The Climate Policy Climate Warms Up

Last week, the Environmental Protection Agency (EPA) finalized a new rule requiring large emitters of carbon dioxide and other greenhouse gases (GHGs) to monitor and report their annual GHG emissions. Yesterday, the EPA released a proposed rule to regulate GHG emissions from major sources of GHG emissions under the Clean Air Act. If finalized, this would be the first fedral regulation limiting GHG emissions from stationary sources.  (More from the WashPost and NYT.)

The threat of federal regulation of GHGs under the Clean Air Act (CAA) is supposed to be a major inducement for industry to support cap-and-trade regulation. The CAA was not drafted with GHG controls in mind, and is not well suited to cost-effective GHG control.  Some business types want climate change legislation to replace CAA rules with a more efficient and workable regulatory regime. For this reason, quite a few companies have supported climate change legislation. (Still others see such a bill as an effective means to gain competitive advantage within their industry.) Interestingly enough, the draft legislation circulated in the Senate this week does not preclude EPA regulation of regulation of GHGs under the CAA. In other words, industry could face both a cap-and-trade regime and CAA regulation (the latter of which could severely compromise any efficiency benefits provided by the former).

An interesting aspect of the EPA’s proposed rule to limit stationary source emissions is the agency’s creative effort to limit the regulation’s applicability in the face of fairly explicit statutory text.  The relevant provisions of the Clean Air Act define major stationary sources as those that emit (or have the potential to emit) 100 or 250 tons per year of regulated pollutants (depending on the type of facility).  Yet the EPA’s rule would only apply to facilities that emit 100 times this  amount of carbon dioxide or carbon-dioxide equivalent.  (Anything less would be de minimis, I suppose.)

The reason for limiting the rule’s application in this way, EPA explicitly acknowledges, is that it would be virtually impossible for the agency impose the permitting and regulatory requirements to all facilities  that meet the statutory threshold.  Rather than try to regulate tens of thousands of residential and commercial buildings and small businesses, the EPA wants to focus its efforts on several thousand large industrial facilities.  There’s no statutory text to support this decision, so the EPA relies on the doctrine of “administrative necessity” and the need to avoid “absurd results.”    (I also suspect the EPA is aware that a more expansive rule covering small businesses, apartment buildings, etc. would make it almost certain that a cap-and-trade bill would preclude GHG regulation under the Act.)

Funny, though, that such administrative concerns — indeed the sheer unworkability of trying to impose GHG controls on such a scale — did not convince a majority of the Supreme Court that the CAA did not apply to GHGs in Massachusetts v. EPA (nor did it convince those who sued the EPA to force GHG regulation, including some who now work for the EPA).  Nor was it that long ago that the Bush EPA was excoriated for its, shall we say, “creative” reading of the CAA’s stationary source provisions to constrain the scope of the Act’s stationary source regulations.  The U.S. Court of Appeals for the D.C. Circuit was not particularly receptive to the Bush Adminstration’s efforts to evade the text of the Act.  Will its response to the Obama Administration’s equally atextual climate rules be any different?