October 21, 2013

The EPA Gets High on Greenhouse Gases

The Supreme Court should seize the opportunity to overturn the agencies new regulations on carbon dioxide.

The key event in the Environmental Protection Agency’s campaign to regulate carbon dioxide as a pollutant came on April 2, 2007. It was the Supreme Court’s decision in Massachusetts v. Environmental Protection Agency. Justice John Paul Stevens, writing for a five-member majority, held that the EPA had a duty to decide whether greenhouse gas emissions from new vehicles are contributing to “air pollution which may reasonably be anticipated to endanger public health or welfare.”

Six years later, the apocalyptic predictions about global warming have not been borne out, notwithstanding the dire rhetoric of Justice Stevens’s opinion. The earth’s temperature has remained stable in the face of increasing concentrations of carbon dioxide in the atmosphere. Indeed, according to measurements from the Climatic Research Unit of the University of East Anglia, “The Earth's average temperature warmed by 1.4ºF (0.8ºC) between the 1850s and 2000s, mostly during 1911-1944 and 1976-1998”—before the upsurge of carbon dioxide concentrations in the atmosphere over the last 15 years.

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Illustration by Barbara Kelley

Nonetheless, on this issue, the EPA is unwilling to alter the form or pace of its regulations in light of the new data that shows no trend of global warming. Clearly, the issue is a lot more complicated than was previously thought.

A Tale of Four EPA Rulings

The consequences of Massachusetts have been vast. Once the EPA was safely in Democratic hands, two decisions followed inexorably from the 2007 Massachusetts decision. In December 2009, the EPA, under the Obama Administration, issued the Endangerment Rule with respect to carbon dioxide that Massachusetts had sought in earlier litigation. Then, in May 2010, the EPA issued its Tailpipe Rule governing emissions from new motor vehicles.

The EPA’s endangerment rule relies, as it is surely entitled to do, on the premise from the Massachusetts case that carbon dioxide counts as a pollutant, even though in some concentrations it is, unlike the other pollutants on the list, essential to life. Indeed, in its ruling, the EPA obscures the distinctive role of carbon dioxide by blending it on a list of “well mixed greenhouse gases,” namely, carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. The latter five gases raise vastly different problems than those posed by carbon dioxide.

The Massachusetts decision also takes no note of an anomaly within the statute that deals with the minimum quantity restrictions that trigger EPA oversight of emissions. Title I of the Clean Air Act (CAA) sets standards for the Prevention of Significant Deterioration (PSD), which treats as a “major” source of pollution any facility that has a potential to emit 250 tons per year of the designated pollutant. Similarly, Title V governs emission requirements for major stationary sources; it calls for permitting regulations if they exceed a threshold of 100 tons per year.

One of the strongest arguments against adding carbon dioxide to the list of pollutants formulated under the CAA is that it would increase the number of regulated facilities from about 280 to over 81,000, which could require, according to recent estimates, an additional $21 billion to process.

Massachusetts also magnifies the major defect in statutory design, which stems from the decision to apply emission restrictions only to new motor vehicles. The key danger here is that any increase in the cost of new motor vehicles will raise prices in ways that will slow down the speed at which older vehicles with higher pollution levels are traded in for new vehicles, which emitted much lower levels of pollution even before the case. The EPA’s dense regulations never once utter the word “incentive” or the phrase “substitution effect” as grounds for examining the potential unintended consequences of its counterproductive rule.

Last, the Endangerment Rule briefly notes that the definition of pollution that applies to new motor vehicles “automatically” carries over to both Title I and Title V of the CAA. That particular point was never addressed in Massachusetts, which confined its analysis to new motor vehicles. In so doing, Justice Stevens denied that the expanded EPA jurisdiction would lead to “extreme measures.” Just that concern led a narrow majority of the Supreme Court, in the 2000 case FDA v. Brown & Williamson, to deny the FDA jurisdiction to regulate tobacco as a drug under the Federal Drug and Cosmetic Act.

Nonetheless, the EPA expanded its reach in its April 2010 Timing Rule, which held that so long as carbon dioxide is a pollutant under Massachusetts, it automatically counts as pollution under Title I and Title V of the CAA. Thereafter in its June 2010 Tailoring Rule, the EPA announced a program whereby it would phase in its regulation of stationary sources, starting with permitting the largest sources, given the manifest risks of “greatly increasing the number of required permits, imposing undue costs on small sources, overwhelming the resources of permitting authorities, and severely impairing the functional of the programs.”

