Marc Ambinder considers something environmentalists have been discussing for months now: the possibility that Obama will create a carbon trading system via the EPA, using the Clean Air Act instead of (or before) going through Congress to get legislation. An Obama aide strongly suggested Obama would go this route this earlier this year, but backed away a bit when conservatives spazzed.
(For more on how this would work, see an excellent piece from earlier this year by Michael Northrup and David Sassoon, and another from me.)
A few of the policy and political angles:
With a quality EPA staff and administrator, Obama could design and begin implementation of such a program within his first year, in advance of the UN climate talks in Copenhagen in Dec. 2009. That would strengthen his hand (and reputation) considerably in international negotiations.
This would fall within his honeymoon period of maximum flexibility, with large Dem majorities that could shrink in 2010 after two years of recession. It could be done in conjunction with massive stimulus spending to take the edge of any adverse macroeconomic impacts. In a stroke, Obama would become a historic president and make good on one of his central campaign pledges — leaving him three years to tackle the others.
Advantage: builds on state efforts
Though the media has done little to tell it, the big story on climate for the past decade has been efforts by cities and states to take the lead on mitigation. As Terry Tamminen said in our interview, some 28 states are now involved in regional carbon trading programs, and more than 30 have put together climate mitigation plans. More than 900 mayors have signed the Mayors Climate Protection Agreement.
These are not just symbolic declarations; underneath is a great deal of painstaking work on monitoring, tracking, and inventorying emissions, developing sector-specific strategies and allocation mechanisms, and doing other ground-level brush clearing required to make systems like this function.
An act of Congress could wipe all this work away via "preemption" (though that’s less probable with Waxman replacing Dingell, one of the great advocates of federal preemption, atop the House Energy Committee). The EPA, on the other hand, would ratify state efforts — put a floor beneath them, not a ceiling above. It would establish a nationwide carbon cap, enumerate a set of regulated entities, create uniform rules for measurement and reporting of emissions, and leave most details beyond that to the states so that they can craft programs suited to their circumstances.
Advantage: rationalize the Clean Air Act
The Clean Air Act is flawed. Congress has been loath to open it up for reform in the last few decades, as there are any number of bad actors chomping at the bit to screw it up, but even its fans acknowledge it has weaknesses.
Consider that the CAA mandates Best Available Control Technology (BACT) to reduce criteria pollutants. But reducing conventional air pollutants by attaching scrubbers also reduces power plant efficiency, which means more coal/gas must be burned for the same amount of power — thus emitting more greenhouse gases. Again: The way the bill is currently structured, reducing conventional pollutants increases GHGs.
If CO2 comes under the CAA, the act would have to be reformed to rely on output standards instead of mandated technologies (goals rather than paths!), which would make for a much more rational and economically efficient regulatory scheme. (Much more on this from Sean here.)
Purported disadvantage: executive branch overreach
Conservatives go apeshit at the notion of regulating CO2 via the CAA, because it wouldn’t give them a chance to water the system down in Congress. Oops, did I say that out loud? What I meant to say is, because it would give an executive branch bureaucracy control over the entire U.S. economy! Command-and-control crypto-socialism, people. It’s real.
Keep in mind, though, that a Clean Air Act carbon program would largely cover what the CAA already regulates — power plants, industrial facilities over a certain size, etc. The program already has mechanisms for tracking and reporting the amount of fuel emitters burn. It has enforcement mechanisms, though they’ve gone sclerotic under Bush.
Contra conservative hyperbole, using this existing bureaucratic machinery rather than creating an entirely new scheme would be the least complex way to tackle CO2 emissions and would involve the least expansion of government.
Purported disadvantage: transportation
What about transportation, though — all those cars and trucks emitting GHGs willy-nilly? Will the EPA now take on regulating millions of tailpipes?
My inclination is to think the EPA will leave the vexed area of transportation emissions to the states. The CAA is not well-equipped to handle it via national carbon trading. But that’s true of cap-and-trade systems generally; it’s doubtful a legislative program would work much better.
The thing to do — and this is my opinion, not sure how widely it’s shared — is handle transportation primarily via other mechanisms. You could slap a straight carbon tax on oil, raise the gas tax, repeal oil subsidies, or build out public transit. You could use more finely targeted tools like feebates, pay-as-you-drive auto insurance, congestion pricing, a junker credit, or California’s tailpipe emission standards and low-carbon fuel standard. Different cities, states, and regions will develop different policy portfolios, supplementary to carbon trading, and that’s for the best.
Possible disadvantage: allocations and offsets
One of the signal features of a good cap-and-trade system is that it auctions rather than gives away the bulk of pollution permits. This raises revenue the feds can spend supporting clean energy and protecting low-income people from the impact of higher energy prices. According to the OMB (and many others), the impact on energy prices will be the same whether permits are auctioned or allocated for free — the difference is, the impact can be offset if auction revenue is spent wisely.
Another signal feature of a good C&T program is that it limits the use of carbon offsets. I don’t want to get into the quasi-religious debate over offsets; suffice to say, at this stage large-scale offset markets like Europe’s CDM cannot adequately guarantee that offsets represent real, verifiable carbon reductions.
If a cap-and-trade system were designed by legislators, it would offer federal answers to the allocation and offset questions — not necessarily good answers, if Lieberman-Warner was any indication. A carbon trading system under the CAA would likely leave these questions to the states. Will the answers be any better?
There are mixed signs: The Regional Greenhouse Gas Initiative (RGGI, which covers 10 Northeastern states) will auction almost all allowances. The Western Climate Initiative (WCI, which covers 11 states and provinces) will auction less than 25 percent. The Midwestern Greenhouse Gas Accord (MGGA, which covers six states) is still hashing out its program.
As for offsets, RGGI allows around 3 percent compliance via offsets; WCI around 10 percent.
It would be messy — something of a "patchwork," as industry is fond of protesting — but one man’s mess is another man’s federalism. Laboratories of democracy and all that.
Purported disadvantage: reversibility
Couldn’t President Palin undo the program with a stroke of a pen in 2012? If the executive giveth, the executive can taketh away.
This is actually an important point: one of the most significant aspects of a quickly established CAA carbon program is that it would create "facts on the ground." U.S. regional trading systems would hook up with other trading systems in in North America, Europe, and elsewhere. The carbon finance industry would grow large and form lobbying muscle. States in the U.S. will sign side treaties with states and regions in other countries (as they have already begun doing).
There will soon form a sprawling apparatus that the next president will be hard-pressed to disassemble.
Real disadvantage: public deliberation
One doesn’t want to be sentimental, but there is something to the argument that shift of this significance should be discussed in public and shaped by the public’s elected representatives. It would be nice, in an ideal world, if reasoned debate and discussion and interest-balancing yielded the perfect program.
But in this world, we’re perilously late getting underway and Obama must weigh America’s procedural ideals against what a wise man once called the "fierce urgency of now." Whatever it’s other merits, the Clean Air Act is now.