Obama mulls cap-and-trade by decree
Senior U.S. administration officials have indicated that if Congress does not pass comprehensive legislation providing for a cap-and-trade system to regulate greenhouse gas emissions they will press ahead unilaterally with proposals using the Environmental Protection Agency (EPA)’s existing authority under the Clean Air Act.
This is an attempt to gain political leverage after deep divisions within the Democratic Party appeared when 26 Democratic senators rebelled earlier this month and voted for an amendment to the budget resolution barring cap-and-trade being considered as part of the budget.
The Financial Times reported White House budget director Peter Orszag admitting attempts to push a cap-and-trade scheme through Congress using the expedited budget reconciliation process had failed.
But Orszag insisted cap-and-trade is “nowhere near dead.” Officials have been briefing lobby groups the administration will ratchet up the pressure by declaring it already has authority to regulate emissions through the Clean Air Act and the EPA, with an announcement coming as early as this week.
“MASSACHUSETTS VERSUS EPA”
The administration appears to be relying on a 2007 Supreme Court decision (“Massachusetts versus Environmental Protection Agency”) that overruled objections from the Bush administration and the EPA to regulating greenhouse gas emissions. See PDF here.
Dismissing the agency’s claims it had no authority in this area, the court held EPA already had statutory power to regulate greenhouse gas emissions under the Clean Air Act and said the agency must undertake a fresh review and provide rational reasons why it would or would not exercise that authority to begin controlling emissions.
The Bush administration published the results of that review in 2008, and declined to take action. But in one of his first decisions, President Barack Obama ordered the agency to reconsider.
Last month EPA published a finding that greenhouse emissions endanger human health by causing climate change. The administration is threatening to take the next step and issue draft regulations to control them.
But the 2007 Supreme Court decision was reached by a narrowly divided court split along the usual ideological lines. The court’s liberal wing (Justices Stevens, Souter, Ginsburg and Breyer) received the crucial fifth vote supporting EPA regulation from swing voter Justice Kennedy, and were strongly opposed by the conservative bloc (Roberts, Scalia, Thomas and Alito).
If the administration tried to circumvent the legislative process and push through cap-and-trade using existing authorities, it is not clear whether it could overcome the judicial or congressional obstacles.
EPA AUTHORITY STILL UNCERTAIN
The problem with the ruling in “Massachusetts” is that it leaves the scope of EPA’s regulatory authority unclear. On the face of it, the ruling is quite narrow. It relates only to EPA’s authority to regulate carbon dioxide and other greenhouse emissions from motor vehicles, and says nothing about emissions from other sources.
It was also reached on a procedural point. EPA’s tortured arguments received short shrift from the justices in the majority.
But while the ruling was narrow, the language in which it was couched was very expansive indeed. Writing for the court, Justice Stevens wrote that “a well documented rise in global temperatures has coincided with a significant increase in the concentration of carbon dioxide in the atmosphere. Respected scientists believe the two trends are related.”
He went on to note “agencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop.” The sweeping declarations and incrementalist approach favored by Stevens could lay the basis for a much broader reading of EPA authority.
It is by no means certain how expansive the Supreme Court would permit EPA to be in regulating emissions. It is not clear whether the court was endorsing a narrow ruling (on motor vehicle emissions) or a broad one (effectively giving EPA unlimited authority to regulate emissions from any source).
White House senior adviser Carol Browner has admitted as much: “There are things that can be done with legislation that won’t quite work within the existing law”.
Everything would rest on the swing vote of Justice Kennedy. Given their previous dissent in “Massachusetts” the court’s conservative bloc should provide a reliable four votes against any EPA-mandated cap-and-trade system that lacks fresh congressional consent.
The pro-business justices are unlikely to support a scheme imposing substantial costs and with significant distributional consequences if proponents cannot marshall a congressional majority to support it through legislation.
So, assuming the liberal wing held together, Kennedy would once again be the swing vote. The long-serving, Reagan-appointed but moderate conservative justice is notoriously hard to read. Would he support imposition of the most ambitious regulatory and economic overhaul in the past 50 years via administrative decree rather than statute law?
His previous vote for EPA authority in “Massachusetts” suggests he might — but it is big step to go from regulatory authority over auto emissions to a comprehensive economy-wide cap and trade system.
FUTURE LEGAL BATTLES
Relying on EPA’s regulatory authority rather than statute would threaten to tie the administration up in the courts in multiple rounds of litigation, probably delaying cap-and-trade at least five years.
In the first round, opponents would contest EPA’s authority to introduce a comprehensive scheme, which would need to go through three rounds of litigation (district court, circuit court of appeals and finally the Supreme Court). Then in a second or even third round of litigation, opponents will be able to challenge the detailed implementation of EPA rules, which would again need to go through all three rounds of review.
During the Bush administration, environmental groups used the court process to challenge and delay implementation of administrative decisions they did not like. Now the administration has changed, there is nothing to stop business and energy groups adopting the same tactics for opposite objectives.
If the administration tries to sidestep the Senate it could endanger the Democratic Party’s control of the chamber. The 26 Democratic senators who rebelled had good political reasons for their caution. Most have to fight re-election in heavily industrial states in the Midwest that would be hard hit, or represent conservative states where energy taxes are intensely controversial.
Having worked so hard to build a near-60 vote super-majority in the Senate to control the agenda and avert filibusters, the administration would be putting this at risk if it goes ahead with a tough scheme these senators cannot support for constituency reasons.
In the end, the administration would much prefer a legislative solution to the legal uncertainty and political cost of an administrative one. Aware of these limitations, the threat of EPA-mandated regulation provides some leverage in negotiations with the Senate, but only at the margin.