It’s instructive to look at the funding levels recently proposed by the House leadership for the remainder of this fiscal year in light of the eight hour hearing on climate change held last week before the House Energy and Power subcommittee.
At the risk of oversimplification, the key messages from the Members who organized the hearing were that the science behind and risks associated with climate change are uncertain, EPA regulations will impose substantial costs and result in job losses, and U.S. industry needs regulatory certainty in order to invest in new facilities here in the United States.
February 15, 2011
By Eileen Claussen
This op-ed first appeared in Politico
A vocal contingent in the House is now attacking the current Environmental Protection Agency administrator for the very thing her predecessor in the Bush administration wanted to do.
EPA Administrator Stephen Johnson wrote a letter to President George W. Bush laying out the legal and scientific rationale for regulating greenhouse gases under the Clean Air Act. Johnson explained steps that the EPA would take to begin to do so.
Johnson’s letter surfaced last week at the House Energy and Power subcommittee hearing on proposed legislation to strip EPA’s authority to regulate greenhouse gas emissions.
Remarkably, it proved that Bush’s EPA administrator had reached the same conclusions and planned almost identical actions to what the current EPA administrator, Lisa Jackson, has begun implementing.
What exactly does Johnson tell Bush? He insists that the EPA must respond to the Supreme Court’s 2007 decision in Massachusetts v. EPA with a finding that greenhouse gases represent a risk to public health or welfare. This is EPA’s “endangerment finding,” which would be overturned by legislation now being proposed in the House.
Johnson also noted, “the latest climate change science does not permit a negative finding, nor does it permit a credible finding that we need to wait for more research.”
What is most telling is that Johnson states that a positive endangerment finding was “agreed to at the Cabinet-level meeting.” Apparently senior Bush administration officials agreed that climate change poses a risk to our nation’s public health and welfare.
Johnson describes his plan as “prudent and cautious yet forward thinking,” and says it “creates a framework for responsible, cost-effective and practical actions.” Sound familiar?
Jackson, in her statement at the hearing last week, called EPA’s actions a “reasonable approach,” one that “will reflect careful consideration of costs and will incorporate compliance flexibility.”
Indeed, the step-by-step plan of action spelled out by Johnson could be a checklist for the EPA’s recent actions — largely the same actions being aggressively attacked today by some in Congress.
These actions include the endangerment finding; a joint rule-making with the Transportation Department to require more fuel-efficient cars; rules to modify the agency’s requirements for new sources to reduce the number of facilities that would be covered (EPA’s tailoring rule), and proposals to respond to specific petitions (EPA has acted on ones for the utility and oil refinery sectors).
Given these striking similarities, attacks on current EPA actions — that the agency is “an instrument of job destruction” and would “put the American economy in a straitjacket” — now resonate as particularly empty political rhetoric.
How could the right thing to do in the Bush administration suddenly become the wrong thing to do in the Obama administration?
Eileen Claussen served as assistant secretary of state for Oceans and International Environmental and Scientific Affairs. She is now president of the Pew Center on Global Climate Change.
With EPA’s recent announcement of timelines for additional regulation of greenhouse gases (utility and refinery sectors) and the arrival in town this week of the new Congress, the shouting about EPA’s regulatory actions has already begun. Many of these claims are clearly political posturing – the facts are that schools, churches, and libraries will NOT be subject to regulations, there will NOT be a moratorium on all new industrial facilities for at least 18 months, and new coal plants will NOT be banned. But it is also true that regulating greenhouse gases (GHGs) has the potential to substantially impact our economy and is critical to reducing the risks and costs associated with climate change. The critical challenge facing EPA is how to properly balance the costs of reducing GHG emissions against the benefits of limiting climate change. How EPA balances these interests demands a serious discussion. In an effort to lower the volume and better inform future discussions about EPA’s use of its regulatory authority, the following are key factors that should be considered.
1. EPA is not overreaching by regulating greenhouse gases (GHGs) under the Clean Air Act but is doing so in direct response to the Supreme Court’s 2007 ruling in Mass. v. EPA.
