by Judith Curry

When did the EPA become our Nation’s energy regulator? When did the EPA acquire both the statutory mandate from Congress and the required subject-matter expertise to do FERC’s and the States’ jobs? When did the EPA gain the expertise to determine the optimal and most reliable mix of coal and natural gas power plants? When did the EPA acquire the expertise to determine how much power can (or should) be reliably generated using wind farms and solar arrays? – Forbes

A good overview article on the issue of EPA overreach is this recent article in Forbes: EPA’s Dangerous Desire to Become America’s Energy Regulator.

Richard Epstein on the Clean Power Plan

The focus of this post is the legal authority of the EPA to promulgate the Clean Power Plan. Specifically, the perspectives of libertarian legal scholar Richard Epstein. For the reader’s digest version, Epstein has written two recent short articles on the topic:

Excerpts:

The issues are complex and their resolution depends in large measure on understanding the ways in which the EPA’s CPP (Clean Coal Plan) exercises its power.

The nub of the difficulty here is this: traditionally, the Clean Air Act pays homage to federalism by having the EPA set National Ambient Air Quality Standards (NAAQs), leaving it to the states to figure out how best to meet the national target in pollution control while knowing that the federal government can override them with its own FIP (Federal Implementation Plan) if the plan is not regarded as sufficient.

The big difference with the CPP plan is that it takes these BSERs (‘best system of emissions reduction’) the next level by announcing that plans should address four discrete “blocks” of issues that include modification of facilities but go beyond that to cover substitution of both natural gas and renewable energy for coal, and to taking measures to reduce the demand for energy within the state.

It is one thing to let the EPA specify the best technology for controlling pollution from a given source. It is quite another to allow it to venture into regulating the transmission and consumption of electrical power, especially since the first of these tasks is governed by the Federal Energy Regulatory Commission, or FERC, which normally leaves these issues to state control. This peculiar jurisdictional line up means that the FIP may not be able to incorporate any of the last three approaches that the EPA wants to be included in SIPs (State Implementation Plans), at which point slashing carbon dioxide output from coal plants could require wholesale plant closings under the as-yet-stated FIP which may only be able to attack facility emissions directly.

The question is just how much discretion should the EPA have in making decisions that could cost individual states and firms billions, especially since it appears that its direct regulatory authority to implement on its own only direct regulation of emissions from designated facilities. It looks therefore that the threat of very heavy direct cuts in output could be used to lever states to make alterations in local policy that the EPA is powerless to impose under its own authority. At this point, the crafty game of extending powers through threats does give rise to a serious constitutional challenge, as the EPA seeks to implement indirectly measures that it could not impose directly.

Even if the end of pollution control is manifestly legitimate, the choice of means should be subject to higher levels of review than are often applied today. More concretely, the ability to set wildly different targets for different states opens up the real possibility that the EPA could help its political friends and hurt its political enemies. They should ratchet up their scrutiny of individual EPA determinations on carbon dioxide to see if they bear any relationship to sensible pollution control strategies, which on balance they do not.

At this point, the legal survival of the EPA’s CPP is anyone’s guess. Much will depend on the EPA’s own guidance documents about FIPs, which should come down this summer. But it is dangerous business to let the EPA take the coal industry hostage by this set of aggressive maneuvers. The Supreme Court’s initial wrong was Massachusetts v. EPA, which wrongly held that carbon dioxide counted as a pollutant under the Clean Air Act.

The simple point is that carbon dioxide raises unique issues that cannot be sensibly addressed within the basic Clean Air Act framework, which is why Congress should now legislate to take this confused matter out of the EPA’s hands. A key element is to develop a constructive national scheme that first updates the EPA’s 2009 endangerment finding on carbon dioxide, and then looks for a more even-handed regulatory scheme that does not hold an enormous dagger over the entire coal industry.

Epstein has penned an earlier article The EPA Gets High on Greenhouse Gases, which provides additional perspective on this issue.

Richard Epstein on climate change

Epstein makes a superb 5 minute statement about climate change [here], although the production and video isn’t great. For a longer version, via podcast, link [here].

Epstein has published a lengthy article (2010) Carbon Dioxide: Our Newest Pollutant. My excerpts from this paper focus on Epstein’s take on solutions to the climate change issue:

The question now is whether any climate control legislation will pass Congress. Temperatures have been cooling, but tempers have been rising. At present, my view is that Congress will not pass any such legislation. The high costs will not sit well in bad economic times. It is just too much of a shot in the dark to go full steam ahead on the strength of imperfect science in the face of a persistent economic downturn. And even if it is passed, the prediction is that all the administrative targets for enforcement will be relaxed either by administrative decree or by special Congressional action. The fragile political consensus on global warming makes it highly unlikely that the decision can be made in a consistent coherent fashion once and for all. Domestically, the gulf between the two political parties is too great, and there is no question that the energy-intensive industries tend to be in Republican states, which gives rise to a differential impact that will add another element of long-term instability.

