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January 27, 2009, 4:00 a.m. Climate change remains at the top of President Obama’s agenda, current economic woes notwithstanding. Obama recently inveighed against energy sources that “threaten our planet,” and several of his early appointments—including Energy Secretary Stephen Chu, science adviser John Holdren, and White House energy czar Carol Browner—signal the importance of climate-change policy to this administration. During the campaign, Obama endorsed an 80-percent reduction in greenhouse-gas emissions by 2050, and House Speaker Nancy Pelosi said she hopes to move climate-change legislation before the end of the year. California Representative Henry Waxman’s successful coup against longtime Energy and Commerce Committee Chairman John Dingell of Michigan makes congressional action more likely. The EPA would have a hard time claiming not to believe that, even if the Obama administration were so inclined: In numerous documents and statements, the agency has reiterated its belief that climate change is a significant concern, and that a gradual warming could have deleterious effects on health and welfare. Even during the Bush administration, the EPA endorsed federal action to “reduce the risk” of global warming. The EPA has done everything short of publishing a formal statement that climate change “may reasonably be anticipated to endanger public health or welfare,” and no court would readily let it off the hook. Thus, Massachusetts effectively requires the imposition of carbon-dioxide controls on new cars and trucks. And there’s more. The act requires the issuance of permits and the imposition of technological controls on facilities that emit more than 250 tons of regulated pollutants annually. For traditional pollutants, such as sulfur oxides, these provisions capture only the really big emitters—large power plants and the like. Applied to carbon dioxide, however, the 250-ton standard could encompass many commercial and residential buildings, increasing the number of regulated facilities tenfold, if not more. A plain reading of the Clean Air Act would also seem to require that the EPA set a National Ambient Air Quality Standard (NAAQS) for carbon dioxide, and then force state pollution-control agencies to develop plans to ensure that metropolitan areas comply. This is a fool’s errand. There is simply no way for state and local regulators to ensure that individual cities, or even larger regions, meet an air-quality standard for a globally dispersed atmospheric pollutant. Local emissions could be reduced to zero, and a given city could still violate the NAAQS because of emissions elsewhere. It would be a pointless regulatory exercise, but after Massachusetts v. EPA it is the law. The regulatory train thus set in motion by the Supreme Court will move apace unless Congress stops it through legislative action. What should such legislation look like? Some who would prefer to replace existing Clean Air Act rules with a cap-and-trade emissions-control regime have labored under the delusion that such a regime could be adopted by administrative fiat. Unlikely. Last year a federal court struck down the Bush administration’s effort to create a regional cap-and-trade system for traditional air pollutants. If the Clean Air Interstate Rule was invalid under the Clean Air Act, there is little hope for implementing a greenhouse-gas trading system. In the meantime, retaining the status quo means suffering costly regulation. Some action is required. What are conservatives willing to offer (or agree to) in return for derailing the EPA regulatory train? Even the most die-hard climate alarmists would prefer a comprehensive legislative alternative to setting the EPA loose on greenhouse gases under current law, so there is a near-universal desire for legislative action of some sort. Which brings us back to cap-and-trade. If administrative fiat won’t bring such a system into existence, an agreement in Congress might. Much of the business community has settled on this view, as did both major presidential candidates during the campaign. Cap-and-trade systems have some theoretical appeal, since they work the way markets do, but it would be sheer folly to impose one for greenhouse gases. For such a scheme to be effective, it would need a massive regulatory regime to ensure compliance. It would also unleash a flurry of rent-seeking as various interest groups and industries pursued advantage in the trading and allocation rules. Administered politically—as any such regime would be—it would also be likely to serve special interests over the purported goal of reducing climate-changing emissions. Insofar as cap-and-trade operates as an indirect tax (in capping emissions it will increase prices), it will be hidden from public view and undermine political accountability. (Perhaps this is why so many politicians prefer it.) Underneath its market-oriented veneer, climate cap-and-trade would be a regulatory monstrosity. One promising alternative is climate-oriented, revenue-neutral tax reform. Congress would replace a wide range of existing federal taxes with a consumption tax based on the carbon content of fuels. Such a tax would create incentives for more efficient energy use, and thus serve the environmentalist goal of discouraging greenhouse-gas emissions—without delegating massive new regulatory authority to the EPA. A direct tax would be more transparent and more subject to democratic control than the cap-and-trade alternative. It would also serve the longstanding conservative goal of replacing taxes on income with a tax on consumption, a policy move that would make sense even if climate change were not a concern. Some will no doubt object (indeed, my friend Chris Horner already has) that contemplating a carbon-tax deal of the sort I propose amounts to “anticipatory capitulation” designed to “buy peace” with the opposition. Not so. Barring the miraculous enactment of the Blackburn bill to overturn Massachusetts, control of greenhouse gases is inevitable. This is not a prediction about what Congress or the EPA will choose to do, but an assessment of what current law requires. It’s an old saw that you can’t beat something with nothing. In this case, the need for a “Plan B” is especially urgent, because the train has already left the station. If stopping that train, and preventing the otherwise inevitable wreck, is important, conservatives need a climate strategy beyond opposition to existing regulations and the imposition of cap-and-trade. On this basis, and because the threat of climate change merits a serious response, conservatives should support policies to encourage and unleash innovation—as well as tax reform replacing corporate and income taxes with a carbon tax that could prevent more onerous regulation. |