Some have incorrectly claimed that EPA has overstepped its authority in regulating greenhouse gases and is attempting to regulate GHGs even though Congress failed to pass climate legislation last year. In fact, it is the Supreme Court in 2007 that clarified that EPA had the authority to regulate GHGs under the existing Clean Air Act. EPA had denied a petition by some states and environmental groups calling on it to begin regulating GHGs under the existing Clean Air Act. The Supreme Court rejected EPA’s claim that the Clean Air Act does not apply to GHGs and held that these emissions meet the definition of an “air pollutant” under the Act. The court held that “under the Act’s clear terms, EPA can avoid promulgating regulations only if it determines that greenhouse gases do not contribute to climate change or if it provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do.” Based on its extensive review of the scientific evidence in its endangerment finding, EPA reached the only conclusion that the evidence supported – that GHG emissions cause or contribute to air pollution, which may reasonably be anticipated to endanger public health or welfare and, therefore, are subject to regulation under the Clean Air Act.
2. EPA’s regulations will not require unproven technologies, impose excessive costs at a time when our economy is hurting, or harm small and previously unregulated sources.
There are legitimate concerns that the Clean Air Act was not developed specifically with GHGs in mind and these emissions are different in fundamental ways from traditional hazardous and criteria pollutants covered by the Act. As a result, EPA has gone to great lengths to “tailor” its regulations -- for example, with respect to new source permitting -- in such a way that only the largest sources of GHGs are covered. This tailoring rule has been challenged in courts (along with all other GHG regulations). If it is overturned, Congressional intervention would likely be necessary. But the Clean Air Act includes many provisions that minimize compliance costs, and many of its fundamental requirements apply equally well to regulating GHGs. For example, the Act requires that technological feasibility and costs be considered in setting emission performance standards and allows for different requirements for new and existing sources. In its guidance to states on what constitutes “best available control technology,” EPA has focused on energy efficiency technologies as a means to achieve both reductions in GHG emissions and cost savings to firms. The agency has also made it clear that the use of coal as a fuel can be continued under its guidelines. While EPA regulations will impose some costs on firms, based on guidance to date, those costs are likely to be modest and will result in far greater benefits than costs to society.
3. Delaying any EPA regulatory actions would be bad for business and bad for the climate.
Delaying regulations by EPA will allow some firms to avoid compliance costs in the near term but will increase overall costs over the longer term. For firms in states already facing GHG requirements (e.g., utilities in 10 northeast and mid-Atlantic states, large emitters in California), any delay in EPA regulations are not likely to alter the requirements they face. For firms in other locations that are planning facilities with long lifetimes, some are likely to install the same technology that would be required by EPA in an effort to avoid more expensive retrofits in the near future. These firms would prefer the certainty of knowing what regulatory requirements they must meet prior to making large capital investments. Finally, delay in reducing GHG emissions will result in greater economic harm throughout our society as families and communities face the costs associated with increases in extreme weather (droughts and floods), impacts from sea level rise, limits on the availability of water resources, and other climate impacts.
4. EPA’s regulatory actions are not a form of backdoor cap and trade or an energy tax.
Congress rejected a comprehensive cap-and-trade approach to regulating GHG in its last session. EPA’s approach does not rely on a cap-and-trade regime and is far from comprehensive. EPA’s regulations focused first on the transportation sector with the issuance of widely supported standards for light-duty vehicles and proposed standards for medium and heavy-duty vehicles. On the stationary source side, EPA first targeted the largest new sources and major modifications of existing sources and recently announced plans to develop new source performance standards for the electric utility and refinery sectors. Such standards are the traditional approach used under the Clean Air Act and are generally implemented through state programs.The regulations are being developed on a timeframe consistent with Clean Air Act requirements covering other pollutants to allow covered sources the flexibility of developing compliance plans that cost-effectively meet a comprehensive set of requirements.
5. EPA is not attempting to meet the same reduction requirements that were rejected by the last Congress.
The House-passed climate change bill called for reductions in GHG emissions of 17 percent of 2005 levels by 2020, increasing to reductions of over 80 percent by 2050. EPA’s use of the Clean Air Act is not likely to produce emission reductions of the magnitude or in the timeframe set forth in the legislation proposed last year.
