In his State of the Union address, President Obama highlighted the pending Clean Power Plan and his intent to make climate change a centerpiece of his domestic policy, and indeed an aspect of his Presidential legacy, with the remainder of his lame duck session. The actions of late leave little doubt that the White House intends to move aggressively to finalize greenhouse gas regulations on many industry sectors before the President leaves office.
Although EPA amended, and slightly delayed, the issuance of the Clean Power Plan, the delay was insignificant in light of the nearly 2 million comments EPA received on each element of the plan. Both elements of the plan, for existing and modified source, and for new sources, are set to be finalized in the Summer of 2015. Of course, finalization of the rules is only the first step in the process, as a flood of lawsuits challenging the Clean Power Plan are expected to immediately follow issuance. Nevertheless, the clear strategy of the White House is to rapidly build momentum around this new policy and force implementation before legal challenges can derail the state-by-state adoption of new rules and policies.
Likewise, the President started treaty talks with China over greenhouse gas reductions. While those talks were widely hailed as promises to reduce greenhouse gas emissions in China, they were in fact nothing more than initial discussions to address climate change. No treaties have been approved, and at this time, none have been presented for approval. Nevertheless, the timing and announcement of the climate change “deal” with China seems calculated to keep the momentum going in the direction of the Clean Power Plan’s proposed greenhouse gas reductions.
Following immediately on the heels of these announcements is the most recent pronouncement from the White House that it would propose regulations to curb methane emissions from oil and gas operations on public lands. Methane is, of course, a highly potent greenhouse gas. This proposal again seems designed to keep up the momentum on policies and regulations aimed at reducing greenhouse gas emissions. It also adds another potentially important element to the mix, which is the proactive resolution of the disparity among market sectors. One of the main complaints about the Clean Power Plan from the utility industry is that coal fired power was being asked to shoulder the load of all greenhouse gas emission reductions for the entire industrial sector. With the methane reduction proposal forthcoming, the White House can now address concerns that other industry sectors are being targeted for greenhouse gas reductions. More industries are certainly soon to follow, though it is yet to be determined whether EPA has the resources to push out any more regulatory modifications.
These are but the most recent developments in the long, slow march toward regulation of greenhouse gases, and more generally toward policies designed to address climate change. Whether you love or hate these regulations, the reality is that they are coming, and probably sooner rather than later. The question, therefore, is not whether the Clean Power Plan can be prevented or whether the United States will eventually act to curb greenhouse gas emissions, but how and when?
I humbly suggest that there is still time to change the direction of greenhouse gas regulation for stationary sources in the United States. Lest we forget, Republican President Richard Nixon signed the Clean Air Act into law on December 31, 1970. The Republican-controlled Congress has much to gain by demonstrating thought leadership on the issue of climate change. Industry can and should support these efforts to create the destiny of climate change regulation.
Comments to EPA, and discussions in the media from the industrial sector, have focused on what is wrong with the Clean Power Plan instead of what should take its place. Changing the nature of that discussion to offer an alternative is critical. The most obvious solution would be to come forward with market-driven proposals to short-circuit the current command and control regulatory proposals. These are not new ideas (indeed, it has been said that there are no new ideas in Congress), but simple strategies that fall in line ideologically with problem-solving concepts that Republicans can support.
The most obvious of these proposed solutions is a nationwide emission trading program. Smaller scale programs are already in place in some states, so the question “will it work” has already been conclusively answered – yes, it will work. Trading programs use simple market forces, and in fact create new markets, to reduce emissions across the various industry sectors. Reductions against capped emissions can be sold or traded, and increased capacity can be purchased on the open market by finding reductions from other facilities or industries. Trading programs drive innovation, create a free market to trade the credits, potentially include all industry sectors, and has little or no direct impact on the bottom line of the company (after all, pollution costs are largely passed on to consumers). Congress could act now to force a nationwide trading system, which would broaden the markets in trading, guarantee consistent application (and thereby stabilize the marketplace), and have the likely benefit of obviating the Clean Power Plan.
Other potential solutions are available, though perhaps less appealing to Republican supporters. For example, carbon taxation has long been proposed as a very simple economic solution. It would have to be called something other than a carbon “tax” to gain broad based Republican support, but it would have the quite simple effect of incentivizing emission reductions across the board.
These and other solutions have been discussed and supported by industry participants. After all, industry executives have long conceded that greenhouse gas regulation is inevitable. And they have virtually begged for predictability and cost control when it does come. More can and should be done to come forward in support of Republican-backed proposals in this direction: acknowledging the inevitability of greenhouse gas regulation, demanding cost certainty, and steering those policies toward market driven solutions.
Now is the time for industry participants to demand that the Republican-controlled Congress act quickly to address concerns with the Clean Power Plan. There is still time to put alternative proposals on the table, though time is quickly running out. Will the industry and the Republican-controlled Congress coalesce around an alternative or accept the building momentum around the Clean Power Plan?