Climate policy: a fragile American precedent

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EllermanDenny Ellerman, formerly a Senior Lecturer at MIT’s Sloan School of Management, was for many years executive director of the Center for Energy and Environmental Policy Research and the Joint Program on the Science and Policy of Global Change. He has also been a part time professor at the EUI and director of the Florence School of Regulation’s Climate Policy Research Unit, from which he recently retired.

In early June, the Obama Administration issued its long awaited ‘Existing Power Plant Rule’ to address climate change by reducing CO2 emissions from existing power plants by 30% by 2030 (as measured from 2005) to kudos from most environmentalists and foreign observers but promises of opposition from important players in the US political process. The proposal is bold in its assertion of regulatory authority, but it also provides extraordinary flexibility to states in achieving differing, mandatory carbon intensity limits set by the federal authority. These intensity targets are established by simulating reasonable improvements in coal plant efficiency, increased use of existing natural-gas-fired generating capacity, and modest increases in renewable energy generation and demand side management. While the modeling underlying these targets presumably reflects an implicit carbon price, states have complete flexibility in deciding how they will achieve their targets. Moreover, the intensity target can be converted into a mass-based limit to enable the adoption of a cap-and-trade program or joining existing programs in the Northeastern states or California.

The timeline for implementation is ambitious. After receiving public comment, the final rule is to be issued in June 2015 so that states can submit their implementation plans by June 2016 for review and approval by the still incumbent Obama Administration. In the best of all worlds, everything would be in place by January 2017 when a new Administration will take over; however, this is highly improbable. In fact, the proposed rule itself allows for requests from the states for a one or two-year delay in the submission of their implementation plans.

While well thought-out and a considerable achievement, the rule has many hurdles to clear. They are time and the always present, fundamental legal and political issues concerning the limits of administrative discretion and executive prerogative under the U.S. Constitution. The legal issue concerns the limits of administrative discretion: How much latitude does the Administrator of the U.S. Environmental Protection Agency have in interpreting legislative authority…in this case the now nearly 50-year-old Clean Air Act and a heretofore unused and therefore judicially untested section of the law. Recently, the Supreme Court has tended to uphold the EPA’s exercise of its discretion, but not always and, in a recent case, the court explicitly cautioned against too wide-ranging an interpretation.

The political problem is closely related and the same one that the President is using to promulgate the rule: executive prerogative. In general, the Obama Administration has taken the stance that if Congress will not (or cannot) act, the executive branch is justified in acting alone to promote the public interest. The problem is that if the political vicissitudes return the Republicans to the White House in 2016, the same argument and precedent will allow for greater prerogative and discretion in hobbling if not disabling the rule. Several years will be required to resolve these issues.