On the one hand, I think that there is good reason to believe that the threat from global warming is overstated, which would be welcome news if true. On the other hand, if it is not overstated, I have sought to explain what I believe to be the major shortfalls of all current and proposed solutions. So what then should be done about this problem, given that no one is sure about what the future will bring? My preferred program has six key components.

First, either cap and trade or a system of pollution taxes works far better than any effort to make collective judgments about the “best available” technology as a precondition for launching new facilities or vehicles. The “best available” technology is the worst possible approach because it hangs regulators up on small differences between alternative technologies when it makes far more sense to let the parties pick their own technology so long as we are able to monitor their output and force them to live with the costs (and benefits) of their own decisions.

Second, go after the low-hanging fruit, by stopping those forms of pollution that are easiest to control. Methane is one obvious place to secure substantial benefits. In the short run, the gas contributes more to global warming than carbon dioxide. In addition, it has other dangerous properties, which are worth curbing. Nor is it too difficult to secure major advantages without disrupting the overall economy. The hope here is to buy some more time so that the technology will evolve in ways that make us less dependent on fossil fuels.

Third, remove subsidies that lead to the destruction of forests. Whether one lives in Iowa or Massachusetts, there is simply no justification for doling out substantial ethanol subsidies to induce people to substitute it for gasoline. Any sensible set of reforms has to force the farm states to back off from these dangerous programs, and the sooner they do, the better. The ethanol situation is driven by the usual suspects: government mandates on fuel and heavy subsidies for domestic production.

Fourth, simplify the regulation on nuclear power. That task can only be done by rebuilding, from the ground up, a regulatory structure that has prevented the construction of a single new plant since 1977. Someone has to change it, and perhaps climate change could be the impetus for some urgency on this score.

Fifth, shun industrial policy, especially one that uses the government to pick preferred pollution control technology. By the same token, we should not indulge in any form of public subsidy for other clean forms of energy production, which may or may not pan out. What is needed is not government experts picking winners (who fail), but a sensible scheme of taxation that allows any entrepreneur a decent return on investment, and a system of intellectual property law that is geared toward the imperatives of innovation. One hidden advantage of this approach is to generate technology that other nations will be prepared to purchase because it will be in their own local interest to do so.

Sixth, ensure that investments in global warming are accurately timed. There is, in all discussions of temporal issues, the question of whether it is better to accumulate your wealth today and spend it tomorrow in order to achieve some long-term end.

We are not even sure of the direction of temperature changes, let alone their magnitude, so we do not have the wealth of empirical evidence that is available in the education context. At this point, the cautious method looks far more attractive. Getting this message across is hard, to be sure, because of the endless technical disputes. But at least for the moment, the EPA’s endangerment finding seems to be both an environmental and institutional mistake. Watchful waiting looks to be the far better policy.

JC reflections

Epstein raises a host of issues about the EPA’s greenhouse gas policies. I think that his bottom line conclusion is important:

The simple point is that carbon dioxide raises unique issues that cannot be sensibly addressed within the basic Clean Air Act framework, which is why Congress should now legislate to take this confused matter out of the EPA’s hands.

The Clean Air Act appears to be ‘wrong trousers’ for the climate change/carbon dioxide problem. Unless a better legal framework emerges, this issue will continue to be a political football that switches sides with the party that holds the Presidency.

Epstein’s perspective seems to me to be more consistent with mainstream libertarian thought, more so than the perspective of Jerry Taylor (discussed in recent CE post).

I’m very pleased to see Epstein writing on this topic, I have been following his writings since my days at the University of Chicago (I’m sure RE doesn’t remember this, but our daughters were classmates at the UC Lab School).

I think this statement is very well said; essentially what I tried to say in my recent Congressional testimony that seemed to confuse Rep Beyer:

On the one hand, I think that there is good reason to believe that the threat from global warming is overstated, which would be welcome news if true. On the other hand, if it is not overstated, I have sought to explain what I believe to be the major shortfalls of all current and proposed solutions.

Of Epstein’s six recommendations for responding to climate change, I don’t disagree with any of them, but I am not a fan of carbon cap and trade or carbon tax (any of the versions that I have seen).

As a summary statement, I like this statement from Epstein’s coal article:

Indeed, one great tragedy of this entire unfortunate episode is that it pushes further down the road any coherent way to deal with all forms of pollution.