Why The 'Post' Is Dead Wrong About Carbon Regulation

by Michael A. Livermore | September 22, 2009

Michael A. Livermore is the executive director of the Institute for Policy Integrity at New York University School of Law. He is the author, along with Richard L. Revesz, of Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Environment and Our Health.

The Washington Post ran an interesting editorial yesterday on regulating carbon—interesting, but ultimately wrong. The Post is correct that putting a price on carbon is the surest way to reduce greenhouse-gas emissions, and that it would be preferable for Congress to do this through legislation. But the editorial was wrong to say the EPA could not efficiently regulate carbon on its own. In fact, if Congress can't pass a climate bill this year, this is exactly what the Obama administration should do.

Thanks to a 2007 Supreme Court decision, the EPA is legally obligated to regulate greenhouse gases under the Clean Air Act. There are a number of ways it could do this. In one scenario, the EPA would try a variety of command-and-control rules that would have high costs and low benefits—the kinds of regulations businesses hate, such as overly prescriptive requirements to adopt specific technologies. What's more, since it's almost certain Congress would take a different approach when it got around to passing its own climate bill, this would create unnecessary transition costs for businesses that have to comply first with one set of rules, then another.

But that scenario can be easily avoided. In a report we issued last spring, the Institute for Policy Integrity showed how the EPA's existing authority under the Clean Air Act could be used to create a comprehensive cap-and-trade program for greenhouse gases. This would involve relying on statutory sections covering vehicle fuels, stratospheric pollution, air quality standards, and performance standards. The EPA's cap-and-trade would work pretty similar to the one that Congress set up—setting an overall ceiling for annual emissions and requiring emitters to pay for allowances. That means that when Congress does finally create its own cap-and-trade program, the two systems could be easily integrated.

What's more, the EPA wouldn't be subject to the same lobbying blitz currently influencing the climate debate in Congress. The agency wouldn't have to give away free allowances to politically powerful polluters the way the House bill did, and it could fashion a fairer system in which, for example, carbon permits were auctioned off rather than divvied up according to some political formula. (The EPA could also impose a stronger cap than that in the House bill.) And, under existing authority, the president could use EPA action as a basis for international agreement.

Some observers have worried that the EPA won't be able to pursue this route because courts have struck down agency-mandated cap-and-trade systems for other pollutants. But the courts haven't always struck down EPA emissions trading programs—such as the trading program for nitrogen oxides—and when they have disqualified programs, it was either because agencies failed to follow proper procedure (as was the case with a Bush-era mercury rule that eased requirements on power plants) or because specific statutory goals were not followed (as was the case in the Clean Air Interstate Rule, which wouldn't have necessarily reduced all interstate pollution). If Obama's EPA treads carefully, it should be able to get a carbon cap-and-trade program past any legal challenges.

Of course, smart action by Congress is always preferable to regulation. A climate-change bill wouldn't be subject to the same flurry of legal challenges, and it couldn't be undone by future administrations the way unilateral EPA rules could be. What's more, in some ways, an EPA-designed cap-and-trade bill could be more cumbersome than the one Congress enacts, because it would have to be tailored to existing regulatory authority. For example, Jason Burnett has argued that the EPA might have to use the performance-standards portions of the Clean Air Act, which would involve setting overall goals and working with states to meet those targets.

Still, with climate change proceeding apace, a climate bill stalling in the Senate, and international negotiators nervously looking to Washington in the run-up to the Copenhagen talks this December, there aren't many options left. And, given that the EPA is legally bound to do something, a cap-and-trade program would be a welcome alternative to inefficient command-and-control rules. It may not be the perfect climate-change-fighting tool, but the Clean Air Act gives the EPA a pretty good place to start if Congress falls short.

(Flickr photo credit: neoyogyrt)

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