Comment on Kerry-Lieberman Climate Bill

I am a sometime-contributor to the National Journal‘s Energy & Environment Expert Blog.  This week the focus is the Kerry-Lieberman climate change bill, the “American Power Act,” and the EPA’s decision to raise the threshold for stationary sources regulated under the Clean Air Act from emissions to 75,000 tons per year for carbon dioxide, even though the statute contains a far lower numerical threshold.  Here is my comment:

The American Power Act is an agglomeration of complex regulatory measures and corporate subsidies. In an effort to provide something for everyone, the bill provides little for the American people. As it stands, the bill is not in the economic nor environmental interest of the United States. Erecting an ever-more complex cap-and-trade scheme on an industry-by-industry basis invites rent-seeking and corporate gamesmanship at the expense of meaningful reductions. Directed subsidies and grants may reward powerful constituencies, but they won’t encourage the innovation and deployment of transformative environmental technologies. A partial directed rebate of the revenues from carbon allowances is half of a good idea. A far better, and much simpler, approach would be the adoption of an economy-wide carbon tax from which all revenues are directly rebated to American taxpayers, with no strings attached. This is the simplest and fairest way to provide marginal incentvies for increased efficiency and carbon-use reductions without hampering economic growth.

While the bill is bad, the EPA’s plans are not much better. This week the EPA finalized rules purportedly designed to fulfill the agency’s statutory obligation to regulate greenhouse gases as pollutants under the Clean Air Act. The rule EPA issued, however, is patently illegal and a flagrant violation of the plain text of the Act. The statute sets clear numerical thresholds for the imposition of PSD and Title V permitting requirements, and provides EPA with no authority to re-write these thresholds — turning 250 tons-per-year into 75,000 tons-per-year — by administrative fiat. The EPA may believe that the it is not practicable to apply the express terms of the Clean Air Act to GHGs, but that is not the agency’s call to make, especially not after the Supreme Court’s decision in Massachusetts v. EPA, which expressly rejected the argument that the CAA was unworkable for GHGs. If the EPA would like to follow a different course, it must go to Congress — and let’s hope Congress can come up with something better than the APA.