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On June 2, the Environmental Protection Agency (EPA) unveiled new regulations to limit America’s carbon dioxide (CO2) emissions. Using provisions of the Clean Air Act of 1970, which require the EPA to regulate pollutants, the EPA has laid out a series of regulations designed to reduce U.S. carbon emissions by 30% from 2005 levels by 2030. Successfully doing so will help America maintain its international commitments to reduce its carbon emissions and the Obama administration and environmental forces believe that it will encourage other nations to take action on climate change. Opponents of the EPA regulations argue that they unconstitutionally strip regulatory control of carbon emissions from Congress and warn that they will harm the nation’s economy. Since the EPA regulations will go into effect over the next four years, extempers should be prepared for questions about their implementation and effectiveness.
This topic brief will provide a brief background on U.S. climate change policy prior to the EPA regulations, break down the EPA regulations, and discuss whether the regulations could prove effective in the near future.
Readers are also encouraged to use the links below and in the related R&D to bolster their files about this topic.
U.S. Climate Change Policy
The United States was once the world’s largest emitter of CO2, a greenhouse gas that traps heat in the atmosphere and causes global temperatures to rise. A planet in our solar system that has a runaway greenhouse gas effect is Venus, where surface temperatures average 460 degrees Celsius, and climate scientists argue that if the Earth does not get control of its greenhouse gas emissions that a catastrophic rise in global temperatures could result. The University of Oxford in September 2009 held the 4 Degrees and Beyond International Climate Conference, which warned of the dire consequences of the world’s average temperature rising by more than four degrees Celsius (7.2 degrees Fahrenheit) by 2100. Some of these consequences included making life impossible in the Earth’s tropic regions, a rise in global sea levels, and the death of wildlife. Last September, the Intergovernmental Panel on Climate Change (IPCC) argued with 95% certainty that humans were the biggest cause of global warming. Climate skeptics argue that the IPCC has squelched research that goes against its findings and that other factors, such as varying levels of solar energy, play a bigger role in climate change.
In 1992, the United Nations held a conference in Rio de Janeiro, Brazil. This conference was called the UN Conference on the Environment and Development (it is also referred to as the Rio summit) and it was the first of many international meetings on climate change. 172 governments attended the Rio meeting, including the United States, and the meeting created the Framework Convention on Climate Change, which paved the way for a binding international accord to deal with the problem. In December 1997, nations agreed to the Kyoto Protocol, which mandated that industrialized nations reduce greenhouse gas emissions, while developing nations committed themselves to reduce their emissions as well (although not with defined targets). The Clinton administration signed the treaty, but it was never ratified. In fact, before Kyoto was agreed to, the U.S. Senate in July 1997 unanimously passed the Byrd-Hagel Resolution which expressed the chamber’s view that the U.S. should not sign the Kyoto Protocol. When George W. Bush became president in 2001 he made it clear that the U.S. would not become a signatory to the Kyoto Protocol and President Barack Obama has never tried to get the treaty ratified by the Senate during his tenure in office thus far.
Although the Bush administration did not push for the ratification of Kyoto, it did flirt with the idea of establishing a carbon trading system in the United States during its second term. A bipartisan effort by Republican Senator John McCain of Arizona and Democratic Senator Joseph Lieberman of Connecticut attempted to pass legislation establish a “cap and trade” system to fight climate change. Under this system, a level of acceptable carbon emissions would be established by the federal government and carbon credits would be distributed to businesses. The theory behind the arrangement is that businesses that exceeded their carbon emissions level could purchase carbon credits from another business that polluted less, thereby creating an economic incentive for businesses to use more energy efficient technology. Bipartisan attempts at passing legislation similar to this took place in 2003 and 2005, but each time failed to clear the Senate. A 2007 Democratic effort to deal with the problem of climate change also failed, never managing to clear committee.
