Cap and Trade Rules
President Obama’s Roadmap to Cap-and-Trade - Part IV

Warming Law
February 2, 2009

Obama may be able to implement cap-and-trade under the Clean Air Act — but should he?

What follows is the final post in a four-post series written by the authors of
Warming Law for the online environmental magazine, Grist.

In previous posts, we’ve spelled out specific steps President Barack Obama can
take to encourage Congress to pass legislation establishing a strong
cap-and-trade program. Yet there has been speculation as to whether the
President already has the authority, under the Clean Air Act, to establish a
cap-and-trade program without waiting for Congress to act.

In actuality, there is no straightforward answer to whether the administration
can introduce cap-and-trade for CO2 under the CAA. For one thing, the EPA has
never successfully implemented a cap-and-trade program for any pollutant without
congressional approval. The Bush administration tried twice, once with the Clean
Air Mercury Rule (regulating mercury emissions) and again with the Clean Air
Interstate Rule (regulating sulfur dioxide and nitrous oxide emissions), though
both programs were ultimately struck down by the D.C. Circuit on unrelated
grounds. (Note: The D.C. Circuit temporarily reinstated the Clean Air Interstate
Rule in December in order to preserve its environmental benefits while the EPA
promulgates new rules. However, the court made clear that it still viewed the
program as unlawful.)

The only time cap-and-trade has been permitted to go forward is when it was
explicitly approved in CAA provisions, as was the case with the EPA’s famous
Acid Rain Program regulating SO2 and NOx. Georgetown Law professor (and
newly-appointed EPA adviser) Lisa Heinzerling noted in testimony [PDF] before
the House Committee on Energy and Commerce that this by itself might be grounds
for prohibiting cap-and-trade for CO2 under other sections of the Act, “because
[the acid rain] provisions explicitly permit emissions trading, it might be
argued that the provisions that do not mention trading do not allow it.”
(Emphasis added.)

Precedent thus provides little insight as to whether a full-fledged
cap-and-trade program for CO2 emissions under the existing CAA would withstand a
court challenge. Moreover, Heinzerling’s congressional testimony reveals that
while certain provisions of the CAA lend themselves to establishing targets for
CO2 emissions, the language of the Act only somewhat supports then using
cap-and-trade as the mechanism for reducing total emissions. She concedes:
The regulatory provisions of the Clean Air Act appear, for the most part, not
to have been written with a cap-and-trade program in mind. Developing a
cap-and-trade program under these provisions would thus, at the very least,
require a good bit of interpretive creativity.

Alternatively, in a widely-circulated article published in October,
environmentalists Michael Northrop and David Sassoon discussed using the CAA to
link up state and regional cap-and-trade programs, thereby circumventing the
question of whether the EPA has the authority to establish its own national
program. The EPA could establish National Ambient Air Quality Standards (NAAQS)
for CO2 and then potentially set requirements for how states meet these
standards through State Implementation Plans. Northrop and Sassoon explain:
It is tricky legal terrain. Many experts do not believe the EPA can establish
a carbon trading mechanism on its own authority, but they agree that states
can, and that the EPA can play the role of regulator.

The legality of this approach, however, would also not be known until it was
attempted and (likely) litigated, a process that could take years.

All this raises a bigger question of whether President Obama should introduce
cap-and-trade under the existing CAA, even if he could legally find a way. While
the CAA has the obvious advantage of being readily available, attempting to
establish a rushed or half-hearted cap-and-trade program under its ungainly
provisions could slow down parallel congressional efforts to pass cap-and-trade,
and well-tailored legislation would almost certainly provide a preferable
framework for greenhouse gas mitigation. As Heinzerling put it to legislators
last April, “the Clean Air Act is an excellent off-the-rack garment for
greenhouse gas regulation, but it may be that congress wants a more tailored fit.”

A much wiser strategy, then, might be for President Obama to use the CAA to prod
Congress on climate change, rather than do its work for it. By (1) using more
established federal tools such as EPCA’s CAFE standards and CAA Section 111 new
and existing source performance standards, (2) granting the waiver that will
allow California and over a dozen other states to start enforcing stricter auto
emission standards, and (3) encouraging local, state, and regional
experimentation with stronger environmental regulations, the Obama EPA can make
it increasingly untenable for Congress not to act.

As the history of environmental regulation has taught us, if such actions occur,
influential industries like automakers and electric utilities will then demand
that Congress provide a more organized, comprehensive approach to climate
policy, especially if faced with an administration eager to use its permitting
and monitoring powers to limit greenhouse gases.

In this sense, President Obama already has the tools to make industry rally
behind, rather than against, a strong cap-and-trade bill — and therefore doesn’t
need to try to force his sleek, modern cap-and-trade plan into the 1970s leisure
suit that is the existing Clean Air Act.


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