6. Important questions do need to be addressed in moving forward.
EPA’s initial set of regulations represent an important beginning in addressing the risks associated with climate change but also raise important issues. In moving forward, several questions will need to be addressed:
* How will EPA’s regulation be implemented in a manner consistent with current and future state actions?
* Given market forces driving utilities toward increased use of natural gas, the regulatory uncertainty that currently exists, and the age and fuel mix of the current utility fleet, what is the likely future role of coal in this sector?
* As EPA moves forward in regulating stationary sources through the use of emission performance standards, how might it be able to provide flexibility to regulated sources to achieve cost-effective reductions?
* How might EPA regulatory actions specific to utilities interact with possible Congressional interest in a clean energy standard?
Steve Seidel is Vice President for Policy Analysis
The Supreme Court announced on December 6 that it would hear an appeal in one of the several common law nuisance cases against greenhouse gas (GHG) emitters that are making their way through the courts. By granting ceritiorari in AEP v. Connecticut, the Supreme Court has signaled its intention to weigh in on the appropriate role of the courts in addressing damages caused by climate change. As explained below, possible future regulatory actions by EPA or, alternatively, action by Congress to restrict EPA’s regulatory authority, could be factors that influence the Court’s decision.
At a time when political gridlock in Washington has blocked climate legislation, EPA and NHTSA have jointly come forward with a sensible proposal that will substantially reduce oil consumption and greenhouse gas (GHG) pollution from heavy-duty trucks. EPA and NHTSA’s proposed new rules build on their recent success in finalizing GHG and fuel efficiency standards for cars and light-duty trucks. Once again, the two agencies collaborated with industry to make sure their standards accomplish environmental and energy security goals in a practical manner.
The transportation sector is responsible for 27 percent of our nation’s GHG emissions. Within this sector, heavy-duty vehicles are the second largest source of emissions (after light-duty vehicles), accounting for 20 percent of the sector’s total. The new proposal covering heavy-duty vehicles (long-haul trucks, large pick-ups and vans, school and transit buses, and utility trucks) manufactured from 2014 through 2018 is estimated to reduce emissions by 7-20 percent from these vehicles (depending on the category of truck) from current levels, achieving an overall reduction of 250 million metric tons of carbon dioxide over the life of the vehicles sold during this five-year period. As a result, emissions in 2030 from this fast growing subsector will be 9 percent below what they would have been in the business as usual case. The proposed rule is also estimated to reduce oil consumption by 500 million barrels over this same period.
Cost and Benefits
To achieve the proposed standards, truck manufacturers will need to modify their vehicles drawing from a range of existing technologies including improvements in aerodynamic designs, lower rolling resistant tires, advanced transmissions, and reduced idling. The agencies report that the cost of meeting the standard for many trucks will be recouped in less than 2 years in the form of fuel savings. The regulatory impact analysis accompanying the proposed rule looks at both the costs and benefits of meeting the proposed standards. It shows the following:
Estimated Lifetime Discounted Costs and Benefits for 2014-2018 Model Year Heavy-Duty Vehicles
|3 percent discount rate||$ billions|
The bottom line is clear – with a net benefit to society of $41 billion, the proposed rule is a worthwhile investment in reducing both our reliance on foreign oil and our emissions of greenhouse gases.
Steve Seidel is Vice President for Policy Analysis
Steve Seidel, vice president for policy analysis, co-wrote this post.
With the failure of the Senate to act on climate change legislation, the focus of attention now shifts to possible regulatory actions by EPA. The Supreme Court in 2007 made it clear that greenhouse gases (GHGs) are pollutants under the existing Clean Air Act (CAA), and the overwhelming scientific evidence (spelled out in great detail in the endangerment finding) demonstrates that such pollutants represent possible harm to public health and welfare.
Opposition to EPA action rests in part on concerns that any regulations will be excessively costly and burdensome to households and U.S. manufacturers. While it is certainly true that regulating GHGs will result in costs, it is also important to look at whether the economic benefits from those regulations will be greater than the costs they impose. In other words, will societal costs of allowing global GHG emissions to continue unabated (costs that will come in the form of impacts from rising sea levels, increased extreme weather including heat waves and droughts, among others) be greater than the costs of regulating those emissions responsibly?
