Will the economy call the EPA’s bluff?

As expected, the Environmental Protection Agency is calling carbon dioxide (CO2) a danger to public health and welfare, a necessary first step for the agency to regulate CO2 under the Clean Air Act.  Commentators, including myself, have doubted that the endangerment finding will lead to comprehensive regulation of CO2 under the Clean Air Act, as there are simply too many impediments to effective regulation under a 1970 law that was not intended to regulate pollutants such as CO2.

Rather, as many have said, an endangerment finding is best used to prod industry into supporting new legislation, which almost everyone, including President Obama, prefers.  The EPA would continue to talk tough on CO2 without intending to actually regulate under the Clean Air Act.  But my question is: what if the economy calls the EPA’s bluff?  What if we go years without legislation – would the EPA go forward with Clean Air Act regulation?

The endangerment finding notwithstanding, the economy will continue to dominate congressional attention, and the country’s, too.  Every day seems to bring to light a new scandal, a new outrage, that prompts calls for reform.  If Congress intends to fix the regulatory flaws that allowed investment banks to be so highly leveraged and Madoff to run a 20-year Ponzi scheme, it simply won’t have time for anything else.

Moreover, should we even want a Climate Change Act of 2009?

Could comprehensive greenhouse gas regulation emerge from the worst financial disaster since the Great Depression?  Greenhouse gas regulation was controversial enough during the high-flying late 1990s, when the Senate unanimously rejected the Kyoto Protocol because it would have imposed costs on the United States without doing the same to China, our main trade competitor.

I can’t imagine that even the staunchest advocates of drastic and immediate greenhouse gas emissions reductions would want a weak 2009 law instead of waiting for the economy to recover in 2010.  Also, consider that a worldwide recession means reduced emissions, and that any law passed this year – or next year – would not take effect until 2012 or 2013.  So there’s no hurry to get the job done in 2009 as opposed to 2010, especially with Americans saying that the economy should take precedence over the environment.

Returning to EPA’s endangerment finding, if the economy precludes a 2009 climate law, how long can the agency maintain its bluff?  An endangerment finding technically requires EPA to spend vast amounts of time and money coming up with CO2 regulations.  If the Obama administration’s plan is to talk tough but hold off on actually regulating, it will only have so much time before environmental organizations, frustrated with the lack of congressional action, begin asking federal courts to require EPA to regulate CO2 in light of its endangerment finding.  And if Congress drags its feet, business leaders might feel less inclined to support legislation if they think EPA is bluffing.  Worse, if they think EPA’s endangerment finding is an empty action, they might actually be encouraged to thwart comprehensive greenhouse gas legislation.

Make no mistake, the EPA’s endangerment finding marks an historic shift in U.S. climate change policy.  It was a necessary move, not only politically, but also because the Supreme Court’s ruling in Massachusetts v. EPA required the agency to say whether CO2 endangered the public health and welfare.  The EPA, then, is stuck between a mandate to regulate CO2 under a less-than-ideal law, and probable congressional neglect on climate change owing to the economy.  Perhaps advocates for regulation should reconsider the opportunities for sensible rulemaking under the Clean Air Act  – it may be all we have for a while, unless the economy suddenly improves.

P.S.: I do not mean to say that regulation of CO2 under the Clean Air Act is impossible.  As I noted in a previous post, some Clean Air Act provisions are well suited to greenhouse gases, and should be used.  Last year, the EPA released an Advanced Notice of Proposed Rulemaking (ANPR), in which several staffers concluded that Clean Air Act regulation is a good idea.  You can view the volume-length ANPR here.