Junk Obama’s Clean Power Plan

Monday, October 30, 2017
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In 2015, the Obama administration’s Environmental Protection Agency (EPA) issued its Clean Power Plan (CPP) that prescribed detailed regulations for the control of carbon dioxide emissions from existing coal-powered power plants as part of its effort to control climate change. Earlier this month, the Trump EPA under Scott Pruitt issued its own proposed rule to undo the Obama administration’s guidelines without a commitment to replace them with a substitute set of rules dedicated to the same end. In response to Pruitt’s major shift in policy direction, states like Massachusetts and New York are suing to prevent the new legal regime from going into effect.

Pruitt’s reversal in environmental policy raises two issues—one scientific and one legal. The scientific issue revolves around the 2009 endangerment findings from an Obama administration study, which determined that carbon dioxide emissions are a pollutant whose emissions levels must be regulated under the Clean Air Act (CAA) because “greenhouse gases in the atmosphere may reasonably be anticipated both to endanger public health and to endanger public welfare.” Other chemicals on the list of six designated pollutants—like methane and nitrous oxide, with known toxicities—surely deserve that designation, but the Obama report overstates the risks of carbon dioxide to the environment.

Although that report acknowledges that the relevant science is evolving, it does not recognize that new information about climate change could weaken the case for regulating carbon dioxide. For example, the 2009 report assumes that modest increases in temperature are likely to create dangers to crops by shortening the growing season. But more careful studies since that time have showed that the increase in carbon dioxide has resulted, as Matt Ridley reports, in a dramatic increase in the greenery on the earth’s surface of about 14 percent over the last 30 years. This far outpaces any supposed harm that might come, as the EPA report suggests, from “weed and pest growth,” which are best controlled by specific technologies and not by top-down policies addressing climate change generally.

More fundamentally, simulations using the EPA’s own climate model show that a full implementation of the Clean Power Plan would, as climate scientists Chip Knappenberger and Patrick Michaels report, reduce global warming by “less than two one-hundredths of a degree Celsius by the year 2100.” A more recent 2017 study by climate scientists James Wallace, John Christy and Joseph D’Aleo reaches the stronger conclusion that to date “there is no statistically valid proof that past increases in atmospheric CO2 concentrations have caused the officially reported rising, even claimed record setting temperatures.” Other powerful forces, including El Niño, are better able to explain particular dramatic events, like the recent hurricanes in Florida, Puerto Rico, and Texas. This attack on the ostensible scientific consensus is highly contentious, but at the very least, this new evidence fully warrants a reexamination of the 2009 endangerment findings. Additional knowledge about global warming can make the case for social action weaker as well as stronger.

Pruitt’s proposed repeal of the CPP did not address the endangerment findings, but instead directed its fire solely to the legal question of whether the Obama EPA exceeded its statutory authority under Section 111(d) the Clean Air Act, which addresses “standards of performance for existing sources.” Implementation of that section depends on a statutory definition that ties a standard of performance to “the degree of emission limitation achievable through the application of the best system of emission reduction.” Section 111(d) then further instructs the administrator to take into “account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements.” Under these definitions, Pruitt correctly claims that the EPA only has the authority to implement emission control devices for existing stationary sources, that, unlike new stationary sources, were in operation before the regulations were put into place. The CAA’s cautionary qualifications on nonair, health, environment, and energy constraints are meant to remind the EPA that its decisions on emissions control do not take place in a void—and that there are trade-offs that necessarily arise when any proposed system of emissions control is put into place.

There is much to dislike about the CAA’s approach, which makes the fundamental structural mistake of looking at the inputs that generate pollution emissions, such as the type of catalytic converters or scrubbers. But the better measure of social harms is the level of pollution outputs from these sources, like how much of a pollutant is emitted by the particular power plant. By measuring outputs, all the technical decisions on plant design would fall to the owners, who know that they will face taxes or injunctions for exceeding the pollution guidelines and other environmental safety standards. Operators of old and inefficient power plants may well shut such plants down, especially if they can erect new state-of-the-art facilities that emit far fewer pollutants without running a regulatory gauntlet. Unfortunately, the current system creates huge incentives for facilities owners to make endless costly modifications of existing facilities, given the enormous permitting obstacles to putting into service newer facilities that are far safer and more efficient than the older, displaced plants.

Pruitt should push hard to change the basic regulatory framework for existing power plants. In the interim, however, he is correct to categorically reject the coercive strategies envisioned by the Obama administration in its Clean Power Plan. Obama’s key move in the CPP dance was to design a comprehensive package of three “building blocks” as part of the best system of emission reduction: The first aims to improve the performance of existing coal-fired generating units; the second and third require substituting lower-emitting natural gas and zero emission technologies—wind and solar—for dirty coal.

The EPA has no authority to require the use of either natural gas or renewable resources under the CAA. It can only regulate systems that are attached to the facility itself. Given its expansive view, the EPA seeks to leverage its power into areas beyond its jurisdiction. The CPP imposed standards of performance on coal-fired plants that could not be met with any existing technology, such that current coal-company operators would have had to shift production to these two alternative technologies to meet the standards. In effect, the CPP presupposes that section 111(d) imposes no restraints on what can be demanded throughout the entire energy grid, which means that compliance required transformation of the electric grid, whose governance does not lie with the EPA but with state regulators and the Federal Energy Regulatory Commission (FERC) that regulate the transmission and wholesale provision of electrical power.

The CPP’s effort to leverage the power of the EPA applies a common legal maneuver to new circumstances. Historically, before the New Deal revolution on the scope of the federal commerce power, the federal government did not have the power to “stabilize”—i.e. cartelize—agriculture output for the benefit of farmers. But under the Agricultural Adjustment Act of 1933, the Roosevelt administration imposed a free-standing tax on producers to fund payments to farmers who stopped agricultural production. In United States v. Butler, the Supreme Court struck down the use of this directed tax as an improper way of circumventing the then-constitutional limits of federal regulatory power. That decision has not been uniformly followed, but in 2012, this approach shaped the Court’s decision in NFIB v. Sebelius, which struck down as unconstitutional the Affordable Care Act’s plan to strip away all existing Medicaid payments from those states that opted out of the law’s Medicaid extension program

It’s never excusable for agencies to use these dubious techniques to extend their powers over states or private parties. The point here is not that existing coal facilities should receive a special dispensation from regulation under the CAA. Any regulations under Section 111 could, of course, make coal less competitive against natural gas. So long as the best system for emission reduction for existing coal plants meets the CAA standards, any decline in coal use should be welcomed, not opposed. Conversely, no one would or should ever remove all emissions controls if that was needed to make coal competitive.

Pollution control should not be treated as a disguised form of industrial policy. Indeed, the needed switch to output-based pollution controls would avoid the hapless task of deciding just how good the “best” system of emissions controls has to be. But until that reform is undertaken, Pruitt may well be correct that no new CPP is better than the highly flawed Obama plan.