This basic regulatory framework – that regulatory costs should be less than the resulting benefits – is codified in OMB review of all major federal regulations by both Republican and Democratic Administrations, has historically been applied to all EPA regulations, and would certainly be applied to any future regulations of GHGs.
So what have been the costs and benefits of past EPA regulations under the CAA historically? Congress required EPA to undertake a retrospective assessment of the costs and benefits of regulations under this statute. The conclusion of this retrospective review is that the CAA resulted in total benefits that are around $37 trillion, while total costs were $0.874 trillion (in 2010 dollars) – an astounding 40 to 1 benefit to cost ratio!
EPA has also produced a prospective assessment of the costs and benefits of the CAA – this time for the time period of 1990 through 2010. In this review, EPA estimated that the most likely benefit to cost ratio of the CAA for this period is 4 to 1. While a very strong and positive value, the ratio is substantially lower than the estimated benefits for the first 20 years of the CAA.
This is not unexpected – early gains are usually greater, and more cost effective, because simple or cheap remedies are the first to be applied in response to regulatory requirements. As those requirements become more stringent, creating additional benefits becomes more costly (from an economics perspective this is described as moving up the marginal cost curve).
How credible is EPA’s assessment of its regulations? Alan Krupnick, formerly of the President’s Council of Economic Advisors, has testified before Congress about the credibility of EPA’s analyses: “Under the auspices of the agency’s Science Advisory Board, both studies were scrutinized throughout the decade-long preparation by at least three expert committees of outside economists, air quality modelers, epidemiologists, and other health experts.”
In addition to these EPA assessments, there have been a handful of quality external analyses of the costs and benefits of the CAA. The Office of Management and Budget (OMB) found that the “major rules” from EPA’s Office of Air resulted in total benefits between $145 and $218 billion annually, for the years between 1992 and 2002. This is compared to costs of between $22 and $25 billion over that same period. A study by researchers at MIT found total annual benefits rising from $50 billion in 1975 to $400 billion in 2000. This report accounts for the monetary benefits of avoided premature death differently than the EPA studies, and as a result reports lower values for the total benefits. A sum of the total discounted benefits yields a total benefit of $6.85 trillion from 1975 through 2000 – a figure still substantially greater than the EPA estimate for the costs of the regulations.
So how might this play out in terms of future regulations of GHGs? EPA’s first GHG regulations were standards set for light duty vehicles (which it coordinated with the efficiency standards set by NHTSA). These standards are expected to lead to net benefits of between $0.5 and 1.2 billion dollars (discounted back to present values using 7 percent and 3 percent discount rates, respectively) without even including a social cost of carbon. If a value is assigned to the avoided GHG emissions associated with this regulation, the net present benefits are even greater!
If there is a lesson that can be drawn from these previous regulatory efforts it is that while regulations do impose real costs, EPA’s actions under the CAA have consistently led to positive environmental and economic outcomes. By not regulating, we would have foregone these positive net benefits and incurred the social costs imposed by unabated pollution.
So the next time someone tells you that the costs of reducing air pollution are too high, ask them what would be the costs to society of not reducing those emissions.
Russell Meyer is the Senior Fellow for Economics and Policy. Steve Seidel is Vice President for Policy Analysis.
Most Americans can recall from social studies class and Schoolhouse Rock that a bill becomes a law through a process of introduction, committee work, and votes in both chambers of Congress before being signed by the President. Yet in reality, Congress influences policy decisions and administrative actions in ways that are more complex and potentially less transparent.
The Constitution gives Congress the power of the purse over government. Congress passes annual appropriations bills that fund the various programs of the federal government, and the necessity for Congress to pass these bills every year makes them an attractive target to attach riders – legislative provisions not directly related to the bill at hand. Appropriations riders are added to a bill by a small number of Congressmen to avoid an open debate on the merits of a particular policy, relying instead on the political and practical necessity to pass the larger funding bill.
