EPA’s Regulation of Power Plant Greenhouse Gases Reinforces Sustainability Management

Barack Obama’s Clean Power Plan was an effort to allow states to gradually reduce greenhouse gases from power plants on a state-wide level. Under Obama’s plan, if a state cleaned up one plant, it could enable a second plant to continue to emit at a higher level, allowing a state to achieve maximum clean-up at minimum cost. The plan was held up by the courts, repealed by the Trump administration, and finally overturned by the Supreme Court in 2022. The Court ruled that the EPA did not have the authority to regulate a state’s air pollution, but only had the authority to regulate specific sources of pollution. When the Clean Air Act was enacted in 1970 and established national ambient air quality standards for the first time, its authors realized that new technologies and new circumstances would require the EPA to regulate pollutants that were unknown in 1970. In 2007, in Massachusetts v. EPA, the Supreme Court decided that greenhouse gases were air pollutants covered by the Clean Air Act and directed the EPA to set limits on this newly understood pollutant. After failing to convince the Supreme Court that the more rational and comprehensive Clean Power Plan did just that, last week the EPA issued source-specific greenhouse gas regulations for individual power plants.

Republican Attorney Generals are gearing up for an appeal, Joe Manchin is throwing a temper tantrum and won’t vote for any EPA political appointees, and the fossil fuel lobby is preparing for a legal assault. I predict that all of this will fail since the EPA finally has done what the Court told them to do back in 2007 and again in 2022. The Court ruled that not only was the EPA authorized to regulate greenhouse gasses, but in 2007 the Court decided they were required to issue regulations. Despite all the noise and the fury, fossil-fuel-generated greenhouse gasses will be eliminated in the United States by the middle of this century. Even if the Democrats manage to lose the White House in the 2024 election, the momentum behind decarbonization is unstoppable. This is because the private sector sees the benefit of a lower cost, less polluting, and more reliable energy system. The regulation will accelerate the transition, but market forces will eventually result in renewable energy replacing fossil fuels. Some of the technologies needed to accelerate this transition are still being developed, but they are coming, and nothing that Texas politicos trying to promote fossil fuels or conservative attorneys general can do will stop it.

As Coral Davenport noted last week in her New York Times report on the EPA’s new regulation:

“In some ways, the E.P.A. regulation is designed to speed up changes that are already underway in the energy industry. Coal, the dirtiest fossil fuel, is in decline — no new coal plants have been built in the United States in the last decade. In the same time frame, the cost of wind and solar power has plummeted, and electricity generation from wind turbines and solar panels has more than tripled. Wind now generates more than 10 percent of the nation’s electricity, and solar power now generates about 3 percent and is growing fast. As a result, planet-warming pollution from power plant smokestacks has dropped by about 25 percent in the last decade, absent any direct regulation. In recent years, many large electric utilities have announced targets to stop adding carbon dioxide to the atmosphere by 2045 or 2050.”

The right wing has decided to attack modern management practices where decision-makers factor in consideration of environmental impacts, promotion of diversity, issues of corporate governance, reporting of environmental risks, and community impact. They have also been aggressively promoting fossil fuels, even when the companies that use energy are resisting its use. They call consideration of environment and diversity “woke” capitalism and think that sophisticated management is some kind of communist plot. This is beyond idiotic. Companies are trying to reduce their environmental risk and move toward renewable energy because they correctly believe it will enhance their profits. I am not arguing that all companies attempting to factor in ESG considerations are competent at doing so. There are also some over-zealous ideologues promoting ESG principles. Nevertheless, as in any new management practice, it takes a while to take hold and learn its limitations. Total quality management, team management, performance measurement and management, and numerous other new management practices (including accounting in the 1930s) have been gradually adjusted and included in organizational management. As a result, modern corporations are far nimbler and more productive than their predecessors in the mid-20th century.

The SEC’s proposed carbon disclosure rule, the subsidies in the Inflation Reduction and Infrastructure Acts, and this proposed EPA power plant rule are already stimulating billions of dollars of investment in the transition to a modern, renewable resource-based economy. Like any technological and economic transition, it is poorly understood by many people and feared by those who believe their self-interest is threatened. When New York City lost its manufacturing base, many thought the city would die. Instead, it replaced that old economy with a brain-based service economy, perhaps best symbolized by the High Line, a freight train track transformed into a tourist attraction. New York is a thriving city despite the pain of a generation-long economic transition. What we know about these transitions is that they are very difficult to stop. In a free market, capitalist system, most of the incentives favor innovation and the rapid diffusion of new technologies. Often these practices threaten environmental quality. We see that with the chemical industry. But the energy transition is well underway and will help mitigate global warming. The transition may be delayed by political reactionaries, but it will not be stopped.

New technologies and more sophisticated management techniques are being developed constantly to help deal with our more complex, interdependent world economy. Xenophobia, anti-globalism, and political movements like America First will persist but will have limited impact. Economic, cultural, and social interconnections continue to grow because they are enabled by the technology of global communication, information, and travel. These global interactions benefit individuals, families, and corporations. Globalism is not a trend, or a conspiracy imposed by George Soros and some hidden cabal of elites; it is a mass-based movement of individuals and corporations acting on their perceived self-interests.

New technologies enable this complex new world, and they are stimulated in part by the problems created by these new technologies. Scientists and engineers are hard at work improving solar cells. They are utilizing nanotechnology to reduce their size and cost while increasing their efficiency. Artificial intelligence and robotics are being used to enhance recycling and waste-mining and to reduce wasted fertilizer, pesticides, and water in agriculture. Somewhere in the world, a couple of teenagers are working in a basement on the breakthrough that will radically improve battery technology. Along with these engineering technologies, management experts and social scientists are learning more about how we can be more productive when we engage with each other in organizational settings. Data driven-management, enhanced employee rights, staff performance appraisal systems, and increased focus on turnover and morale are not random or rare occurrences. They are central elements of sophisticated, successful modern management. So too is consideration of the impact of the organization on its natural environment and surrounding community. When I teach my graduate courses in management, I use Donald Trump’s classic line in The Apprentice: “You’re Fired” as an example of terrible management. If you need to fire someone, either your hiring practices are deficient or your process to train and develop staff needs improvement. Similarly, companies that ignore the cost and environmental impact of their energy sources or favor existing sources out of fear or habit are likely to be missing other opportunities to improve their performance.

Most American companies are embracing sustainability management, along with a wide variety of new production and management technologies. The search for improvement is continuous, and it is why our economy continues to innovate and produce. The Biden Administration’s moves on carbon disclosure and greenhouse gas regulation are reinforcing and legitimizing these best practices. The trends are so strong that no political interference will upend them. Politicos can cry “woke” all they want, sustainability management is here to stay.

Views and opinions expressed here are those of the authors, and do not necessarily reflect the official position of the Columbia Climate School, Earth Institute or Columbia University.