In 2009, with his party in control of both chambers of Congress (and possessing a super majority in the Senate), President Obama pushed for new climate change legislation. The so-called American Clean Energy and Security Act of 2009 tried to create a cap and trade system, encourage the use of renewable energy sources, and limit CO2, methane, and other greenhouse gas emissions. The House of Representatives passed the bill on June 26, 2009 by a vote of 219-212, but the Senate failed to pass the legislation after Democrats from coal states broke away from their colleagues. Stymied by Congress, the Obama administration set out to use its executive authority and the regulatory framework of the Environmental Protection Agency (EPA) to deal with the situation. The New York Times on June 2 reports that under the Clean Air Act, the EPA is required to regulate any substance its defines as a pollutant, which it defines as “substances that endanger human life and health.” In 2007, the Supreme Court ruled 5-4 in Massachusetts v. Environmental Protection Agency that CO2 and other greenhouse gases were pollutants and the EPA had the power to regulate them. The 2007 Supreme Court decision, in conjunction with the Obama administration’s desire to enact climate change regulations, is what has produced the latest EPA ruling.
The New EPA Regulations
The new EPA rules are attempting to reduce U.S. CO2 emissions by 30% from 2005 levels by 2030. This will help the U.S. meet an international agreement on climate change at Copenhagen in 2009 to reduce its carbon emissions by 17% from 2005 levels by 2020. The Washington Post on June 2 writes that the proposed regulations would cut 500 million metric tons of CO2 annually by 2030 and most of the cuts in U.S. CO2 output would be made within the first decade of the regulations, with carbon emissions being cut by 26% by 2020. The EPA argues that the new rule will go a long way toward preserving public health as other air pollutants such as sulfur dioxide, nitrogen oxides, and soot would be reduced by 25% and this would avoid 2,700 to 6,600 premature deaths and 140,000 to 150,000 asthma attacks. This would help America achieve $7 in health benefits for every $1 invested in the regulations.
The economic sector that will bear the brunt of the regulations will be utilities, as The Wall Street Journal reports on June 5 that utilities are more than one-third of total U.S. carbon emissions. Coal-fired power plants are targeted under the regulations since they are the biggest emitters of CO2 and they are 40% of the nation’s electricity grid. The Christian Science Monitor on June 5 writes that the EPA estimates that the regulations will accelerate the decline of coal generated power plants by 20-22% by 2020. Many coal-fired power plants are old, many of which date back to the 1950s, so the regulations can also be viewed as a way to encourage utility companies to update their operations. Since the EPA’s regulations will encompass the utility industry, The Boston Globe on June 3 writes that they will have a more significant impact than President Obama’s other emissions proposals, such as his 2011 agreement with automakers to increase the fuel efficiency of vehicles by 2025.
Although there have been significant conservative criticisms of the EPA setting a regulatory standard for carbon emissions without going through Congress, the proposal does allow for a great deal of flexibility and follows the principle of federalism. Politico on June 6 writes that states will be allowed to come up with their own ways to limit carbon emissions and have the opportunity to make agreements with other states to establish carbon trading systems (some states like California already have a cap and trade system). The Guardian on June 2 adds that states and power companies have many options, aside from cap and trade systems to reduce their emissions. They can retrofit their existing power plants so that coal burning does not emit as much CO2 into the atmosphere, they can choose to go with more renewable sources of energy like wind and solar, they can switch to natural gas, or they can try to give energy customers incentives to reduce their use of electricity. According to The National Journal on June 2, the EPA regulations also enable states to impose carbon taxes as a way to incentivize power companies to reduce CO2 emissions. Furthermore, each state has a different emissions target set by the EPA. The Business Insider on June 2 writes that the EPA examined each state’s ability to use new energy sources, improve the efficiency of its coal power plants, shift from coal to cleaner sources of energy, and reduce demand for electricity. Some states like North Dakota, which use more coal for their power plants, have a low emissions target of 10.6% by 2030, versus other states like Washington, which have been given a 71.6% target. The idea is that states with a large number of coal-fired plants will need more time to put new systems online and states that have already adopted new technologies will have an easier path toward cutting their emissions to acceptable levels.
