CQ WEEKLY
– IN FOCUS
Aug. 3, 2008 – 11:03 a.m.
Clean Air Policy Gets a Little Murky
By Rebecca Adams, CQ Staff
For most of the Bush era, environmentalists have known one thing about White House environmental policy: They opposed it, largely on the grounds that it was too accommodating to business interests and too timid in ameliorating key challenges such as climate change and air quality control. Their view was that an executive branch unafraid to assert its will through rule-making would impose its industry-friendly policies in a way that Congress or future presidents could not easily undo.
It turns out they were wrong, at least about the permanence of some of these changes. Instead, the administration’s air quality initiatives — and its policies on climate change — have been thrown into chaos by a series of adverse court rulings. The situation now has environmental foes of the Bush White House pondering whether to throw in with efforts to salvage the air quality framework that was on track toward full implementation next January or to embark on a complete overhaul of clean-air regulations.
And they’re not alone. Next January also marks the inauguration of a new president, and both 2008 presidential hopefuls, Sens. Barack Obama of Illinois and John McCain of Arizona, have vowed to pursue more aggressive approaches to climate change if elected. Thanks to all the uncertainty surrounding air quality policy, the next president will have far greater latitude to preserve or revise — or scrap — the Bush White House framework than anyone expected.
Meanwhile, industries affected by air quality rules are in the awkward position of appealing to a Democratic Congress to approve regulations similar to the ones they received from the White House in order to fend off the likelihood that the next administration’s policies will be tougher still.
The CAIR Scare
At the heart of the present through-the-looking-glass phase of air policy is a ruling from the D.C. District Court last month that completely vacated the White House’s Clean Air Interstate Rule (CAIR). That regulation was one of the main pillars of Bush’s regulatory framework on air issues. The CAIR program would have created cap-and-trade markets in 28 states and the District of Columbia with limits on sulfur dioxide and nitrogen oxides. The administration had put that rule and another, known as the Clean Air Mercury Rule, in place in 2005, after Congress failed to agree on a broad bill setting caps on sulfur dioxide, nitrogen oxides and mercury. With the unexpected scrapping of the CAIR system, no major player in environmental policy has a clear sense of the new regulatory politics of air quality — or how best to plan around the many variables now in play.
Many utility executives had accepted the Bush rules because they feared Congress might set more aggressive limits. Environmentalists wanted a tougher program that would apply nationwide but accepted the rule as a good first step. Many cited Environmental Protection Agency (EPA) estimates that the more healthful air resulting from CAIR would prevent 17,000 deaths a year.
In the CAIR decision, the appeals court was particularly concerned that the Clean Air Act calls for a state-by-state analysis of pollution contributions — something quite different from the regional trading approach adopted in CAIR. The court dubbed the rule “fundamentally flawed” and called on EPA to “redo its analysis from the ground up” — a sweeping mandate that surprised environmentalists and industry groups alike. Rescinding the rule has created additional worries, since it was also meant to serve as a foundation for other rules, such as a policy on air visibility, that may well may be in jeopardy also.
“The EPA, no matter who the next administration is, is going to have a huge number of issues to deal with right at the beginning,” said Jeffrey Holmstead, an industry lawyer at the Bracewell & Giuliani law firm who, as a former Bush administration assistant administrator for air and radiation, oversaw CAIR and many of the rules that have since been vacated.
The ruling is the latest — and most urgent — in a series of legal setbacks for the White House on air quality.
Indeed, the past three years have seen the severest legal blows to the EPA’s approach to air pollution in the agency’s history. While the decisions have turned on fairly technical disputes, judges have forcefully struck down the reasoning behind major EPA policies on the grounds that the Clean Air Act did not support them. In a February ruling revoking Bush’s cap-and-trade policy on mercury emissions, the D.C. Circuit Court said that in ignoring Clean Air Act requirements, the agency’s “explanation deploys the logic of the Queen of Hearts, substituting EPA’s desires for the plain text” of the act.
Climate change policies, too, have taken hits. The Supreme Court also ruled last year, in Massachusetts v. EPA, that the agency must explain why it has not acted to regulate carbon dioxide. If the EPA finds that greenhouse gases such as carbon dioxide endanger public health or welfare, the agency must regulate them as pollutants.
And EPA’s own staff believes more judicial losses are coming. Agency officials unanimously recommended that EPA Administrator Stephen L. Johnson grant a request from California last year to allow the state to set its own tailpipe emission rules because it was legally risky to reject the waiver. The White House took the risk and denied it anyway.