Several rider efforts have succeeded in prohibiting funding or delaying environmental programs, much as some are talking about doing to prevent EPA from implementing greenhouse gas regulation under the Clean Air Act. Unlike policy decisions set in authorizing legislation, funding restrictions only apply for the year of appropriations covered and must be renewed on an annual basis. Unfortunately, once the precedent is set, it is common for riders to reappear for multiple years, usually without an up-or-down vote on that specific policy decision.
When it comes to climate change, Rep. Joe Knollenberg (R-MI) took a bill that failed to gain any traction in the committee process and turned it into a barrier to productive climate work through the appropriations process. Reacting to the Kyoto Protocol, drafted in December 1997, Rep. Knollenberg introduced HR 3807, in May 1998, which would have prohibited the use of funds for “for rules, regulations, or programs designed to implement, or in contemplation of implementing, the Kyoto Protocol.” A broad reading of the phrase “in contemplation of” would have stopped federal funds from being used for any work on climate change, even educational workshops. When the bill failed even to move out of the Republican controlled committee to which it was referred, Rep. Knollenberg turned to the appropriations process, where he attached the bill as a rider to the appropriations bill that included FY1999 funding for EPA. The same language was included in several appropriations bills. In addition to the EPA bill, it was also included the next year for FY2000 funding. As a result, Rep. Knollenberg was able to inhibit the Clinton Administration’s climate change work without going through the regular process of enacting legislation.
Other environmental priorities have been the targets of appropriations riders and defunding efforts. These riders became popular shortly after the political upheaval of 1994, but the effects were often much longer lasting. Beginning in Fiscal Year 1996, a rider was attached annually to the transportation appropriations bill preventing increases in the Corporate Average Fuel Economy (CAFE) standard known as the “CAFE freeze rider.” Like the proposed riders on greenhouse gas regulation, this rider was in reaction to an action by the Clinton Administration, in this case an advanced notice of proposed rulemaking by the National Highway Traffic Safety Administration. The recurrence of this rider continued until Fiscal Year 2001 when the rider was dropped in favor of a study on raising CAFE standards, ultimately yielding to bipartisan support for new standards much later than initially anticipated.
Environmental advocates have also used riders to avoid open policy discussion and votes. One of the longest running annual appropriations riders was a prohibition on offshore oil and gas leasing off the East and West coasts and certain parts of Alaska. That rider was included in appropriations bills for 27 years, from 1981 to 2008, without ever being a stand-alone piece of legislation passed by Congress.
The lesson of these and the plethora of other riders included on appropriations bill every year is clear: these provisions have staying power. The inclusion of a one-year delay on greenhouse gas reductions could easily continue for two years – or even twenty. According to the scientific information available, we don’t have the luxury of waiting that long to reduce our emissions. Instead, the United States should proceed with the prudent and reasonable series of regulations that have been outlined and are being implemented under existing law following the 2007 Supreme Court ruling in Massachusetts v. EPA.
Michael Tubman is the Congressional Affairs Fellow
On Thursday, the Senate defeated Sen. Lisa Murkowski’s (R-AK) “disapproval resolution” intended to prevent the EPA from regulating greenhouse gas emissions under the existing Clean Air Act.
The vote sends a clear signal that the Senate must act now. The Senate must invest its time and energy over the next two months to find the common ground solutions required to pass meaningful clean energy and climate legislation. The key building blocks for a final bill already exist, and the Senate must seize this opportunity to create a safer, cleaner, more secure energy future.
A few things are clear from the vote:
- 53 Senators voted in support of EPA’s finding that greenhouse gas (GHG) emissions pose a danger to human health and environment, with many stating their preference for Congressional action but not wanting to unilaterally disarm EPA.
- Of the Senators voting for the resolution, at least 8 made statements saying that they believe we need to reduce GHG emissions. Among these were 5 Republican Senators.
- In total, at least 61 Senators, through their votes or statements today, expressed support for policy that would limit GHG emissions.
