Can EPA run a cap-and-trade program?
The Obama administration has made very clear that they want Congress, rather than EPA, to take the lead in creating a national response to climate change. Despite their oft-repeated preference for congressional action, recently, EPA head Lisa Jackson had to once again reiterate that the agency had no plans to do a carbon cap.
There is some irony in members of Congress worrying about what EPA is up to when their time might be better spent putting a law together themselves.
Under existing law, it is possible for EPA to create an economy-wide price on carbon. The Clean Air Act gives the agency broad authority to regulate pollutants deemed harmful to the health and safety of the population, and there are several routes EPA could take to create a national cap-and-trade, even potentially setting up allowance auctions and going through states to refund the profits back to American taxpayers.
But going down this road has many downsides. First, (apologies to Paul Thomas Anderson) there will be lawsuits. Even if EPA uses cap-and-trade to keep the costs of regulation down, certain industry groups will be in court before the ink is dry on the new rule. And even if courts ultimately side with EPA, these lawsuits will succeed in slowing down progress.
The second problem is the threat of a new president coming in and dismantling the system. Anything that Obama does can be undone by a future administration-either directly or through a lack of budget support and enforcement.
Running carbon pricing through EPA is also a little more unwieldy than it could be if structured by smart legislative action. Regulators would have to jury-rig an auction system, possibly needing to enlist the help of the states. Command-and-control mandates under the Clean Air Act would stand, potentially hindering the efficiency of the program.
There is also a small “d” democratic issue. Controlling America’s greenhouse gases will take a massive economy-wide effort and there is a legitimate benefit in having the issue hashed out in the legislature by elected officials. That is not necessarily to say that the legislature will arrive at a better plan than regulators, but a new law passed by Congress and signed by the president would have a have a stronger democratic imprimatur than an EPA regulation.
But if Congress cannot get its act together, a Plan B of EPA action would not be so bad. If the regulation is well-designed and justified according to the letter of the law, it will be better able to overcome legal challenge. Auctioning permits and sending a monthly refund check to taxpayers would build broad based public support for the program, buffering it from the winds of change in the White House. While running cap-and-trade through EPA is not preferable, it is clearly better than infinite delay in Congress.
There is still time and a glimmer of hope for a climate bill has been rekindled. But if it doesn’t pass, the world’s eyes will turn to EPA with hope that they are prepared to pick up the slack. With that in mind, legislators’ best strategy for fending off a more active regulatory agency is to get to work and pass a bill themselves.