutants under the CAA. On the contrary, for example, the Bush administration successfully established a number of regionally based trading systems to control air pollutants (including nitrogen oxide and sulphur oxide). While such successful programs are occasionally identified as “proof” that the CAA can be used to control carbon emissions, that assertion confuses apples and oranges:

-The Bush administration programs are small and targeted to specific pollutants that can be traced to acid rain, health problems (like asthma) etc.

-Market based trading programs that intend to cap pollutants (such as CO2) that have no traceable direct effect but rather a broad global impact due to rising temperatures are something altogether different.

The shear enormity of controlling carbon emissions economy-wide under the CAA was not contemplated when the CAA was drafted. Such a regulatory scheme could conceivably expand the size of the EPA by as much as a third just to manage the scope of the program. Yet, there are those advocates that point to the fact that an EPA administrator is now proposing such use of the CAA, therefore the action must be legal and reasonable; not the most compelling legal argument I have ever heard.

While the stick strategy was intended to facilitate the passing of cap-and-trade legislation, an alternative response is in the works. Presently, there are two legislative proposals floating on the Hill that would affect EPA’s proposed timeline for enforcement. Sen. Lisa Murkowski (R-Alaska) is proposing an amendment that would block the EPA from implementing regulations on stationary sources while Sen. Rockefeller’s proposal would suspend EPA’s regulatory authority over the issue as a means of giving more time to address the issue directly.