Giving new meaning to the word “hybrid”

Last week, we learned that the Obama EPA will conclude that carbon dioxide is an air pollutant as defined by the Clean Air Act (CAA).  But a so-called endangerment finding on CO2 won’t lead to comprehensive CAA regulation, as I argued a few posts ago.

Rather, the Obama administration will use the CAA as a boogie man to force industry to support comprehensive climate change legislation in Congress.  The CAA features “command-and-control” requirements that industry hates, and anything coming out of Congress would be market-based.  So with the specter of CAA regulation, congressional legislation becomes the lesser evil.

This works out well for the Obama administration, which supports a market-based approach anyway, and which realizes that the CAA is not ideally suited for the regulation of greenhouse gases (GHGs).  The CAA is a poor regulatory choice for a variety of reasons that can’t be neatly summed up here (feel free to disagree, especially since I’m being conclusory!).

One major reason is that the CAA, written in the 1960s, did not contemplate the regulation of well-mixed pollutants.  That is, the CAA’s target is local pollutants tending to stay in the place where they are emitted.  The CAA’s centerpiece is State Implementation Plans (SIPs), from which the EPA can evaluate the pollution reduction efforts of each state.  If New York has a particularly bad sulfur dioxide problem, the EPA can judge its SO2 reduction efforts by looking at the New York SIP, asking: did New York meet its reduction goals, how much sulfur is in the air?  GHGs, by contrast, do not stay in the place where they are emitted; their concentrations are fairly uniform throughout the world.  Thus, New York could stop GHGs completely, yet still fall short of its SO2 air concentration goal because GHGs are still being emitted in every other part of the world.

But just because the CAA is not built for GHGs does not mean it should be discarded completely.  Rather, what I advocate is a hybrid approach, a robust utilization of the CAA tools that work well for GHG reduction to supplement the cap-and-trade approach that Obama supports.

A hybrid approach is absolutely necessary for plugging the shortfalls of the cap-and-trade program that we can expect Congress to churn out.  Here I am talking about offsets, which have been compared – not unfairly, I think – to the indulgences that the Catholic Church sold during the life of Martin Luther.

Offsets would allow companies to earn GHG reduction credits by funding projects like afforestation and methane capture from landfills.  Even assuming that these projects produce actual and verifiable emissions reductions, offsets allow firms to avoid making emissions reductions themselves.  Offsets sap cap-and-trade’s ability to spur technological upgrades and breakthroughs, since companies can fund emissions reduction projects in lieu of cleaning up their own mess.  Offsets threaten our long-term emissions reductions goals, which cannot be met without technological enhancement.  We cannot pay our way to President Obama’s goal – an 80 percent reduction in emissions by 2050.

But offsets are not going away.  Indeed, they are thriving, as a part of the Kyoto Protocol and several regional GHG reduction regimes in the U.S., and among the upper-class green movement.  Something, then, is needed to ensure sustained technological progress – something like the CAA’s New Source Performance Standards (NSPS).

Sec. 111 of the CAA mandates that facilities adopt a minimum level of emissions technology for various pollutants regulated under the CAA.  Using Sec. 111, the EPA could require that new power plants adopt the most efficient methods of producing energy.  So even if a company can use offsets to avoid making some emissions reductions itself, NSPS will offset the offsets, by ensuring that needed emissions technology improvements are still being made.

Of course, industries would howl at NSPS, and will rightly point out that NSPS curtails their ability to use offsets to meet their reduction goals.  But that’s the point, isn’t it?

I don’t mean to seem insensitive to cost concerns, especially during the Great Depression Part II.  But – as a colleague in my climate change law class recently said – the point of cap-and-trade is the cap, NOT the trade.   Meaning, there is no point of having climate change regulation if it won’t lead to the emissions reduction goals that are needed to avert climate catastrophe.  We are pushing for cap-and-trade because it is the only solution that’s politically doable.  But we shouldn’t push for that solution and then undermine it with offsets.

The hybrid approach – supplementing cap-and-trade with key CAA provisions such as Sec. 111 – is what’s needed to make sure we don’t offset our way to 100 more years of inefficient, uninspired energy use.