Clean Air Policy Gets a Little Murky
Rewriting the Clean-Air Rules
The CAIR ruling still remains the most immediate challenge, to both the White House’s regulatory approach and the various players invested in federal air quality policy. In anticipation of CAIR’s adoption, some utility companies have already invested significantly in pollution controls for their power plants that might be too costly to operate if the tighter policies do not end up taking effect. Others, in anticipation of stricter pollution limits, have bought emission allowance credits that could be worthless, barring the restoration of a stricter set of air quality rules. Some, such as the PPL Corp., a utility in Pennsylvania, have done both.
State officials are also in a bind. They face deadlines for other longstanding air quality standards, such as Clinton administration-era rules on seasonal soot and smog, which are slated to take effect in May for 22 states. Without the now-vacated Bush policies, the affected states probably won’t hit their deadlines, and could face penalties as a result. The Bush rules would have given power plants a financial incentive to reduce pollution. With those incentives off the table, plants may back out of contracts for new pollution control equipment or run the equipment less. That will put pressure on states to find new ways to cut pollution and meet the deadlines.
The ruling has also thrown congressional policy making into disarray. Two of the Senate’s unlikelier bedfellows — arch-environmental skeptic James M. Inhofe , an Oklahoma Republican, and stalwart environmental ally Hillary Rodham Clinton , a New York Democrat — are already sounding alarms about the suddenly shaky air quality regime. Since it’s unlikely that lawmakers will resolve these issues this year, the next administration will probably have to work through them in short order after taking office. It is unclear how strictly the next president will set limits or compliance deadlines in any new rules or whether Congress will hit upon a fix.
In one scenario, Congress could simply give the EPA authority to redraft the guidelines from the scrapped Bush rules, either with goals mirroring the administration’s or with more ambitious reductions over the long term. In another, lawmakers could open up the Clean Air Act for wide-ranging revisions. Still another approach, advocated by Sen. Clinton and others, would package new pollution-reduction policies affecting substances long governed by the Clean Air Act with the more novel approaches to curbing the greenhouse gas emissions that cause climate change.
That proposal already has widespread approval from state officials in New York, who would like to couple controls on sulfur dioxide, nitrogen oxides and mercury with carbon dioxide, which is not capped now.
“We have an opportunity in time, and I think dealing with them all at once would facilitate industry planning,” said Jared Snyder, a New York Department of Environmental Conservation official, in testimony last week before the Senate Environment and Public Works Subcommittee on Clean Air and Nuclear Safety. “It’s worth a try to try to solve all these problems.”
The Price of Certainty
On a separate track, the EPA is exploring a number of options for resolving the uncertainty. The EPA could negotiate a settlement with all of the parties — a possibility, since none of the litigants expected the entire regulatory regime to be tossed out. However, the rule was challenged by a number of stakeholders for different reasons, so it could be difficult to find quick agreement.
Environmentalists, career EPA officials and utility executives all would prefer that Congress settle the issue through legislation, which would be harder to overturn in the courts. “If they could get a reasonable bill through Congress, that would be a good result,” said attorney Holmstead, who advises industry. “People would really like to have certainty. On the other hand, it depends a bit on what the price would be for that certainty.”
Some environmentalists already argue that combining legislation for climate change mitigation with clean-air rules may represent too steep a price. “There’s only so much political capital out there to do environmental stuff,” said Dave Hamilton, director of the Sierra Club’s Global Warming and Energy Program. “That capital needs to be focused on climate.”
Indeed, moving a bill on climate change would be complicated enough without a side debate on the Clean Air Act. The big climate change bill would not just regulate sectors of the economy, as Bush’s Clean Air Act rules did with power plants, but almost the entire economy. The Senate failed, 48-36, to shut off a filibuster on the broad climate bill in June. Senate Energy and Natural Resources Chairman Jeff Bingaman , D-N.M., said July 28 that it “would be a heavy lift” for any administration to pass climate change legislation in a time of economic turmoil and high energy prices.
Delaware Democratic Sen. Thomas R. Carper said he would support combining the Clean Air Act issues with proposals to cap carbon dioxide only if it was clear that a deal could be reached quickly. “I don’t know that we should wait if we can come to consensus on a three-P bill,” Carper said, using a shorthand term for the three pollutants sulfur dioxide, mercury and nitrogen oxides.
Clean Air Policy Gets a Little Murky
The next few months will be critical to determining what happens next. The EPA will decide by late August what its best legal or regulatory options for responding to the CAIR ruling would be. In the meantime, state officials such as Snyder will continue negotiating with their peers in other states to see if a compromise can be proposed to Congress.
In the meantime, utility executives and environmentalists are in for a long, anxious wait until the next administration is seated. “Now we’re left with a laundry list of uncertainty, very costly uncertainty,” said Inhofe. “We have a colossal mess on our hands.”
FURTHER READING: Climate change, CQ Weekly, pp. 1545, 1009.
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