In addition, Sen. Murkowski and at least 17 of the Senators who voted for Sen. Murkowski’s resolution of disapproval framed their votes as intended to prevent EPA from regulating greenhouse gas emissions under the existing Clean Air Act or about the separation of powers, rather than as statements on climate science. Following are excerpts from Senate floor statements or from press releases following the vote that indicate the Senators’ willingness to work toward Senate action on a clean energy and climate bill.
Sen. Lindsay Graham (R-SC): What I propose is that the Congress, once we stop the EPA, create a rational way forward on energy policy that includes clean air and regulation of carbon. … Carbon is bad. Let's do something about it in a commonsense way. … If we can clean up the air in America, we would be doing the next generation and the world a great service. The key is, can you clean up the air and make it good business? I believe you can. Let's pursue both things: good business and clean air.
Sen. Ben Nelson (D-NE): Now, I have no doubt that carbon emissions should be reduced in the U.S. But not through excessively costly EPA regulations or a complicated cap and trade proposal that could spur speculation that enriches Wall Street, while not cleaning the air above Main Street. … In my view greenhouse gas emissions should be reduced through a comprehensive energy bill. One that promotes efficiency, innovation, new technology, and renewable energy such as wind and biofuels that can be produced in Nebraska's fields. An energy bill should help, not harm, Nebraska and the American economy as it cleans up the air.
Sen. Susan Collins (R-ME): Our country must develop reasonable policies to spur the creation of green energy jobs, lessen our dangerous dependence on foreign oil, and reduce greenhouse gas emissions. We face an international race to lead the world in alternative energy technologies, and we can win that race if Congress enacts legislation to put a price on carbon and thus encourage investment here in the United States.
Sen. Mark Pryor (D-AR): There is clear consensus within the scientific community that human activities will have a serious and costly impact on our environment unless we take meaningful steps to mitigate pollution from greenhouse gases. … Congress should act quickly, but thoughtfully, in developing comprehensive energy and climate policies that meet our nation’s needs. The costs of inaction or wrong action are too great for future generations.
Sen. Olympia Snowe (R-ME): [I]t is Congress – and not unelected bureaucrats – that should be responsible for developing environmental policies that integrate our nation’s economic well-being as an urgent priority along with the reduction of carbon emissions, and I do not accept that these are mutually exclusive goals. … I will continue to work with my congressional colleagues to achieve our shared goals of fostering a healthy economy while moving toward a clean-energy future by replacing EPA regulations with a system that protects Maine employers and reduces greenhouse gases by the level that science dictates.
Sen. Mary Landrieu (D-LA): I look forward to working with Democrats and Republicans to find a better, smarter way forward in the weeks ahead. Americans want and need energy solutions and more job creation, not overreach by regulators. That starts with real, public debate on climate change and energy challenges facing our nation.
Eileen Claussen is President
This post also appeared today in National Journal's Energy & Environment Experts blog in response to a question about Congressional action related to EPA's endangerment finding.
Let’s be absolutely clear here. Overturning EPA’s endangerment finding -- that greenhouse gases are a risk to public health and welfare – would send exactly the wrong signal about the serious nature of this issue. To take such an action, just days after our nation’s top scientific body (the National Academy of Sciences) issued a loud and clear call for action, should be unthinkable.
Some may vote for the resolution not intending to repudiate the science but to reserve the right of Congress (and not EPA) to set policies to restrict greenhouse gas emissions. If this is their rationale, then a vote to delay EPA regulations for two years (along the lines of Sen. Rockefeller’s bill) might make more sense.
While the Senate’s effort to take up comprehensive clean energy and climate legislation remains on hold awaiting a resolution of when and if an immigration bill will be considered, EPA just issued a new report that sends a loud and clear reminder about why Congressional action is urgent. The report, Climate Change Indicators in the United States, presents detailed information documenting 24 different ways in which climate change is altering our nation and the world.
This is not your standard climate report with pages and pages of scenarios and model runs projecting out over time what future climate impacts are possible. Instead, this report looks back and documents biological and physical changes that have already occurred. It focuses on actual measurements of real conditions – from increases in greenhouse gas concentrations measured in the atmosphere to changes in sea surface temperatures to shifts in the length of growing seasons.