The reason extempers should follow the EPA regulations is that they will not be finalized for another year and they will be implemented into the next presidential administration. U.S. News & World Report on June 2 writes that the EPA will hold four public hearings during its required 120-day comment period. These hearings will take place in Denver, Atlanta, Washington, D.C., and Pittsburgh. EPA Administrator Gina McCarthy expects that the regulations will be finalized by June 2015 and states will have until 2016 to submit their proposals to the federal government. Some states might also get extensions until 2017 and some could wait until 2018 if they are willing to work with other states on cap and trade arrangements. Thus, there will be a lengthy rollout of the new regulations and extempers should receive questions about the EPA regulations in future seasons. This is the same scenario that played out with the Affordable Care Act, which was passed in 2010, but went into effect this year.
The Future of the Regulations
Since the EPA’s regulations will take several years to implement, they could prove vulnerable to political and legal challenge. The Politico article previously cited from June 6 points out that during this window Congress could attempt to overrule the EPA regulations, a power that it gave itself in the Congressional Review Act of 1996. If Congress did this with President Obama at the helm, their attempt to gut the regulations would be vetoed, but after the 2016 presidential elections anything could happen. It is also expected that conservative groups, coal companies, and other utility firms will challenge the EPA’s regulations in court, which could further complicate the enforcement of the regulations. There is also the question of what the EPA does with states that refuse to submit carbon reduction proposals. This is not out of the realm of possibility as state governors refused Medicaid expansion and setting up state run health insurance exchanges under the Affordable Care Act. Other state governors have begun to take a stand against the federal government’s rollout of the Common Core in education as well. The Houston Chronicle on June 3 reveals that if states refuse to submit a carbon reduction plan, the EPA has the power to create one for it, but it is uncertain whether the EPA could force a state to comply with that plan. As a result, the willingness of some states, especially conservative ones, to submit to the EPA’s mandates may determine whether its regulations eventually succeed or fail.
The regulations have the potential to give benefits to American consumers in the form of reducing some of the effects of climate change and reducing health risks, but they could also carry a steep economic costs. The New York Times on June 1 writes that the U.S. Chamber of Commerce is arguing that the EPA’s regulations will cost of the U.S. economy $50 billion each year that they are put into effect. USA Today on June 3 points out that the EPA agrees that its regulations will cost $7.3-$8.8 billion by 2030, but they argue the public health benefits will amount of $55-$93 billion, thereby arguing that their plan actually produces cost savings. The Washington Times on June 2 adds that the Obama administration is arguing the new EPA standards will actually reduce consumers electric bills by 8% since the regulations will encourage power companies to invest in more energy efficient technologies and cut waste. However, conservatives argue that the math for this calculation does not make any sense. They argue that utility companies are profit driven enterprises and that they will pass along the costs of regulatory compliance to consumers. Pocket Full of Liberty, a conservative and libertarian blog, points out on June 3 that consumers could end up paying $289 billion more for electricity through 2030, which would reduce their standard of living. Conservatives also point out that President Obama promised Americans that they would save $2,500 on their health insurance premiums under the Affordable Care Act and this largely proved to be false. The U.S. Chamber of Commerce on June 3 argues that the regulations could hurt basic services in local communities as coal miners will find themselves out of work and the lose revenue from these jobs will hurt education, police services, and busing services. Defenders of the EPA regulations, though, refute the Chamber’s claims. Bloomberg on June 2 argues that coal industry jobs have been declining for years and that investing in renewable energy is the best way to keep Americans working. Renewable energy lobbyists such as the American Wind Energy Association also argue that over the last five years the eleven states that have used wind energy have seen electricity rates declined versus those of non-wind states.