Carbon Dioxide in the Courts

This issue came before the D.C. Circuit Court of Appeals in the 2012 decision Coalition for Responsible Regulation v. EPA, where the initial panel upheld the EPA on all four rules, relying on a combination of Massachusetts’ broad definition of “any pollutant” and its deference to the administrative expertise of the EPA. That decision illustrates a dangerous dynamic that leads to the expansion of environmental law—and other bodies of substantive law.

The initial decision in Massachusetts was apparently confined to one area, motor vehicles, before anyone laid bare the linkages with other portions of the statute. It is unclear whether Justice Stevens would have backed down from his decision if these collateral consequences had been put on center stage in the initial argument. But it was probably just that point that led the current Supreme Court to take on the knotty issues in Utility Air Regulatory Group v. EPA.

The issue of statutory interpretation presented in this case is common in administrative proceedings. The text of a statute often contains basic coverage provisions that are very broad, apparently sweeping into regulatory activities that bear little if any relationship to the law’s central purposes. For instance, in Brown & Williamson¸ Justice Sandra Day O’Connor tackled a very broad definition of “drug” to include articles and devices other than food “intended to affect the structure or any function of the body.”

From these definitions, the FDA concluded that it could regulate cigarettes as a “combination product,” whereby the cigarette itself delivers the chemicals in tar and nicotine, which in turn surely affects the structure and function of the body. But the simple response was that it was absurd to apply this elaborate administrative structure to products for which manufacturers did not claim any “therapeutic effect.” Who runs clinical trials to find out whether tobacco is an effective agent in curing diseases?

In my view, Brown & Williamson should have dictated the opposite result in Massachusetts. But Justice Stevens, who was part of the dissent in Brown & Williamson, distinguished the decision on frivolous grounds without explaining how his broad definition of a pollutant fit within the basic structural features of the CAA. That broad definition is producing anomalous results.

The EPA normally allows for states to develop their own implementation plans (or SIPs) to cope with local pollution for stationary sources. But these state-based plans make no sense in dealing with carbon dioxide. The government’s brief in the Appellate Court tiptoes around this issue. That omission is important here because the pressure toward localism in the operative provisions do not mesh at all with carbon dioxide pollution, which mixes quickly into the atmosphere regardless of its point of emission. The risks of global warning are tied far more closely to emissions in China and India than to stationary sources in the United States.

The Uncertain Future

It is clear from the extensive materials filed in this case that the decision in Utility Air Group will in some sense be a referendum on the earlier decision in Massachusetts. The arrival of Justices Sotomayor and Kagan make it likely that everything will turn on whether Justice Anthony Kennedy pivots away from Massachusetts on the ground that these new extensions reveal the unsoundness of the earlier decision.

Ironically, that will turn on making the same arguments this time around that failed in Massachusetts. But in this instance, the move is well worth making, for the consequences of additional EPA regulation could lead to a radical reduction in the operation of all major public utilities, with profound economic dislocations.

The argument here does not raise the absurd and foolish claim that all forms of environmental regulation are inappropriate. The standard rational for direct regulation of pollution from multiple sources is still that private rights of action cannot cope with pollution emitted from multiple sources, given their prohibitive administrative costs. But the general case for government regulation does not resolve the current controversy, for just as underregulation is one risk, so too is overregulation another.

The EPA is heading in the wrong direction. The correct approach is to encourage new, and cleaner, facilities to open that replace existing dirty facilities. The ideal response in Utility Air Group would be to overrule Massachusetts, which would force Congress to start over. That outcome is not likely here, even as the basic anomalies of the CAA come more clearly into view.

But there is enough texture and confusion in the bowels of the CAA to allow the Supreme Court to sever the supposedly automatic linkage between motor vehicles and stationary sources. Our current policy on air pollution needs retooling, for in environmental regulation as elsewhere, the means chosen are as important as the ends they seek to implement. 


Richard A. Epstein, Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, Laurence A. Tisch Professor of Law at New York University, and senior lecturer at the University of Chicago, researches and writes on a broad range of constitutional, economic, historical, and philosophical subjects. He has taught administrative law, antitrust law, communications law, constitutional law, corporate law, criminal law, employment discrimination law, environmental law, food and drug law, health law, labor law, Roman law, real estate development and finance, and individual and corporate taxation. His publications cover an equally broad range of topics. His most recent book, published in 2013, is The Classical Liberal Constitution: The Uncertain Quest for Limited Government (2013). He is a past editor of the Journal of Legal Studies (1981–91) and the Journal of Law and Economics (1991–2001).


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