Cap and Trade Returns

And this time Congress isn't necessary.

When the Obama administration was unsuccessfully trying to push the "cap and trade" bill through Congress, the president and his Environmental Protection Agency (EPA) administrator Lisa Jackson repeatedly warned policymakers that if the bill didn’t pass, they would regulate greenhouse gases through the Clean Air Act anyway. Given the tedious complexity of the Clean Air Act process, many (including this writer) believed this was a hollow threat. We were wrong. On Wednesday, Jackson released a document that will serve as the blueprint for a sweeping new power grab by her agency, one that neatly avoids the tiresome and time-consuming requirements that a piece of legislation duly passed by Congress would impose on the EPA. Under this new set of policy guidelines, bureaucrats charged with regulating the amount of air pollutants released into the atmosphere will be empowered to step away from the smokestack and step into the boiler houses and board rooms of industries across the country.

Up until now, the authority of the EPA and the state and local agencies that do the bulk of environmental work in the field has been limited to “what comes out of the stack.” The EPA could limit emissions, in order to meet applicable standards, but it couldn’t get involved in economic decisions or process details. Those days are over. In the name of reducing greenhouse gas emissions, the EPA will be directing the state and local agencies that report to the feds to use “energy efficiency” as a permitting guideline. Jackson’s agency wants bureaucrats across the nation to begin dictating choices in equipment and the way that equipment is operated and maintained, and to turn the EPA's judgment on the best way to operate a facility into permit conditions.

The document in question is entitled “PSD and Title V Permitting Guidance for Greenhouse Gases.” It was released to the public on Wednesday. The fact that it is a guidance document, as opposed to a formal regulatory proposal, is very significant. Regulations have to be proposed in certain forms, economic costs have to be considered, and there is a long, detailed public process involved. Guidance, on the other hand, isn’t subject to any of these sorts of annoying requirements. Guidance is the EPA offering its “opinion” on a subject and, when the criticism begins, Jackson will surely hide behind this accurate, but ultimately deceptive, detail. Few states outside of Texas will ignore EPA guidance, for such a document is traditionally treated as Holy Writ by state and local agencies. After all, their permitting decisions are ultimately subject to the EPA's approval. How can a state regulator expect to have a decision approved by the overseeing federal authority if he or she ignores federal guidance?

It’s a subtle, yet devilishly brilliant policy. Few people understand the legal distinctions that come into play and Jackson will be able to con much of the mainstream media into believing that industrial advocates like me are making a mountain out of a molehill. We’re not. For those readers not aware of it, I am an expert on environmental regulation in general and the Clean Air Act in particular. Helping industry deal with both has been my primary career for over twenty-five years. Believe me: the implications of what Jackson is trying to do will have severe repercussions on our beleaguered industrial sector.

In this particular guidance document, the EPA acknowledges that the Holy Grail of greenhouse gas control, carbon capture and sequestration (i.e. injecting carbon dioxide deep underground) is a long way away from being a cost-effective, reliable technology – if it ever will be. That’s a reasonable start, but it’s all downhill from there. When permitting large new industrial projects, or major modifications to existing plants, the agency is directing permitting authorities to require energy efficiency improvements in order to reduce greenhouse gas emissions. Now, nobody is against energy efficiency and most everyone in the private sector is amenable to anything that reduces energy costs. However, when the EPA decides that it should dictate energy efficiency measures by choosing equipment, influencing process design, and turning what should be operational decisions into permit conditions, we’ve crossed a line.

This intrusion into the private sector is all the worse when one understands just what kind of people in the bureaucracy will be making these decisions. There are a few notable exceptions, but for the most part, the men and women who write permits fall into one of two categories: a) kids a few years out of college who know very little about any industrial process, or b) older folks who couldn’t hack it in the private sector because they don’t have sufficient talent, enough intelligence or both. In either case, it is a constant struggle for industry to make permit writers understand the relatively simple issues that involve what’s coming out of a smokestack. Asking these same people to grasp what happens in an entire manufacturing or power producing process is a recipe for chaos.

These same permit writers will also be asked to make a rather remarkable decision: whether to allow a facility to increase the amount of “traditional” air pollutants like particulate matter and sulfur dioxide, if such an increase is the price to pay for decreasing greenhouse gas emissions. This is another unprecedented development. For decades, environmental groups have fought against the very appearance of “backsliding” when it comes to air pollution emissions from industrial sources. Yet, praying at the altar of the false god of global warming, this administration has said in writing that backsliding can be OK, so long as greenhouse gas emissions are reduced. One can get a lot more energy out of a ton of Illinois coal, for example, but Illinois coal contains much more sulfur than the low sulfur, lower energy western coal that’s commonly burned today. Jackson’s guidance would seem to open the door to using the former, without worrying about pesky sulfur dioxide so much. Finally, according to Jackson’s guidance, state and local agencies should consider increasing permit fees in order to cover the costs of implementing greenhouse gas regulation under the Clean Air Act. They have the authority to do so, the administrator says, under the act already, even though nobody has gone through any sort of formal rule-making process with regard to greenhouse gases.

Ironically, even if you adhere to global warming alarmism, none of this nonsense is necessary. The US has reduced greenhouse gas emission down to mid-nineties levels. China is the big player in terms of greenhouse gases and will only get bigger. The combination of Renewable Portfolio Standards (which require utilities to gradually reduce their fossil fuel use over time) and regional cap and trade programs means that well over half of the states are committed to making drastic reductions in greenhouse gas emissions. Why does the USEPA need to step in to reduce greenhouse gas emissions when we are already committed to reducing greenhouse gas emissions?

It all sounds rather surreal, but there doesn’t seem to be much chance of stopping this hurtling train of environmental extremism. Because this policy is being implemented as guidance, Lisa Jackson isn’t required to solicit comments, much less respond to them. Nonetheless, she has agreed to a public comment period before the EPA finalizes its new policy. That comment period opened on Wednesday and closes on December 1st, a grand total of fourteen days that includes the Thanksgiving holiday. This is a move reminiscent of the Democrats' rush to pass the healthcare bill so we could "learn what was in it." It will be impossible for industry groups and free market advocates to digest the implications of this radical shift in policy, much less respond effectively to it. That’s undoubtedly exactly what Lisa Jackson wants. EPA regulation of greenhouse gases is scheduled to begin on January 2, 2011, a date that will mark the beginning of the last chapter in the once proud history of America’s industrial sector.