On Tuesday, Environmental Protection Agency Administrator Lisa Jackson agreed to reconsider her predecessor's conclusion that greenhouse gas emissions are not subject to regulation under the Clean Air Act's "PSD" program which governs emissions from large power plants and industrial facilities. As the Washington Post and New York Times report, this is likely the first step toward the EPA's adoption of greenhouse gas emission controls under the Act. As the Times notes, EPA's Jackson has already asked her staff to prepare the necessary documentation for the legal finding that would trigger regulation -- regulation that (as I've argued before) is inevitable under current law.
Regulating greenhouse gases under the Clean Air Act will create a regulatory train-wreck. It will impose substantial costs, and yet fail to meet the President's ambitious emission reduction targets (80% by 2050). For this reason, many believe that the prospect of loosing the Clean Air Act on carbon dioxide (combined with the unleashing of the Endangered Species Act as a consequence of the polar bear listing) will encourage Congress to enact climate legislation. That's when the real fun will begin. If, as the President has suggested, Congress puts forward a cap-and-trade proposal, it will unleash a feeding frenzy of rent-seeking, as every conceivable industry and interest group seeks to protect its own or gain competitive advantage. This is one reason why I would prefer a revenue-neutral carbon tax, combined with policies to accelerate technological innovation and adoption -- but I'm not holding my breath.