Politically, the regulations are likely part of President Obama’s legacy and political commentators speculate that it might be the last of his large domestic policy programs (assuming that he cannot reach an immigration agreement with Congress). The long-term view of the regulations, though, may hurt Democratic candidates in the 2014 midterm elections. Democratic Senate candidates such as Natalie Tennant (West Virginia) and Alison Lundergan Grimes (Kentucky) are on the defensive over the regulations, which voters in their states view as a “war on coal” that is waged by Washington bureaucrats. Senator Mary Landrieu of Louisiana, whose seat is always under attack from Republicans, has bashed the regulations by saying that the EPA should not be setting carbon pollution standards. Additionally, Democrats and Republicans from coal states, such as Republican Senator John Barrasso of Wyoming and Senator Wendy Heltkamp of North Dakota, have warned of the EPA’s regulations on communities that depend on coal. At a time when President Obama is incurring some of the ire of his party due to the Bowe Berdahl swap with the Taliban, these regulations are not likely to endear him to more conservative members of the Democratic Party. As far as any impact on 2016, The Hill on June 3 notes that a poll by the Democratic-aligned Public Policy Polling (PPP) found that 46% of voters would not vote for a candidate in 2016 that does not believe in human-caused climate change versus 38% of voters who would support such a candidate. The poll also found that 53% of Americans support the EPA’s regulations versus 35% in opposition. If the economic impact of the regulations looks prohibitive or if the promises of the EPA fall short of what they are projecting, you can expect Republicans to tie the Democratic presidential candidate to them. Similarly, if the regulations appear successful, expect the Democratic candidate to use them as an example of government success and paint the Republican candidate as anti-environment.
The EPA’s regulations open a great future for natural gas investors, since most states are likely to switch from coal to natural gas to comply with the EPA’s mandates. Natural gas burns half as much CO2 as coal does and U.S. supplies of natural gas have grown in recent years due to fracking and the discovery of new natural gas deposits. The United States currently possesses more natural gas than any other nation in the world, but scientists warn in The Christian Science Monitor on June 5 that if natural gas is not burned for energy and gets into the atmosphere that it is a greenhouse gas that is twenty times as potent as CO2 over a one hundred year period. Natural gas leaks happen along its entire production chain and if these problems are not fixed, especially if more power plants begin using natural gas, then it may be very difficult for the United States to meet its carbon target by 2030.
Finally, there is the question of whether the United States unilateral move on regulating carbon emissions will motivate other countries to do the same. The Obama administration is hoping that when international talks are held in Paris in 2016 that their actions will compel developing nations such as India and China to impose similar carbon controls. China, the world’s biggest CO2 emitter, has recently sent signals that it will consider an absolute cap on its carbon emissions. The Guardian on June 3 points out that He Jiankun, chairman of China’s Advisory Committee on Climate Change, said that China would pursue an absolute cap and the timing of his remarks was seen by the American media as a victory for the Obama administration’s foreign climate change efforts. However, Mr. He quickly took back his comments by saying that they were not the official views of the Chinese government and as of the date of this brief, the Chinese government has yet to put a number on what its absolute cap might be. The unwillingness of China and India to set significant caps on their emissions has often been used by opponents of carbon efforts at home as evidence of why the United States should not do so. The argument is that if China and India are able to continue emitting as much CO2 as they want and the U.S. cuts back that it will harm its own economy while doing very little on global climate change. This is a stumbling block that will have to be overcome in Paris, but by taking action on carbon emissions, President Obama removes one of the usual arguments by India and China that they should not have to listen to the U.S. when the U.S. refuses to impose carbon restrictions on itself. Also, the U.S. could impose “green tariffs” on China and India in the future if those nations do not limit their carbon emissions, but that could spark a trade war that could have dire global economic consequences. As far as the European Union (EU) is concerned, they applauded American efforts, but they announced that the U.S. needed to do more to make a bigger dent in the climate change problem.
As a whole, the EPA regulations can be seen as a first step to limit America’s CO2 emissions and upgrade elements of its energy grid. It is uncertain at present what scope the final regulations will take, whether they will be successfully implemented, and whether they will compel other nations in the developing world to do the same. As a result, extempers should continue to follow the EPA’s steps in enforcing the regulations and be prepared to talk about snags in the process in the months and years ahead.